<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 11, 1998
REGISTRATION NO. 333-44875
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
INTERMEDIA COMMUNICATIONS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 4813 59-29-13586
(Primary Standard (I.R.S. Employer
(State or other Industrial Identification No.)
jurisdiction Classification
of incorporation or Code Number)
organization)
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
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after theeffective date of this Registration Statement.
If any of the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING PRICE AGGREGATE AMOUNT OF
TITLE OF SECURITIES TO BE PROPOSED OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT PRICE FEE
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<S> <C> <C> <C> <C>
8 1/2% Series B Senior
Notes
due 2008.............. $400,000,000 $1,000 $400,000,000 $118,000.00*
</TABLE>
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* Previously paid
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<PAGE>
INTERMEDIA COMMUNICATIONS INC.
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM CAPTION IN FORM S-4 LOCATION IN PROSPECTUS
---- ------------------- ----------------------
<C> <S> <C>
1 Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus.... Outside Front Cover Page
2 Inside Front and Outside Back Cover Pages
of Prospectus............................. Inside Front Cover Page; Available
Information; Outside Back Cover Page
3 Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............. Prospectus Summary; The Company; Risk
Factors; Selected Financial and Other
Operating Data
4 Terms of the Transaction................... Prospectus Summary; Risk Factors; The
Exchange Offer; Description of the Senior
Notes; Plan of Distribution
5 Pro Forma Financial Statements............. Selected Financial and Other Operating Data
6 Material Contracts with the Company Being
Acquired.................................. *
7 Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters........................ *
8 Interests of Named Experts and Counsel..... Legal Matters; Experts
9 Disclosure of Commission Position on
Indemnification For Securities Act
Liabilities............................... *
10 Information With Respect to S-3 Outside and Inside Cover Pages of
Registrants................................ Prospectus; Prospectus Summary; Risk
Factors; Use of Proceeds; Capitalization;
Selected Financial and Other Operating
Data; Business; Description of the Senior
Notes
11 Incorporation of Certain Information by Incorporation of Certain Documents by
Reference.................................. Reference
12 Information With Respect to S-2 or S-3
Registrants............................... *
13 Incorporation of Certain Information by
Reference.................................. *
14 Information With Respect to Registrants
Other Than S-3 or S-2 Registrants......... *
15 Information With Respect to S-3 Companies.. *
16 Information With Respect to S-2 or S-3
Companies................................. *
17 Information With Respect to Companies Other
Than S-2 or S-3 Companies................. *
18 Information if Proxies, Consents or
Authorizations Are to be Solicited........ *
19 Information if Proxies, Consents or
Authorizations Are Not to be Solicited, or
in an Exchange Offer...................... *
</TABLE>
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* Omitted because item is inapplicable or answer is in the negative.
<PAGE>
OFFER TO EXCHANGE
8 1/2% SERIES B SENIOR NOTES DUE 2008 FOR ANY AND ALL OUTSTANDING 8 1/2%
SENIOR NOTES DUE 2008 OF
INTERMEDIA COMMUNICATIONS INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON MARCH 13, 1998, UNLESS EXTENDED
----------------
Intermedia Communications Inc., a Delaware corporation ("Intermedia" or the
"Company"), hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying Letter of Transmittal (which
together constitute the "Exchange Offer"), to exchange $1,000 principal amount
of 8 1/2% Series B Senior Notes due 2008 (the "Senior Notes") of the Company
for each $1,000 principal amount of the issued and outstanding 8 1/2% Senior
Notes due 2008 (the "Old Notes" and collectively with the Senior Notes, the
"Notes") of the Company. As of the date of this Prospectus, $400,000,000
principal amount of the Old Notes were outstanding. The terms of the Senior
Notes are substantially identical in all material respects (including interest
rate and maturity) to the terms of the Old Notes except for certain transfer
restrictions and registration rights relating to the Old Notes.
The Exchange Offer is being made to satisfy certain obligations of the
Company under the Registration Rights Agreement, dated December 23, 1997,
among the Company and the other signatories thereto (the "Registration Rights
Agreement"). Upon consummation of the Exchange Offer, holders of Old Notes
that were not prohibited from participating in the Exchange Offer and did not
tender their Old Notes will not have any registration rights under the
Registration Rights Agreement covering such Old Notes not tendered and such
Old Notes will continue to be subject to the restrictions on transfer
contained in the legend thereon. If the Exchange Offer is not consummated, or
the Shelf Registration Statement (as defined herein) is not filed or is not
declared effective or, after either this Registration Statement (the "Exchange
Registration Statement") or the Shelf Registration Statement has been declared
effective, such registration statement thereafter ceases to be effective or
usable (subject to certain exceptions) in connection with resales of Old Notes
or Senior Notes in accordance with and during the periods specified in the
Registration Rights Agreement, additional interest will accrue and be payable
on the Notes until so declared effective or consummated. See "The Exchange
Offer," "Description of the Senior Notes--Registration Rights; Liquidated
Damages."
Based on interpretations by the staff of the Securities and Exchange
Commission (the "SEC" or the "Commission") with respect to similar
transactions, the Company believes that Senior Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by holders thereof (other than any holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act of 1933, as amended (the "Securities Act")) without compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided that the Senior Notes are acquired in the ordinary course of the
holders' business, the holders have no arrangement with any person to
participate in the distribution of the Senior Notes and neither the holder nor
any other person is engaging in or intends to engage in a distribution of the
Senior Notes. Each broker-dealer that receives Senior Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of Senior Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Senior Notes received in exchange for Old Notes acquired as a
result of market-making activities or other trading activities. The Company
has agreed that, for a period of 365 days after the Exchange Date (as defined
herein), it will make this Prospectus available to any broker-dealer for use
in connection with any such resale. See "Plan of Distribution."
The Senior Notes will evidence the same debt as the Old Notes and will be
entitled to the benefits of the Indenture (as defined herein). For a more
complete description of the terms of the Senior Notes, see "Description of the
Senior Notes." There will be no cash proceeds to the Company from the Exchange
Offer. The Senior Notes will be senior unsecured obligations of the Company
ranking pari passu in right of payment of principal and interest with all
other existing and future senior indebtedness of the Company, including the
Company's 12 1/2% Senior Discount Notes due 2006 (the "12 1/2% Notes"), the 11
1/4% Senior Discount Notes due 2007 (the "11 1/4% Notes") and the 8 7/8%
Senior Notes due 2007 (the "8 7/8% Notes" and, together with the 12 1/2% Notes
and the 11 1/4% Notes, the "Existing Senior Notes") and the Old Notes, and
will rank senior in right of payment to any future subordinated indebtedness
of the Company. Holders of secured indebtedness of the Company will, however,
have claims that are prior to the claims of the holders of the Senior Notes
with respect to the assets securing such other indebtedness. See "Description
of the Senior Notes." As of September 30, 1997, on a pro forma basis after
giving effect to the issuance of the 8 7/8% Notes, the December 23 Offering
(as defined herein) and the pending acquisition of Shared Technologies (as
defined herein), the Company would have had approximately $1.4 billion of
indebtedness and other liabilities, including trade payables outstanding,
which includes approximately $71.0 million of indebtedness and other
liabilities of the Company's subsidiaries.
(continued on next page)
----------------
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DESCRIPTION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE
----------------
THE DATE OF THIS PROSPECTUS IS FEBRUARY 12, 1998
<PAGE>
(Continuation of front cover page)
The Old Notes were originally issued and purchased by Bear Stearns & Co.,
Inc. and Salomon Brothers Inc (the "Initial Purchasers") pursuant to a
purchase agreement (the "Purchase Agreement") dated as of December 18, 1997
between the Company and the Initial Purchasers (the "December 23 Offering").
The Initial Purchasers, in turn, resold the Old Notes in private sales exempt
from registration under the Securities Act in reliance upon the exemptions
provided by Rule 144A, Regulation S and by Section 4(2) of the Securities Act.
The Old Notes may not be reoffered, resold or otherwise pledged, hypothecated
or transferred in the United States unless registered or unless an exemption
from the registration requirements of the Securities Act and applicable state
securities laws is available.
The Company has not entered into any arrangement or understanding with any
person to distribute the Senior Notes to be received in the Exchange Offer and
to the best of the Company's information and belief, each person participating
in the Exchange Offer is acquiring the Senior Notes in its ordinary course of
business and has no arrangement or understanding with any person to
participate in the distribution of the Senior Notes to be received in the
Exchange Offer.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange. The Exchange Offer will
expire at 5:00 p.m., New York City time, on March 13, 1998, unless extended
(the "Expiration Date"). The date of acceptance for exchange of the Old Notes
for the Senior Notes (the "Exchange Date") will be the first business day
following the Expiration Date. Old Notes tendered pursuant to the Exchange
Offer may be withdrawn at any time prior to the Expiration Date; otherwise
such tenders are irrevocable.
The Senior Notes will have the same issue date and issue price as the Old
Notes. For a discussion of the tax consequences of the Exchange Offer, see
"Certain Federal Income Tax Considerations."
Prior to this Exchange Offer, there has been no public market for the Notes.
The Company does not currently intend to list the Senior Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active public market for
the Senior Notes will develop.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports and other information with the Commission. Such
reports, proxy and other information can be inspected and copied without
charge at the Public Reference Room maintained by the Commission at 450 Fifth
Street, N.W., Room 1024, Washington D.C. 20549. In addition, upon request,
such reports, proxy statements and other information will be made available
for inspection and copying at the Commission's public reference facilities at
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at Seven
World Trade Center, 13th floor, New York, New York 10048. Copies of such
material can be obtained at prescribed rates upon request from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington D.C.
20549. The Commission also maintains a site on the World Wide Web
(http://www.sec.gov) that contains reports, proxy and information statements
and other information regarding registrants, like the Company, that file
electronically with the Commission. The Company's common stock is listed on
the Nasdaq National Market under the symbol "ICIX". Reports, proxy statements
and other information concerning the Company may be inspected and copied at
the offices of the National Association of Securities Dealers, Inc. 1735 K
Street, N.W., Washington D.C. 20006.
In the event that the Company ceases to be subject to the informational
reporting requirements of the Exchange Act, the Company has agreed that,
whether or not it is required to do so by the rules and regulations of the
Commission, for so long as any of the securities offered hereby remain
outstanding, it will furnish to the holders of the securities and file with
the Commission (unless the Commission will not accept such a filing) (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the
Company were required to file such forms, including a "Management's Discussion
and Analysis of Results of Operations and Financial Condition" and, with
respect to the annual information only, a report thereon by the Company's
certified independent public accountants and (ii) all reports that would be
required to be filed with the Commission on Form 8-K if the Company were
required to file such reports. In addition, for so long as any of the
securities offered hereby remain outstanding, the Company has agreed to make
available to any prospective purchaser of the securities or beneficial owner
of the securities in connection with any sale thereof the information required
by Rule 144A(d)(4) under the Securities Act.
ii
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or information have been filed by the Company with
the Commission and are incorporated herein by reference:
The Company's Annual Report on Form 10-K for the year ended December 31,
1996.
The Company's Annual Report on Form 10-K/A for the year ended December
31, 1996 filed with the Commission on May 15, 1997.
The portions of the Proxy Statement for the Annual Meeting of
Stockholders of the Company held on May 22, 1997 that have been
incorporated by reference into the Company's Annual Report on Form 10-K
for the year ended December 31, 1996.
The Company's Current Report on Form 8-K filed with the Commission on
February 24, 1997.
The Company's Current Report on Form 8-K filed with the Commission on
March 14, 1997.
The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997.
The Company's Current Report on Form 8-K filed with the Commission on
June 5, 1997.
The Company's Current Report on Form 8-K filed with the Commission on
July 9, 1997.
The Company's Current Report on Form 8-K filed with the Commission on
July 17, 1997.
The Company's Current Report on Form 8-K/A filed with the Commission on
August 4, 1997.
The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1997.
The Company's Current Report on Form 8-K filed with the Commission on
October 27, 1997.
The Company's Current Report on Form 8-K filed with the Commission on
November 6, 1997.
The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997.
The Company's Current Report on Form 8-K filed with the Commission on
November 25, 1997.
The Company's Current Report on Form 8-K/A filed with the Commission on
December 4, 1997.
The Company's Current Report on Form 8-K/A filed with the Commission on
December 16, 1997.
The Company's Current Report on Form 8-K filed with the Commission on
December 18, 1997.
The Company's Current Report on Form 8-K/A filed with the Commission on
December 22, 1997.
The Company's Current Report on Form 8-K filed with the Commission on
January 21, 1998.
In addition, the following information that has been filed with the
Commission is incorporated herein by reference:
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.
The audited financial statements of Shared Technologies Fairchild Inc.
("Shared Technologies") appearing in Shared Technologies' Annual Report on
Form 10-K 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 will provide without charge to each person to whom a copy of
this Prospectus has been delivered, including any beneficial owner, upon the
written or oral request of such person to Intermedia Communications Inc., 3625
Queen Palm Drive, Tampa, Florida 33619 (telephone 813-829-0011), Attention:
Investor Relations, a copy of any or all of the documents referred to above
(other than exhibits to such documents) which have been incorporated by
reference in this Prospectus.
iii
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus and in the Consolidated
Financial Statements and the Notes thereto incorporated herein by reference.
References in this Prospectus to the "Company" or "Intermedia" mean Intermedia
Communications Inc. together with its subsidiaries, except where the context
otherwise requires. This Prospectus contains certain "forward-looking
statements" concerning the Company's operations, economic performance and
financial condition, which are subject to inherent uncertainties and risks,
including those identified under "Risk Factors." Actual results could differ
materially from those anticipated in this Prospectus. When used in this
Prospectus, the words "estimate," "project," "anticipate," "expect," "intend,"
"believe" and similar expressions are intended to identify forward-looking
statements.
THE COMPANY
Intermedia is a rapidly growing integrated communications services provider
("ICP"), offering a full suite of local, long distance and enhanced data
telecommunications services to business and government end user customers, long
distance carriers, Internet service providers ("ISPs"), resellers and wireless
communications companies. Founded in 1987, the Company is currently the third
largest (based on annualized telecommunications services revenues) among
providers generally referred to as competitive local exchange carriers
("CLECs") after MFS Communications Company, Inc. and Teleport Communications
Group Inc. As of September 30, 1997, the Company had sales offices in 43 cities
throughout the eastern half of the United States and offered a full product
package of telecommunications services in 19 metropolitan statistical areas. In
April 1996, Intermedia became one of the first ICPs in the United States to
provide integrated switched local and long distance service and now has
thirteen voice switches in service. The Company provides enhanced data
services, including frame relay, asynchronous transfer mode ("ATM") and
Internet access services, primarily to business and government customers
(including over 100 ISPs), in approximately 3,800 cities nationwide, utilizing
approximately 130 Company-owned data switches. Intermedia also serves as a
facilities-based interexchange carrier to approximately 15,000 customers
nationwide. Intermedia continues to increase its customer base and network
density in the eastern half of the United States and is pursuing attractive
opportunities to add additional services and expand into complementary
geographic markets.
Intermedia was incorporated in the State of Delaware on November 9, 1987, as
the successor to a Florida corporation that was founded in 1986. The Company's
principal offices are located at 3625 Queen Palm Drive, Tampa, Florida 33619,
and its telephone number is (813) 829-0011.
RECENT DEVELOPMENTS
Regulatory Changes. The Telecommunications Act of 1996 (the "1996 Act") and
the issuance by the Federal Communications Commission ("FCC") of rules
governing local competition, particularly those requiring the interconnection
of all networks and the exchange of traffic among the incumbent local exchange
carriers ("ILECs") and CLECs, as well as pro-competitive policies already
developed by state regulatory commissions, have caused fundamental changes in
the structure of the local exchange markets. On July 18, 1997, the U.S. Court
of Appeals for the Eighth Circuit issued a final decision vacating the FCC's
pricing and "most favored nation" rules, as well as certain other of the FCC's
interconnection rules. On October 14, 1997, the Eighth Circuit Court issued an
order clarifying its previous decision. In this order, the Court held that
ILECs have an obligation under the 1996 Act to offer other carriers access to
the ILECs network elements on an unbundled basis, but the ILECs do not have an
obligation to recombine those elements for use by other carriers. The FCC and
other parties' request that the Supreme Court review these decisions has been
granted. Most recently, on January 22, 1998, the Eighth Circuit Court
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
1
<PAGE>
condition the provision by the regional Bell operating companies ("RBOCs") 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 the pricing and other issues, they remain subject to scrutiny and oversight
by state regulatory commissions. Although the Company is not able to predict
the impact of these decisions on future efforts to negotiate interconnection
agreements with ILECs, the Company's analysis shows that interconnection
arrangements that have been approved or mandated by state regulatory
commissions have been consistent with the intent of the 1996 Act to expand
local competition and the Company's business plan. These regulatory
developments create opportunities for new entrants offering local exchange
services to capture a portion of the ILECs' nearly 100% market share. Due to
the rapid development and continuing growth of the Company's sales force and
its competitive advantages in providing integrated telecommunications services,
the Company believes that it is well positioned to capitalize on the new market
opportunities emerging in the local exchange market.
On May 16, 1997, the FCC released an order that fundamentally restructured
the "access charges" that ILECs charge to interexchange carriers and end user
customers. The Company believes that the FCC's new access charge rules do not
adversely affect the Company's business plan, and that they in fact present
significant new opportunities for new entrants, including the Company. Aspects
of the access charge order may be changed in the future. Numerous parties have
either filed appeals with federal courts or asked the FCC to reconsider
portions of its new rules.
On December 31, 1997, 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. The United States and
some long distance companies have requested a stay of this decision and it is
expected that they, and others, will seek its reversal on appeal. If the
District Court's decision is permitted to stand, it could result in RBOCs'
providing interexchange service in their operating regions sooner than
previously expected.
Acquisitions. On July 11, 1997, the Company consummated the final step in the
acquisition of DIGEX, through the merger of Daylight Acquisition Corp.
("Daylight"), a wholly-owned subsidiary of the Company, with DIGEX (the "DIGEX
Acquisition"). The aggregate consideration for the DIGEX Acquisition, which was
funded with the Company's existing cash reserves, was approximately $160
million. DIGEX, headquartered in suburban Washington, D.C., is a national ISP,
which provides a comprehensive range of industrial strength Internet solutions,
including high speed dedicated business Internet connectivity, Web site
management and private network solutions, primarily to business and government
customers. DIGEX's operations are being integrated with those of the Company,
and DIGEX will be operated as a division of the Company. For the nine months
ended September 30, 1997, DIGEX's revenues were approximately $33.5 million.
On November 20, 1997, Intermedia, through Moonlight Acquisition Corp., a
wholly-owned subsidiary of Intermedia, entered into a definitive merger
agreement with Shared Technologies. The total deemed purchase price for Shared
Technologies is estimated to be approximately $640 million, excluding certain
transaction expenses and fees relating to certain agreements. In addition,
Intermedia agreed to settle certain litigation. As part of the agreement,
Intermedia was granted irrevocable options, which together with other common
stock of Shared Technologies owned by Intermedia, gives Intermedia control of
over 50% of Shared Technologies common stock on a fully diluted basis.
Intermedia made a tender offer for 4 million additional shares of Shared
Technologies at $15 per share in cash, which expired on December 26, 1997. More
than 16 million shares were tendered pursuant to the tender offer. In order to
avoid the purchase of fractional shares, 4,000,064 shares were accepted.
Shared Technologies is the nation's largest provider of shared
telecommunications services and systems. Through its technical infrastructure
and 800 employees, Shared Technologies acts as a single point of contact for
business telecommunications services at more than 465 buildings throughout the
United States and Canada. For
2
<PAGE>
the year ended December 31, 1996, and the nine months ended September 30, 1997,
Shared Technologies' revenues were approximately $157.2 million and $141.8
million, respectively, and its EBITDA for such periods were approximately $34.9
million and $33.4 million, respectively. This acquisition is expected to
enhance Intermedia's national presence in telecommunications markets, enabling
it to provide a bundled offering of local, long distance, data, Internet and
systems integration services to Shared Technologies' existing 15,000 business
customers. If this acquisition is consummated, the Company will have
approximately 160,000 CLEC access lines, serving more than 2,000 buildings.
The merger agreement is expected to be consummated during the first quarter
of 1998. Consummation of the merger agreement is subject to various customary
conditions, including receipt of necessary regulatory approvals.
On December 17, 1997 the Company entered into a definitive agreement to
acquire the stock of the Long Distance Savers group of companies ("LDS") for a
purchase price of approximately $151.0 million, of which $120.0 million is
payable in Intermedia common stock and $31.0 million is payable in cash, in
each case, subject to certain adjustments (the "LDS Acquisition"). Closing of
the LDS Acquisition, expected to occur in the first quarter of 1998, is subject
to customary conditions, including regulatory approvals, and there can be no
assurance that the LDS Acquisition will be consummated.
LDS is a regional interexchange carrier, providing long distance services and
Internet access to more than 45,000 business subscribers and employing over 100
sales and customer service professionals in Louisiana, Texas, Oklahoma,
Mississippi and Florida. LDS had revenues of $101.7 million and $82.3 million
and EBITDA of $15.0 million and $9.9 million for the year ended December 31,
1996 and the nine months ended September 30, 1997, respectively. The LDS
Acquisition will provide a significant time-to-market advantage in a region
important to Intermedia's expansion plan, while also contributing an
experienced regional management team and established sales platform. Because
LDS's service portfolio and footprint complements Intermedia's, management of
the Company believes that the LDS Acquisition also presents significant synergy
realization opportunities. By joining forces with an established operating
company with a staff of experienced sales, management and technical personnel,
Intermedia expects to expedite its entry into these Southern markets.
The Company is currently evaluating, has made offers with respect to and is
engaged in discussions regarding various acquisition opportunities. These
acquisitions could be funded by cash (including the proceeds of the December 23
Offering) and/or the Company's securities. Except as described in this
Prospectus, Intermedia is not a party to any agreement for any material
acquisition nor can there be any assurance that any such acquisition will be
consummated.
Offerings. In July 1997, the Company completed private placements (the "July
1997 Offerings") of 6,900,000 Depositary Shares (including the exercise of the
over-allotment option with respect to such Depositary Shares) (the "Series D
Depositary Shares"), each representing a one-hundredth interest in a share of
Series D Preferred Stock (the "Series D Preferred Stock"), and $649.0 million
principal amount at maturity of 11 1/4% Senior Discount Notes due 2007 (the "11
1/4% Notes") (including the exercise of the over-allotment option with respect
to such 11 1/4% Notes). The aggregate gross proceeds from the July 1997
Offerings was approximately $547.3 million.
On October 30, 1997, the Company completed private placements (the "October
30 Offerings") of 8,000,000 Depositary Shares (including exercise of the over-
allotment option with respect to such Depositary Shares, the "Depositary
Shares"), each representing a one-hundredth interest in a share of Series E
Preferred Stock (the "Series E Preferred Stock") and $260.3 million principal
amount (including the exercise of the over-allotment option with respect
thereto) of 8 7/8% Notes. The aggregate gross proceeds from the October 30
Offerings was $460.3 million.
On December 23, 1997, the Company completed a private placement of $400.0
million (including the exercise of the over-allotment option with respect
thereto) of the Old Notes. The aggregate gross proceeds from the December 23
Offering was $390.0 million.
3
<PAGE>
THE EXCHANGE OFFER
Securities Offered..........
Up to $400,000,000 principal amount of 8 1/2%
Series B Senior Notes due 2008 of the Company
(the "Senior Notes" and collectively with the Old
Notes, the "Notes"). The terms of the Senior
Notes and the Old Notes are substantially
identical in all material respects, except for
certain transfer restrictions and registration
rights relating to the Old Notes which do not
apply to the Senior Notes. See "Description of
the Senior Notes."
The Exchange Offer.......... The Company is offering to exchange $1,000
principal amount of Senior Notes for each $1,000
principal amount of Old Notes. See "The Exchange
Offer" for a description of the procedures for
tendering Old Notes. The Exchange Offer satisfies
the registration obligations of the Company under
the Registration Rights Agreement. Upon
consummation of the Exchange Offer, holders of
Old Notes that were not prohibited from
participating in the Exchange Offer and did not
tender their Old Notes will not have any
registration rights under the Registration Rights
Agreement with respect to such non-tendered Old
Notes and, accordingly, such Old Notes will
continue to be subject to the restrictions on
transfer contained in the legend thereon.
Tenders, Expiration Date;
Withdrawal.................
The Exchange Offer will expire at 5:00 p.m., New
York City time, on March 13, 1998, or such later
date and time to which it is extended. Tenders of
Old Notes pursuant to the Exchange Offer may be
withdrawn and Old Notes retendered at any time
prior to the Expiration Date. Any Old Notes not
accepted for exchange for any reason will be
returned without expense to the tendering holder
as promptly as practicable after the expiration
or termination of the Exchange Offer.
Federal Income Tax
Considerations............. The Exchange Offer will not result in any income,
gain or loss to the holders or the Company for
federal income tax purposes. See "Certain Federal
Income Tax Considerations."
Use of Proceeds.............
There will be no proceeds to the Company from the
exchange of the Old Notes for the Senior Notes
pursuant to the Exchange Offer.
Exchange Agent.............. SunTrust Bank, Central Florida, National
Association, the trustee (the "Trustee") under
the Indenture (as defined herein), is serving as
Exchange Agent in connection with the Exchange
Offer.
4
<PAGE>
CONSEQUENCES OF EXCHANGING OLD NOTES PURSUANT TO THE EXCHANGE OFFER
Generally, holders of Old Notes (other than any holder who is an "affiliate"
of the Company within the meaning of Rule 405 under the Securities Act) who
exchange their Old Notes for Senior Notes pursuant to the Exchange Offer may
offer their Senior Notes for resale, resell their Senior Notes, and otherwise
transfer their Senior Notes without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided such Senior
Notes are acquired in the ordinary course of the holders' business, such
holders have no arrangement with any person to participate in a distribution of
such Senior Notes and neither the holder nor any other person is engaging in or
intends to engage in a distribution of the Senior Notes. Each broker-dealer
that receives Senior Notes for its own account in exchange for Old Notes must
acknowledge that it will deliver a prospectus in connection with any resale of
its Senior Notes. Broker-dealers may not exchange Old Notes which are part of
an unsold original allotment in the Exchange Offer. See "Plan of Distribution."
To comply with the securities laws of certain jurisdictions, it may be
necessary to qualify for sale or register the Senior Notes prior to offering or
selling such Senior Notes. The Company is required, under the Registration
Rights Agreement, to register the Senior Notes in any jurisdiction reasonably
requested by the holders, subject to certain limitations. Upon consummation of
the Exchange Offer, holders that were not prohibited from participating in the
Exchange Offer and did not tender their Old Notes will not have any
registration rights under the Registration Rights Agreement with respect to
such non-tendered Old Notes and, accordingly, such Old Notes will continue to
be subject to the restrictions on transfer contained in the legend thereon. In
general, the Old Notes may not be offered or sold (except in private
transactions), unless registered under the Securities Act and applicable state
securities laws. See "The Exchange Offer--Consequences of Failure to Exchange".
5
<PAGE>
SUMMARY DESCRIPTION OF THE SENIOR NOTES
Securities Offered.......... Up to $400,000,000 principal amount of 8 1/2%
Series B Senior Notes due January 15, 2008 of the
Company. The terms of the Senior Notes and the
Old Notes are substantially identical in all
material aspects, except for certain transfer
restrictions and registration rights relating to
the Old Notes which do not apply to the Senior
Notes. See "Description of the Senior Notes."
Issue Price................. $1,000 stated principal amount of the Old Notes
per $1,000 stated principal amount of the Senior
Notes.
Maturity Date............... January 15, 2008.
Interest.................... Interest on the Senior Notes will accrue at 8
1/2% per annum and will be payable semi-annually
in arrears on January 15 and July 15 of each
year, commencing on July 15, 1998.
Yield....................... 8 1/2% per annum, computed on the basis of a 360
day year comprised of twelve 30-day months.
Optional Redemption......... The Senior Notes may be redeemed at the option of
the Company, in whole or in part, on or after
January 15, 2003, at a premium declining to par
in 2006, plus accrued and unpaid interest, if
any, through the redemption date.
In the event of the sale by the Company prior to
January 15, 2001 of its capital stock (other than
Disqualified Stock (as defined herein)) (i) to a
Strategic Investor (as defined herein), in a
single transaction or a series of related
transactions, for an aggregate purchase price
equal to or exceeding $50.0 million or (ii) in
one or more Public Offerings (as defined herein)
of Common Stock, up to a maximum of 25% of the
aggregate principal amount of the Notes
originally issued will, at the option of the
Company, be redeemable from the net cash proceeds
of such sale (but only to the extent such
proceeds consist of cash or readily marketable
cash equivalents received in respect of the
capital stock (other than Disqualified Stock) so
sold) at a redemption price equal to 108.50% of
the principal amount thereof, with respect to the
Notes to be redeemed on the redemption date,
provided that at least 75% of the aggregate
principal amount of Notes originally issued
remains outstanding immediately after the
occurrence of such redemption.
