-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U/gOlu6oCYnGxpEghyJx+n+CFnj8mljSnc8nax4qR9fprm211sAcSBzfxrIlGaI4 sb1qRsfSm1dEkGpWFHjhbg== 0000950123-00-001454.txt : 20000221 0000950123-00-001454.hdr.sgml : 20000221 ACCESSION NUMBER: 0000950123-00-001454 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000217 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000218 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERMEDIA COMMUNICATIONS INC CENTRAL INDEX KEY: 0000885067 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 592913586 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-20135 FILM NUMBER: 549807 BUSINESS ADDRESS: STREET 1: 3625 QUEEN PALM DR STREET 2: STE 720 CITY: TAMPA STATE: FL ZIP: 33619 BUSINESS PHONE: 8138290011 MAIL ADDRESS: STREET 1: 3625 QUEEN PALM DRIVE CITY: TAMPA STATE: FL ZIP: 33619-1309 FORMER COMPANY: FORMER CONFORMED NAME: INTERMEDIA COMMUNICATIONS OF FLORIDA INC DATE OF NAME CHANGE: 19930328 8-K 1 CURRENT REPORT 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------ FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 -------------------------- Date of Report (Date of earliest event reported): February 17, 2000 ----------------- INTERMEDIA COMMUNICATIONS INC. ------------------------------ (Exact name of registrant as specified in its charter) Delaware 59-2913586 - -------------------------- ------------------ (State or other jurisdic- (I.R.S. Employer tion of incorporation or Identification No.) organization) 0-20135 ------------------------ (Commission File Number) 3625 Queen Palm Drive, Tampa, Florida 33619-1309 - ------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (813) 829-0011 -------------- 2 Item 5. Other Events On February 17, 2000, Intermedia Communications Inc. ("Intermedia") issued the press release attached hereto as Exhibit 99.1. Item 7. Financial Statements and Exhibits Exhibit 4.1 Certificate of Designation for the 7% Series G Junior Convertible Participating Preferred Stock. Exhibit 4.2 Warrant Agreement, dated February 17, 2000, among Intermedia and ICI Ventures LLC. Exhibit 4.3 Warrant Agreement, dated February 17, 2000, among Intermedia and ICI Ventures LLC. Exhibit 4.4 Registration Rights Agreement, dated February 17, 2000, among Intermedia and ICI Ventures LLC. Exhibit 10.1 Purchase Agreement, dated January 11, 2000, among Intermedia and ICI Ventures LLC. Exhibit 99.1 Press Release, dated February 17, 2000. 2 3 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: February 18, 2000 INTERMEDIA COMMUNICATIONS INC. (Registrant) By: /s/ RAYMOND L. LAWLESS ----------------------------- Name: Raymond L. Lawless Title: Vice President, Finance and Treasurer 3 4 EXHIBIT INDEX Exhibit Page No. Description No. - ------- ----------- ---- 4.1 Certificate of Designation for the 7% Series G Junior Convertible Participating Preferred Stock. 4.2 Warrant Agreement, dated February 17, 2000, among Intermedia and ICI Ventures LLC. 4.3 Warrant Agreement, dated February 17, 2000, among Intermedia and ICI Ventures LLC. 4.4 Registration Rights Agreement, dated February 17, 2000, among Intermedia and ICI Ventures LLC. 10.1 Purchase Agreement, dated January 11, 2000, among Intermedia and ICI Ventures LLC. 99.1 Press Release, dated February 17, 2000. 4 EX-4.1 2 CERTIFICATE OF DESIGNATION 1 Exhibit 4.1 CERTIFICATE OF DESIGNATION OF VOTING POWER, DESIGNATION PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF 7% SERIES G JUNIOR CONVERTIBLE PARTICIPATING PREFERRED STOCK OF INTERMEDIA COMMUNICATIONS INC. ------------------------- Pursuant to Section 151 of the General Corporation Law of the State of Delaware ------------------------- Intermedia Communications Inc., a Delaware corporation (the "Company"), certifies that pursuant to the authority contained in ARTICLE FOURTH of its Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware (the "DGCL"), the Board of Directors of the Company (the "Board") at a special meeting duly called and held on December 30, 1999, duly approved and adopted the following resolution which resolution remains in full force and effect on the date hereof: RESOLVED, that pursuant to the authority vested in the Board by the Certificate of Incorporation, the Board does hereby designate, create, authorize and provide for the issue of a series of preferred stock having a par value of $1.00 per share, with a liquidation preference of $1,000 per share (the "Liquidation Preference") which shall be designated as Series G Junior Convertible Participating Preferred Stock (the "Preferred Stock") consisting of 200,000 shares (which