Change of Control........... In the event of a Change of Control (as defined
herein) the holders of the Senior Notes will have
the right to require the Company to purchase
their Senior Notes at a price equal to 101% of
the aggregate principal amount thereof, plus
accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase.
Ranking..................... The Senior Notes will be senior obligations of
the Company, will rank pari passu in right of
payment with all existing and future senior
indebtedness of the Company, including the
Existing Senior
6
<PAGE>
Notes and the Old Notes, and will rank senior in
right of payment to any future subordinated
indebtedness of the Company. Holders of secured
indebtedness of the Company will, however, have
claims that are prior to the claims of the
holders of the Senior Notes with respect to the
assets securing such other indebtedness. As of
September 30, 1997, on a pro forma basis after
giving effect to the issuance of the 8 7/8%
Notes, the December 23 Offering and the pending
acquisition of Shared Technologies, the Company
would have had approximately $1.4 billion of
indebtedness and other liabilities, including
trade payables outstanding, which includes
approximately $71.0 million of indebtedness and
other liabilities of the Company's subsidiaries.
Certain Covenants...........
The indenture governing the Senior Notes (the
"Indenture") 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 preferred stock, pay
dividends or make other distributions, repurchase
equity interests or subordinated indebtedness,
engage in sale and leaseback transactions, create
certain liens, enter into certain transactions
with affiliates, sell assets of the Company or
its subsidiaries, conduct certain lines of
business, issue or sell equity interests of the
Company's subsidiaries or enter into certain
mergers and consolidations. In addition, under
certain circumstances, the Company will be
required to offer to purchase the Senior Notes at
a price equal to 100% of the principal amount
thereof, plus accrued and unpaid interest, if
any, to the date of purchase, with the proceeds
of certain asset sales. See "Description of the
Senior Notes."
For additional information regarding the Senior Notes and the definitions of
certain capitalized terms used above, see "Description of the Senior Notes."
7
<PAGE>
SUMMARY FINANCIAL AND OTHER OPERATING DATA
Statement of operations and balance sheet data presented below as of and for
the five years in the period ended December 31, 1996 have been derived from the
consolidated financial statements of the Company, which financial statements
have been audited by Ernst & Young LLP, independent certified public
accountants. The summary financial data presented below as of and for the
quarters ended September 30, 1996 and 1997 have been derived from unaudited
financial statements of the Company. In the opinion of management, the
unaudited financial statements have been prepared on the same basis as the
audited financial statements and include all adjustments, which consist only of
normal recurring adjustments, necessary for a fair presentation of the
financial position and the results of operations for these periods. Operating
results for the nine months ended September 30, 1997 are not necessarily
indicative of the results that may be expected for the full year.
The operating results of EMI Communications Corp. ("EMI") are included in the
Company's consolidated operating results commencing July 1, 1996. The operating
results of Universal Telecom Inc. ("UTT") and NetSolve Incorporated
("NetSolve") are included in the Company's consolidated operating results
commencing December 1, 1996. The operating results of DIGEX are included in the
Company's consolidated operating results commencing July 1, 1997. The 1996 pro
forma operating information gives effect to the EMI, UTT, NetSolve and DIGEX
acquisitions and the pending acquisition of Shared Technologies as if they
occurred on January 1, 1996. The 1997 pro forma operating information gives
effect to the DIGEX Acquisition and the pending acquisition of Shared
Technologies as if they occurred on January 1, 1997. Both 1996 and 1997 pro
forma operating information give effect to the March 1997 sale of $300 million
of 13 1/2% Series A Redeemable Exchangeable Preferred Stock, the July 1997
Offerings, the October 30 Offerings and the December 23 Offering as if they
occurred at the beginning of the respective periods. The following financial
information should be read in conjunction with "Business" and the Consolidated
Financial Statements of the Company and the Notes thereto which are
incorporated herein by reference.
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND STATISTICAL DATA)
<TABLE>
<CAPTION>
PRO FORMA(2)
PRO FORMA(1) NINE MONTHS NINE MONTHS
YEAR ENDED ENDED ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
-------------------------------------------- ------------ ------------------- -------------
1992 1993 1994 1995 1996 1996 1996 1997 1997
------ ------- ------- -------- -------- ------------ -------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS:
Revenues.............. $7,030 $ 8,292 $14,272 $ 38,631 $103,397 $ 324,885 $ 64,333 $ 165,317 $ 326,742
Costs and Expenses:
Facilities
administration and
maintenance and line
costs................ 1,760 2,843 5,396 22,989 81,105 210,595 49,044 200,241 269,600
Selling, general and
administrative....... 2,607 3,893 6,412 14,993 36,610 99,396 23,884 64,983 134,651
Depreciation and
amortization......... 2,190 3,020 5,132 10,196 19,836 79,863 12,069 34,274 79,899
------ ------- ------- -------- -------- --------- -------- --------- ---------
6,557 9,756 16,940 48,178 137,551 389,854 84,997 299,498 484,150
------ ------- ------- -------- -------- --------- -------- --------- ---------
Income (loss) from
operations........... 473 (1,464) (2,668) (9,547) (34,154) (64,969) (20,664) (134,181) (157,408)
Other income (expense)
Interest expense..... (1,031) (844) (1,218) (13,767) (35,213) (129,673) (24,179) (39,895) (107,581)
Interest and other
income.............. 323 234 819 4,060 12,168 (3,912) 9,201 16,691 (210)
Income tax benefit... -- -- -- 97 -- (783) -- -- (214)
------ ------- ------- -------- -------- --------- -------- --------- ---------
Loss before
extraordinary item.. (235) (2,074) (3,067) (19,157) (57,199) (199,337) (35,642) (157,385) (265,413)
Extraordinary loss on
early extinguishment
of debt............. -- -- -- (1,592) -- (311) -- (43,834) (43,834)
------ ------- ------- -------- -------- --------- -------- --------- ---------
Net loss............ $ (235) $(2,074) $(3,067) $(20,749) $(57,199) $(199,648) $(35,642) $(201,219) $(309,247)
Preferred stock
dividends and
accretions........... (267) -- -- -- -- (71,851) -- (27,118) (53,135)
------ ------- ------- -------- -------- --------- -------- --------- ---------
Net loss attributable
to common
stockholders......... $ (502) $(2,074) $(3,067) $(20,749) $(57,199) $(271,499) $(35,642) $(228,337) $(362,382)
====== ======= ======= ======== ======== ========= ======== ========= =========
Net loss per common
share:
Loss before
extraordinary item.. $ (.10) $ (.29) $ (.34) $ (1.91) $ (4.08) $ (18.68) $ (2.69) $ (11.21) $ (19.35)
Extraordinary loss... -- -- -- (.16) -- (0.02) -- (2.66) (2.66)
------ ------- ------- -------- -------- --------- -------- --------- ---------
Net loss............. $ (.10) $ (.29) $ (.34) $ (2.07) $ (4.08) $ (18.70) $ (2.69) $ (13.87) $ (22.01)
====== ======= ======= ======== ======== ========= ======== ========= =========
Weighted average
number of shares
outstanding.......... 4,797 7,077 8,956 10,036 14,018 14,518 13,243 16,463 16,463
OTHER DATA:
Book value per common
share................ 3.09 5.18 5.39 3.89 7.01
Ratio of earnings to
combined fixed
charges and preferred
stock dividends(3)... -- -- -- -- -- -- -- -- --
Earnings before
interest, income
taxes, depreciation
and amortization
("EBITDA")(4)........ $2,663 $ 1,556 $ 2,464 $ 649 $(14,318) $ 14,894 $ (8,596) $ (99,907) $ (77,509)
Capital expenditures,
including
acquisitions of
businesses, net of
cash acquired........ $8,818 $10,486 $13,731 $ 31,915 $143,615 $ 309,391 $ 80,810 $ 328,861 $ 339,469
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
--------------------------------- -------------
1992 1993 1994 1995 1996 1996 1997
----- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
NETWORK DATA:(5)
Buildings connected(6)........ 161 234 293 380 487 429 2,703
Route miles................... 240 335 378 504 655 647 762
Fiber miles................... 6,184 10,239 11,227 17,128 24,122 23,763 33,801
Number of city-based networks
in service................... 4 5 6 9 9 9 10
ENHANCED DATA SERVICES:(5)
Nodes(7)...................... -- 100 900 2,300 9,500 8,462 17,286
Cities(8)..................... -- 37 336 600 2,200 1,134 3,787
Switches...................... -- 4 12 31 89 76 130
EMPLOYEES(5)................... 49 58 146 287 874 724 1,820
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,(9)
----------------------------------------- ------------- ----------------
1992 1993 1994 1995 1996 1997 1997
------- ------- ------- -------- -------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents(10)....... $ 1,775 $27,954 $10,208 $ 50,997 $189,546 $ 471,101 $ 547,279
Working capital(11).... 8,999 25,712 9,588 70,353 206,029 449,648 530,654
Total assets........... 36,174 61,219 74,086 216,018 512,940 1,086,185 1,978,822
Long-term obligations
and redeemable
preferred stock
(including current
maturities)........... 11,742 11,614 16,527 165,545 358,508 1,101,372 1,959,033
Total stockholders'
equity................ 21,257 45,987 52,033 40,254 114,230 (90,771) (90,771)
</TABLE>
- --------
1. The pro forma operating information gives effect to the EMI, UTT and
NetSolve acquisitions, which occurred effective June 30, 1996, December 1,
1996 and December 1, 1996, respectively, and the DIGEX Acquisition and the
pending acquisition of Shared Technologies as if they occurred on January
1, 1996. The pro forma operating information also gives effect to the March
1997 sale of $300 million of 13 1/2% Series A Redeemable Exchangeable
Preferred Stock, the July 1997 Offerings, the October 30 Offerings and the
December 23 Offering.
2. The pro forma operating information gives effect to the DIGEX Acquisition
and the pending acquisition of Shared Technologies as if they occurred on
January 1, 1997. The pro forma operating information also gives effect to
the March 1997 sale of $300 million of 13 1/2% Series A Redeemable
Exchangeable Preferred Stock, the July 1997 Offerings, the October 30
Offerings and the December 23 Offering.
3. For purposes of calculating the ratio of earnings to combined fixed charges
and preferred stock dividends: (i) earnings consist of loss before income
taxes, plus fixed charges excluding capitalized interest and preferred
stock dividends and (ii) fixed charges consist of interest expensed and
capitalized, plus amortization of deferred financing costs, preferred stock
dividends, plus a portion of rent expense under operating leases deemed by
the Company to represent an interest factor. For the years ended December
31, 1992, 1993, 1994, 1995 and 1996 and the quarters ended September 30,
1996 and 1997 the Company's earnings were insufficient to cover combined
fixed charges and preferred stock dividends by $622, $2,288, $3,324,
$19,931, $59,978, $37,582 and $187,031, respectively. For the year ended
December 31, 1996 and the quarter ended September 30, 1997, the Company's
pro forma earnings, after giving effect to the acquisitions and the
offerings described in Notes 1 and 2 above, were insufficient by $273,968
and $321,076 respectively, to cover pro forma combined fixed charges and
preferred stock dividends.
4. EBITDA consists of earnings before interest, income taxes, depreciation,
and amortization. In addition, 1995 and 1997 EBITDA excludes extraordinary
charges of $1,592 and $43,834, respectively, related to the early
extinguishment of debt. EBITDA is provided in the Summary of Financial and
Other Operating Data since it is a measure commonly used in the
telecommunications industry to measure operating performance, asset value
and financial leverage. It is presented to enhance the reader's
understanding of the Company's operating results and is not intended to
present cash flow for the periods presented. See the Consolidated
Statements of Cash Flows included in the Company's Consolidated Financial
Statements and the Notes thereto included elsewhere in this Prospectus.
5. Amounts as reflected in the table are based upon information contained in
the Company's operating records.
6. Beginning in January 1997, the Company changed its definition of "Buildings
connected" to include buildings connected to the Company's network via
leased facilities controlled by the Company in addition to those connected
to the Company's network via facilities constructed by the Company. The
Company believes the new definition is consistent with industry practice.
7. Amount represents an individual point of origin and termination of data
served by the Company's enhanced data network. In the opinion of management
of the Company, all node numbers are appropriate.
8. Represents the number of discrete postal cities to which enhanced data
services are provided by the Company.
9. Gives effect to the October 30 Offerings, the December 23 Offering and the
pending Shared Technologies acquisition.
10. Cash and cash equivalents excludes investments of $20,954, $26,675, and
$6,351 for the years ended December 31, 1995 and 1996 and the quarter ended
September 30, 1997, respectively, restricted under the terms of various
notes and other agreements.
11. Working capital includes the restricted investments referred to in Note 10
above.
9
<PAGE>
RISK FACTORS
In addition to other information set forth elsewhere in this Prospectus,
before tendering their Old Notes for Senior Notes, holders should consider
carefully the following factors which (other than "Consequences of Failure to
Exchange") are generally applicable to the Old Notes as well as to the Senior
Notes.
Consequences of Failure to Exchange. Upon consummation of the Exchange
Offer, holders of Old Notes that were not prohibited from participating in the
Exchange Offer and did not tender their Old Notes will not have any
registration rights under the Registration Rights Agreement with respect to
such non-tendered Old Notes and, accordingly, such Old Notes will continue to
be subject to the restrictions on transfer contained in the legend thereon. In
general, the Old Notes may not be offered or sold, unless registered under the
Securities Act and applicable state securities laws, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not intend to register the
Old Notes under the Securities Act.
Based on interpretations by the Staff of the SEC with respect to similar
transactions, the Company believes that Senior Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold or
otherwise transferred by holders (other than any holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act provided that the Senior Notes are acquired
in the ordinary course of the holders' business, the holders have no
arrangement with any person to participate in the distribution of the Senior
Notes and neither the holder nor any other person is engaging in or intends to
engage in a distribution of the Senior Notes. Each broker-dealer that receives
Senior Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
the Senior Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Senior Notes received in
exchange for Old Notes acquired by the broker-dealer as a result of market-
making activities or other trading activities. Broker-Dealers may not exchange
Old Notes which are part of an unsold original allotment in the Exchange
Offer. The Company has agreed that, for a period of 365 days after the
Exchange Date, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale of the Senior Notes. See "Plan of
Distribution." The Senior Notes may not be offered or sold unless they have
been registered or qualified for sale under applicable state securities laws
or an exemption from registration or qualification is available and is
complied with. The Registration Rights Agreement requires the Company to
register or qualify the Senior Notes for resale in any state as may be
reasonably requested by their holders, subject to certain limitations.
Substantial Indebtedness; Insufficiency of Earnings to Cover Fixed
Charges. The Company is highly leveraged. At September 30, 1997, after giving
pro forma effect to the October 30 Offerings and the December 23 Offering, and
the application of the net proceeds therefrom and the pending acquisition of
Shared Technologies, the Company would have had outstanding approximately $1.4
billion in aggregate principal amount of indebtedness and other liabilities on
a consolidated basis (including trade payables), approximately $312.0 million
of obligations with respect to dividend payments and the mandatory redemption
of the 13 1/2% Series B Redeemable Exchangeable Preferred Stock due 2009 (the
"Series B Preferred Stock") and $170.1 and $193.7 million of obligations with
respect to the Series D Preferred Stock and the Series E Preferred Stock,
respectively. The degree to which the Company is leveraged could have
important consequences to holders of the Senior Notes, including the
following: (i) a substantial portion of the Company's cash flow from
operations will be dedicated to payment of the principal and interest on its
indebtedness, to payment of dividends on and the redemption of the Series B
Preferred Stock and the payment of dividends on the Series D Preferred Stock
and Series E Preferred Stock, thereby reducing funds available for other
purposes; (ii) the Company's significant degree of leverage could increase its
vulnerability to changes in general economic conditions or increases in
prevailing interest rates; (iii) the Company's ability to obtain additional
financing for working capital, capital expenditures, acquisitions, general
corporate purposes or other purposes could be impaired; and (iv) the Company
may be more leveraged than certain of its competitors, which may be a
competitive disadvantage.
10
<PAGE>
The Company's historical earnings have been insufficient to cover combined
fixed charges and dividends on preferred stock by $0.6 million, $2.3 million,
$3.3 million, $19.8 million and $60.0 million for each of the years ended
December 31, 1992, 1993, 1994, 1995 and 1996, respectively. Combined fixed
charges and dividends include interest and dividends whether paid or accrued.
In addition, insufficiencies of $37.6 million and $187.0 million were
experienced in the nine-month periods ended September 30, 1996 and 1997,
respectively. On a pro forma basis, after giving effect to the DIGEX, EMI,
NetSolve and UTT acquisitions, and the pending Shared Technologies
acquisition, and the March 1997 offerings, July 1997 Offerings, October 30
Offerings and the December 23 Offering, the Company's earnings were
insufficient to cover combined fixed charges and dividends on preferred stock
by $274.0 million for the year ended December 31, 1996 and by $321.1 million
for the nine months ended September 30, 1997. The Company anticipates that
earnings will be insufficient to cover fixed charges for the next several
years. In order for the Company to meet its debt service obligations, its
dividend and redemption obligations with respect to the Series B Preferred
Stock and its dividend obligations with respect to the Series D Preferred
Stock and Series E Preferred Stock, the Company will need to substantially
improve its operating results. There can be no assurance that the Company's
operating results will be of sufficient magnitude to enable the Company to
meet such debt service, dividend and redemption obligations. In the absence of
such operating results, the Company could face substantial liquidity problems
and might be required to raise additional financing through the issuance of
debt or equity securities; however, there can be no assurance that Intermedia
would be successful in raising such financing, or the terms or timing thereof.
Effective Subordination of the Senior Notes. The Senior Notes are not
secured by any of the assets of the Company. Holders of secured indebtedness
of the Company will have claims that are prior to the claims of the holders of
the Senior Notes to the extent of the assets securing such other indebtedness.
The Indenture, the indenture governing the 8 7/8% Notes (the "8 7/8% Notes
Indenture"), the indenture governing the 12 1/2% Notes (the "12 1/2% Notes
Indenture") and the indenture governing the 11 1/4% Notes (the "11 1/4% Notes
Indenture" and together with the 8 7/8% Notes Indenture and the 12 1/2% Notes
Indenture, the "Existing Senior Note Indentures") permit certain indebtedness
of the Company to be secured. In addition, the Senior Notes will be
effectively subordinated to $71.0 million of indebtedness and other
liabilities and commitments (including trade payables) of the Company's
subsidiaries. The Company has had preliminary discussions with several banks
regarding the establishment of a senior credit facility. Such credit facility
may be secured by a substantial portion of the assets of the Company.
Therefore, the Notes would be effectively subordinated to such senior credit
facility to the extent of such security. There can be no assurance that the
Company will be successful in negotiating such a senior credit facility.
Risks Associated with Acquisitions. The Company intends to use the net
proceeds of the December 23 Offering to expand its networks and service
offerings through internal development and, possibly, acquisitions. Such
acquisitions, if made, could divert the resources and management time of the
Company and would require integration with the Company's existing networks and
services. There can be no assurance that the pending acquisitions of Shared
Technologies and LDS will be consummated or that any such other acquisitions
will occur or that any such acquisitions, including the pending acquisitions
of Shared Technologies and LDS, if made, would be on terms favorable to the
Company or would be successfully integrated into the Company's operations.
Consistent with its strategy, the Company is currently evaluating, has made
offers with respect to, and is engaged in discussions regarding various
acquisition opportunities. These acquisitions could be funded by cash
(including the proceeds of the December 23 Offering) and/or the Company's
securities. It is possible that one or more of such possible future
acquisitions, if completed, could adversely affect the Company's funds from
operations or cash available for distribution, in the short term or the long
term or both, or increase the Company's debt, or such an acquisition could be
followed by a decline in the market value of the Company's securities.
On November 20, 1997, Intermedia, Moonlight Acquisition Corp., a wholly-
owned subsidiary of Intermedia, and Shared Technologies signed a definitive
merger agreement pursuant to which holders of Shared Technologies common stock
would receive $15.00 per share in cash upon consummation of the merger. In
connection with the proposed acquisition of Shared Technologies and in
anticipation of Shared Technologies becoming a "Restricted Subsidiary" within
the meaning of the Indenture, the Existing Note Indentures and the
11
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Series B Certificate of Designation, the Company purchased certain equity
interests and certain notes issued by Shared Technologies. See "Recent
Developments -- Acquisitions." If the proposed acquisition of Shared
Technologies is not consummated before May 11, 1998 and, as a result, Shared
Technologies does not become a Restricted Subsidiary of the Company, an Event
of Default may occur under the terms of each of the Existing Note Indentures,
the Indenture and the Series B Certificate of Designation (as defined herein)
unless the Company disposes of its investment in Shared Technologies without a
loss or holds its investment through an Unrestricted Subsidiary. If such an
event of default occurs, upon receipt of notice from the trustee under each of
the Existing Note Indentures or the Senior Note Indenture or the holders of at
least 25% of the outstanding principal amounts of the Existing Senior Notes or
the Senior Notes, acceleration of the Existing Senior Notes and the Senior
Notes, respectively, would result. The occurrence of an Event of Default would
not lead to the acceleration of the Series B Preferred Stock. If all of the
Existing Senior Notes and the Senior Notes were accelerated, the Company would
not have sufficient funds available to repay the Existing Senior Notes and the
Senior Notes, unless it could arrange a refinancing of the Existing Senior
Notes and the Senior Notes.
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 and expects to consummate additional acquisitions during the current
fiscal year. In connection therewith, the Company may not have obtained, 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.
Effect of Substantial Additional Indebtedness on the Company's Ability to
Repay the Senior Notes. The Indenture, the Existing Senior Notes Indentures
and the Series B Certificate of Designation limit, but do not prohibit, the
incurrence of additional indebtedness by the Company and its subsidiaries, and
the Company may incur substantial additional indebtedness during the next few
years to finance the construction of networks and purchase of network
electronics, including local/long distance voice and data switches. In
addition, the Company may establish a bank credit facility which may be
secured by a substantial portion of the assets of the Company. Additional
indebtedness of the Company, including any indebtedness under a bank credit
facility may rank pari passu with or effectively senior (if secured) to, the
Senior Notes. See "Description of the Senior Notes." The debt service
requirements of any additional indebtedness could make it more difficult for
the Company to make principal and interest payments on the Senior Notes. No
guarantees have been issued with respect to the Senior Notes; thus the
Company's subsidiaries are not directly obligated under the Senior Notes.
Earnings generated by any of the Company's subsidiaries, as well as the
existing assets of such subsidiaries, will have to be used first by such
subsidiaries to fulfill their debt service requirements. See "--Effective
Subordination of the Senior Notes."
Regulatory Approval of the Offering. Nine of the states in which the Company
is certificated provide for prior approval or notification of the issuance of
securities by the Company. Because of time constraints, the Company did not
expect to have obtained such approval from any of the nine states prior to
consummation of the December 23 Offering. The requirements for these filings
may have been pre-empted by the National Securities Market Improvement Act of
1996, although there is no case law on this point. The Company has filed the
necessary notifications and applications for approval in these states. After
consultation with counsel, the Company believes the approvals will be granted
and that seeking such approvals subsequent to the December 23 Offering should
not result in any material adverse consequences to the Company, although there
can be no assurance that such a consequence will not result.
Maintenance of Peering Relationships. The Internet is comprised of many ISPs
who operate their own networks and interconnect with other ISPs at various
peering points. The establishment and maintenance of peering relationships
with other ISPs is necessary in order to exchange traffic with other ISPs
without having to pay settlement charges. Although the Company meets the
industries current standards for peering, there is no assurance that other
national ISPs will maintain peering relationships with the Company. In
addition, there may develop increasing requirements associated with
maintaining peering with the major national ISPs with which
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the Company may have to comply. There can be no assurance that the Company
will be able to expand or adapt its network infrastructure to meet the
industry's evolving standards on a timely basis, at a commercially reasonable
cost, or at all.
Potential Liability of On-Line Service Providers. The law in the United
States relating to the liability of on-line service providers and ISPs for
information carried on, disseminated through or hosted on their systems is
currently unsettled. Several private lawsuits seeking to impose such liability
are currently pending. In one case brought against an ISP, Religious
Technology Center v. Netcom On-Line Communication Services, Inc., the United
States District Court for the Northern District of California ruled in a
preliminary phase that under certain circumstances ISPs could be held liable
for copyright infringement. The 1996 Act prohibits and imposes criminal
penalties for using an interactive computer service to transmit certain types
of information and content, such as indecent or obscene communications. On
June 26, 1997, the Supreme Court affirmed the decision of a panel of three
federal judges which granted a preliminary injunction barring enforcement of
this portion of the 1996 Act to the extent that enforcement is based upon
allegations other than obscenity or child pornography as an impermissible
restriction on the First Amendment's right of free speech. In addition,
numerous states have adopted or are currently considering similar types of
legislation. The imposition upon ISPs or Web hosting sites of potential
liability for materials carried on or disseminated through their systems could
require the Company to implement measures to reduce its exposure to such
liability, which may require the expenditure of substantial resources or the
discontinuation of certain product or service offerings. The Company believes
that it is currently unsettled whether the 1996 Act prohibits and imposes
liability for any services provided by the Company should the content or
information transmitted be subject to the statute. The increased attention
focused upon liability issues as a result of these lawsuits, legislation and
legislative proposals could affect the growth of Internet use. Any such
liability or asserted liability could have a material adverse effect on the
Company's business, financial condition and results of operations.
Dependence upon Network Infrastructure; Risk of System Failure; Security
Risks. The Company's success in marketing its services to business and
government users requires that the Company provide superior reliability,
capacity and security via its network infrastructure. The Company's networks
are subject to physical damage, power loss, capacity limitations, software
defects, breaches of security (by computer virus, break-ins or otherwise) and
other factors, certain of which have caused, and will continue to cause,
interruptions in service or reduced capacity for the Company's customers.
Similarly, the Company's ISP business relies on the availability of its
network infrastructure for the provision of Internet connectivity.
Interruptions in service, capacity limitations or security breaches could have
a material adverse effect on the Company's business, financial condition and
results of operations.
Absence of a Public Market for the Notes. The Senior Notes are a new issue
of securities. The Company does not intend to apply for listing of the Senior
Notes 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 Senior Notes, they are not obligated to do so and any
such market-making may be discontinued at any time without notice.
Accordingly, there can be no assurance as to the liquidity or continuation of
any market for the Senior Notes. The Senior Notes 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 Senior Notes has been subject to disruptions that have
caused substantial volatility in the prices of similar securities. There can
be no assurance that the market for the Senior Notes would not be subject to
similar disruptions.
Certain Tax Considerations. For a discussion of certain material federal
income tax considerations which are relevant to the purchase, ownership and
disposition of the Senior Notes, see "Certain Federal Income Tax
Consequences."
Limited Operations of Certain Services; History of Net Losses. The Company's
business commenced in 1987. Substantially all of the Company's revenues are
derived from local exchange services, enhanced data services, long distance
services, integration services and certain local network services. Many of
these services
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have only recently been initiated or their availability only recently expanded
in new market areas. The Company is expecting to substantially increase the
size of its operations in the near future. Prospective investors, therefore,
have limited historical financial information about the Company upon which to
base an evaluation of the Company's performance. Given the Company's limited
operating history, there is no assurance that it will be able to compete
successfully in the telecommunications business.
The development of the Company's business and the expansion of its networks
require significant capital, operational and administrative expenditures, a
substantial portion of which are incurred before the realization of revenues.
These capital expenditures will result in negative cash flow until an adequate
customer base is established. Although its revenues have increased in each of
the last three years, Intermedia has incurred significant increases in
expenses associated with the installation of local/long distance voice
switches and expansion of its fiber optic networks, services and customer
base. Intermedia reported net losses of approximately $3.1 million, $20.7
million and $57.2 million for the years ended December 31, 1994, 1995 and 1996
and net losses of $201.2 million for the nine months ended September 30, 1997,
respectively. The Company anticipates recording a significant net loss in 1997
that is expected to be substantially greater than the loss in 1996 and expects
net losses to continue for the next several years. In addition, the Company
expects to have negative EBITDA in 1997. There can be no assurance that
Intermedia will achieve or sustain profitability or positive EBITDA in the
future.
Class Action by DIGEX Stockholders. On June 5, 1997, the Company announced
that it had agreed to acquire 100% of the outstanding equity of DIGEX. 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 the consummation of the Merger on July 11, 1997. In
addition, the Complaints seek cash damages from the DIGEX Directors. In August
1997, a motion to dismiss the Complaints was filed on behalf of Intermedia,
DIGEX and the DIGEX Directors. The action has been dormant since that time.
These cases are in their very early stages and no assurance can be given as
to their ultimate outcome. Intermedia, after consultation with its counsel,
believes that there are meritorious factual and legal defenses to the claims
in the Complaints. Intermedia intends to defend vigorously the claims in the
Complaints.
Significant Capital Requirements and Need for Additional
Financing. Expansion of the Company's existing networks and services and the
development of new networks and services require significant capital
expenditures. Intermedia expects to fund its capital requirements through
existing resources, joint ventures, debt or equity financing (including
capital raised through the December 23 Offering), credit availability and
internally generated funds. The Company expects that continued expansion of
its business will require raising substantial equity and/or debt by the end of
fiscal 1999. Depending on market conditions, the Company may determine to
raise additional capital before such time. There can be no assurance, however,
that Intermedia will be successful in raising sufficient debt or equity on
terms that it will consider acceptable. Moreover, the Indenture, the Existing
Senior Note Indentures, the Certificate of Designation setting forth the
rights of the Series B Preferred Stock (the "Series B Certificate of
Designation"), the Certificate of Designation setting forth the rights of the
Series D Preferred Stock, and the Certificate of Designation setting forth the
rights of the Series E Preferred Stock impose certain restrictions upon the
Company's ability to incur additional indebtedness or issue additional
preferred
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stock. In addition, the Company's future capital requirements will depend upon
a number of factors, including marketing expenses, staffing levels and
customer growth, as well as other factors that are not within the Company's
control, such as competitive conditions, government regulation and capital
costs. Failure to generate sufficient funds may require Intermedia to delay or
abandon some of its future expansion or expenditures, which would have a
material adverse effect on its growth and its ability to compete in the
telecommunications industry.
Expansion Risk. The Company is experiencing a period of rapid expansion
which management expects will increase in the near future. This growth has
increased the operating complexity of the Company as well as the level of
responsibility for both existing and new management personnel. The Company's
ability to manage its expansion effectively will require it to continue to
implement and improve its operational and financial systems and to expand,
train and manage its employee base. The Company's inability to effectively
manage its expansion could have a material adverse effect on its business.
A portion of the Company's expansion may occur through acquisitions as an
alternative to direct investments in the assets required to implement the
expansion. No assurance can be given that suitable acquisitions can be
identified, financed and completed on acceptable terms, or that the Company's
future acquisitions, if any, will be successful or will not impair the
Company's ability to service its outstanding obligations.
Risks of Implementation; Need to Obtain Permits and Rights of Way. The
Company is continuing to expand its existing networks. The Company has
identified other expansion opportunities in the eastern half of the United
States and is currently extending the reach of its networks to pursue such
opportunities. There can be no assurance that the Company will be able to
expand its existing networks or construct or acquire new networks as currently
planned on a timely basis. The expansion of the Company's existing networks
and its construction or acquisition of new networks will be dependent, among
other things, on its ability to acquire rights-of-way and any required permits
on satisfactory terms and conditions and on its ability to finance such
expansion, acquisition and construction. In addition, the Company may require
pole attachment agreements with utilities and ILECs to operate existing and
future networks, and there can be no assurance that such agreements will be
obtained or obtainable on reasonable terms. These factors and others could
adversely affect the expansion of the Company's customer base on its existing
networks and commencement of operations on new networks. If the Company is not
able to expand, acquire or construct its networks in accordance with its
plans, the growth of its business would be materially adversely affected.
Competition. In each of its markets, the Company faces significant
competition for the local network services, including local exchange services,
it offers from ILECs, which currently dominate their local telecommunications
markets. ILECs have long-standing relationships with their customers which
relationships may create competitive barriers. Furthermore, ILECs may have the
potential to subsidize competitive service from monopoly service revenues. In
addition, a continuing trend toward business combinations and alliances in the
telecommunications industry may create significant new competitors to the
Company. The Company also faces competition in most markets in which it
operates from one or more ICPs and ILECs operating fiber optic networks. In
addition, the Company faces competition in its integration services business
from equipment manufacturers, the RBOCs and other ILECs, long distance
carriers and systems integrators, and in its enhanced data services business
(including Internet) from local telephone companies, long distance carriers,
very small aperture terminal ("VSAT") providers, other ISPs and others. In
particular, the market for Internet services is extremely competitive and
there are limited barriers to entry. Many of the Company's existing and
potential competitors have financial, personnel and other resources
significantly greater than those of the Company.
The Company believes that various legislative initiatives, including the
recently enacted 1996 Act, have removed remaining legislative barriers to
local exchange competition. Nevertheless, in light of the passage of the 1996
Act, regulators are also likely to provide ILECs with increased pricing
flexibility as competition increases. If ILECs are permitted to lower their
rates substantially or engage in excessive volume or term discount pricing
practices for their customers, the net income or cash flow of ICPs and CLECs,
including the
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Company, could be materially adversely affected. In addition, while the
Company currently competes with AT&T, MCI and others in the interexchange
services market, the recent federal legislation permits the RBOCs to provide
interexchange services once certain criteria are met. Once the RBOCs begin to
provide such services, they will be in a position to offer single source
service similar to that being offered by Intermedia. 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. If that decision is permitted to stand, it could result in RBOCs
providing interexchange service in their operating regions sooner than
previously expected. See "Business--Recent Developments--Regulatory Changes."
In addition, AT&T and MCI have entered and other interexchange carriers have
announced their intent to enter into the local exchange services market, which
is facilitated by the 1996 Act's resale and unbundled network element
provisions. The Company cannot predict the number of competitors that will
emerge as a result of existing or new federal and state regulatory or
legislative actions. Competition from the RBOCs with respect to interexchange
services or from AT&T, MCI or others with respect to local exchange services
could have a material adverse effect on the Company's business.
Regulation. The Company is subject to varying degrees of federal, state and
local regulation. The Company is not currently subject to price cap or rate of
return regulation at the state or federal level, nor is it currently required
to obtain FCC authorization for the installation, acquisition or operation of
its interstate network facilities. Further, the FCC issued an order holding
that non-dominant carriers, such as the Company, are required to withdraw
interstate tariffs for domestic long distance service. That order has been
stayed by a federal appeals court and it is not clear at this time whether the
detariffing order will be implemented. Until further action is taken by the
court, the Company will continue to maintain tariffs for these services. In
June 1997, the FCC issued another order stating that non-dominant carriers,
such as the Company, could withdraw their tariffs for interstate access
services. While the Company has no immediate plans to withdraw its tariff,
this FCC order allows the Company to do so. The FCC also requires the Company
to file interstate tariffs on an ongoing basis for international traffic. The
Company is generally subject to certification or registration and tariff or
price list filing requirements for intrastate services by state regulators.
Although passage of the 1996 Act should result in increased opportunities for
companies that are competing with the ILECs, no assurance can be given that
changes in current or future regulations adopted by the FCC or state
regulators or other legislative or judicial initiatives relating to the
telecommunications industry would not have a material adverse effect on the
Company. In addition, although the 1996 Act provides incentives to the ILECs
that are subsidiaries of RBOCs to enter the long distance service market by
requiring ILECs to negotiate interconnection agreements with local
competitors, there can be no assurance that these ILECs will negotiate quickly
with competitors such as the Company for the required interconnection of the
competitor's networks with those of the ILECs or that the terms of such
agreements will be favorable.
Potential Diminishing Rate of Growth. During the period from 1994 through
1996, the Company's revenues grew at a compound annual growth rate of 169%.
While the Company expects to continue to grow, as its size increases it is
likely that its rate of growth will diminish.
Risk of New Service Acceptance by Customers. The Company has recently
introduced a number of services, primarily local exchange services, that the
Company believes are important to its long-term growth. The success of these
services will be dependent upon, among other things, the willingness of
customers to accept the Company as the provider of such services. No assurance
can be given that such acceptance will occur; the lack of such acceptance
could have a material adverse effect on the Company.
Rapid Technological Changes. The telecommunications industry is subject to
rapid and significant changes in technology. While Intermedia believes that,
for the foreseeable future, these changes will neither materially affect the
continued use of its fiber optic networks nor materially hinder its ability to
acquire necessary technologies, the effect on the business of Intermedia of
technological changes such as changes relating to emerging wireline and
wireless transmission technologies, including software protocols, cannot be
predicted.
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Dependence on Key Personnel. The Company's business is managed by a small
number of key management and operating personnel, the loss of certain of whom
could have a material adverse impact on the Company's business. The Company
believes that its future success will depend in large part on its continued
ability to attract and retain highly skilled and qualified personnel. None of
the Company's key executives, other than David C. Ruberg, President, Chief
Executive Officer and Chairman of the Board, is a party to a long-term
employment agreement with the Company.
Risk of Cancellation or Non-Renewal of Network Agreements, Licenses and
Permits. The Company has lease and/or purchase agreements for rights-of-way,
utility pole attachments, conduit and dark fiber for its fiber optic networks.
Although the Company does not believe that any of these agreements will be
cancelled in the near future, cancellation or non-renewal of certain of such
agreements could materially adversely affect the Company's business in the
affected metropolitan area. In addition, the Company has certain licenses and
permits from local government authorities. The 1996 Act requires that local
government authorities treat telecommunications carriers in a competitively
neutral, non-discriminatory manner, and that most utilities, including most
ILECs and electric companies, afford alternative carriers access to their
poles, conduits and rights-of-way at reasonable rates on non-discriminatory
terms and conditions. There can be no assurance that the Company will be able
to maintain its existing franchises, permits and rights or to obtain and
maintain the other franchises, permits and rights needed to implement its
strategy on acceptable terms.
Dependence on Business from Interexchange Carriers ("IXCs"). For the year
ended December 31, 1996, approximately 10% of the Company's consolidated
revenues were attributable to access services provided to IXCs. The loss of
access revenues from IXCs in general could have a material adverse effect on
the Company's business.
In addition, the Company's growth strategy assumes increased revenues from
IXCs from the deployment of local/long distance voice switches on its networks
and the provision of switched access origination and termination services.
There is no assurance that the IXCs will continue to increase their
utilization of the Company's services, or will not reduce or cease their
utilization of the Company's services, which could have a material adverse
effect on the Company.
Business Combinations; Change of Control. The Company has from time to time
held, and continues to hold, preliminary discussions with (i) potential
strategic investors who have expressed an interest in making an investment in
or acquiring the Company and (ii) potential joint venture partners looking
toward the formation of strategic alliances that would expand the reach of the
Company's networks or services without necessarily requiring an additional
investment in the Company. In addition to providing additional growth capital,
management believes that an alliance with an appropriate strategic investor
would provide operating synergy to, and enhance the competitive positions of,
both Intermedia and the investor within the rapidly consolidating
telecommunications industry. There can be no assurance that agreements for any
of the foregoing will be reached. An investment, business combination or
strategic alliance could constitute a change of control. The Indenture and the
Existing Senior Note Indentures provide that a change of control would require
the Company to repay the indebtedness outstanding under such instruments. If a
change of control does occur, there is no assurance that the Company would
have sufficient funds to make such repayments or could obtain any additional
debt or equity financing that could be necessary in order to repay the Senior
Notes and the Existing Senior Notes.
Forward Looking Statements. The statements contained in this Prospectus that
are not historical facts are "forward-looking statements" (as such term is
defined in the Private Securities Litigation Reform Act of 1995), which can be
identified by the use of forward-looking terminology such as "estimates,"
"projects," "anticipates," "expects," "intends," "believes," or the negative
thereof or other variations thereon or comparable terminology, or by
discussions of strategy that involve risks and uncertainties. Management
wishes to caution the reader that these forward-looking statements are only
estimates or predictions. No assurance can be given that future results will
be achieved; actual events or results may differ materially as a result of
risks facing the Company or actual results differing from the assumptions
underlying such statements.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Old Notes were originally issued and sold on December 23, 1997 in
reliance upon the exemptions from registration under Rule 144A, Regulation S
and Section 4(2) of the Securities Act. Pursuant to the Registration Rights
Agreement, the Company agreed to register with the SEC a series of notes with
substantially identical terms as the Old Notes, to be offered in exchange for
the Old Notes. The purpose of the Exchange Offer is to satisfy the Company's
obligations under the Registration Rights Agreement. Holders that are not
prohibited from participating in the Exchange Offer and do not tender all of
their Old Notes will no longer have any registration rights under the
Registration Rights Agreement.
TERMS OF THE EXCHANGE
The Company offers to exchange, subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal accompanying this Prospectus, the
same principal amount of Senior Notes for the Old Notes tendered for exchange.
The terms of the Senior Notes are substantially identical to the Old Notes in
all material respects (including interest rate and maturity), except that (i)
the Senior Notes will not be subject to the restrictions on transfer (other
than with respect to holders who are affiliates) and (ii) the Registration
Rights Agreement covenants regarding registration and the related Liquidated
Damages (other than those that have accrued and were not paid) with respect to
Registration Defaults will have been deemed satisfied. The Senior Notes will
evidence the same debt as the Old Notes and will be entitled to the benefits
of the Indenture. See "Description of the Senior Notes." The Exchange Offer is
not conditioned upon any minimum aggregate principal amount of Old Notes being
tendered for exchange.
The Company believes that Senior Notes received in exchange for Old Notes
may be offered for sale, sold and otherwise transferred by any holder (other
than any holder which is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) without compliance with the registration
and prospectus delivery requirements of the Securities Act, provided that the
Senior Notes are acquired in the ordinary course of the holder's business, the
holder has no arrangement or understanding with any person to participate in
the distribution of the Senior Notes and neither the holder nor any other
person is engaging in or intends to engage in a distribution of the Senior
Notes. Any holder who tenders in the Exchange Offer for the purpose of
participating in a public distribution of the Senior Notes must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with the distribution. Broker-dealers may not exchange Old Notes
which are part of an unsold original allotment in the Exchange Offer.
Tendering holders of the Old Notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the Exchange Offer.
EXPIRATION DATE; EXTENSIONS, TERMINATION; AMENDMENT
The Exchange Offer will expire on the Expiration Date. The term "Expiration
Date" means 5:00 p.m., New York City time, on March 13, 1998 or such later
date and time, if any, as extended by the Company, in its sole discretion. The
Company may extend the Exchange Offer at any time and from time to time by
giving oral or written notice to holders of the Old Notes and unless otherwise
required by applicable law or regulation, by timely public announcement, by
making a release to the Dow Jones News Service on or before 9:00 a.m. of the
next business day following the Expiration Date. During any extension of the
Exchange Offer, all Old Notes tendered for exchange will remain subject to the
Exchange Offer. In connection with the Exchange Offer, the Company will comply
with all applicable requirements of the federal securities laws, including,
but not limited to, Rule 14e-1 under the Exchange Act.
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The Exchange Date will be the first business day following the Expiration
Date. The Company expressly reserves the right to (i) terminate the Exchange
Offer and not accept for exchange any Old Notes if either of the events set
forth under "Conditions to the Exchange Offer" shall have occurred and shall
not have been waived by the Company and (ii) amend the terms of the Exchange
Offer in any manner which, in its good faith judgment,
is advantageous to the holders of the Old Notes, whether before or after any
tender of the Old Notes. Unless the Company terminates the Exchange Offer
prior to 5:00 p.m., New York City time, on the Expiration Date, the Company
will exchange the Senior Notes for the Old Notes on the Exchange Date.
PROCEDURES FOR TENDERING OLD NOTES
The Exchange Offer is subject to the terms and conditions set forth in this
Prospectus and the Letter of Transmittal.
Old Notes may be tendered by properly completing and signing the Letter of
Transmittal and delivering the Letter of Transmittal to the Exchange Agent at
its address set forth in this Prospectus on or prior to the Expiration Date,
together with (i) the certificate or certificates representing the Old Notes
being tendered and any required signature guarantees, (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of the Old
Notes, if such procedure is available, into the Exchange Agent's account at
The Depository Trust Company (the "Book-Entry Transfer Facility" or
"Depository") pursuant to the procedure for book-entry transfer described
below, or (iii) the completion of the procedures for guaranteed delivery set
forth below. See "Guaranteed Delivery Procedures."
If the Senior Notes are to be issued in the name of the registered holder
and the registered holder has signed the Letter of Transmittal the holder's
signature need not be guaranteed. In any other case, the tendered Old Notes
must be endorsed or accompanied by written instruments of transfer in form
satisfactory to the Exchange Agent and duly executed by the registered holder
and the signature on the endorsement or instrument of transfer must be
guaranteed by a commercial bank or trust company located or having an office
or correspondent in the United States, or by a member firm of a national
securities exchange or of the National Association of Securities Dealers, Inc.
(an "Eligible Institution"). If the Senior Notes and/or Old Notes not
exchanged are to be delivered to an address other than that of the registered
holder appearing on the register for the Old Notes, the signature on the
Letter of Transmittal must be guaranteed by an Eligible Institution.
THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS
RECOMMENDED THAT REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER
INSURANCE OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE
EXPIRATION DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE
EXPIRATION DATE. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE
COMPANY.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal,
the Old Notes or a Book-Entry Confirmation and all other required documents
are received by the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Old Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the right to reject any or all tenders
not in proper form or the acceptance for exchange of which may, in the opinion
of the Company's counsel, be unlawful. The Company also reserves the right to
waive any of the conditions of the Exchange Offer or any defect, withdrawal,
rejection of tender or irregularity in the tender of any Old Notes. Neither
the Company, the Exchange Agent nor any other person will be under any duty to
give notification of any defects, withdrawals, rejections or irregularities or
incur any liability for failure to give any such notification.
19
<PAGE>
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The holder tendering Old Notes exchanges, assigns and transfers the Old
Notes to the Company and irrevocably constitutes and appoints the Exchange
Agent as the holder's agent and attorney-in-fact to cause the Old Notes to be
assigned, transferred and exchanged. The holder represents and warrants that
(i) it has full power and authority to tender, exchange, assign and transfer
the Old Notes and to acquire Senior Notes in exchange for the Old Notes, (ii)
when the Old Notes are accepted for exchange, the Company will acquire good
and unencumbered title to the Old Notes, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim
and (iii) it will, upon request, execute and deliver any additional documents
deemed by the Company to be necessary or desirable to complete the exchange,
assignment and transfer of tendered Old Notes. The holder further agrees that
acceptance of any tendered Old Notes by the Company and the issuance of Senior
Notes in exchange therefor shall constitute performance in full by the Company
of its obligations under the Registration Rights Agreement and that the
Company shall have no further obligations or liabilities thereunder (except
with respect to accrued and unpaid Liquidated Damages, if any). All authority
conferred by the holder will survive the death or incapacity of the holder and
every obligation of the holder shall be binding upon the heirs, legal
representatives, successors assigns, executors and administrators of the
holder.
Each holder will also certify that it (i) is not an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act or that, if it
is an "affiliate," it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable, (ii) is
acquiring the Senior Notes offered in the ordinary course of its business and
(iii) has no arrangement with any person to participate in the distribution of
the Senior Notes.
WITHDRAWAL RIGHTS
Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date.
To be effective, a written notice of withdrawal must be timely received by
the Exchange Agent at its address set forth in this Prospectus by mail,
courier, telegraphic, telex or facsimile transmission. Any notice of
withdrawal must specify the person named in the Letter of Transmittal as
having tendered Old Notes to be withdrawn, the certificate numbers of Old
Notes to be withdrawn, the principal amount of Old Notes to be withdrawn, a
statement that the holder is withdrawing its election to tender the Old Notes
for exchange, and the name of the registered holder of the Old Notes, and must
be signed by the holder in the same manner as the original signature on the
Letter of Transmittal (including any required signature guarantees) or be
accompanied by evidence satisfactory to the Exchange Agent that the person
withdrawing the tender has succeeded to the beneficial ownership of the Old
Notes being withdrawn. The Exchange Agent will return the properly withdrawn
Old Notes promptly following receipt of notice of withdrawal. If Old Notes
have been tendered pursuant to a book-entry transfer, any notice of withdrawal
must specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Old Notes and otherwise comply with
the procedures of the Book-Entry Transfer Facility. All questions as to the
validity of notices of withdrawals, including time of receipt, will be
determined by the Company, and such determination will be final and binding on
all parties. Any Old Notes which have been tendered for exchange but which are
not exchanged will be returned to the holder thereof without cost to the
holder (or, in the case of Old Notes tendered by book-entry transfer by
crediting an account maintained with the Book-Entry Transfer Facility for the
Old Notes) as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be re-
tendered at any time on or prior to the Expiration Date. Any Old Notes so
withdrawn and not re-tendered will not be exchanged for Senior Notes under the
Exchange Offer.
20
<PAGE>
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF SENIOR DISCOUNT NOTES
Upon terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Old Notes validly tendered and not withdrawn and
issuance of the Senior Notes will be made on the Exchange Date. For the
purposes of the Exchange Offer, the Company shall be deemed to have accepted
for exchange validly tendered Old Notes when, as and if the Company has given
oral or written notice thereof to the holders.
The Exchange Agent will act as agent for the tendering holders of Old Notes
for the purpose of causing the Old Notes to be assigned, transferred and
exchanged for Senior Notes. Upon the terms and subject to the conditions of
the Exchange Offer, delivery of Senior Notes in exchange for Old Notes will be
made by the Exchange Agent promptly after acceptance of the tendered Old Notes
by the Company. Tendered Old Notes not accepted for exchange by the Company
will be returned without expense to the tendering holders (or, in the case of
Old Notes tendered by book-entry transfer crediting an account maintained with
the Depository) promptly following the Expiration Date or, if the Company
terminates the Exchange Offer prior to the Expiration Date, promptly after the
Exchange Offer is terminated.
BOOK-ENTRY TRANSFER
The Exchange Agent will establish an account at the Book-Entry Transfer
Facility for purposes of the Exchange Offer within two business days after the
date of this Prospectus, and any financial institution that is a participant
in the Book-Entry Transfer Facility's systems may make book-entry delivery of
Old Notes by causing the Book-Entry Transfer Facility to transfer the Old
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility in
accordance with the Book-Entry Transfer Facility's procedure for transfer. The
Letter of Transmittal with any required signature guarantees and any other
required documents, must be received by the Exchange Agent on or prior to the
Expiration Date for any book-entry transfers.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter
of Transmittal or any other documents required hereby to the Exchange Agent
prior to the Expiration Date must tender their Old Notes and follow the
guaranteed delivery procedures. Pursuant to such procedures: (i) such tender
must be made by or through an Eligible Institution; (ii) prior to the
Expiration Date, the Exchange Agent must have received from the Eligible
Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, mail or hand delivery) setting forth the
name and address of the holder of the Old Notes, the certificate number or
numbers of such Old Notes and the principal amount of Old Notes tendered,
stating that the tender is being made thereby and guaranteeing that, within
five business days after the Expiration Date, the Letter of Transmittal (or
facsimile thereof) together with the certificate(s) representing the Old Notes
(or a confirmation of electronic delivery of book-entry delivery into the
Exchange Agent's account at the Depository) and any of the required documents
will be deposited by the Eligible Institution with the Exchange Agent; and
(iii) such properly completed and executed Letter of Transmittal (or facsimile
hereof), as well as all other documents required by the Letter of Transmittal
and the certificate(s) representing all tendered Old Notes in proper form for
transfer (or a confirmation of electronic mail delivery or book-entry delivery
into the Exchange Agent's account at the Depository) must be received by the
Exchange Agent within five business days after Expiration Date. Any holder of
Old Notes who wishes to tender his Old Notes pursuant to the guaranteed
delivery procedures described above must ensure that the Exchange Agent
receives the Notice of Guaranteed Delivery prior to 5:00 P.M., New York City
time, on the Expiration Date.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company will
not be required to issue Senior Notes in exchange for any properly tendered
Old Notes not previously accepted and may terminate the Exchange Offer (by
oral or written notice to the holders and by timely public announcement
communicated, unless otherwise required by applicable law or regulation, by
making a release to the Dow Jones News Service), or, at its option, modify or
otherwise amend the Exchange Offer, if any of the following events occur:
21
<PAGE>
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission (i) seeking to restrain
or prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, or assessing or seeking any
damages as a result thereof, or (ii) resulting in a material delay in the
ability of the Company to accept for exchange or exchange some or all of
the Old Notes pursuant to the Exchange Offer, or any statute, rule,
regulation, order or injunction shall be sought, proposed, introduced,
enacted, promulgated or deemed applicable to the Exchange Offer or any of
the transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority,
agency or court, domestic or foreign, that in the sole judgment of the
Company might directly or indirectly result in any of the consequences
referred to in clause (i) or (ii) above or, in the sole judgment of the
Company, might result in the holders of Senior Notes having obligations
with respect to resales and transfers of Senior Notes which are greater
than those described in the interpretation of the SEC referred to on the
cover page of this Prospectus, or would otherwise make it inadvisable to
proceed with the Exchange Offer; or
(b) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospectus of the Company, taken as a whole, that, in the sole judgment of
the Company is or may be adverse to the Company, or the Company shall have
become aware of facts that, in the sole judgment of the Company have or may
have adverse significance with respect to the value of the Old Notes or the
Senior Notes; which, in the sole judgment of the Company in any case, and
regardless of the circumstances (including any action by the Company)
giving rise to any such condition, makes it unlawful to proceed with the
Exchange Offer and/or with such acceptance for exchange or with such
exchange.
The Company expressly reserves the right to terminate the Exchange Offer and
not accept for exchange any Old Notes upon the occurrence of any of the
foregoing conditions (which represent all of the material conditions to the
acceptance by the Company of properly tendered Old Notes). In addition, the
Company may amend the Exchange Offer at any time prior to the Expiration Date
if any of the conditions set forth above occur. Moreover, regardless of
whether any of such conditions has occurred, the Company may amend the
Exchange Offer in any manner which, in its good faith judgment, is
advantageous to holders of the Old Notes.
These conditions are for the sole benefit of the Company and may be waived
by the Company, in whole or in part, in its sole discretion. Any determination
made by the Company that any of these conditions has occurred will be final
and binding on all holders, absent manifest error.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no Senior Notes will be issued in exchange for any such Old
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or the qualification of the Indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act").
EXCHANGE AGENT
SunTrust Bank, Central Florida, National Association, the Trustee under the
Indenture, has been appointed as the Exchange Agent for the Exchange Offer.
All executed Letters of Transmittal, questions and requests for assistance and
requests for additional copies of this Prospectus or of the Letter of
Transmittal should be directed to the Exchange Agent, addressed as follows:
SunTrust Bank, Central Florida, National Association
225 East Robinson St.
Suite 250
Orlando, FL 32801
Attention: Alice Springer
Facsimile: (407) 237-5299
Confirm by telephone: (407) 237-5179
22
<PAGE>
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY
SOLICITATION OF TENDERS; EXPENSES
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those
contained in this Prospectus and the Letter of Transmittal. If given or made,
such information or representations should not be relied upon as having been
authorized by the Company. Neither the delivery of this Prospectus nor any
exchange made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Company since the
respective dates as of which information is given herein. The Exchange Offer
is not being made to (nor will tenders be accepted from or on behalf of)
holders of Old Notes in any jurisdiction in which the making of the Exchange
Offer or the acceptance thereof would not be in compliance with the laws of
such jurisdiction. The Company may, however, at the reasonable request of any
holder, take such action as it may deem necessary to make the Exchange Offer
in any such jurisdiction and extend the Exchange Offer to holders of Old Notes
in such jurisdiction.
TRANSFER TAXES
Holders who tender their Old Notes in exchange for Senior Notes will not be
obligated to pay any transfer taxes in connection therewith, except that
holders who instruct the Company to register Senior Notes in the name of, or
request that Old Notes not tendered or not accepted in the Exchange Offer be
returned to, a person other than the registered tendering holder will be
responsible for the payment of any applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE
Upon consummation of the Exchange Offer, holders of Old Notes that were not
prohibited from participating in the Exchange Offer and did not tender their
Old Notes will not have any registration rights under the Registration Rights
Agreement with respect to such non-tendered Old Notes and, accordingly such
Old Notes will continue to be subject to the restrictions on transfer
contained in the legend thereon. In general, the Old Notes may not be offered
or sold, unless registered under the Securities Act and the applicable state
securities laws, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. The
Company does not intend to register the Old Notes under the Securities Act.
Based on interpretations by the staff of the SEC, Senior Notes issued pursuant
to the Exchange Offer in exchange for Old Notes may be offered for resale,
resold or otherwise transferred by holders (other than any holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
requirements of Securities Act provided that the Senior Notes are acquired in
the ordinary course of the holders' business, the holders have no arrangement
with any person to participate in the distribution of the Senior Notes and
neither the holder nor any other person is engaging in or intends to engage in
a distribution of the Senior Notes. If any holder has any arrangement or
understanding with respect to the distribution of the Senior Notes to be
acquired pursuant to the Exchange Offer, the holder (i) could not rely on the
applicable interpretations of the staff of the SEC and (ii) must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives
Senior Notes for its own account in exchange for Old Notes must acknowledge
that it will deliver a prospectus in connection with any resale of the Senior
Notes. See "Plan of Distribution." In addition, to comply with the securities
laws of certain jurisdictions, if applicable, the Senior Notes may not be
offered or sold unless they have been registered or qualified for sale in such
jurisdiction or an exemption from registration or qualification is available
and is complied with. The Company has agreed under the Registration Rights
Agreement to register or qualify the Senior Notes for resale in any
jurisdictions reasonably requested by any holder, subject to certain
limitations.
23
<PAGE>
OTHER
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Old Notes are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
Upon consummation of the Exchange Offer, holders of Old Notes that were not
prohibited from participating in the Exchange Offer and did not tender their
Old Notes will not have any registration rights under the Registration Rights
Agreement with respect to such non-tendered Old Notes and, accordingly, such
Old Notes will continue to be subject to the restrictions on transfer
contained in the legend thereon.
The Company has not entered into any arrangement or understanding with any
person to distribute the Senior Notes to be received in the Exchange Offer and
to the best of the Company's information and belief, each person participating
in the Exchange Offer is acquiring the Senior Notes in its ordinary course of
business and has no arrangement or understanding with any person to
participate in the distribution of the Senior Notes to be received in the
Exchange Offer. In this regard, the Company will make each person
participating in the Exchange Offer aware (through this Prospectus or
otherwise) that if the Exchange Offer is being registered for the purpose of
secondary resale, any holder using the Exchange Offer to participate in a
distribution of Senior Notes to be acquired in the registered Exchange Offer
(1) may not rely on the staff position enunciated in Morgan Stanley and Co.
Inc. (avail. June 5, 1991) and Exxon Capital Holding Corp. (avail. May 13,
1988) or similar letters and (2) must comply with registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction.
ACCOUNTING TREATMENT
The Senior Notes will be recorded at the same carrying value as the Old
Notes, as reflected in the Company's accounting records on the Exchange Date.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company. The expenses of the Exchange Offer will be amortized over the term of
the Senior Notes.
24
<PAGE>
USE OF PROCEEDS
There will be no proceeds to the Company from the Exchange Offer.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of September 30, 1997, the pro forma capitalization which gives
effect to the pending Shared Technologies acquisition, the October 30
Offerings and the December 23 Offering. This table should be read in
conjunction with the Consolidated Financial Statements of the Company and the
Notes thereto and other information included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996 and the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1997, each of which
are incorporated herein by reference, and, the Unaudited Pro Forma Condensed
Consolidated Financial Statements, included in the Company's Form 8-K dated
December 18, 1997, incorporated herein by reference.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
1997
----------------------
PRO
ACTUAL FORMA(1)
---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents........................... $ 471,101 $ 547,279
========== ==========
Long-term debt
12 1/2% Senior Discount Notes due 2006............ 213,001 213,001
11 1/4% Senior Discount Notes due 2007............ 383,666 383,666
8 7/8% Senior Notes due 2007...................... -- 260,250
8 1/2% Senior Notes due 2008...................... -- 400,000
Other long-term debt.............................. 1,363 4,548
Capital lease obligations......................... 21,232 21,758
---------- ----------
Total long-term debt............................ 619,262 1,283,223
Series B Preferred Stock............................ 312,001 312,001
Series D Preferred Stock............................ 170,109 170,109
Series E Preferred Stock............................ -- 193,700
Common stock and additional paid-in capital......... 237,505 237,505
Accumulated deficit................................. (319,478) (319,478)
Deferred Compensation............................... (8,798) (8,798)
---------- ----------
Total stockholders' equity.......................... (90,771) (90,771)
---------- ----------
Total capitalization................................ $1,010,601 $1,868,262
========== ==========
</TABLE>
- --------
(1) This column gives effect to the Shared Technologies acquisition, the
October 30 Offerings and the December 23 Offering as if they had occurred
on September 30, 1997.
25
<PAGE>
SELECTED FINANCIAL AND OTHER OPERATING DATA
The selected financial data and balance sheet data presented below as of and
for the five years in the period ended December 31, 1996 have been derived
from the consolidated financial statements of the Company, which financial
statements have been audited by Ernst & Young LLP, independent certified
public accountants. The selected financial data presented below as of and for
the quarters ended September 30, 1996 and 1997 have been derived from
unaudited financial statements of the Company. In the opinion of management,
the unaudited financial statements have been prepared on the same basis as the
audited financial statements and include all adjustments, which consist only
of normal recurring adjustments, necessary for a fair presentation of the
financial position and the results of operations for these periods. Operating
results for the nine months ended September 30, 1997 are not necessarily
indicative of the results that may be expected for the full year.
The operating results of EMI are included in the Company's consolidated
operating results commencing July 1, 1996. The operating results of UTT and
NetSolve are included in the Company's consolidated operating results
commencing December 1, 1996. The operating results of DIGEX are included in
the Company's consolidated operating results commencing July 1, 1997. The 1996
pro forma operating information gives effect to the EMI, UTT, NetSolve and
DIGEX acquisitions and the pending acquisition of Shared Technologies as if
they occurred on January 1, 1996. The 1997 pro forma operating information
gives effect to the DIGEX Acquisition and the pending acquisition of Shared
Technologies as if they occurred on January 1, 1997. Both 1996 and 1997 pro
forma operating information give effect to the March 1997 sale of $300 million
of 13 1/2% Series A Redeemable Exchangeable Preferred Stock, the July 1997
Offerings, the October 30 Offerings and the December 23 Offering as if they
occurred at the beginning of the respective periods. The following financial
information should be read in conjunction with "Business" and the Consolidated
Financial Statements of the Company and the Notes thereto, which are
incorporated herein by reference.
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND STATISTICAL DATA)
<TABLE>
<CAPTION>
PRO-
FORMA(1)
YEAR PRO-FORMA (2)
ENDED NINE MONTHS ENDED NINE MONTHS
YEAR ENDED DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
--------------------------------------------- ------------ -------------------- -------------
1992 1993 1994 1995 1996 1996 1996 1997 1997
------- ------- ------- -------- -------- ------------ -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS:
Revenues.............. $ 7,030 $ 8,292 $14,272 $ 38,631 $103,397 $ 324,885 $ 64,333 $ 165,317 $ 326,742
Costs and Expenses:
Facilities
administration and
maintenance and line
costs................ 1,760 2,843 5,396 22,989 81,105 210,595 49,044 200,241 269,600
Selling, general and
administrative....... 2,607 3,893 6,412 14,993 36,610 99,396 23,884 64,983 134,651
Depreciation and
amortization......... 2,190 3,020 5,132 10,196 19,836 79,863 12,069 34,274 79,899
------- ------- ------- -------- -------- --------- -------- ---------- ---------
6,557 9,756 16,940 48,178 137,551 389,854 84,997 299,498 484,150
------- ------- ------- -------- -------- --------- -------- ---------- ---------
Income (loss) from
operations........... 473 (1,464) (2,668) (9,547) (34,154) (64,969) (20,664) (134,181) (157,408)
Other income (expense)
Interest expense..... (1,031) (844) (1,218) (13,767) (35,213) (129,673) (24,179) (39,895) (107,581)
Interest and other
income.............. 323 234 819 4,060 12,168 (3,912) 9,201 16,691 (210)
Income tax benefit... -- -- -- 97 -- (783) -- (214)
------- ------- ------- -------- -------- --------- -------- ---------- ---------
Loss before
extraordinary item.. (235) (2,074) (3,067) (19,157) (57,199) (199,337) (35,642) (157,385) (265,413)
Extraordinary loss on
early extinguishment
of debt............. -- -- -- (1,592) -- (311) -- (43,834) (43,834)
------- ------- ------- -------- -------- --------- -------- ---------- ---------
Net loss.............. $ (235) $(2,074) $(3,067) $(20,749) $(57,199) $(199,648) $(35,642) $ (201,219) $(309,247)
Preferred stock
dividends and
accretions........... (267) -- -- -- -- (71,851) (27,118) (53,135)
------- ------- ------- -------- -------- --------- -------- ---------- ---------
Net loss attributable
to common
stockholders......... $ (502) $(2,074) $(3,067) $(20,749) $(57,199) $(271,499) $(35,642) $ (228,337) $(362,382)
======= ======= ======= ======== ======== ========= ======== ========== =========
Net loss per common
share:
Loss before
extraordinary item.. $ (.10) $ (.29) $ (.34) $ (1.91) $ (4.08) $ (18.68) $ (2.69) $ (11.21) $ (19.35)
Extraordinary loss... -- -- -- (.16) -- (0.02) -- (2.66) (2.66)
------- ------- ------- -------- -------- --------- -------- ---------- ---------
Net loss............. $ (.10) $ (.29) $ (.34) $ (2.07) $ (4.08) $ (18.70) $ (2.69) $ (13.87) $ (22.01)
======= ======= ======= ======== ======== ========= ======== ========== =========
Weighted average
number of shares
outstanding.......... 4,797 7,077 8,956 10,036 14,018 14,518 13,243 16,463 16,463
OTHER DATA:
Book value per common
share ............... 3.09 5.18 5.39 3.89 7.01
Ratio of earnings to
combined fixed
charges and preferred
stock dividends(3)... -- -- -- -- -- -- -- -- --
Earnings before
interest, income
taxes, depreciation
and amortization
("EBITDA")(4)........ $ 2,663 $ 1,556 $ 2,464 $ 649 $(14,318) $ 14,894 $ (8,596) $ (99,907) $ (77,509)
Capital expenditures,
including
acquisitions of
businesses, net of
cash acquired........ $ 8,818 $10,486 $13,731 $ 31,915 $143,615 $ 309,391 $ 80,810 $ 328,861 $ 339,469
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------------------- -------------
1992 1993 1994 1995 1996 1996 1997
------ ------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
NETWORK DATA:(5)
Buildings connected(6).... 161 234 293 380 487 429 2,703
Route miles............... 240 335 378 504 655 647 762
Fiber miles............... 6,184 10,239 11,227 17,128 24,122 23,763 33,801
Number of city-based
networks in service...... 4 5 6 9 9 9 10
ENHANCED DATA SERVICES:(5)
Nodes(7).................. -- 100 900 2,300 9,500 8,462 17,268
Cities(8)................. -- 37 336 600 2,200 1,134 3,787
Switches.................. -- 4 12 31 89 76 130
EMPLOYEES(5)............... 49 58 146 287 874 724 1,820
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, (9)
----------------------------------------- ------------- -----------------
1992 1993 1994 1995 1996 1997 1997
------- ------- ------- -------- -------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents(10)....... $ 1,775 $27,954 $10,208 $ 50,997 $189,546 $ 471,101 $ 547,279
Working capital(11).... 8,999 25,712 9,588 70,353 206,029 449,648 530,654
Total assets........... 36,174 61,219 74,086 216,018 512,940 1,086,185 1,978,822
Long-term obligations
and redeemable
preferred stock
(including current
maturities)........... 11,742 11,614 16,527 165,545 358,508 1,101,372 1,959,033
Total stockholders'
equity................ 21,257 45,987 52,033 40,254 114,230 (90,771) (90,771)
</TABLE>
- --------
1. The pro forma operating information gives effect to the EMI, UTT and
NetSolve acquisitions, which occurred effective June 30, 1996, December 1,
1996 and December 1, 1996, respectively, as if they occurred on January 1,
1996. The pro forma operating information also gives effect to the DIGEX
Acquisition, the pending acquisition of Shared Technologies, the March
1997 sale of $300 million of 13 1/2% Series A Redeemable Exchangeable
Preferred Stock, the July 1997 Offerings, the October 30 Offerings and the
December 23 Offering.
2. The pro forma operating information gives effect to the DIGEX Acquisition
and the pending acquisitions of Shared Technologies as if they occurred on
January 1, 1997. The pro forma operating information also gives effect to
the March 1997 sale of $300 million of 13 1/2% Series A Redeemable
Exchangeable Preferred Stock, the July 1997 Offerings, the October 30
Offerings and the December 23 Offering.
3. For purposes of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends: (i) earnings consist of loss before
income taxes, plus fixed charges excluding capitalized interest and
preferred stock dividends and (ii) fixed charges consist of interest
expensed and capitalized, plus amortization of deferred financing costs,
preferred stock dividends, plus a portion of rent expense under operating
leases deemed by the Company to represent an interest factor. For the
years ended December 31, 1992, 1993, 1994, 1995, and 1996 and the quarters
ended September 30, 1996 and 1997 the Company's earnings were insufficient
to cover combined fixed charges and preferred stock dividends by $622,
$2,288, $3,324, $19,931, $59,978, $37,582 and $187,031, respectively. For
the year ended December 31, 1996 and the quarter ended September 30, 1997,
the Company's pro forma earnings, after giving effect to the acquisitions
and the offerings described in Notes 1 and 2 above, were insufficient by
$273,968 and $321,076, respectively, to cover pro forma combined fixed
charges and preferred stock dividends.
4. EBITDA consists of earnings before interest, income taxes, depreciation
and amortization. In addition, 1995 and 1997 EBITDA excludes extraordinary
charge of $1,592 and $43,834, respectively, related to the early
extinguishment of debt. EBITDA is provided in the Summary of Financial and
Other Operating Data since it is a measure commonly used in the
telecommunications industry to measure operating performance, asset value
and financial leverage. It is presented to enhance the reader's
understanding of the Company's operating results and is not intended to
present cash flow for the periods presented. See the Consolidated
Statements of Cash Flows included in the Company's Consolidated Financial
Statements and the Notes thereto included elsewhere in this Prospectus.
5. Amounts as reflected in the table are based upon information contained in
the Company's operating records.
6. Beginning in January 1997, the Company changed its definition of
"Buildings connected" to include buildings connected to the Company's
network via leased facilities controlled by the Company in addition to
those connected to the Company's network via facilities constructed by the
Company. The Company believes the new definition is consistent with
industry practice.
7. Amount represents an individual point of origin and termination of data
served by the Company's enhanced network. In the opinion of management of
the Company, all node numbers are appropriate.
8. Represents the number of discrete postal cities to which enhanced data
services are provided by the Company.
9. Gives effect to the October 30 Offerings, the December 23 Offering and the
pending Shared Technologies acquisition.
10. Cash and cash equivalents excludes investments of $20,954, $26,675, and
$6,351 for the years ended December 31, 1995 and 1996 and the quarters
ended September 30, 1996 and 1997, respectively, restricted under the
terms of various notes and other agreements.
11. Working capital includes the restricted investments referred to in Note 10
above.
27
<PAGE>
BUSINESS
Intermedia is a rapidly growing ICP, offering a full suite of local, long
distance and enhanced data telecommunications services to business and
government end user customers, long distance carriers, ISPs, resellers and
wireless communications companies. Founded in 1987, the Company is currently
the third largest (based on annualized telecommunications services revenues)
among providers generally referred to as CLECs after MFS Communications
Company, Inc. and Teleport Communications Group Inc. As of September 30, 1997,
the Company had sales offices in 43 cities throughout the eastern half of the
United States and offered a full product package of telecommunications
services in 19 metropolitan statistical areas. In April 1996, Intermedia
became one of the first ICPs in the United States to provide integrated
switched local and long distance service and now has thirteen voice switches
in service. The Company provides enhanced data services, including frame
relay, ATM and Internet access services, primarily to business and government
customers (including over 100 ISPs), in approximately 3,800 cities nationwide,
utilizing approximately 130 Company-owned data switches. Intermedia also
serves as a facilities-based interexchange carrier to approximately 15,000
customers nationwide. Intermedia continues to increase its customer base and
network density in the eastern half of the United States and is pursuing
attractive opportunities to add additional services and expand into
complementary geographic markets.
RECENT DEVELOPMENTS
Regulatory Changes. 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 local exchange
markets. On July 18, 1997, the U.S. Court of Appeals for the Eighth Circuit
issued a final decision vacating the FCC's pricing and "most favored nation"
rules, as well as certain other of the FCC's interconnection rules. On October
14, 1997, the Eighth Circuit Court issued an order clarifying its previous
decision. In this order, the Court held that ILECs have an obligation under
the 1996 Act to offer other carriers access to the ILECs network elements on
an unbundled basis, but the ILECs do not have an obligation to recombine those
elements for use by other carriers. The FCC and other parties' request that
the Supreme Court review these decisions has been granted. Most recently, on
January 22, 1998, the Eighth Circuit Court 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 the pricing and
other issues, they remain subject to scrutiny and oversight by state
regulatory commissions. Although the Company is not able to predict the impact
of these decisions on future efforts to negotiate interconnection agreements
with ILECs, the Company's analysis shows that interconnection arrangements
that have been approved or mandated by state regulatory commissions have been
consistent with the intent of the 1996 Act to expand local competition and the
Company's business plan. These regulatory developments create opportunities
for new entrants offering local exchange services to capture a portion of the
ILECs' nearly 100% market share. Due to the rapid development and continuing
growth of the Company's sales force and its competitive advantages in
providing integrated telecommunications services, the Company believes that it
is well positioned to capitalize on the new market opportunities emerging in
the local exchange market.
On May 16, 1997, the FCC released an order that fundamentally restructured
the "access charges" that ILECs charge to interexchange carriers and end user
customers. The Company believes that the FCC's new access charge rules do not
adversely affect the Company's business plan, and that they in fact present
significant new opportunities for new entrants, including the Company. Aspects
of the access charge order may be changed in the future. Numerous parties have
either filed appeals with federal courts or asked the FCC to reconsider
portions of its new rules.
On December 31, 1997, 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
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<PAGE>
demonstrate that their networks have been made available to competitive
providers of local exchange services in those regions. The United States and
some long distance companies have requested a stay of this decision and it is
expected that they, and others, will seek its reversal on appeal. If the
District Court's decision is permitted to stand, it could result in RBOCs'
providing interexchange service in their operating regions sooner than
previously expected.
Acquisitions. On July 11, 1997, the Company consummated the final step in
the DIGEX Acquisition through the merger of Daylight, a wholly-owned
subsidiary of the Company, with DIGEX. The aggregate consideration for the
DIGEX Acquisition, which was funded with the Company's existing cash reserves,
was approximately $160 million. DIGEX, headquartered in suburban Washington,
D.C., is a national ISP, which provides a comprehensive range of industrial
strength Internet solutions, including high speed dedicated business Internet
connectivity, Web site management and private network solutions, primarily to
business and government customers. DIGEX's operations are being integrated
with those of the Company, and DIGEX will be operated as a division of the
Company. For the nine months ended September 30, 1997, DIGEX's revenues were
approximately $33.5 million.
On November 20, 1997, Intermedia, through Moonlight Acquisition Corp., a
wholly-owned subsidiary of Intermedia, entered into a definitive merger
agreement with Shared Technologies. The total deemed purchase price for Shared
Technologies is estimated to be approximately $640 million, excluding certain
transaction expenses and fees relating to certain agreements. In addition,
Intermedia agreed to settle certain litigation. As part of the agreement,
Intermedia was granted irrevocable options, which together with other common
stock of Shared Technologies owned by Intermedia, gives Intermedia control of
over 50% of Shared Technologies common stock on a fully diluted basis.
Intermedia made a tender offer for 4 million additional shares of Shared
Technologies at $15 per share in cash, which expired on December 26, 1997.
More than 16 million shares were tendered pursuant to the tender offer. In
order to avoid the purchase of fractional shares, 4,000,064 shares were
accepted.
Shared Technologies is the nation's largest provider of shared
telecommunications services and systems. Through its technical infrastructure
and 800 employees, Shared Technologies acts as a single point of contact for
business telecommunications services at more than 465 buildings throughout the
United States and Canada. For the year ended December 31, 1996, and the nine
months ended September 30, 1997, Shared Technologies' revenues were
approximately $157.2 million and $141.8 million, respectively, and its EBITDA
for such periods were approximately $34.9 million and $33.4 million,
respectively. This acquisition is expected to enhance Intermedia's national
presence in telecommunications markets, enabling it to provide a bundled
offering of local, long distance, data, Internet and systems integration
services to Shared Technologies' existing 15,000 business customers. If this
acquisition is consummated, the Company will have approximately 160,000 CLEC
access lines, serving more than 2,000 buildings.
The merger agreement is expected to be consummated during the first quarter
of 1998. Consummation of the merger agreement is subject to various customary
conditions, including receipt of necessary regulatory approvals.
On December 17, 1997 the Company entered into a definitive agreement to
acquire the stock of LDS for a purchase price of approximately $151.0 million,
of which $120.0 million is payable in Intermedia common stock and $31.0
million is payable in cash, in each case, subject to certain adjustments (the
"LDS Acquisition"). Closing of the LDS Acquisition, expected to occur in the
first quarter of 1998, is subject to customary conditions, including
regulatory approvals, and there can be no assurance that the LDS Acquisition
will be consummated.
LDS is a regional interexchange carrier, providing long distance services
and Internet access to more than 45,000 business subscribers and employing
over 100 sales and customer service professionals in Louisiana, Texas,
Oklahoma, Mississippi and Florida. LDS had revenues of $101.7 million and
$82.3 million and EBITDA of $15.0 million and $9.9 million for the year ended
December 31, 1996 and the nine months ended September 30, 1997, respectively.
The LDS Acquisition will provide a significant time-to-market advantage in a
region
29
<PAGE>
important to Intermedia's expansion plan, while also contributing an
experienced regional management team and established sales platform. Because
LDS's service portfolio and footprint complements Intermedia's, management of
the Company believes that the LDS Acquisition also presents significant
synergy realization opportunities. By joining forces with an established
operating company with a staff of experienced sales, management and technical
personnel, Intermedia expects to expedite its entry into these Southern
markets.
The Company is currently evaluating, has made offers with respect to and is
engaged in discussions regarding various acquisition opportunities. These
acquisitions could be funded by cash (including the proceeds of the December
23 Offering) and/or the Company's securities. Except as described in this
Prospectus, Intermedia is not a party to any agreement for any material
acquisition nor can there be any assurance that any such acquisition will be
consummated.
Offerings. In July 1997, the Company completed the July 1997 Offerings of
6,900,000 Series D Depositary Shares, each representing a one-hundredth
interest in a share of Series D Preferred Stock, and $649.0 million principal
amount at maturity of 11 1/4% Notes (including the exercise of the over-
allotment option with respect to such 11 1/4% Notes). The aggregate gross
proceeds from the July 1997 Offerings was approximately $547.3 million.
On October 30, 1997, the Company completed private placements of 8,000,000
Depositary Shares, each representing a one-hundredth interest in a share of
Series E Preferred Stock and $260.3 million principal amount of 8 7/8% Notes
(including the exercise of the over-allotment option with respect to such 8
7/8% Notes). The aggregate gross proceeds from the October 30 Offerings was
$460.3 million.
On December 23, 1997, the Company completed a private placement of the Old
Notes. The aggregate gross proceeds from the December 23 Offering (including
the exercise of the over-allotment option with respect to the Old Notes) was
$390.0 million.
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<PAGE>
DESCRIPTION OF OUTSTANDING INDEBTEDNESS
In addition to the Old Notes, the Company has outstanding the following
indebtedness:
12 1/2% NOTES
The Company had outstanding an aggregate principal amount of $330,000,000 of
12 1/2% Senior Discount Notes due 2006, with an aggregate accreted value of
$213,001,000 as of September 30, 1997. The 12 1/2% Notes were issued at a
substantial discount from their principal amount and mature on May 15, 2006.
Cash interest does not accrue on the 12 1/2% Notes prior to May 15, 2001.
Commencing November 15, 2001, cash interest on the 12 1/2% Notes will be
payable semi-annually in arrears on May 15 and November 15 of each year at a
rate of 12 1/2% per annum. The 12 1/2% Notes may be redeemed at the Company's
option at any time, in whole or in part, on or after May 15, 2001 upon payment
of the redemption price plus accrued and unpaid interest, if any, to the date
of redemption. The 12 1/2% Notes are unsecured obligations of the Company
ranking pari passu in right of payment of principal and interest with all
other existing and future senior indebtedness of the Company, including the 11
1/4% Notes, the 8 7/8% Notes and the Senior Notes, and rank senior to any
future subordinated indebtedness. In the event of a change of control of the
Company prior to May 15, 2001, holders of the 12 1/2% Notes have the right to
require the Company to repurchase their 12 1/2% Notes, in whole or in part, at
a price equal to 101% of the accreted value thereof or, in the case of any
such purchase on or after May 15, 2001, at 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of purchase.
The covenants in the 12 1/2% Notes Indenture are substantially similar to
the covenants in the indentures for the other Existing Senior Notes and are
substantially similar (with modifications to certain definitions and
exceptions) to the covenants in the Indenture governing the Senior Notes. The
12 1/2% Notes Indenture 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 preferred stock,
pay dividends or make other distributions, repurchase equity interests or
subordinated indebtedness, engage in sale and leaseback transactions, create
certain liens, enter into certain transactions with affiliates, sell assets of
the Company or its subsidiaries, conduct certain lines of business, issue or
sell equity interests of the Company's subsidiaries or enter into certain
mergers and consolidations. In addition, under certain circumstances, the
Company is required to offer to purchase 12 1/2% Notes at a price equal to
100% of the accreted value thereof, if such circumstances occur prior to May
15, 2001, or at 100% of the principal amount thereof, if such circumstances
occur on or after May 15, 2001, plus accrued and unpaid interest, if any, to
the date of purchase with the proceeds of certain asset sales. This
description of the 12 1/2% Notes is intended as a summary and is qualified in
its entirety by reference to the 12 1/2% Notes Indenture.
11 1/4% NOTES
The Company has outstanding an aggregate principal amount at maturity of
$649,000,000 of 11 1/4% Senior Discount Notes due 2007, with an aggregate
accreted value of $383,666,000 as of September 30, 1997. The 11 1/4% Notes
were issued at a substantial discount from their principal amount and mature
on July 15, 2007. Cash interest does not accrue on the 11 1/4% Notes prior to
July 15, 2002. Commencing January 15, 2003, cash interest on the 11 1/4% Notes
will be payable semi-annually in arrears on July 15 and January 15 of each
year at a rate of 11 1/4% per annum. The 11 1/4% Notes may be redeemed at the
Company's option at any time, in whole or in part, on or after July 15, 2002
upon payment of the redemption price plus accrued and unpaid interest, if any,
to the date of the redemption. The 11 1/4% Notes are unsecured obligations of
the Company ranking pari passu in right of payment of principal and interest
with all other existing and future senior indebtedness of the Company,
including the 12 1/2% Notes, the 8 7/8% Notes and the Senior Notes, and rank
senior to any future subordinated indebtedness. In the event of a change of
control of the Company prior to July 15, 2002, holders of the 11 1/4% Notes
have the right to require the Company to repurchase their 11 1/4% Notes, in
whole or in part, at a price equal to 101% of the accreted value thereof or,
in the case of any such purchase on or after July 15, 2002, at 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the
date of purchase.
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The covenants in the 11 1/4% Notes Indenture are substantially similar to
the covenants in the indentures for the other Existing Senior Notes and are
substantially similar (with modifications to certain definitions and
exceptions) to the covenants in the Indenture governing the Senior Notes. The
11 1/4% Notes Indenture contains covenants that, among other things, limit the
ability of the Company and its subsidiaries to make certain restricted
payments, incur additional indebtedness and issue preferred stock, pay
dividends or make other distributions, repurchase equity interests or
subordinated indebtedness, engage in sale and leaseback transactions, create
certain liens, enter into certain transactions with affiliates, sell assets of
the Company or its subsidiaries, conduct certain lines of business, issue or
sell equity interests in the Company's subsidiaries or enter into certain
mergers and consolidations. In addition, under certain circumstances, the
Company is required to offer to purchase 11 1/4% Notes at a price equal to
100% of the accreted value thereof, if such circumstances occur prior to July
15, 2002, or at 100% of the principal amount thereof, if such circumstances
occur on or after July 15, 2002, plus accrued and unpaid interest, if any, to
the date of purchase with the proceeds of certain asset sales. This
description of the 11 1/4% Notes is intended as a summary and is qualified in
its entirety by reference to the 11 1/4% Notes Indenture.
8 7/8% NOTES
The Company has outstanding an aggregate principal amount of $260,250,000 of
8 7/8% Senior Notes due 2007, which will mature on November 1, 2007. Cash
interest on the 8 7/8% Notes is payable semi-annually in arrears on May 1 and
November 1 of each year at a rate of 8 7/8% per annum. The 8 7/8% Notes may be
redeemed at the Company's option at any time, in whole or in part, on or after
November 1, 2002 upon payment of the redemption price plus accrued and unpaid
interest, if any, to the date of redemption. The 8 7/8% Notes are unsecured
obligations of the Company ranking pari passu in right of payment of principal
and interest with all other existing and future senior indebtedness of the
Company, including the 12 1/2% Notes, the 11 1/4% Notes and the Senior Notes,
and rank senior to any future subordinated indebtedness. In the event of a
change of control of the Company, holders of the 8 7/8% Notes have the right
to require the Company to repurchase their 8 7/8% Notes, in whole or in part,
at a price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of purchase.
The covenants in the 8 7/8% Notes Indenture are substantially similar to the
covenants in the indentures for the other Existing Senior Notes and are
substantially similar (with modifications to certain definitions and
exceptions) to the covenants in the Indenture governing the Senior Notes. The
8 7/8% Notes Indenture 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 preferred stock,
pay dividends or make other distributions, repurchase equity interests or
subordinated indebtedness, engage in sale and leaseback transactions, create
certain liens, enter into certain transactions with affiliates, sell assets of
the Company or its subsidiaries, conduct certain lines of business, issue or
sell equity interests of the Company's subsidiaries or enter into certain
mergers and consolidations. In addition, under certain circumstances, the
Company is required to offer to purchase 8 7/8% Notes at a price equal to 100%
of the principal amount thereof, plus accrued and unpaid interest, if any, to
the date of purchase with the proceeds of certain asset sales. This
description of the 8 7/8% Notes is intended as a summary and is qualified in
its entirety by reference to the 8 7/8% Notes Indenture.
CAPITAL LEASE OBLIGATIONS
As of September 30, 1997, the Company had outstanding approximately $21.2
million aggregate principal amount of capital lease obligations arising
primarily from 19 agreements for leases of fiber optic cable used in various
of the Company's networks. The effective interest rates under these agreements
range from 10.5% to 13.5% and expire, subject to various Intermedia renewal
options, from 2001 to 2016.
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DESCRIPTION OF THE SENIOR NOTES
GENERAL
Set forth below is a summary of certain provisions of the Senior Notes. The
Senior Notes, like the Old Notes, will be issued pursuant to an Indenture (the
"Indenture"), dated December 23, 1997, between the Company and SunTrust Bank,
Central Florida, National Association, as trustee (the "Trustee"), a copy of
which has been filed as an exhibit to the Registration Statement of which this
prospectus is a part. The terms of the Senior Notes include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Senior
Notes are subject to all such terms, and holders of Senior Notes are referred
to the Indenture and the Trust Indenture Act for a statement thereof. The
following summary of certain provisions of the Indenture does not purport to
be complete and is qualified in its entirety by reference to the Indenture,
including the definitions therein of certain terms used below. The definitions
of certain terms used in the following summary are set forth below under "--
Certain Definitions." As of the date hereof, none of the Company's
Subsidiaries are Unrestricted Subsidiaries. However, under certain
circumstances, the Company will be able to designate current or future
Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not
be subject to many of the restrictive covenants set forth in the Indenture. As
used in this section, the term "Company" refers only to Intermedia
Communications Inc. and not to its Subsidiaries. The terms of the Senior Notes
are substantially identical to the Old Notes in all material respects
(including interest rate and maturity), except that (i) the Senior Notes will
not be subject to the restrictions on transfer (other than with respect to
holders who are affiliates) and (ii) the Registration Rights Agreement
covenants regarding registration and the related Liquidated Damages (other
than those that have accrued and were not paid) with respect to Registration
Defaults will have been deemed satisfied.
RANKING
The Senior Notes will rank senior in right of payment to all subordinated
Indebtedness of the Company. The Senior Notes will rank pari passu in right of
payment with all existing and future senior borrowings, including the Existing
Senior Notes and the Old Notes and borrowings under the Credit Facility.
Holders of secured Indebtedness of the Company will, however, have claims that
are prior to the claims of the Holders of the Senior Notes with respect to the
assets securing such other Indebtedness.
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
Senior Notes. The Senior Notes will be effectively subordinated to all
indebtedness and other liabilities and commitments (including trade payables
and lease obligations) of the Company's Subsidiaries. Any right of the Company
to receive assets of any of its Subsidiaries upon the latter's liquidation or
reorganization (and the consequent right of the Holders of the Senior Notes to
participate in those assets) will be effectively subordinated to the claims of
that Subsidiary's creditors, except to the extent that the Company is itself
recognized as a creditor of such Subsidiary, in which case the claims of the
Company would still be subordinate to any security in the assets of such
Subsidiary and any indebtedness of such Subsidiary senior to that held by the
Company. As of September 30, 1997, on a pro forma basis after giving effect to
the pending acquisition of Shared Technologies and the issuance of the 8 7/8%
Notes and the December 23 Offering and the application of the proceeds
therefrom, the Company would have had approximately $1.4 billion of senior
indebtedness outstanding, including trade payables, and the Company's
Subsidiaries would have had approximately $71.0 million of indebtedness and
other liabilities outstanding.
PRINCIPAL, MATURITY AND INTEREST
The Senior Notes are limited in aggregate principal amount to $400,000,000
and will mature on January 15, 2008. Interest on the Senior Notes will accrue
at 8 1/2% per annum and will be payable semi-annually in arrears on January 15
and July 15 of each year, commencing on July 15, 1998, to holders of record on
the immediately preceding January 1 and July 1. Interest on the Senior Notes
will accrue from the most recent date to which interest has been paid or, if
no interest has been paid, from the Issue Date. Interest will be computed on
the basis of a 360-day year comprised of twelve 30-day months. The Senior
Notes will be issued in registered form, without coupons, and in denominations
of $1,000 and integral multiples thereof.
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<PAGE>
OPTIONAL REDEMPTION
The Senior Notes will not be redeemable at the Company's option prior to
January 15, 2003. Thereafter, the Senior Notes will be subject to redemption
at the option of the Company, in whole or in part, upon not less than 30 nor
more than 60 days' notice, at the redemption prices (expressed as percentages
of principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on January 15 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003.............................................................. 104.250%
2004.............................................................. 102.833%
2005.............................................................. 101.417%
2006 and thereafter............................................... 100.000%
</TABLE>
Notwithstanding the foregoing, in the event of the sale by the Company prior
to January 15, 2001 of its Capital Stock (other than Disqualified Stock) (i)
to a Strategic Investor in a single transaction or series of related
transactions for an aggregate purchase price equal to or exceeding $50.0
million or (ii) in one or more Public Offerings, up to a maximum of 25% of the
aggregate principal amount of the Notes originally issued will, at the option
of the Company, be redeemable from the net cash proceeds of such sale or sales
(but only to the extent such proceeds consist of cash or readily marketable
cash equivalents received in respect of the Capital Stock, other than
Disqualified Stock, so sold) at a redemption price equal to 108.50% of the
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the redemption date, provided that at least 75% of
the aggregate principal amount of the Notes originally issued remains
outstanding immediately after the occurrence of such redemption and that such
redemption occurs within 90 days of the date of the closing of such sale.
MANDATORY REDEMPTION
The Company will not be required to make mandatory redemption or sinking
fund payments with respect to the Senior Notes.
OFFER TO PURCHASE UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required to
make an offer (the "Change of Control Offer") to each holder of Senior Notes
to repurchase all or any part (equal to $1,000 or an integral multiple
thereof) of such holder's Senior Notes at a purchase price equal to 101% of
the aggregate principal amount thereof plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of purchase (the "Change of
Control Payment"). The Change of Control Offer must be commenced within 30
days following a Change of Control, must remain open for at least 30 and not
more than 40 days (unless required by applicable law) and must comply with the
requirements of Rule 14e-1 under the Exchange Act and any other applicable
securities laws and regulations.
Except as described above with respect to a Change of Control, the Indenture
does not contain provisions that permit the holders of the Senior Notes to
require that the Company repurchase or redeem the Senior Notes in the event of
a takeover, recapitalization or similar transaction.
Due to the leveraged structure of the Company and the effective
subordination of the Senior Notes to secured Indebtedness of the Company and
Indebtedness of the Company's Subsidiaries, the Company may not have
sufficient funds available to purchase the Senior Notes tendered in response
to a Change of Control Offer. In addition, the Existing Senior Notes or other
agreements relating to Indebtedness of the Company's Subsidiaries may contain
prohibitions or restrictions on the Company's ability to effect a Change of
Control Payment.
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The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the Company's assets. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of Senior Notes to require the Company to repurchase such Senior Notes
as a result of a sale, lease, transfer, conveyance or other disposition of
less than all of the assets of the Company to another Person may be uncertain.
OFFER TO PURCHASE WITH EXCESS ASSET SALE PROCEEDS
When the cumulative amount of Excess Proceeds (as defined below under
"Certain Covenants--Asset Sales") exceeds $10.0 million, the Company will make
an offer to all holders of Senior Notes and Pari Passu Notes (an "Excess
Proceeds Offer"), to purchase the maximum principal amount of Senior Notes and
Pari Passu Notes that may be purchased out of such Excess Proceeds, at an
offer price in cash in an amount equal to 100% of the outstanding principal
amount of the Senior Notes and 100% of the accreted value or 100% of the
outstanding principal amount, as applicable, of the Pari Passu Notes, plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the
date fixed for the closing of such offer, in accordance with the procedures
specified in the Indenture.
If the aggregate principal amount and/or accreted value, as the case may be,
of Senior Notes and Pari Passu Notes surrendered by holders thereof exceeds
the amount of Excess Proceeds, the Trustee will select the Senior Notes and
Pari Passu Notes to be purchased on a pro rata basis. To the extent that the
aggregate amount of Senior Notes and Pari Passu Notes tendered pursuant to an
Excess Proceeds Offer is less than the amount of Excess Proceeds, the Company
may use such deficiency for general purposes. Upon completion of an Excess
Proceeds Offer, the amount of Excess Proceeds will be reset at zero.
SELECTION OF NOTES FOR REDEMPTION OR OFFERS TO PURCHASE
If less than all of the Senior Notes are to be redeemed or to be purchased
pursuant to any purchase offer required under the Indenture at any time,
selection of Senior Notes for redemption or purchase will be made by the
Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the Senior Notes are listed, or, if the
Senior Notes are not so listed, on a pro rata basis, by lot or by such method
as the Trustee shall deem fair and appropriate, provided that no Senior Notes
with a principal amount of $1,000 or less shall be redeemed or purchased in
part. A new Senior Note in principal amount equal to the unredeemed or
unpurchased portion will be issued in the name of the holder thereof upon
cancellation of the original Senior Note. On and after the redemption or
purchase date, interest will cease to accrue on the Senior Notes or portions
of them called for redemption or purchase.
NOTICE OF REDEMPTION
Notice of redemption shall be mailed by first class mail at least 30 but not
more than 60 days before the redemption date to each holder of Senior Notes to
be redeemed at its registered address. If any Senior Note is to be redeemed in
part only, the notice of redemption that relates to such Senior Note shall
state the portion of the principal amount to be redeemed.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that the Company and its Subsidiaries may not,
directly or indirectly:
(i) declare or pay any dividend or make any distribution on account of
any Equity Interests of the Company or any of its Subsidiaries other than
dividends or distributions payable (A) in Equity Interests of the Company
that are not Disqualified Stock or (B) to the Company or any Subsidiary;
(ii) purchase, redeem, defease, retire or otherwise acquire for value
("Retire" and correlatively, a "Retirement") any Equity Interests of the
Company or any of its Subsidiaries or other Affiliate of the Company (other
than any such Equity Interests owned by the Company or any Subsidiary);
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(iii) Retire for value any Indebtedness of (A) the Company that is
subordinate in right of payment to the Senior Notes or (B) any Subsidiary,
except, with respect to clause (A) or (B) above, at final maturity or in
accordance with the mandatory redemption or repayment provisions set forth
in the original documentation governing such Indebtedness; or
(iv) make any Restricted Investment (all such payments and other actions
set forth in clauses (i) through (iv) above being collectively referred to
as "Restricted Payments"), unless, at the time of such Restricted Payment:
(a) no Default or Event of Default has occurred and is continuing or
would occur as a consequence thereof;
(b) after giving effect to such Restricted Payment on a pro forma
basis as if such Restricted Payment had been made at the beginning of
the applicable four-quarter period, the Company could incur at least
$1.00 of additional Indebtedness pursuant to the Consolidated Cash Flow
Leverage Ratio test described under "--Incurrence of Indebtedness and
Issuance of Disqualified Stock;" and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries after the
Issue Date (including any Restricted Payments made pursuant to clauses
(i), (v) and (vi) of the next paragraph), is less than the sum of
(w) 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) from June 30, 1996 to the
end of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such
period is a deficit, less 100% of such deficit), plus
(x) 100% of the aggregate net cash proceeds received by the
Company from the issue or sale of Equity Interests of the Company or
of debt securities or Disqualified Stock of the Company that have
been converted into such Equity Interests (other than Equity
Interests (or convertible debt securities) sold to a Subsidiary of
the Company and other than Disqualified Stock or debt securities
that have been converted into Disqualified Stock) after June 30,
1996 (other than any such Equity Interests, the proceeds of which
were used as set forth in clauses (ii) and (viii) below) plus
(y) 100% of the sum of, without duplication, (1) aggregate
dividends or distributions received by the Company or any Subsidiary
from any Joint Venture (other than dividends or distributions to pay
any obligations of such Joint Venture to Persons other than the
Company or any Subsidiary, such as income taxes), with non-cash
distributions to be valued at the lower of book value or fair market
value as determined by the Board of Directors, (2) the amount of the
principal and interest payments received since the Issue Date by the
Company or any Subsidiary from any Joint Venture and (3) the net
proceeds from the sale of an Investment in a Joint Venture received
by the Company or any Subsidiary; provided that there is no
obligation to return any
such amounts to the Joint Venture, and excluding any such dividend,
distribution, interest payment or net proceeds that constitutes a
return of capital invested pursuant to clause (vi) of the next
succeeding paragraph, plus
(z) $10.0 million.
The foregoing provisions will not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment would have
complied with the provisions of the Indenture;
(ii) the Retirement of (A) any Equity Interests of the Company or any
Subsidiary of the Company, (B) Indebtedness of the Company that is
subordinate to the Senior Notes or (C) Indebtedness of a Subsidiary of the
Company, in exchange for, or out of the proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of, Equity
Interests of the Company (other than Disqualified Stock);
(iii) the Retirement of any Indebtedness of the Company subordinated in
right of payment to the Senior Notes in exchange for, or out of the
proceeds of the substantially concurrent incurrence of Indebtedness of
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the Company (other than Indebtedness to a Subsidiary of the Company), but
only to the extent that such new Indebtedness is permitted under the
covenant described below under the caption, "Incurrence of Indebtedness and
Issuance of Disqualified Stock" and (1) is subordinated in right of payment
to the Senior Notes at least to the same extent as, (2) has a Weighted
Average Life to Maturity at least as long as, and (3) has no scheduled
principal payments due in any amount earlier than, any equivalent amount of
principal under the Indebtedness so Retired;
(iv) the Retirement of any Indebtedness of a Subsidiary of the Company in
exchange for, or out of the proceeds of the substantially concurrent
incurrence of Indebtedness of the Company or any Subsidiary but only to the
extent that such incurrence is permitted under the covenant described below
under the caption "Incurrence of Indebtedness and Issuance of Disqualified
Stock" and only to the extent that such Indebtedness (1) is not secured by
any assets of the Company or any Subsidiary to a greater extent than the
Retired Indebtedness was so secured, (2) has a Weighted Average Life to
Maturity at least as long as the Retired Indebtedness and (3) if such
Retired Indebtedness was an obligation of the Company, is pari passu or
subordinated in right of payment to the Senior Notes at least to the same
extent as the Retired Indebtedness;
(v) the Retirement of any Equity Interests of the Company or any
Subsidiary of the Company held by any member of the Company's (or any of
its Subsidiaries') management pursuant to any management equity
subscription agreement or stock option agreement; provided that the
aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $1.0 million in any twelve-month
period plus the aggregate cash proceeds received by the Company during such
twelve-month period from any reissuance of Equity Interests by the Company
to members of management of the Company and its Subsidiaries;
(vi) Investments in any Joint Venture; provided that at the time any such
Investment is made, such Investment will not cause the aggregate amount of
Investments at any one time outstanding under this clause (vi) to exceed
the greater of (x) $25 million and (y) 5% of the Total Common Equity of the
Company;
(vii) the payment of cash in lieu of fractional shares (a) payable as
dividends on Equity Interests of the Company or (b) issuable upon
conversion of or in exchange for securities convertible into or
exchangeable for Equity Interests of the Company or (c) issuable as a
result of a corporate reorganization, provided that, in the case of (a) and
(b), the issuance of such Equity Interests or securities and, in the case
of (c), such corporate reorganization, was permitted under the terms of the
Indenture; and
(viii) Investments with the net cash proceeds received by the Company
from the issue or sale of Equity Interests of the Company (other than
Disqualified Stock) after December 31, 1997;
provided, however, that at the time of, and after giving effect to, any
Restricted Payment permitted under clauses (i), (ii), (iii), (iv), (v), (vi)
and (viii), no Default or Event of Default shall have occurred and be
continuing.
The Indenture also provides that a Permitted Investment that ceases to be a
Permitted Investment pursuant to the definition thereof, shall become a
Restricted Investment, deemed to have been made on the date that it ceases to
be a Permitted Investment.
The Board of Directors may designate any Subsidiary to be an Unrestricted
Subsidiary if such designation would not cause a Default or an Event of
Default. For purposes of making such determination, all outstanding
Investments by the Company and its Subsidiaries (except to the extent repaid
in cash) in such Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the greatest of (x) the net book value of such Investments at the
time of such designation, (y) the fair market value of such Investments at the
time of such designation and (z) the original fair market value of such
Investments at the time they were made. Such designation will only be
permitted if such Restricted Payment would be permitted at such time.
The Board of Directors of the Company may at any time designate any
Unrestricted Subsidiary to be a Subsidiary; provided that such designation
shall be deemed to be an incurrence of Indebtedness by a Subsidiary
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of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary
and such designation shall only be permitted if (i) such Indebtedness is
permitted under the covenant entitled "Incurrence of Indebtedness and Issuance
of Disqualified Stock," and (ii) no Default or Event of Default would be in
existence following such designation.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant "--Restricted Payments" were computed, which
calculations may be based upon the Company's latest available financial
statements.
Incurrence of Indebtedness and Issuance of Disqualified Stock
The Indenture provides that:
(i) the Company and its Subsidiaries may not, directly or indirectly,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable for the payment of (collectively, "incur" and,
correlatively, "incurred" and "incurrence") any Indebtedness (including,
without limitation, Acquired Debt) and
(ii) the Company and its Subsidiaries may not issue any Disqualified
Stock,
provided, however, that the Company and/or any of its Subsidiaries may incur
Indebtedness (including, without limitation, Acquired Debt) or issue shares of
Disqualified Stock if, after giving effect to the incurrence of such
Indebtedness or the issuance of such Disqualified Stock, the Consolidated Cash
Flow Leverage Ratio for the Company's most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date of such incurrence or issuance (A) does not exceed 5.5 to 1
if such incurrence or issuance occurs on or prior to June 1, 1999 and (B) does
not exceed 5.0 to 1 if such occurrence or issuance occurs after June 1, 1999,
in each case, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred, or the Disqualified Stock had been issued, as the case may
be, at the beginning of such four-quarter period. If the Company incurs any
Indebtedness or issues or redeems any Preferred Stock subsequent to the
commencement of the period for which such ratio is being calculated but prior
to the event for which the calculation of the ratio is made, then the ratio
will be calculated giving pro forma effect to any such incurrence of
Indebtedness, or such issuance or redemption of Preferred Stock, as if the
same had occurred at the beginning of the applicable period. In making such
calculation on a pro forma basis, interest attributable to Indebtedness
bearing a floating interest rate shall be computed as if the rate in effect on
the date of computation had been the applicable rate for the entire period.
The foregoing limitation will not apply to (with each exception to be given
independent effect):
(a) the incurrence by the Company and/or any of its Subsidiaries of
Indebtedness under the Credit Facility in an aggregate principal amount at
any one time outstanding (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the Company
and/or any of its Subsidiaries thereunder) not to exceed $150.0 million in
the aggregate at any one time outstanding, less the aggregate amount of all
Net Proceeds of Asset Sales applied to permanently reduce the commitments
with respect to such Indebtedness pursuant to the covenant described above
under the caption "Asset Sales;"
(b) the incurrence by the Company and/or any of its Subsidiaries of
Vendor Indebtedness, provided that the aggregate amount of such Vendor
Indebtedness incurred does not exceed 80% of the total cost of the
Telecommunications Related Assets financed therewith (or 100% of the total
cost of the Telecommunications Related Assets financed therewith if such
Vendor Indebtedness was extended for the purchase of tangible physical
assets and was so financed by the vendor thereof or an affiliate of such
vendor);
(c) the incurrence by the Company and/or any of its Subsidiaries of the
Existing Indebtedness, including the Existing Senior Notes;
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(d) the incurrence by the Company and/or any of its Subsidiaries of
Indebtedness in an aggregate amount not to exceed $50.0 million at any one
time outstanding;
(e) the incurrence by the Company of Indebtedness, but only to the extent
that such Indebtedness is expressly subordinate to the payment in full of
all Obligations with respect to the Senior Notes and has a final maturity
no earlier than, and a Weighted Average Life to Maturity equal to or
greater than, the final maturity and Weighted Average Life to Maturity,
respectively, of the Senior Notes, in an aggregate principal amount not to
exceed 2.0 times the net cash proceeds received by the Company after June
30, 1996 from the issuance and sale of Equity Interests of the Company
(that are not Disqualified Stock) plus the fair market value of Equity
Interests (other than Disqualified Stock) issued after June 30, 1996 in
connection with any acquisition of any Telecommunications Business;
(f) the incurrence (a "Permitted Refinancing") by the Company and/or any
of its Subsidiaries of Indebtedness issued in exchange for, or the proceeds
of which are used to refinance, replace, refund or defease ("Refinance" and
correlatively, "Refinanced" and "Refinancing") Indebtedness, other than
Indebtedness incurred pursuant to clause (a) above, but only to the extent
that:
(1) the net proceeds of such Refinancing Indebtedness do not exceed
the principal amount of and premium, if any, and accrued interest on
the Indebtedness so Refinanced (or if such Indebtedness was issued at
an original issue discount, the original issue price plus amortization
of the original issue discount at the time of the repayment of such
Indebtedness) plus the fees, expenses and costs of such Refinancing and
reasonable prepayment premiums, if any, in connection therewith;
(2) the Refinancing Indebtedness shall have a final maturity no
earlier than, and a Weighted Average Life to Maturity equal to or
greater than, the final maturity and Weighted Average Life to Maturity
of the Indebtedness being Refinanced; and
(3) if the Indebtedness being Refinanced is subordinated in right of
payment to the Senior Notes, the Refinancing Indebtedness shall be
subordinated in right of payment to the Senior Notes on terms at least
as favorable to the holders of Senior Notes as those contained in the
documentation governing the Indebtedness being so Refinanced;
(g) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Subsidiaries; and
(h) the incurrence by the Company or any of its Subsidiaries of Hedging
Obligations that are incurred for the purpose of fixing or hedging interest
rate or foreign currency risk with respect to any floating rate
Indebtedness that is permitted by the terms of the Indenture to be
outstanding.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness, Disqualified Stock or Preferred Stock meets the
criteria of more than one of the categories described in clauses (a) through
(h) above or is entitled to be incurred pursuant to the first paragraph of
this covenant, the Company shall, in its sole discretion, classify such item
in any manner that complies with this covenant and such item will be treated
as having been incurred pursuant to only one of such clauses or pursuant to
the first paragraph herein. Accrual of interest or dividends, the accretion of
accreted value or liquidation preference and the payment of interest or
dividends in the form or additional Indebtedness, Common Stock or Preferred
Stock will not be deemed to be an incurrence of Indebtedness for purposes of
this covenant.
Asset Sales
The Indenture provides that the Company and its Subsidiaries may not,
whether in a single transaction or a series of related transactions occurring
within any twelve-month period,
(i) sell, lease, convey, dispose or otherwise transfer any assets
(including by way of a Sale and Leaseback Transaction) other than sales,
leases, conveyances, dispositions or other transfers (A) in the ordinary
course of business, (B) to the Company by any Subsidiary of the Company or
from the Company to any Subsidiary of the Company, (C) that constitute a
Restricted Payment, Investment or dividend or
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distribution permitted under the covenant described above under the caption
"Restricted Payments" or (D) that constitute the disposition of all or
substantially all of the assets of the Company pursuant to the covenant
described below under the caption "Merger, Consolidation or Sale of Assets"
or
(ii) issue or sell Equity Interests in any of its Subsidiaries (other
than an issuance or sale of Equity Interests of any such Subsidiary to the
Company or a Subsidiary),
if, in the case of either (i) or (ii) above, in a single transaction or a
series of related transactions occurring within any twelve-month period, such
assets or securities
(x) have a Fair Market Value in excess of $2.0 million or
(y) are sold or otherwise disposed of for net proceeds in excess of $2.0
million (each of the foregoing, an "Asset Sale"), unless:
(a) no Default or Event of Default exists or would occur as a result
thereof;
(b) the Company, or such Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the Fair
Market Value (evidenced by a resolution of the Board of Directors of the
Company set forth in an Officers' Certificate delivered to the Trustee), of
the assets or securities issued or sold or otherwise disposed of; and
(c) at least 75% of the consideration therefor received by the Company or
such Subsidiary is in the form of cash, provided, however, that (A) the
amount of (x) any liabilities (as shown on the Company's or such
Subsidiary's most recent balance sheet or in the notes thereto), of the
Company or any Subsidiary of the Company (other than liabilities that are
by their terms subordinated to the Senior Notes) that are assumed by the
transferee of any such assets and (y) any notes, obligations or other
securities received by the Company or any such Subsidiary from such
transferee that are immediately converted by the Company or such Subsidiary
into cash, shall be deemed to be cash (to the extent of the cash received
in the case of subclause (y)) for purposes of this clause (c); and (B) an
amount equal to the Fair Market Value (determined as set forth in clause
(b) above) of (1) Telecommunications Related Assets received by the Company
or any such Subsidiary from the transferee that will be used by the Company
or any such Subsidiary in the operation of a Telecommunications Business in
the United States and (2) the Voting Stock of any Person engaged in the
Telecommunications Business in the United States received by the Company or
any such Subsidiary (provided that such Voting Stock is converted to cash
within 270 days or such Person concurrently becomes or is a Subsidiary of
the Company) will be deemed to be cash for purposes of this clause (c).
The foregoing provisions will not apply to a sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company, which
will be governed by the provisions of the Indenture described below under
"Merger, Consolidation, or Sale of Assets."
The Indenture also provides that within 360 days after the receipt of net
proceeds of any Asset Sale, the Company (or such Subsidiary, as the case may
be) may apply the Net Proceeds from such Asset Sale to (i) permanently reduce
the amounts permitted to be borrowed by the Company under the terms of any of
its Senior Indebtedness or (ii) the purchase of Telecommunications Related
Assets or Voting Stock of any Person engaged in the Telecommunications
Business in the United States (provided that such Person concurrently becomes
a Subsidiary of the Company). Any Net Proceeds from any Asset Sales that are
not so applied or invested will constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $10.0 million, the Company will be
required to make an Excess Proceeds Offer in accordance with the terms set
forth under "Offer to Purchase with Excess Asset Sale Proceeds."
Liens
The Indenture provides that the Company and its Subsidiaries may not,
directly or indirectly, create, incur, assume or suffer to exist any Lien on
any asset now owned or hereafter acquired, or any income or profits therefrom
or assign or convey any right to receive income therefrom, except for
Permitted Liens.
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Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company and its Subsidiaries may not,
directly or indirectly, create or otherwise cause to become effective any
consensual encumbrance or restriction on the ability of any Subsidiary to:
(i) pay dividends or make any other distributions to the Company or any
of its Subsidiaries on its Capital Stock or with respect to any other
interest or participation in, or measured by, its profits, or pay any
Indebtedness owed to the Company or any of its Subsidiaries;
(ii) make loans or advances to the Company or any of its Subsidiaries; or
(iii) transfer any of its properties or assets to the Company or any of
its Subsidiaries;
except for such encumbrances or restrictions existing as of the Issue Date
or under or by reason of:
(a) Existing Indebtedness;
(b) applicable law;
(c) any instrument governing Acquired Debt as in effect at the time
of acquisition (except to the extent such Indebtedness was incurred in
connection with, or in contemplation of, such acquisition), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired;
(d) by reason of customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with
past practices;
(e) Indebtedness in respect of a Permitted Refinancing, provided that
the restrictions contained in the agreements governing such Refinancing
Indebtedness are not materially more restrictive than those contained
in the agreements governing the Indebtedness being refinanced;
(f) with respect to clause (iii) above, purchase money obligations
for property acquired in the ordinary course of business, Vendor
Indebtedness incurred in connection with the purchase or lease of
Telecommunications Related Assets or performance bonds or similar
security for performance which liens securing such obligations do not
cover any asset other than the asset acquired or, in the case of
performance bonds or similar security for performance, the assets
associated with the Company's performance;
(g) Indebtedness incurred under clause (a) of the covenant entitled
"Incurrence of Indebtedness and Issuance of Disqualified Stock;"
(h) the Indenture and the Senior Notes or future Indebtedness with
substantially similar restrictions, if any, to the Senior Notes; or
(i) in the case of clauses (a), (c), (e), (g) and (h) above, any
amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, provided
that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings are not
materially more restrictive with respect to such dividend and other
payment restrictions than those contained in such instruments as in
effect on the date of their incurrence or, if later, the Issue Date.
Merger, Consolidation or Sale of Assets
The Indenture provides that the Company may not consolidate or merge with or
into (whether or not the Company is the surviving entity), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of
its properties or assets in one or more related transactions to, another
corporation, Person or entity unless:
(i) the Company is the surviving entity or the entity or Person formed by
or surviving any such consolidation or merger (if other than the Company)
or to which such sale, assignment, transfer, lease, conveyance or other
disposition has been made is a corporation organized or existing under the
laws of the United States, any state thereof or the District of Columbia;
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(ii) the entity or Person formed by or surviving any such consolidation
or merger (if other than the Company) or the entity or Person to which such
sale, assignment, transfer, lease, conveyance or other disposition has been
made assumes all the obligations of the Company under the Senior Notes and
the Indenture pursuant to a supplemental indenture in form reasonably
satisfactory to the Trustee;
(iii) immediately after such transaction no Default or Event of Default
exists;
(iv) except in connection with a Merger with or into a wholly owned
Subsidiary of the Company, the Company, or any entity or Person formed by
or surviving any such consolidation or merger, or to which such sale,
assignment, transfer, lease, conveyance or other disposition has been made,
at the time of such transaction after giving pro forma effect thereto as if
such transaction had occurred at the beginning of the applicable fiscal
quarter (including any Indebtedness incurred or anticipated to be incurred
in connection with or in respect of such transaction or series of
transactions), either (A) could incur at least $ 1.00 of additional
Indebtedness pursuant to the Consolidated Cash Flow Leverage Ratio test
described under "--Incurrence of Indebtedness and Issuance of Disqualified
Stock" or (B) would have (x) Total Market Capitalization of at least $1.0
billion and (y) total Indebtedness (net of cash and cash equivalents that
are not restricted cash or restricted cash equivalents as reflected on the
Company's consolidated balance sheet as of the time of such event) in an
amount no greater than 40% of its Total Market Capitalization; and
(v) such transaction would not result in the loss, material impairment or
adverse modification or amendment of any authorization or license of the
Company or its Subsidiaries that would have a material adverse effect on
the business or operations of the Company and its Subsidiaries taken as a
whole.
Transactions with Affiliates
The Indenture provides that the Company and its Subsidiaries may not sell,
lease, transfer or otherwise dispose of any of their respective properties or
assets to, or purchase any property or assets from, or enter into any
contract, agreement, understanding, loan, advance or guarantee with, or for
the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless:
(i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Subsidiary with
an unrelated Person;
(ii) such Affiliate Transaction is approved by a majority of the
disinterested directors on the Board of Directors of the Company; and
(iii) the Company delivers to the Trustee, with respect to any Affiliate
Transaction involving aggregate payments in excess of $1.0 million, a
resolution of a committee of independent directors of the Company set forth
in an Officers' Certificate certifying that such Affiliate Transaction
complies with clauses (i) and (ii) above;
provided that
(a) transactions pursuant to any employment, stock option or stock
purchase agreement entered into by the Company or any of its
Subsidiaries, or any grant of stock, in the ordinary course of business
that are approved by the Board of Directors of the Company,
(b) transactions between or among the Company and its Subsidiaries,
(c) transactions permitted by the provisions of the Indenture
described above under the covenant "--Restricted Payments," and
(d) loans and advances to employees and officers of the Company or
any of its Subsidiaries in the ordinary course of business in an
aggregate principal amount not to exceed $1.0 million at any one time
outstanding,
shall not be deemed Affiliate Transactions.
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Use of Proceeds
The Indenture provides that the Company may use the gross proceeds from the
sale of the Old Notes only for the following purposes:
(i) to pay the fees and expenses of the issuance of the Old Notes
including any discount or commission to the Initial Purchasers of the Old
Notes;
(ii) with respect to any funds remaining after application under clause
(i) above, to fund up to 80% of the cost of the acquisition or construction
of Telecommunications Related Assets, or to the repayment of the Existing
Senior Notes.
Pending application of the proceeds in accordance with clause (ii) above,
the Company will deposit such proceeds into a segregated account in the
Company's name. The Company will deliver to the Trustee an Officer's
Certificate with each annual compliance certificate certifying that the
amounts in such account were applied in accordance with this covenant.
Business Activities
The Indenture provides that the Company and its Subsidiaries may not,
directly or indirectly, engage in any business other than the
Telecommunications Business.
Limitations on Sale and Leaseback Transactions
The Indenture provides that the Company and its Subsidiaries may not,
directly or indirectly, enter into, assume, Guarantee or otherwise become
liable with respect to any Sale and Leaseback Transaction, provided that the
Company or any Subsidiary of the Company may enter into any such transaction
if (i) the Company or such Subsidiary would be permitted under the covenants
described above under "--Incurrence of Indebtedness and Issuance of
Disqualified Stock" and "--Liens" to incur secured Indebtedness in an amount
equal to the Attributable Debt with respect to such transaction, (ii) the
consideration received by the Company or such Subsidiary from such transaction
is at least equal to the Fair Market Value of the property being transferred,
and (iii) the Net Proceeds received by the Company or such Subsidiary from
such transaction are applied in accordance with the covenant described above
under the caption "--Asset Sales."
Reports
The Indenture provides that the Company will file with the Trustee 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"). 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) and the
Trustee. Whether or not required by the Exchange Act to file SEC Reports with
the Commission, so long as any Senior Notes are outstanding, the Company will
furnish copies of the SEC Reports to the holders of Senior Notes at the time
the Company is required to file the same with the Trustee and make such
information available to investors who request it in writing. In addition, the
Company has agreed that, for so long as any Senior Notes 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.
Payments for Consents
The Indenture provides that neither the Company nor any of its Affiliates
shall, directly or indirectly, pay or cause to be paid any consideration,
whether by way of interest, fee or otherwise, to any holder of any Notes for
or as an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Senior Notes unless such consideration is
offered to be paid or agreed to be paid to all holders of the Senior Notes
that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
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EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default:
(i) default for 30 days in the payment when due of interest or Liquidated
Damages, if any, on the Senior Notes;
(ii) default in payment when due of principal or premium, if any, on the
Senior Notes at maturity, upon redemption or otherwise;
(iii) failure by the Company to perform or comply with the provisions of
the covenants described above under "--Offer to Purchase Upon Change of
Control," "--Asset Sales," "--Restricted Payments," "--Incurrence of
Indebtedness and Issuance of Disqualified Stock" or "--Merger,
Consolidation or Sale of Assets;"
(iv) failure by the Company for 30 days after notice from the Trustee or
the holders of at least 25% in principal amount of the Notes then
outstanding to comply with its other agreements in the Indenture or the
Senior Notes;
(v) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Subsidiaries
(or the payment of which is guaranteed by the Company or any of its
Subsidiaries), whether such Indebtedness or Guarantee now exists, or is
created after the Issue Date, which default (x) is caused by a failure to
pay when due principal, premium, if any, or interest on such Indebtedness
within the grace period provided in such Indebtedness (a "Payment
Default"), and the principal amount of any such Indebtedness, together with
the principal amount of any other such Indebtedness of the Company or any
Significant Subsidiary under which there has been a Payment Default or the
maturity of which has been accelerated as provided in clause (y),
aggregates $5.0 million or more or (y) results in the acceleration (which
acceleration has not been rescinded) of such Indebtedness prior to its
express maturity and the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5.0 million or more;
(vi) failure by the Company or any of its Significant Subsidiaries to pay
final judgments (other than any judgment as to which a reputable insurance
company has accepted full liability in writing) aggregating in excess of
$5.0 million which judgments are not paid, discharged or stayed within 45
days after their entry; and
(vii) certain events of bankruptcy or insolvency with respect to the
Company or any of its Significant Subsidiaries.
If any Event of Default occurs and is continuing under the Indenture, the
Trustee or the holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable immediately.
Upon such declaration, the principal of, premium, if any, and accrued and
unpaid interest and Liquidated Damages, if any, on the Senior Notes shall be
due and payable immediately. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency with
respect to the Company or any of its Significant Subsidiaries, the foregoing
amount shall ipso facto become due and payable without further action or
notice. No premium is payable upon acceleration of the Senior Notes except
that in the case of an Event of Default that is the result of an action or
inaction by the Company or any of its Subsidiaries intended to avoid
restrictions on or premiums related to redemptions of the Senior Notes
contained in the Indenture or the Senior Notes. The amount declared due and
payable will include the premium that would have been applicable on a
voluntary prepayment of the Senior Notes or, if voluntary prepayment is not
then permitted, the premium set forth in the Indenture. Holders of the Senior
Notes may not enforce the Indenture or the Senior Notes except as provided in
the Indenture. Subject to certain limitations, holders of a majority in
principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from holders of the
Senior Notes notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payments of principal or interest)
if it determines that withholding notice is in such holders' interest.
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The holders of a majority in aggregate principal amount of the Notes then
outstanding, by notice to the Trustee, may on behalf of the holders of all of
the Notes, waive any existing Default or Event of Default and its consequences
under the Indenture, except a continuing Default or Event of Default in the
payment of interest or Liquidated Damages or premium on, or the principal of,
the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF PARTNERS, DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Senior Notes or the Indenture or for any claim based on, in respect of, or by
reason of such obligations or their creation. Each holder of Senior Notes by
accepting a Senior Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Senior Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations discharged with respect to the outstanding Senior Notes ("Legal
Defeasance"). Such Legal Defeasance means that the Company shall be deemed to
have paid and discharged the entire indebtedness represented by the
outstanding Senior Notes, except for:
(a) the rights of holders of outstanding Senior Notes to receive from the
trust described below payments in respect of the principal of, premium, if
any, and interest on and Liquidated Damages with respect to such Senior
Notes when such payments are due, or on the redemption date, as the case
may be;
(b) the Company's obligations with respect to the Senior Notes concerning
issuing temporary Senior Notes, registration of Senior Notes, mutilated,
destroyed, lost or stolen Senior Notes and the maintenance of an office or
agency for payment and money for security payments held in trust;
(c) the rights, powers, trust, duties and immunities of the Trustee, and
the Company's obligations in connection therewith; and
(d) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company released with respect to certain covenants that
are described in the Indenture ("Covenant Defeasance") and thereafter any
omission to comply with such obligations shall not constitute a Default or
Event of Default with respect to the Senior Notes. In the event Covenant
Defeasance occurs, certain events (not including non payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Senior Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(i) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the holders of the Senior Notes, cash in U.S. dollars, non-
callable U.S. government obligations, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants selected by the Company, to pay the
principal of, premium, if any, and interest on the outstanding Senior
Notes, on the stated maturity or on the applicable optional redemption
date, as the case may be, of such principal or installment of principal of,
premium, if any, or interest on or Liquidated Damages with respect to the
outstanding Senior Notes;
(ii) in the case of Legal Defeasance, the Company must deliver to the
Trustee an opinion of counsel in the United States reasonably acceptable to
the Trustee confirming that (A) the Company has received from,
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or there has been published by, the Internal Revenue Service a ruling or
(B) since the Issue Date, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
opinion of counsel shall confirm that, the holders of the outstanding
Senior Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not
occurred;
(iii) in the case of Covenant Defeasance, the Company must deliver to the
Trustee an opinion of counsel in the United States reasonably acceptable to
the Trustee confirming that the holders of the outstanding Senior Notes
will not recognize income, gain or loss for federal income tax purposes as
a result of such Covenant Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would
have been the case if such Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or
insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date
of deposit;
(v) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(vi) the Company must have delivered to the Trustee an opinion of counsel
to the effect that after the 91st day (or such other applicable date)
following the deposit, the trust funds will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
(vii) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the holders of Senior Notes over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and
(viii) the Company must deliver to the Trustee an Officers' Certificate
and an opinion of counsel, each stating that all conditions precedent
provided for relating to the Legal Defeasance or the Covenant Defeasance
have been complied with.
TRANSFER AND EXCHANGE
A holder may transfer or exchange Senior Notes in accordance with the
Indenture. The Registrar and the Trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or
exchange any Senior Note selected for redemption. Also, the Company is not
required to transfer or exchange any Senior Note for a period of 15 days
before a selection of Senior Notes to be redeemed.
The registered holder of a Senior Note will be treated as the owner of it
for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next succeeding paragraph, the Indenture or the
Senior Notes may be amended or supplemented with the consent of the holders of
at least a majority in principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange
offer for Notes), and any existing default or compliance with any provision of
the Indenture or the Senior Notes may be waived with the consent of the
holders of a majority in principal amount of the then outstanding Notes
(including consents obtained in connection with a tender offer or exchange
offer for Notes).
Without the consent of each holder affected, however, an amendment or waiver
may not (with respect to any Senior Note held by a non-consenting holder):
(i) reduce the principal amount of Notes whose holders must consent to an
amendment, supplement or waiver;
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(ii) reduce the principal or change the fixed maturity of any Senior Note
or alter the provisions with respect to the redemption of the Senior Notes
(other than provisions relating to the covenants described under the
caption "--Offer to Purchase upon Change of Control" and "--Offer to
Purchase with Excess Asset Sale Proceeds");
(iii) reduce the rate of or change the time for payment of interest on
any Senior Notes;
(iv) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the Senior Notes (except a rescission of
acceleration of the Senior Notes by the holders of at least a majority in
aggregate principal amount of the Senior Notes and a waiver of the payment
default that resulted from such acceleration);
(v) make any Senior Note payable in money other than that stated in the
Senior Notes;
(vi) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of holders of Senior Notes to
receive payments of principal of, premium, if any, or interest on the
Senior Notes;
(vii) waive a redemption payment with respect to any Senior Note (other
than a payment required by one of the covenants described above under the
captions "--Offer to Purchase upon Change of Control" and "Offer to
Purchase with Excess Asset Sale Proceeds"); or
(viii) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any holder of Senior
Notes, the Company and the Trustee may amend or supplement the Indenture or
the Senior Notes:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Senior Notes in addition to or in place
of certificated Senior Notes;
(c) to provide for the assumption of the Company's obligations to holders
of the Senior Notes in the case of a merger or consolidation;
(d) to make any change that would provide any additional rights or
benefits to the holders of the Senior Notes or that does not adversely
affect the legal rights under the Indenture of any such holder; or
(e) to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should the Trustee become a creditor of the Company, to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim as security or otherwise. The Trustee is permitted to engage
in other transactions with the Company; however, if the Trustee acquires any
conflicting interest, it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue as Trustee or resign.
The holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur and be continuing, the Trustee will be required, in the exercise
of its powers, to use the degree of care of a prudent man in the conduct of
his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any holder of Senior Notes, unless such holder shall have offered
to the Trustee security and indemnity satisfactory to it against any loss,
liability or expense. No holder of any Senior Note will have any right to
institute any proceeding with respect to the Indenture or for any remedy
thereunder, unless (i) such holder gives to the Trustee written notice of a
continuing Event of Default, (ii) holders of at least 25% in principal amount
of the then outstanding Notes make a written request to pursue the remedy,
(iii) such holders of the Senior Notes provide to the Trustee satisfactory
indemnity and (iv) the Trustee does not comply within 60 days. Otherwise, no
holder of any Senior Note will have any right to institute any proceeding
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with respect to the Indenture or for any remedy thereunder, except: (i) a
holder of a Senior Note may institute suit for enforcement of payment of the
principal of and premium, if any, or interest on such Senior Note on or after
the respective due dates expressed in such Senior Note (including upon
acceleration thereof) or (ii) the institution of any proceeding with respect
to the Indenture or any remedy thereunder, including without limitation
acceleration, by the Holders of a majority in principal amount of the
outstanding Senior Notes, provided that, upon institution of any proceeding or
exercise of any remedy such Holders provide the Trustee with prompt notice
thereof.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company and the Initial Purchasers entered into the Registration Rights
Agreement on December 23, 1997. Pursuant to the Registration Rights Agreement,
the Company agreed to file with the Commission the Exchange Registration
Statement of which this Prospectus forms a part with respect to the Notes.
Upon the effectiveness of the Exchange Registration Statement, the Company
will offer to the holders of Transfer Restricted Securities pursuant to the
Exchange Offer who are able to make certain representations the opportunity to
exchange their Transfer Restricted Securities for the Senior Notes. If (i) the
Company is not required to file the Exchange Registration Statement or
permitted to consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy or (ii) any holder of
Transfer Restricted Securities notifies the Company within the specified time
period that (A) it is prohibited by law or Commission policy from
participating in the Exchange Offer, (B) that it may not resell the Senior
Notes acquired by it in the Exchange Offer to the public without delivering a
prospectus and the prospectus contained in the Exchange Registration Statement
is not appropriate or available for such resales or (C) that it is a broker-
dealer and owns Old Notes acquired directly from the Company or an affiliate
of the Company, the Company will file with the Commission a shelf registration
statement (the "Shelf Registration Statement") to cover resales of the Old
Notes by the Holders thereof who satisfy certain conditions relating to the
provision of information in connection with the Shelf Registration Statement.
The Company will use its best efforts to cause the applicable registration
statement to be declared effective as promptly as possible by the Commission.
For purposes of the foregoing, "Transfer Restricted Securities" means each Old
Note until (i) the date on which such Old Note has been exchanged by a Person
other than a broker-dealer for a Senior Note in the Exchange Offer, (ii)
following the exchange by a broker-dealer in the Exchange Offer of a Old Note
for a Senior Note, the date on which such Senior Note is sold to a purchaser
who receives from such broker-dealer on or prior to the date of such sale a
copy of the prospectus contained in the Exchange Registration Statement, (iii)
the date on which such Old Note has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iv) the date on which such Old Note is distributed to the public
pursuant to Rule 144 under the Act.
The Registration Rights Agreement provides that (i) the Company will file
the Exchange Registration Statement with the Commission on or prior to 60 days
after December 23, 1997 (the "Closing Date"), (ii) the Company will use its
best efforts to have the Exchange Registration Statement declared effective by
the Commission on or prior to 120 days after the Closing Date, (iii) unless
the Exchange Offer would not be permitted by applicable law or Commission
policy, the Company will commence the Exchange Offer and use its best efforts
to issue on or prior to 30 business days after the date on which the Exchange
Registration Statement was declared effective by the Commission, Senior Notes
in exchange for all Old Notes tendered prior thereto in the Exchange Offer and
(iv) if obligated to file the Shelf Registration Statement, the Company will
use its best efforts to file the Shelf Registration Statement with the
Commission on or prior to 60 days after such filing obligation arises (and in
any event within 150 days after the Closing Date) and to cause the Shelf
Registration Statement to be declared effective by the Commission on or prior
to 90 days after such obligation arises (and in any event within 240 days
after the Closing Date). If (a) the Company fails to file any of the
registration statements required by the Registration Rights Agreement on or
before the date specified for such filing, (b) any of such registration
statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), (c) the
Company fails to consummate the Exchange Offer within 30 business days of the
Effectiveness Target Date with respect to the Exchange Registration Statement,
or (d) the Shelf Registration Statement or the Exchange Registration Statement
is declared effective but thereafter
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ceases to be effective or usable in connection with resales of Transfer
Restricted Securities during the periods specified in the Registration Rights
Agreement, 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, (each such event referred to in clauses (a) through (d)
above a "Registration Default"), then the Company will pay liquidated damages
("Liquidated Damages") to each Holder of Transfer Restricted Securities, with
respect to the first 90-day period immediately following the occurrence of
such Registration Default in an amount equal to $.05 per week per $1,000
principal amount of Old Notes constituting Transfer Restricted Securities held
by such Holder. The amount of the Liquidated Damages will increase by an
additional $.05 per week per $1,000 principal amount of Old Notes constituting
Transfer Restricted Securities with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $.50 per week per $1,000 principal amount of Old Notes
constituting Transfer Restricted Securities. All accrued Liquidated Damages
will be paid by the Company on each Interest Payment Date to the holder of the
Global Securities by wire transfer of immediately available funds or by
federal funds check and to Holders of Certificated Securities by mailing
checks to their registered addresses. Following the cure of all Registration
Defaults, the accrual of Liquidated Damages will cease.
Holders of Old Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information
to be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Old Notes included
in the Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Senior Notes may be issued in
the form of one or more Global Securities (the "Global Securities"). The
Global Securities will be deposited on the Exchange Date with, or on behalf
of, The Depository Trust Company (the "Depositary") and registered in the name
of the Depository or its nominee.
Senior Notes that are issued as described below under "--Certificated
Securities" will be issued in the form of registered definitive certificates
(the "Certificated Securities"). Upon the transfer of Certificated Securities,
such Certificated Securities may, unless the Global Securities have previously
been exchanged for Certificated Securities, be exchanged for an interest in
the Global Securities representing the principal amount of Senior Notes being
transferred.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the
"Participants" or the "Depositary's Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers (including the Initial Purchasers), banks and trust companies,
clearing corporations and certain other organizations. Access to the
Depositary's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect
Participants" or the "Depositary's Indirect Participants") that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Securities, the Depositary will
credit the accounts of Participants designated by the Exchange Agent with
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portions of the principal amount of the Global Securities and (ii) ownership
of the Senior Notes evidenced by the Global Securities will be shown on, and
the transfer of ownership thereof will be effected only through, records
maintained by the Depositary (with respect to the interests of the
Depositary's Participants), the Depositary's Participants and the Depositary's
Indirect Participants. Prospective purchasers are advised that the laws of
some states require that certain persons take physical delivery in definitive
form of securities that they own. Consequently, the ability to transfer Senior
Notes evidenced by the Global Securities will be limited to such extent.
So long as the Depository, or its nominee is the registered owner of any
Senior Notes, the Depository or such nominee, as the case may be, will be
considered the sole holder under the Indenture of any Senior Notes evidenced
by the Global Securities. Beneficial owners of Senior Notes evidenced by the
Global Securities will not be considered the owners or holders thereof under
the Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any
aspect of the records of the Depositary or for maintaining, supervising or
reviewing any records of the Depositary relating to the Senior Notes.
Payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on any Senior Notes registered in the name of the
Depository or its nominee on the applicable record date will be payable by the
Trustee to or at the direction of the Depository or such nominee, as the case
may be, in its capacity as the registered holder under the Indenture. Under
the terms of the Indenture, the Company and the Trustee may treat the persons
in whose names Senior Notes, including the Global Securities, are registered
as the owners thereof for the purpose of receiving such payments.
Consequently, neither the Company nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to beneficial
owners of Senior Notes. The Company believes, however, that it is currently
the policy of the Depositary to immediately credit the accounts of the
relevant Participants with such payments, in amounts proportionate to their
respective holdings of beneficial interests in the relevant security as shown
on the records of the Depositary. Payments by the Depositary's Participants
and the Depositary's Indirect Participants to the beneficial owners of Senior
Notes will be governed by standing instructions and customary practice and
will be the responsibility of the Depositary's Participants or the
Depositary's Indirect Participants.
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest in
the Global Securities may, upon request to the Trustee, exchange such
beneficial interest for Senior Notes in the form of Certificated Securities.
Upon any such issuance, the Trustee is required to register such Certificated
Securities in the name of, and cause the same to be delivered to, such person
or persons (or the nominee of any thereof). In addition, if (i) the Company
notifies the Trustee in writing that the Depositary 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
Trustee in writing that it elects to cause the issuance of Senior Notes in the
form of Certificated Securities under the Indenture, then, upon surrender by
the Depository or its nominee of its Global Security, Senior Notes in such
form will be issued to each person that the Depository or its nominee identify
as being the beneficial owner of the related Senior Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Depository or its nominee in identifying the beneficial owners of Senior Notes
and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Depository or its nominee for
all purposes.
SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Senior Notes
represented by the Global Securities (including principal, premium, if any,
interest and Liquidated Damages, if any) be made by wire transfer of
immediately available funds to the accounts specified by the Depository or its
nominee. With respect to Certificated Securities, the Company will make all
payments of principal, premium, if any, interest and
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Liquidated Damages, if any, by wire transfer of immediately available funds to
the accounts specified by the holders thereof or, if no such account is
specified, by mailing a check to each such holder's registered address. The
Senior Notes represented by the Global Securities are expected to be eligible
to trade in the Depositary's Same-Day Funds Settlement System, and any
permitted secondary market trading activity in such Senior Notes will
therefore be required by the Depositary to be settled in immediately available
funds. The Company expects that secondary trading in the Certificated
Securities will also be settled in immediately available funds.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise,
provided, however, that beneficial ownership of 25% or more of the voting
securities of a Person shall be deemed to be control.
"Attributable Debt" means, with respect to any Sale and Leaseback
Transaction, the present value at the time of determination (discounted at a
rate consistent with accounting guidelines, as determined in good faith by the
Company) of the payments during the remaining term of the lease (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended) or until the earliest date on which the lessee may
terminate such lease without penalty or upon payment of a penalty (in which
case the rental payments shall include such penalty), after excluding all
amounts required to be paid on account of maintenance and repairs, insurance,
taxes, assessments, water, utilities and similar charges.
"Beneficial Owner" means a beneficial owner as defined in Rules 13d-3 and
13d-5 under the Exchange Act (or any successor rules), including the provision
of such Rules that a Person shall be deemed to have beneficial ownership of
all securities that such Person has a right to acquire within 60 days;
provided that a Person will not be deemed a beneficial owner of, or to own
beneficially, any securities if such beneficial ownership (1) arises solely as
a result of a revocable proxy delivered in response to a proxy or consent
solicitation made pursuant to, and in accordance with, the Exchange Act and
(2) is not also then reportable on Schedule 13D or Schedule 13G (or any
successor schedule) under the Exchange Act.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be so required to be capitalized on the balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock and (iii) in the case of a partnership, partnership interests
(whether general or limited) and any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, such partnership.
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"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition, 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, to any Person or group (as such term
is used in Section 13(d)(3) and 14(d)(2) of the Exchange Act), (ii) the
adoption of a plan relating to the liquidation or dissolution of the Company,
(iii) any Person or group (as defined above) is or becomes the Beneficial
Owner, directly or indirectly, of more than 50% of the total Voting Stock or
Total Common Equity of the Company, including by way of merger, consolidation
or otherwise or (iv) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors.
"Closing Price" on any Trading Day with respect to the per share price of
any shares of Capital Stock means the last reported sale price regular way or,
in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the New
York Stock Exchange or, if such shares of Capital Stock are not listed or
admitted to trading on such exchange, on the principal national securities
exchange on which such shares are listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on the
Nasdaq National Market or, if such shares are not listed or admitted to
trading on any national securities exchange or quoted on Nasdaq National
Market but the issuer is a Foreign Issuer (as defined in Rule 3b-4(b) under
the Exchange Act) and the principal securities exchange on which such shares
are listed or admitted to trading is a Designated Offshore Securities Market
(as defined in Rule 902(a) under the Securities Act), the average of the
reported closing bid and asked prices regular way on such principal exchange,
or, if such shares are not listed or admitted to trading on any national
securities exchange or quoted on Nasdaq National Market and the issuer and
principal securities exchange do not meet such requirements, 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 that is selected from time to time
by the Company for that purpose and is reasonably acceptable to the Trustee.
"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding
up of such Person, to shares of Capital Stock of any other class of such
Person.
"Consolidated Cash Flow Leverage Ratio" with respect to any Person means the
ratio of the Consolidated Indebtedness of such Person to the Consolidated
EBITDA of such Person for the relevant period; provided, however, that (1) if
the Company or any Subsidiary of the Company has incurred any Indebtedness
(including Acquired Debt) or if the Company has issued any Disqualified Stock
or if any Subsidiary of the Company has issued any Preferred Stock since the
beginning of such period that remains outstanding on the date of such
determination or if the transaction giving rise to the need to calculate the
Consolidated Cash Flow Leverage Ratio is an incurrence of Indebtedness
(including Acquired Debt) or the issuance of Disqualified Stock by the
Company, Consolidated EBITDA and Consolidated Indebtedness for such period
will be calculated after giving effect on a pro forma basis to (A) such
Indebtedness, Disqualified Stock or Preferred Stock, as applicable, as if such
Indebtedness had been incurred or such stock had been issued on the first day
of such period, (B) the discharge of any other Indebtedness repaid,
repurchased, defeased or otherwise discharged with the proceeds of such new
Indebtedness or sale of stock as if such discharge had occurred on the first
day of such period, and (C) the interest income realized by the Company or its
Subsidiaries on the proceeds of such Indebtedness or of such stock sale, to
the extent not yet applied at the date of determination, assuming such
proceeds earned interest at the rate in effect on the date of determination
from the first day of such period through such date of determination, (2) if
since the beginning of such period the Company or any Subsidiary of the
Company has made any sale of assets (including, without limitation, any Asset
Sales or pursuant to any Sale and Leaseback Transaction), Consolidated EBITDA
for such period will be (A) reduced by an amount equal to Consolidated EBITDA
(if positive) directly attributable to the assets which are the subject of
such sale of assets for such period or (B) increased by an amount equal to
Consolidated EBITDA (if negative) directly attributable thereto for such
period and (3) if since the beginning of such period the Company or any
Subsidiary of the Company (by merger or otherwise) has made an Investment in
any Subsidiary of the Company (or any Person which becomes a
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Subsidiary of the Company) or has made an acquisition of assets, including,
without limitation, any acquisition of assets occurring in connection with a
transaction causing a calculation of Consolidated EBITDA to be made hereunder,
which constitutes all or substantially all of an operating unit of a business,
Consolidated EBITDA for such period will be calculated after giving pro forma
effect thereto (including the incurrence of any Indebtedness (including
Acquired Debt)) as if such Investment or acquisition occurred on the first day
of such period. For purposes of this definition, whenever pro forma effect is
to be given to an acquisition of assets, the pro forma calculations will be
determined in good faith by a responsible financial or accounting Officer of
the Company, provided, however, that such Officer shall assume (i) the
historical sales and gross profit margins associated with such assets for any
consecutive 12-month period ended prior to the date of purchase (provided that
the first month of such 12-month period will be no more than 18 months prior
to such date of purchase) and (ii) other expenses as if such assets had been
owned by the Company since the first day of such period. If any Indebtedness
(including, without limitation, Acquired Debt) bears a floating rate of
interest and is being given pro forma effect, the interest on such
Indebtedness will be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period.
"Consolidated EBITDA" as of any date of determination means the Consolidated
Net Income for such period (but without giving effect to adjustments,
accruals, deductions or entries resulting from purchase accounting
extraordinary losses or gains and any gains or losses from any Asset Sales),
plus the following to the extent deducted in calculating such Consolidated Net
Income: (i) provision for taxes based on income or profits of such Person and
its Subsidiaries for such period, (ii) Consolidated Interest Expense, (iii)
depreciation, amortization (including amortization of goodwill and other
intangibles) and other non-cash charges (excluding any such non-cash charge to
the extent that it represents an accrual of or reserve for cash charges in any
future period or amortization of a prepaid cash expense that was paid in a
prior period and excluding non-cash interest and dividend income) of such
Person and its Subsidiaries for such period, in each case, on a consolidated
basis and determined in accordance with GAAP. Notwithstanding the foregoing,
the provision for taxes on the income or profits of, and the depreciation,
amortization, interest expense and other non-cash charges of, a Subsidiary of
the referent Person shall be added to Consolidated Net Income to compute
Consolidated EBITDA only to the extent (and in same proportion) that the Net
Income of such Subsidiary was included in calculating the Consolidated Net
Income of such Person and only if a corresponding amount would be permitted at
the date of determination to be dividended to the Company by such Subsidiary,
or loaned to the Company by any such Subsidiary, without prior approval (that
has not been obtained), pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders.
"Consolidated Indebtedness" means, with respect to any Person, as of any
date of determination, the aggregate amount of Indebtedness of such Person and
its Subsidiaries as of such date calculated on a consolidated basis in
accordance with GAAP consistently applied.
"Consolidated Interest Expense" means, for any Person, for any period, the
aggregate of the following for such Person for such period determined on a
consolidated basis in accordance with GAAP: (a) the amount of interest in
respect of Indebtedness (including amortization of original issue discount,
amortization of debt issuance costs, and non-cash interest payments on any
Indebtedness, the interest portion of any deferred payment obligation and
after taking into account the effect of elections made under any Interest Rate
Agreement however denominated with respect to such Indebtedness), (b) the
amount of Redeemable Dividends (to the extent not already included in
Indebtedness in determining Consolidated Interest Expense for the relevant
period) and (c) the interest component of rentals in respect of any Capital
Lease Obligation paid, in each case whether accrued or scheduled to be paid or
accrued by such Person during such period to the extent such amounts were
deducted in computing Consolidated Net Income, determined on a consolidated
basis in accordance with GAAP. For purposes of this definition interest on a
Capital Lease Obligation shall be deemed to accrue at an interest rate
reasonably determined by such Person to be the rate of interest implicit in
such Capital Lease Obligation in accordance with GAAP consistently applied.
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"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that:
(i) the Net Income of any Person that is not a Subsidiary or that is
accounted for by the equity method of accounting shall be included only to
the extent of the amount of dividends or distributions paid in cash to the
referent Person or a Subsidiary thereof,
(ii) the Net Income of any Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or other distributions by that
Subsidiary of that Net Income is not at the date of determination permitted
without any prior governmental approval (which has not been obtained) or,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary or its stockholders,
(iii) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded,
(iv) the cumulative effect of a change in accounting principles shall be
excluded, and
(v) the Net Income of any Unrestricted Subsidiary shall be excluded,
whether or not distributed to the Company or one of its Subsidiaries.
"Contingent Investment" means, with respect to any Person, any guarantee by
such Person of the performance of another Person or any commitment by such
Person to invest in another Person. Any Investment that consists of a
Contingent Investment shall be deemed made at the time that the guarantee of
performance or the commitment to invest is given, and the amount of such
Investment shall be the maximum monetary obligation under such guarantee of
performance or commitment to invest. To the extent that a Contingent
Investment is released or lapses without payment under the guarantee of
performance or the commitment to invest, such Investment shall be deemed not
made to the extent of such release or lapse. With respect to any Contingent
Investment, the payment of the guarantee of performance or the payment under
the commitment to invest shall not be deemed to be an additional Investment.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the Issue Date or (ii) was nominated for election or elected to
such Board of Directors with the affirmative vote of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Credit Facility" means any credit facility entered into by and among the
Company and one or more commercial banks or financial institutions, providing
for senior term or revolving credit borrowings of a type similar to credit
facilities typically entered into by commercial banks and financial
institutions, including any related notes, Guarantees, collateral documents,
instruments and agreements executed in connection therewith, as such credit
facility and related agreements may be amended, extended, refinanced, renewed,
restated, replaced or refunded from time to time.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock to the extent that, and only to
the extent that, by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof,
in whole or in part, on or prior to the date on which the Senior Notes mature,
provided, however, that any Capital Stock which would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require the Company to repurchase or redeem such Capital Stock upon the
occurrence of a Change of Control occurring prior to the final maturity of the
Senior Notes shall not constitute Disqualified Stock if the change in control
provisions applicable to such Capital Stock are no more favorable to the
holders of such Capital Stock than the provisions applicable
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to the Senior Notes contained in the covenant described under "Offer to
Purchase Upon a Change of Control" and such Capital Stock specifically
provides that the Company will not repurchase or redeem any such stock
pursuant to such provisions prior to the Company's repurchase of such Senior
Notes as are required to be repurchased pursuant to the covenant described
under "Offer to Purchase Upon Change of Control."
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent
in foreign currency, whose debt is rated "A" (or higher) according to S&P or
Moody's at the time as of which any investment or rollover therein is made.
"Eligible Receivable" means any Receivable not more than 90 days past due
under its scheduled payment terms.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock or that are measured by the value of Capital
Stock (but excluding any debt security that is convertible into or
exchangeable for Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended (or any
successor act), and the rules and regulations thereunder.
"Existing Indebtedness" means the Existing Senior Notes and all other
Indebtedness of the Company and its Subsidiaries in existence on the Issue
Date.
"Existing Senior Notes" means the Company's 12 1/2% Senior Discount Notes
due 2006, the Company's 11 1/4% Senior Discount Notes due 2007 and the
Company's 8 7/8% Senior Notes due 2007.
"Fair Market Value" means with respect to any asset or property, the sale
value that would be obtained in an arm's length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect on the Issue Date.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under Interest Rate Agreements.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced
by bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing the balance
deferred and unpaid of the purchase price of any property (including pursuant
to capital leases) or representing any Hedging Obligations, except any such
balance that constitutes an accrued expense or trade payable, if and to the
extent any of the foregoing (other than Hedging Obligations or letters of
credit) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, all indebtedness of others secured by a Lien
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on any asset of such Person (whether or not such indebtedness is assumed by
such Persons), all obligations to purchase, redeem, retire, defease or
otherwise acquire for value any Disqualified Stock or any warrants, rights or
options to acquire such Disqualified Stock valued, in the case of Disqualified
Stock, at the greatest amount payable in respect thereof on a liquidation
(whether voluntary or involuntary) plus accrued and unpaid dividends, the
liquidation value of any Preferred Stock issued by Subsidiaries of such Person
plus accrued and unpaid dividends, and also includes, to the extent not
otherwise included, the Guarantee of items that would be included within this
definition and any amendment, supplement, modification, deferral, renewal,
extension or refunding of any of the above; notwithstanding the foregoing, in
no event will performance bonds or similar security for performance be deemed
Indebtedness so long as such performance bonds or similar security for
performance would not appear as a liability on a balance sheet of such Person
prepared in accordance with GAAP; and provided further, that the amount of any
Indebtedness in respect of any Guarantee shall be the maximum principal amount
of the Indebtedness so guaranteed.
"Interest Rate Agreements" means (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against
fluctuations in interest rates.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of loans,
Guarantees, Contingent Investments, advances or capital contributions
(excluding commission, travel and similar advances to officers and employees
made in the ordinary course of business), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities of any
other Person and all other items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP; provided,
however, that any investment to the extent made with Capital Stock of the
Company (other than Disqualified Stock) shall not be deemed an "Investment"
for purposes of the Indenture.
"Issue Date" means December 23, 1997.
"Joint Venture" means a Person in the Telecommunications Business in which
the Company holds less than a majority of the shares of Voting Stock or an
Unrestricted Subsidiary in the Telecommunications Business.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Marketable Securities" means:
(i) Government Securities;
(ii) any certificate of deposit maturing not more than 270 days after the
date of acquisition issued by, or time deposit of, an Eligible Institution;
(iii) commercial paper maturing not more than 270 days after the date of
acquisition issued by a corporation (other than an Affiliate of the
Company) with a rating at the time as of which any investment therein is
made, of "A-1" (or higher) according to S&P or "P-1" (or higher) according
to Moody's;
(iv) any banker's acceptances or money market deposit accounts issued or
offered by an Eligible Institution; and
(v) any fund investing exclusively in investments of the types described
in clauses (i) through (iv) above.
"Moody's" means Moody's Investors Service, Inc. and its successors.
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"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but
not loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to Sale and Leaseback Transactions) or (b)
the disposition of any securities by such Person or any of its Subsidiaries or
the extinguishment of any Indebtedness of such Person or any of its
Subsidiaries and (ii) any extraordinary gain (but not loss), together with any
related provision for taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale, net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation
expenses incurred as a result thereof, taxes paid or payable as a result
thereof (after taking into account any available tax credits or deductions and
any tax sharing arrangements), amounts required to be applied to the repayment
of Indebtedness secured by a Lien on the asset or assets that are the subject
of such Asset Sale and any reserve for adjustment in respect of the sale price
of such asset or assets. Net Proceeds shall exclude any non-cash proceeds
received from any Asset Sale, but shall include such proceeds when and as
converted by the Company or any Subsidiary of the Company to cash.
"Note Registration Rights Agreement" means the Registration Rights Agreement
between the Company and the Initial Purchasers in respect of the Notes.
"Pari Passu Notes" means any notes issued by the Company which, by their
terms and the terms of any indenture governing such notes, have an obligation
to be repurchased by the Company upon the occurrence of an Asset Sale.
"Permitted Investment" means (a) any Investments in the Company or any
Subsidiary of the Company; (b) any Investments in Marketable Securities; (c)
Investments by the Company or any Subsidiary of the Company in a Person, if as
a result of such Investment (i) such Person becomes a Subsidiary of the
Company or (ii) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Subsidiary of the Company; (d) any
Investments in property or assets to be used in (A) any line of business in
which the Company or any of its Subsidiaries was engaged on the Issue Date or
(B) any Telecommunications Business; (e) Investments in any Person in
connection with the acquisition of such Person or substantially all of the
property or assets of such Person by the Company or any Subsidiary of the
Company; provided that within 180 days from the first date of any such
Investment, either (A) such Person becomes a Subsidiary of the Company or any
of its Subsidiaries or (B) the amount of any such Investment is repaid in full
to the Company or any of its Subsidiaries; (f) Investments pursuant to any
agreement or obligation of the Company or a Subsidiary, in effect on the Issue
Date or on the date a Subsidiary becomes a Subsidiary (provided that any such
agreement was not entered into in contemplation of such Subsidiary becoming a
Subsidiary), to make such Investments; (g) Investments in prepaid expenses,
negotiable instruments held for collection and lease, utility and workers'
compensation, performance and other similar deposits; (h) Hedging Obligations
permitted to be incurred by the covenant entitled "Incurrence of Indebtedness
and Issuance of Preferred Stock;" and (i) bonds, notes, debentures or other
securities received as a result of Asset Sales permitted under the covenant
entitled "Asset Sales."
"Permitted Liens" means (i) Liens securing Indebtedness (including Capital
Lease Obligations) permitted to be incurred pursuant to clauses (a), (b) and
(d) of the second paragraph of the covenant entitled "Incurrence of
Indebtedness and Issuance of Preferred Stock;" (ii) Liens in favor of the
Company; (iii) Liens on property of a Person existing, at the time such Person
is merged into or consolidated with the Company or any Subsidiary of the
Company; provided that such Liens were in existence prior to the contemplation
of such merger or consolidation and do not extend to any assets other than
those of the Person merged into or consolidated with the Company; (iv) Liens
on property existing at the time of acquisition thereof by the Company or any
Subsidiary of the Company, provided that such Liens were in existence prior to
the contemplation of such acquisition; (v) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
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obligations of a like nature incurred in the ordinary course of business; (vi)
Liens existing, on the Issue Date; (vii) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings timely instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor;
(viii) Liens incurred in the ordinary course of business of the Company or any
Subsidiary of the Company with respect to obligations that do not exceed $5.0
million at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by the Company or such
Subsidiary; (ix) Liens on Telecommunications Related Assets existing during
the time of the construction thereof; (x) Liens on Receivables to secure
Indebtedness permitted to be incurred by the covenant entitled "Incurrence of
Indebtedness and Issuance of Preferred Stock," but only to the extent that the
outstanding amount of the Indebtedness secured by such Liens would not
represent more than 80% of Eligible Receivables; and (xi) Liens to secure any
Permitted Refinancing of any Indebtedness secured by Liens referred to in the
foregoing clauses (i), (iii), (v) or (x); but only to the extent that such
Liens do not extend to any other property or assets and the principal amount
of the Indebtedness secured by such Liens is not increased.
"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" as applied to the Capital Stock of any Person, means
Capital Stock of such Person of any class or classes (however designated) that
ranks prior, as to payment of dividends or as to the distribution of assets
upon any voluntary or involuntary liquidation, dissolution or winding up of
such Person, to shares of Capital Stock of any other class of such Person.
"Public Offering" means an underwritten offering of Common Stock of the
company registered under the Securities Act.
"Receivables" means, with respect to any Person, all of the following
property and interests in property of such person or entity, whether now
existing or existing in the future or hereafter acquired or arising: (i)
accounts; (ii) accounts receivable, including, without limitation, all rights
to payment created by or arising from sales of goods, leases of goods or the
rendition of services no matter how evidenced, whether or not earned by
performance; (iii) all unpaid seller's or lessor's rights including, without
limitation, rescission, replevin, reclamation and stoppage in transit,
relating to any of the foregoing after creation of the foregoing or arising
therefrom; (iv) all rights to any goods or merchandise represented by any of
the foregoing, including, without limitation, returned or repossessed goods;
(v) all reserves and credit balances with respect to any such accounts
receivable or account debtors; (vi) all letters of credit, security, or
Guarantees for any of the foregoing; (vii) all insurance policies or reports
relating to any of the foregoing; (viii) all collection of deposit accounts
relating to any of the foregoing; (ix) all proceeds of any of the foregoing;
and (x) all books and records relating to any of the foregoing.
"Redeemable Dividend" means, for any dividend with regard to Disqualified
Stock and Preferred Stock, the quotient of the dividend divided by the
difference between one and the maximum statutory federal income tax rate
(expressed as a decimal number between 1 and 0) then applicable to the issuer
of such Disqualified Stock or Preferred Stock.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Retire" means, with respect to any Indebtedness, to repay, redeem, refund,
purchase or otherwise to acquire for value, such Indebtedness. The terms
"Retired" and "Retirement" shall have correlative meanings.
"S & P" means, Standard and Poor's Corporation and its successors.
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"Sale and Leaseback Transaction" means, with respect to any Person, any
direct or indirect arrangement pursuant to which any property (other than
Capital Stock) is sold by such Person or a Subsidiary of such Person and is
thereafter leased back from the purchaser or transferee thereof by such Person
or one of its Subsidiaries.
"Senior Indebtedness" means any Indebtedness permitted to be incurred by the
Company under the terms of the Indenture, unless the instrument under which
such Indebtedness is incurred expressly provides that it is subordinated in
right of payment to the Senior Notes. Notwithstanding anything to the contrary
in the foregoing, Senior Indebtedness will not include (i) any liability for
federal, state, local or other taxes owed or owing by the Company, (ii) any
Indebtedness of the Company to any of its Subsidiaries or other Affiliates,
(iii) any trade payables or (iv) any Indebtedness that is incurred in
violation of the Indenture.
"Significant Subsidiary" means any Subsidiary that would be a "Significant
Subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Strategic Investor" means, with respect to any sale of the Company's
Capital Stock, any Person which, both as of the Trading Day immediately before
the day of such sale and the Trading Day immediately after the day of such
sale, has, or whose parent has, a Total Market Capitalization of at least $1.0
billion on a consolidated basis. In calculating Total Market Capitalization
for the purpose of this definition, the consolidated Indebtedness of such
Person, solely when calculated as of the Trading Day immediately after the day
of such sale, will be calculated after giving effect to such sale (including
any Indebtedness incurred in connection with such sale). For purposes of this
definition, the term parent means any Person of which the referent Strategic
Investor is a Subsidiary.
"Subsidiary" of any Person means (i) any corporation, association or
business entity of which more than 50% of the total voting power of shares of
Capital Stock entitled (without regard to the occurrence of any contingency)
to vote in the election of directors, managers or trustees thereof is at the
time owned or controlled, directly or indirectly, by such Person or one or
more of the other Subsidiaries of such Person or a combination thereof and
(ii) any partnership (a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person or (b) the only
general partners of which are such Person or one or more Subsidiaries of such
Person or any combination thereof; provided that any Unrestricted Subsidiary
shall be excluded from this definition of "Subsidiary."
"Telecommunications Business" means, when used in reference to any Person,
that such Person is engaged primarily in the business of (i) transmitting, or
providing services relating to the transmission of, voice, video or data
through owned or leased transmission facilities, (ii) creating, developing or
marketing communications related network equipment, software and other devices
for use in a Telecommunications Business or (iii) evaluating, participating or
pursuing any other activity or opportunity that is related to those identified
in (i) or (ii) above; provided that the determination of what constitutes a
Telecommunications Business shall be made in good faith by the Board of
Directors of the Company.
"Telecommunications Related Assets" means all assets, rights (contractual or
otherwise) and properties, whether tangible or intangible, used in connection
with a Telecommunications Business.
"Total Common Equity" of any Person means, as of any date of determination,
the product of (i) the aggregate number of outstanding primary shares of
Common Stock of such Person on such day (which shall not include any options
or warrants on, or securities convertible or exchangeable into, shares of
Common Stock of such Person) and (ii) the average Closing Price of such Common
Stock over the 20 consecutive Trading Days immediately preceding such day. If
no such Closing Price exists with respect to shares of any such class, the
value of such shares for purposes of clause (ii) of the preceding sentence
shall be determined by the Board of Directors of the Company in good faith and
evidenced by a resolution of the Board of Directors filed with the Trustee.
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"Total Market Capitalization " of any Person means, as of any day of
determination (and as modified for purposes of the definition of "Strategic
Investor"), the sum of (1) the consolidated Indebtedness of such Person and
its Subsidiaries (except in the case of the Company, in which case of the
Company and its Subsidiaries) on such day, plus (2) the product of (i) the
aggregate number of outstanding primary shares of Common Stock of such Person
on such day (which shall not include any options or warrants on, or securities
convertible or exchangeable into, shares of Common Stock of such Person) and
(ii) the average Closing Price of such Common Stock over the 20 consecutive
Trading Days immediately preceding such day, plus (3) the liquidation value of
any outstanding share of Preferred Stock of such Person on such day less (4)
cash and cash equivalents (other than restricted cash and restricted cash
equivalents) as presented on such Person's consolidated balance sheet on such
date. If no such Closing Price exists with respect to shares of any such
class, the value of such shares for purposes of clause (2) of the preceding
sentence shall be determined by the Company's Board of Directors in good faith
and evidenced by a resolution of the Board of Directors filed with the
Trustee.
"Trading Day," with respect to a securities exchange or automated quotation
system, means a day on which such exchange or system is open for a full day of
trading.
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a resolution of
the Board of Directors.
"Vendor Indebtedness" means any Indebtedness of the Company or any
Subsidiary incurred in connection with the acquisition or construction of
Telecommunications Related Assets.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or Persons
performing similar functions) of such Person, whether at all times or only so
long as no senior class of securities has such voting power by reason of any
contingency.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
principal amount of such Indebtedness into (b) the total of the product
obtained by multiplying (x) the amount of each then remaining installment,
sinking fund, serial maturity or other required payments of principal,
including payment at final maturity, in respect thereof, by (y) the number of
years (calculated to the nearest one-twelfth) that will elapse between such
date and the making of such payment; provided, that with respect to Capital
Lease Obligations, that maturity shall be calculated after giving effect to
all renewal options by the Lessee.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material United States federal
income tax considerations generally applicable to holders acquiring the Senior
Notes but does not purport to be a complete analysis of all potential
consequences. The discussion is based upon the United States 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 Senior Notes.
The discussion assumes that the holders of the Senior Notes 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 Senior Notes or that any such position would
not be sustained.
The tax treatment of a holder of the Senior Notes 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 the Senior Notes 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 Senior Notes by a holder in light of such holder's personal circumstances.
In addition, the discussion does not consider the effect of any applicable
foreign, state, local or other tax laws, or estate or gift tax considerations.
PERSONS CONSIDERING THE PURCHASE OF THE SENIOR NOTES SHOULD CONSULT THEIR OWN
TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL
INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES
ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION.
For purposes of this discussion, a "U.S. Holder" means a citizen or resident
of the United States, a corporation, partnership or other entity created or
organized in the United States or under the laws of the United States or of
any political subdivision thereof, an estate whose income is includible in
gross income for United States federal income tax purposes regardless of its
source or a trust, if a U.S. court is able to exercise primary supervision
over the administration of the trust and one or more U.S. persons have the
authority to control all substantial decisions of the trust. A "Non-U.S.
Holder" means a holder who is not a U.S. Holder.
INTRODUCTION
The exchange of Old Notes for Senior Notes will not constitute a recognition
event for federal income tax purposes. Consequently, no gain or loss will be
recognized by holders upon receipt of the Senior Notes. The Senior Notes will
have the same issue date and issue price as the Old Notes. A holder's adjusted
tax basis in the Senior Notes will be the same as the holder's adjusted tax
basis in the Old Notes exchanged therefor. A holder will be considered to have
held the Senior Notes from the time the holder originally acquired the Old
Notes.
TAX CONSEQUENCES TO U.S. HOLDERS
Interest on the Senior Notes
Interest paid on the Senior Notes will generally be taxable to a U.S. Holder
as ordinary interest income at the time it is accrued or is received in
accordance with the U.S. Holder's method of accounting for federal income tax
purposes.
Sale or Other Taxable Disposition of the Senior Notes
Upon the sale or other taxable disposition of the Senior Notes, the
difference between the sum of the amount of cash and the fair market value of
other property received and the holder's adjusted tax basis in the Senior
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Notes 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 Senior Notes
exceeds one year. The most favorable tax rate on long-term capital gains of
non-corporate holders (20%) will not be available unless the holding period
exceeds 18 months.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
Interest on the Senior Notes
Interest paid by the Company to a Non-U.S. Holder will not be subject to
United States federal income or withholding tax if such interest is not
effectively connected with the conduct of a trade or business within the
United States by such Non-U.S. Holder and such Non-U.S. Holder (i) does not
actually or constructively own 10% or more of the total combined voting power
of all classes of stock of the Company entitled to vote; (ii) is not a
controlled foreign corporation with respect to which the Company is a "related
person" within the meaning of the Code; and (iii) certifies, under penalties
of perjury, that such holder is not a United States person and provides such
holder's name and address (the "Portfolio Interest Exemption").
Interest paid to a Non-U.S. Holder of the Senior Notes that is effectively
connected with a United States trade or business conducted by such Non-U.S.
Holder will be taxed at the graduated rates applicable to United States
citizens, resident aliens and domestic corporations (the "Regular Federal
Income Tax") and will not be 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 interest payment. In addition to the Regular Federal Income Tax,
effectively connected interest 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).
Sale or Other Taxable Disposition of the Senior Notes
A Non-U.S. Holder will generally not be subject to United States federal
income tax on gain recognized on a sale or other disposition of a Senior Note
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 or (ii) in the case
of a Non-U.S. Holder who is a nonresident alien individual and holds the
Senior Note as a capital asset, such holder is present in the United States
for 183 or more days in the taxable year and certain other requirements are
met.
If a Non-U.S. Holder falls within clause (i) 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 described above). If an 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
If interest on the Senior Notes is exempt from withholding of United States
federal income tax under the Portfolio Interest Exemption, the Senior Notes
will not be included in the estate of a deceased Non-U.S. Holder for United
States federal estate tax purposes.
New Withholding Regulations
The Treasury Department recently promulgated final regulations regarding the
withholding and information reporting rules applicable to Non-U.S. Holders
(the "New Withholding Regulations"). In general, the New Withholding
Regulations do not significantly alter the substantive withholding and
information reporting requirements but rather unify current certification
procedures and forms and clarify reliance standards. The New Withholding
Regulations are generally effective for payments made after December 31, 1998,
subject to certain transition rules. NON-U.S. HOLDERS SHOULD CONSULT THEIR OWN
TAX ADVISORS WITH RESPECT TO THE IMPACT, IF ANY, OF THE NEW WITHHOLDING
REGULATIONS.
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INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company will, where required, report to the holders of Senior Notes and
to the IRS the amount of any interest paid on the Senior Notes in each
calendar year and the amounts of tax withheld, if any, with respect to such
payments.
A U.S. Holder of Senior Notes may be subject to backup withholding at the
rate of 31% with respect to interest paid on, or the proceeds of a sale or
other disposition of, the Senior Notes 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 Senior Notes 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 Senior Notes may also be subject to
certain information reporting or backup withholding if certain requisite
certification is not received or other exemptions do not apply. Any amount
paid as backup withholding would be creditable against the holder's federal
income tax liability.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives Senior Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of the Senior Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Senior Notes received in exchange for Old Notes
acquired as a result of market-making activities or other trading activities.
The Company has agreed that for a period expiring on the earlier of (i) the
date that all holders of Transfer Restricted Securities have registered such
securities pursuant to the Exchange Offer and (ii) 365 days after the Exchange
Date, it will make this Prospectus, as amended or supplemented, available to
any broker-dealer for use in connection with any such resale.
The Company will not receive any proceeds from any sale of Senior Notes by
broker-dealers. Senior Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options of the Senior Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such broker-dealer and/or the purchasers of any Senior Notes. Any broker-
dealer that resells Senior Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker-dealer that participates in a
distribution of Senior Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit on any resale of Senior Notes and
any commissions or concessions received by any such persons may be deemed to
be underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
The Company has not entered into any arrangement or understanding with any
person to distribute the Senior Notes to be received in the Exchange Offer and
to the best of the Company's information and belief, each person participating
in the Exchange Offer is acquiring the Senior Notes in its ordinary course of
business and has no arrangement or understanding with any person to
participate in the distribution of the Senior Notes to be received in the
Exchange Offer.
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LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Company by Kronish, Lieb, Weiner & Hellman LLP, 1114 Avenue of the Americas,
New York, New York 10036-7798. Ralph J. Sutcliffe, a partner of Kronish, Lieb,
Weiner & Hellman LLP, beneficially owns 5,748 shares of the Company's Common
Stock, par value $.01 per share (the "Common Stock"), and a warrant to
purchase 100,000 shares of Common Stock at an exercise price equal to $41.50
per share.
EXPERTS
The consolidated financial statements and schedule of the Company appearing
in the Company's Annual Report (Form 10-K) for the year ended December 31,
1996, have been audited by Ernst & Young LLP, independent certified public
accountants, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements and
schedule are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of DIGEX 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 Technologies
Fairchild Inc. 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 financial statements and schedule of Shared Technologies
Fairchild Inc. and subsidiaries at December 31, 1995 and for each of the two
years in the period ended December 31, 1995 incorporated by reference in this
Prospectus have been audited by Rothstein, Kass & Company, P.C., independent
certified public accountants, as indicated in their report, which includes an
explanatory paragraph relating to the changing of the method of accounting for
its investment in one of its subsidiaries, with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm
as experts in accounting and auditing.
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMA-
TION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFER OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPA-
NY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY ANY SECURITY OTHER THAN THOSE TO WHICH IT RELATES, NOR DOES
IT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHO-
RIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALI-
FIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HERE-
UNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
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TABLE OF CONTENTS
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Available Information...................................................... ii
Incorporation of Certain Documents by
Reference................................................................. iii
Prospectus Summary......................................................... 1
Risk Factors............................................................... 10
The Exchange Offer......................................................... 18
Use of Proceeds............................................................ 25
Capitalization............................................................. 25
Selected Financial and Other Operating Data................................ 26
Business................................................................... 28
Description of Outstanding Indebtedness.................................... 31
Description of the Senior Notes............................................ 33
Certain Federal Income Tax Considerations.................................. 61
Plan of Distribution....................................................... 64
Legal Matters.............................................................. 65
Experts.................................................................... 65
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$400,000,000
LOGO
INTERMEDIA COMMUNICATIONS INC.
8 1/2% SERIES B
SENIOR NOTES
DUE 2008
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PROSPECTUS
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February 12, 1998
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Restated Certificate of Incorporation, as amended, provides
that the Company shall to the fullest extent permitted by the General
Corporation Law of the State of Delaware (the "GCL"), as amended from time to
time, indemnify all persons whom it may indemnify pursuant thereto. The
Company's Bylaws contain a similar provision requiring indemnification of the
Company's directors and officers to the fullest extent authorized by the GCL.
The GCL 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 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 GCL 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 Restated
Certificate of Incorporation, as amended, 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.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, the Company has been informed that in the opinion
of the Commission such indemnification is against public policy as expressed
in the Act and is therefore unenforceable.
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ITEM 21. EXHIBITS.
(A) EXHIBITS
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1.1 --Purchase Agreement, dated as of December 18, 1997, among the Company
and the Initial Purchasers.
2.1 --Agreement and Plan of Merger, dated as of June 4, 1997, among the
Company, Daylight Acquisition Corp. and DIGEX. 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.
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.
4.6 --Registration Rights Agreement, dated as of December 23, 1997, among
the Company and the Initial Purchasers.
5.1* --Opinion of Kronish, Lieb, Weiner & Hellman LLP.
8.1* --Opinion of Kronish, Lieb, Weiner & Hellman LLP re: tax matters, is
contained in their opinion filed as Exhibit 5.1 to this Registration
Statement.
12.1 --Statement Re: Computation of Ratios.
23.1* --Consent of Kronish, Lieb, Weiner & Hellman LLP is contained in their
opinion filed as Exhibit 5.1 to this Registration Statement.
23.2* --Consent of Ernst & Young LLP.
23.3* --Consent of Ernst & Young LLP.
23.4* --Consent of Arthur Andersen LLP.
23.5* --Consent of Rothstein, Kass & Company, P.C.
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24.1 --Power of Attorney.
25.1 --Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 on Form T-1.
99.1 --Form of Letter of Transmittal.
</TABLE>
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*Filed herewith. All other exhibits have been previously filed.
(B) FINANCIAL STATEMENT SCHEDULES
Financial Data Schedules are not required to be filed since all financial
statements have been previously included in filings with the Commission.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrants will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that paragraphs (i) and (ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Company pursuant
to Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) 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.
II-3
<PAGE>
(5) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report,
to security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule
14c-3 under the Exchange Act; and where interim financial information
required to be presented by Article 3 of Regulation S-X is not set forth in
the prospectus, to deliver or cause to be delivered to each person to whom
the prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such
interim financial information.
(6) To file an application for the purpose of determining eligibility of
the trustee to act under subsection (a) of Section 310 of the Trust
Indenture Act in accordance with the rules and regulations prescribed by
the Commission under Section 305(b)(2) of the Trust Indenture Act.
(7) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
Exchange Registration Statement, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of this Exchange
Registration Statement through the date of responding to the request.
(8) To supply be means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in this Exchange Registration
Statement when it became effective.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
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 11TH DAY OF FEBRUARY, 1998.
INTERMEDIA COMMUNICATIONS INC.
/s/ David C. Ruberg
By___________________________________
DAVID C. RUBERG,
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
SIGNATURES TITLE
Date
Chairman of the
Board, President February 11,
* and Chief 1998
_____________________________________ Executive Officer
DAVID C. RUBERG
Principal Financial and Accounting Officers:
Chief Financial
* Officer, Secretary February 11,
_____________________________________ and Senior Vice 1998
ROBERT M. MANNING President
Controller and
* Chief Accounting February 11,
_____________________________________ Officer 1998
JEANNE M. WALTERS
Other Directors:
Director
* February 11,
_____________________________________ 1998
JOHN C. BAKER
Director February 11,
* 1998
_____________________________________
GEORGE F. KNAPP
Director
_____________________________________
PHILIP A. CAMPBELL
/s/ David C. Ruberg
*By_____________________________
AS ATTORNEY-IN-FACT
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER EXHIBIT PAGE
------ ------- ----
<C> <S> <C>
1.1 --Purchase Agreement, dated as of December 18, 1997, among the
Company and the Initial Purchasers.
2.1 --Agreement and Plan of Merger, dated as of June 4, 1997, among
the Company, Daylight Acquisition Corp. and DIGEX. 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.
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.
4.6 --Registration Rights Agreement, dated as of December 23, 1997,
among the Company and the Initial Purchasers.
5.1* --Opinion of Kronish, Lieb, Weiner & Hellman LLP.
8.1* --Opinion of Kronish, Lieb, Weiner & Hellman LLP re: tax
matters, is contained in their opinion filed as Exhibit 5.1 to
this Registration Statement.
12.1 --Statement Re: Computation of Ratios.
23.1* --Consent of Kronish, Lieb, Weiner & Hellman LLP is contained
in their opinion filed as Exhibit 5.1 to this Registration
Statement.
23.2* --Consent of Ernst & Young LLP.
23.3* --Consent of Ernst & Young LLP.
23.4* --Consent of Arthur Andersen LLP.
23.5* --Consent of Rothstein, Kass & Company, P.C.
24.1 --Power of Attorney.
25.1 --Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 on Form T-1.
99.1* --Form of Letter of Transmittal.
</TABLE>
- --------
*Filed herewith. All other exhibits have been previously filed.
<PAGE>
EXHIBIT 5.1
February 11, 1998
Intermedia Communications Inc.
3625 Queen Palm Drive
Tampa, Florida 33619
Ladies and Gentlemen:
We have acted as counsel to Intermedia Communications Inc., a Delaware
corporation (the "Company"), in connection with its Registration Statement on
Form S-4 (the "Registration Statement"), filed pursuant to the Securities Act of
1933, as amended (the "Securities Act"), relating to the Company's proposed
offer to exchange (the "Exchange Offer") 8 1/2% Series B Senior Notes due 2008
of the Company (the "New Notes") for any and all outstanding 8 1/2% Senior Notes
due 2008 of the Company (the "Old Notes"). The Old Notes were issued and sold
on December 23, 1997 pursuant to an indenture (the "Indenture") between the
Company and SunTrust Bank, Central Florida, National Association, as trustee, in
a transaction exempt from registration under the Securities Act in reliance upon
Rule 144A, Regulation S and Section 4(2) of the Securities Act. The New Notes
will also be issued pursuant to the Indenture.
In that connection, we have reviewed the Indenture, the Registration
Statement and such other documents and instruments as we have deemed
appropriate. In such review, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted as originals and the conformity to
the original documents of all documents submitted to us as copies.
On the basis of such review, and having regard to such legal
consideration as we have deemed relevant, it is our opinion that:
1. The New Notes have been duly and validly authorized for issuance
by the Company and, when issued in accordance with the terms of the Exchange
Offer and the Indenture, will be the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms and
entitled to the benefits of the Indenture, except
<PAGE>
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.
2. The statements under the caption "Certain Federal Income Tax
Considerations" in the prospectus relating to the New Notes included in the
Registration Statement, insofar as such statements constitute summaries of
federal income tax law, fairly summarize the matters referred to therein.
We are members of the Bar of the State of New York and do not purport
to be experts or give any opinion except as to matters involving the laws of
such state, the general corporation laws of the State of Delaware and the
federal laws of the United States.
We hereby consent to the use of our name under the caption "Legal
Matters" in the prospectus included in the Registration Statement and to the use
of this opinion as an exhibit to the Registration Statement.
Very truly yours,
Kronish, Lieb, Weiner & Hellman LLP
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the captions "Experts",
"Summary Financial and Other Operating Data" and "Selected Financial and Other
Operating Data" in Amendment No. 1 to the Registration Statement (Form S-4 No.
333-44875) and related Prospectus of Intermedia Communications Inc. for the
registration of $400,000,000 8 1/2% Series B Senior Notes due 2008 and to the
incorporation by reference therein of our report dated February 10, 1997,
except for Note 13, as to which the date is March 7, 1997, with respect to the
consolidated financial statements and schedule of Intermedia Communications
Inc. included in its Annual Report (Form 10-K) for the year ended December 31,
1996, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Tampa, Florida
February 9, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-4 No. 333-44875) and
related Prospectus of Intermedia Communications Inc. for the registration of
$400,000,000 8 1/2% Series B Senior Notes due 2008 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
February 9, 1998
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Amendment No. 1 to Form S-4 Registration Statement of our
report dated March 7, 1997 included in the Shared Technologies Fairchild Inc.
Form 10-K for the year ended December 31, 1996 and to all references to our
Firm included in this Form S-4 Registration Statement File No. 333-44875.
/s/ Arthur Andersen LLP
Washington, D.C.
February 9, 1998
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Amendment No. 1 to the
Registration Statement on Form S-4 of Intermedia Communications Inc. for the
registration of $400,000,000 8 1/2% Series B Senior Notes due 2008 of our
report, which contains an explanatory paragraph relating to the changing of
the method of accounting for Shared Technologies Fairchild Inc.'s investment
in one of its subsidiaries, dated March 1, 1996, on our audits of the
consolidated financial statements and financial statement schedule of Shared
Technologies Fairchild Inc. as of December 31, 1995 and for the years ended
December 31, 1995 and 1994. We also consent to the reference to our firm under
the caption "Experts".
/s/ Rothstein, Kass & Company, P.C.
Roseland, New Jersey
February 9, 1998
<PAGE>
Exhibit 99.1
LETTER OF TRANSMITTAL
FOR
8 1/2% SENIOR NOTES DUE 2008
OF
INTERMEDIA COMMUNICATIONS INC.
PURSUANT TO THE EXCHANGE OFFER IN RESPECT OF
ALL OF THEIR OUTSTANDING 8 1/2% SENIOR NOTES DUE 2008
FOR
8 1/2% SERIES B SENIOR NOTES DUE 2008
PURSUANT TO THE PROSPECTUS DATED FEBRUARY 12, 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON MARCH 13, 1998, UNLESS EXTENDED. TENDERS OF OLD NOTES
MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY
TIME, ON THE BUSINESS DAY PRIOR TO THE EXPIRATION DATE.
TO: SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION, EXCHANGE AGENT
By Mail, Hand or Overnight Courier: By Facsimile:
SunTrust Bank, Central Florida, National Association
(407) 237-5299
225 East Robinson Street, Suite 250
Orlando, Florida 32801 Confirm by Telephone:
Attention: Alice L. Springer (407) 237-5179
Delivery of this Letter of Transmittal to an address, or transmission via
telegram, telex or facsimile, other than as set forth above will not
constitute a valid delivery. The instructions contained herein should be read
carefully before this Letter of Transmittal is completed.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW NOTES FOR THEIR OLD NOTES
PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR
OLD NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
By execution hereof, the undersigned acknowledges receipt of the Prospectus
(the "Prospectus"), dated February 12, 1998, of Intermedia Communications Inc.
(the "Issuer"), which, together with this Letter of Transmittal and the
Instructions hereto (the "Letter of Transmittal"), constitute the Issuer's
offer (the "Exchange Offer") to exchange $1,000 principal amount of its 8 1/2%
Series B Senior Notes due 2008 (the "New Notes") that have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant
to a Registration Statement of which the Prospectus constitutes a part, for
each $1,000 principal amount of its outstanding 8 1/2% Senior Notes due 2008
(the "Old Notes"), upon the terms and subject to the conditions set forth in
the Prospectus.
The Company has not entered into any arrangement or understanding with any
person to distribute the New Notes to be received in the Exchange Offer and to
the best of the Company's information and belief, each person participating in
the Exchange Offer is acquiring the New Notes in its ordinary course of
business and has no arrangement or understanding with any person to
participate in the distribution of the New Notes to be received in the
Exchange Offer.
This Letter of Transmittal is to be used by Holders if: (i) certificates
representing Old Notes are to be physically delivered to the Exchange Agent
herewith by Holders; (ii) tender of Old Notes is to be made by book-entry
transfer to the Exchange Agent's account at The Depository Trust Company
("DTC") pursuant to the procedures set forth in the Prospectus under "The
Exchange Offer--Procedures for Tendering Old Notes" by any financial
institution that is a participant in DTC and whose name appears on a security
position listing as the owner of Old Notes (such participants, acting on
behalf of Holders, are referred to herein, together with such Holders, as
"Acting Holders"); or (iii) tender of Old Notes is to be made according to the
guaranteed delivery procedures set forth in the Prospectus under "The Exchange
Offer--Procedures for Tendering Old Notes." Delivery of documents to DTC does
not constitute delivery to the Exchange Agent.
1
<PAGE>
The term "Holder" with respect to the Exchange Offer means any person: (i)
in whose name Old Notes are registered on the books of the Issuer or any other
person who has obtained a properly completed bond power from the registered
Holder or (ii) whose Old Notes are held of record by DTC who desires to
deliver such Old Notes by book entry transfer at DTC.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with
respect to the Exchange Offer. Holders who wish to tender their Old Notes must
complete this Letter of Transmittal in its entirety.
All capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Prospectus.
The instructions included with this Letter of Transmittal must be followed.
Questions and requests for assistance or for additional copies of the
Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Exchange Agent. See Instruction 8 herein.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR OLD NOTES
MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY.
List below the Old Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, list the certificate numbers and principal
amounts on a separately executed schedule and affix the schedule to this
Letter of Transmittal. Tenders of Old Notes will be accepted only in principal
amounts equal to $1,000 or integral multiples thereof.
DESCRIPTION OF OLD NOTES
- -------------------------------------------------------------------------------
CERTIFICATE AGGREGATE
NUMBER(S)* PRINCIPAL
(ATTACH SIGNED AMOUNT
NAME(S) AND ADDRESS(ES) OF HOLDER(S) LIST IF TENDERED (IF LESS
(PLEASE FILL IN, IF BLANK) NECESSARY) THAN ALL)**
- ----------------------------------------------------------------------
--------------------
--------------------
--------------------
--------------------
--------------------
--------------------
--------------------
--------------------
--------------------
--------------------
--------------------
--------------------
- ----------------------------------------------------------------------
TOTAL PRINCIPAL AMOUNT OF OLD NOTES TENDERED
- -------------------------------------------------------------------------------
* Need not be completed by Holders tendering by book-entry transfer.
** Need not be completed by Holders who wish to tender with respect to all
Old Notes listed. See Instruction 2.
2
<PAGE>
[_]CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY DTC TO THE EXCHANGE
AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
DTC Book-Entry Account No.: ________________________________________________
Transaction Code No.: ______________________________________________________
If Holders desire to tender Old Notes pursuant to the Exchange Offer and (i)
certificates representing such Old Notes are not lost but are not immediately
available, (ii) time will not permit this Letter of Transmittal, certificates
representing such Old Notes or other required documents to reach the Exchange
Agent prior to the Expiration Date or (iii) the procedures for book-entry
transfer cannot be completed prior to the Expiration Date, such Holders may
effect a tender of such Old Notes in accordance with the guaranteed delivery
procedures set forth in the Prospectus under "The Exchange Offer--Procedures
for Tendering Old Notes."
[_]CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Holder(s) of Old Notes: _________________________________________
Window Ticket No. (if any): ________________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Eligible Institution that Guaranteed Delivery: _____________________
DTC Book-Entry Account No.: ________________________________________________
If Delivered by Book-Entry Transfer,
Name of Tendering Institution: _____________________________________________
Transaction Code No.: ______________________________________________________
[_]CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: ______________________________________________________________________
Address: ___________________________________________________________________
____________________________________________________________________________
LADIES AND GENTLEMEN:
Subject to the terms of the Exchange Offer, the undersigned hereby tenders
to the Issuer the principal amount of Old Notes indicated above. Subject to
and effective upon the acceptance for exchange of the principal amount of Old
Notes tendered in accordance with this Letter of Transmittal, the undersigned
sells, assigns and transfers to, or upon the order of, the Issuer all right,
title and interest in and to the Old Notes tendered hereby. The undersigned
hereby irrevocably constitutes and appoints the Exchange Agent its agent and
attorney-in-fact (with full knowledge that the Exchange Agent also acts as the
agent of the Issuer and as Trustee under the Indenture for the Old Notes and
the New Notes) with respect to the tendered Old Notes with full power of
substitution to (i) deliver certificates for such Old Notes to the Issuer, or
transfer ownership of such Old Notes on the account books maintained by DTC,
together, in either such case, with all accompanying evidences of transfer and
authenticity to, or upon the order of, the Issuer and (ii) present such Old
Notes for transfer on the books of the Issuer and receive all benefits and
otherwise exercise all rights of beneficial ownership of such Old Notes, all
in accordance with the terms of the Exchange Offer. The power of attorney
granted in this paragraph shall be deemed irrevocable and coupled with an
interest.
The undersigned hereby represents and warrants that he or she has full power
and authority to tender, sell, assign and transfer the Old Notes tendered
hereby and that the Issuer will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim, when the same are acquired by the Issuer. The
undersigned also acknowledges that this Exchange Offer is being made in
reliance upon an interpretation by the staff of the Securities and Exchange
Commission that the New
3
<PAGE>
Notes issued in exchange for the Old Notes pursuant to the Exchange Offer may
be offered for resale, resold and otherwise transferred by holders thereof
(other than any such holder that is an "affiliate" of the Issuer within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
holders' business and such holders have no arrangement with any person to
participate in the distribution of such New Notes. The undersigned
acknowledges that if he or she is participating in the Exchange Offer for the
purpose of distributing the New Notes, the undersigned must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. If the undersigned is not a
broker-dealer, the undersigned represents that it is not engaged in, and does
not intend to engage in, a distribution of the New Notes. If the undersigned
is a broker-dealer that will receive New Notes for its own account in exchange
for Old Notes, the undersigned represents that such Old Notes were acquired as
a result of market-making activities or other trading activities and
acknowledges that it will deliver a prospectus in connection with any resale
of such New Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The undersigned represents that (i) the New Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of such Holder's
business, (ii) such Holder has no arrangements with any person to participate
in the distribution of such New Notes and (iii) such Holder is not an
"affiliate," as defined under Rule 405 of the Securities Act, of the Issuer
or, if such Holder is an affiliate, that such Holder will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Issuer to be necessary or
desirable to complete the assignment and transfer of the Old Notes tendered
hereby.
For purposes of the Exchange Offer, the Issuer shall be deemed to have
accepted validly tendered Old Notes when, as and if the Issuer has given oral
or written notice thereof to the Exchange Agent. If any tendered Old Notes are
not accepted for exchange pursuant to the Exchange Offer for any reason,
certificates for any such unaccepted Old Notes will be returned (except as
noted below with respect to tenders through DTC), without expense, to the
undersigned at the address shown below or at a different address shown below
or at a different address as may be indicated under "Special Issuance
Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned and every obligation under this Letter of Transmittal shall be
binding upon the undersigned's heirs, personal representatives, successors and
assigns.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering Old Notes" in the Prospectus and in the instructions hereto will
constitute a binding agreement between the undersigned and the Issuer upon the
terms and subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the certificates representing the New Notes issued in exchange for the
Old Notes accepted for exchange and return any Old Notes not tendered or not
exchanged, in the name(s) of the undersigned (or in either such event in the
case of Old Notes tendered by DTC, by credit to the account at DTC).
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please send the certificates representing the New Notes issued in exchange for
the Old Notes accepted for exchange and any certificates for Old Notes not
tendered or not exchanged (and accompanying documents, as appropriate) to the
undersigned at the address shown below the undersigned's signatures, unless,
in either event, tender is being made through DTC. In the event that both
"Special Issuance Instructions" and "Special Delivery Instructions" are
completed, please issue the certificates representing the New Notes issued in
exchange for the Old Notes accepted for exchange and return any Old Notes not
tendered or not exchanged in the name(s) of, and send said certificates to,
the person(s) so indicated. The undersigned recognizes that the Issuer has no
obligation pursuant to the "Special Issuance Instructions" and "Special
Delivery Instructions" to transfer any Old Notes from the name of the
registered holder(s) thereof if the Issuer does not accept for exchange any of
the Old Notes so tendered.
4
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS OF OLD NOTES REGARDLESS
OF WHETHER OLD NOTES ARE BEING PHYSICALLY DELIVERED HEREWITH)
This Letter of Transmittal must be signed by the Holder(s) of Old Notes
exactly as their name(s) appear(s) on certificate(s) for Old Notes or, if
tendered by a participant in DTC, exactly as such participant's name
appears on a security position listing as the owner of Old Notes, or by
person(s) authorized to become registered Holder(s) by endorsements and
documents transmitted with this Letter of Transmittal. If signature is by
a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person
must set forth his or her full title below under "Capacity" and submit
evidence satisfactory to the Issuer of such person's authority to so act.
See Instruction 3 herein.
If the signature appearing below is not of the registered Holder(s) of
the Old Notes, then the registered Holder(s) must sign a valid proxy.
X _______________________ Date: ___________________
X _______________________ Date: ___________________
SIGNATURE(S) OF
HOLDER(S) OR
AUTHORIZED SIGNATORY
Name(s): ____________________ Address __________________________________
______________________ ___________________________________
(PLEASE PRINT) (INCLUDING ZIP CODE)
Capacity: ___________________ Area Code and Telephone No.: _____________
Social Security No.: ________
SIGNATURE GUARANTEE (SEE INSTRUCTION 3 HEREIN)
CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION
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(NAME OF ELIGIBLE INSTITUTION GUARANTEEING SIGNATURES)
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(ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE NUMBER (INCLUDING AREA CODE) OF
FIRM)
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(AUTHORIZED SIGNATURE)
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(PRINTED NAME)
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(TITLE)
Date: ___________________
5
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4 HEREIN) (SEE INSTRUCTIONS 3 AND 4 HEREIN)
To be completed ONLY if certifi- To be completed ONLY if
cates for Old Notes in a principal certificates for Old Notes in a
amount not tendered are to be is- principal amount not tendered or
sued in the name of, or the New not accepted for purchase or the
Notes issued pursuant to the Ex- New Notes issued pursuant to the
change Offer are to be issued to Exchange Offer are to be sent to
the order of, someone other than someone other than the person or
the person or persons whose signa- persons whose signature(s)
ture(s) appear(s) within this Let- appear(s) within this Letter of
ter of Transmittal or issued to an Transmittal or to an address
address different from that shown different from that shown in the
in the box entitled "Description box entitled "Description of Old
of Old Notes" within this Letter Notes" within this Letter of
of Transmittal, or if Old Notes Transmittal.
tendered by book-entry transfer
that are not accepted for purchase
are to be credited to an account
maintained at DTC.
Name: .............................
(PLEASE PRINT)
Address: ..........................
Name: ............................. (PLEASE PRINT)
(PLEASE PRINT)
...................................
Address: .......................... ZIP CODE
(PLEASE PRINT)
...................................
................................... TAXPAYER IDENTIFICATION OR SOCIAL
ZIP CODE SECURITY NUMBER
...................................
TAXPAYER IDENTIFICATION OR SOCIAL
SECURITY NUMBER
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER AND THE SOLICITATION
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES. The certificates
for the tendered Old Notes (or a confirmation of a book-entry into the
Exchange Agent's account at DTC of all Old Notes delivered electronically), as
well as a properly completed and duly executed copy of this Letter of
Transmittal or facsimile hereof and any other documents required by this
Letter of Transmittal must be received by the Exchange Agent at its address
set forth herein prior to 5:00 p.m., New York City time, on the Expiration
Date. The method of delivery of the tendered Old Notes, this Letter of
Transmittal and all other required documents to the Exchange Agent is at the
election and risk of the Holder and, except as otherwise provided below, the
delivery will be deemed made only when actually received by the Exchange
Agent. Instead of delivery by mail, it is recommended that the Holder use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. No Letter of Transmittal or Old Notes
should be sent to the Issuer.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, this Letter
of Transmittal or any other documents required hereby to the Exchange Agent
prior to the Expiration Date must tender their Old Notes and follow the
guaranteed delivery procedures set forth in the Prospectus. Pursuant to such
procedures: (i) such tender must be made by or through an Eligible
Institution; (ii) prior to the Expiration Date, the Exchange Agent must have
received from the Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or hand
delivery) setting forth the name and address of the Holder of the Old Notes,
the certificate number or numbers of such Old Notes and the principal amount
of Old Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within five business days after the Expiration Date, this
Letter of Transmittal (or facsimile thereof) together with the certificate(s)
representing the Old Notes (or a confirmation of electronic delivery of book-
entry delivery into the Exchange Agent's account at DTC) and any of the
required documents will be deposited by the Eligible Institution with the
Exchange Agent; and (iii) such properly completed and executed Letter of
Transmittal (or facsimile hereof), as well as all other documents required by
this Letter of Transmittal and the certificate(s) representing all tendered
Old Notes in proper form for transfer (or a confirmation of electronic mail
delivery of book-entry delivery into the Exchange Agent's account at DTC),
must be received by the Exchange Agent within five business days after the
Expiration Date, all as provided in the Prospectus under the caption
"Guaranteed Delivery Procedures." Any Holder of Old Notes who wishes to tender
his Old Notes pursuant to the guaranteed delivery procedures described above
must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery
prior to 5:00 p.m., New York City time, on the Expiration Date.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined
by the Issuer in its sole discretion, which determination will be final and
binding. The Issuer reserves the absolute right to reject any and all Old
Notes not properly tendered or any Old Notes the Issuer's acceptance of which
would, in the opinion of counsel for the Issuer, be unlawful. The Issuer also
reserves the right to waive any irregularities or conditions of tender as to
particular Old Notes. The Issuer's interpretation of the terms and conditions
of the Exchange Offer (including the instructions in this Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be
cured within such time as the Issuer shall determine. Neither the Issuer, the
Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of Old
Notes, nor shall any of them incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such defects or irregularities have been cured or waived. Any Old Notes
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned
without cost by the Exchange Agent to the tendering Holders of Old Notes,
unless otherwise provided in this Letter of Transmittal, as soon as
practicable following the Expiration Date.
7
<PAGE>
2. PARTIAL TENDERS. Tenders of Old Notes will be accepted in all
denominations of $1,000 and integral multiples in excess thereof. If less than
the entire principal amount of any Old Notes is tendered, the tendering
Holders should fill in the principal amount tendered in the third column of
the chart entitled "Description of Old Notes." The entire principal amount of
Old Notes delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated. If the entire principal amount of all Old Notes is
not tendered, Old Notes for the principal amount of Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise
indicated. If the entire principal amount of all Old Notes is not tendered,
Old Notes for the principal amount of Old Notes not tendered and a certificate
or certificates representing New Notes issued in exchange of any Old Notes
accepted will be sent to the Holder at his or her registered address, unless a
different address is provided in the appropriate box on this Letter of
Transmittal or unless tender is made through DTC, promptly after the Old Notes
are accepted for exchange.
3. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or facsimile hereof)
is signed by the registered Holder(s) of the Old Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the Old
Notes without alteration, enlargement or any change whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder(s) of Old Notes tendered and the certificate(s) for New
Notes issued in exchange therefor is to be issued (or any untendered principal
amount of Old Notes is to be reissued) to the registered Holder, such Holder
need not and should not endorse any tendered Old Note, nor provide a separate
bond power. In any other case, such Holder must either properly endorse the
Old Notes tendered or transmit a properly completed separate bond power with
this Letter of Transmittal, with the signatures on the endorsement or bond
power guaranteed by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered Holder(s) of any Old Notes listed, such Old Notes
must be endorsed or accompanied by appropriate bond powers signed as the name
of the registered Holder(s) appears on the Old Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or bond
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, or officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing, and
unless waived by the Issuer, evidence satisfactory to the Issuer of their
authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 3 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal (or facsimile hereof) must be
guaranteed by an Eligible Institution unless the Old Notes tendered pursuant
thereto are tendered (i) by a registered Holder (including any participant in
DTC whose name appears on a security position listing as the owner of Old
Notes) who has not completed the box set forth herein entitled "Special
Issuance Instructions" or the box entitled "Special Delivery Instructions" or
(ii) for the account of an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering Holders should
indicate, in the applicable spaces, the name and address to which New Notes or
substitute Old Notes for principal amounts not tendered or not accepted for
exchange are to be issued or sent, if different from the name and address of
the person signing this Letter of Transmittal (or in the case of tender of the
Old Notes through DTC, if different from DTC). In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated.
5. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes or Old Notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or are
to be registered or issued in the name of, any person other than the
registered Holder of the Old Notes tendered hereby, or if tendered Old Notes
8
<PAGE>
are registered in the name of any person other than the person signing this
Letter of Transmittal, or if a transfer tax is imposed for any reason other
than the exchange of Old Notes pursuant to the Exchange Offer, then the amount
of any such transfer taxes (whether imposed on the registered Holder or any
other person) will be payable by the tendering Holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
this Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering Holder.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
6. WAIVER OF CONDITIONS. The Issuer reserves the absolute right to amend,
waive or modify specified conditions in the Exchange Offer in the case of any
Old Notes tendered.
7. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any tendering Holder
whose Old Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated herein for further instruction.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance and requests for additional copies of the Prospectus or this Letter
of Transmittal may be directed to the Exchange Agent at the address specified
in the Prospectus. Holders may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
(DO NOT WRITE IN SPACE BELOW)
CERTIFICATE SURRENDERED OLD NOTES TENDERED OLD NOTES ACCEPTED
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Delivery Prepared by Checked by Date
9