shares of preferred stock were authorized to be issued by the Company by resolution of the Board of Directors of the Company dated as of March 17, 1997, and by vote of the stockholders of the Company dated as of May 22, 1997), having the following voting powers, preferences and relative, participating, optional and other special rights, and qualifications, limitations and restrictions thereof as follows: 1. Ranking. The Preferred Stock shall rank, with respect to dividend distributions and distributions upon the liquidation, winding-up and dissolution of the Company, (i) senior to all classes of common stock of the Company and to each other class of capital stock or series of preferred stock issued by the Company established after the Preferred Stock Issue Date by the Board, the terms of which do not expressly provide that it ranks senior to or on a parity with the Preferred Stock as to dividend distributions and distributions upon the liquidation, winding-up and dissolution of the Company (collectively referred to with the common stock of the Company as "Junior Securities"); (ii) on a parity with the Series D Preferred Stock, the Series E Preferred Stock, the Series F Preferred Stock and any additional shares of Preferred Stock issued by the Company in the future and any other class of capital stock or series of preferred stock issued 2 by the Company established after the Preferred Stock Issue Date by the Board, the terms of which expressly provide that such class or series will rank on a parity with the Preferred Stock as to dividend distributions and distributions upon the liquidation, winding-up and dissolution of the Company (collectively referred to as "Parity Securities"); and (iii) junior to the Series B Preferred Stock and to each class of capital stock or series of preferred stock issued by the Company established after the Preferred Stock Issue Date by the Board, the terms of which expressly provide that such class or series will rank senior to the Preferred Stock as to dividend distributions and distributions upon liquidation, winding-up and dissolution of the Company (collectively referred to as "Senior Securities"). No dividend whatsoever shall be declared or paid upon, or any sum set apart for the payment of dividends upon, any outstanding share of the Preferred Stock with respect to any dividend period unless all dividends for all preceding dividend periods have been declared and paid, or declared and a sufficient sum set apart for the payment of such dividend, upon all outstanding shares of Senior Securities. 2. Dividends. (i) The holders of shares of the Preferred Stock shall be entitled to receive, when, as and if dividends are declared by the Board out of funds of the Company legally available therefor, cumulative dividends from the Preferred Stock Issue Date accruing at the rate per annum of 7% of the sum of (i) the Liquidation Preference per share and (ii) all compounded accumulated and unpaid dividends on such shares of Preferred Stock from the Preferred Stock Issue Date, payable and compounded quarterly in arrears on each January 15, April 15, July 15 and October 15, commencing on July 15, 2000 (each a "Dividend Payment Date"). If any such date is not a Business Day, such payment shall be made on the next succeeding Business Day, to the holders of record as of the next preceding January 1, April 1, July 1 and October 1 (each, a "Record Date"). Dividends will be payable, at the option of the Company, (i) in cash, (ii) by delivery of shares of Common Stock to holders (based upon the Average Stock Price (as defined below)), or (iii) through any combination of the foregoing. If the dividends are paid in shares of Common Stock, the number of shares of Common Stock to be issued on each Dividend Payment Date will be determined by dividing the total dividend to be paid on all outstanding shares of Preferred Stock held by each holder by the average of the high and low sales prices of the Common Stock as reported by the Nasdaq National Market or any national securities exchange upon which the Common Stock is then listed, for each of the ten consecutive Trading Days immediately preceding the fifth Trading Day preceding the Record Date (the "Average Stock Price"). In the event of a Sale of the Company, Significant Event or Change of Control where the Preferred Stock remains outstanding, the term Common Stock, as used solely in this paragraph 2(i), paragraph 2(v) and paragraph 2(vi), shall mean securities issuable to the holders of Common Stock in connection with such Sale of the Company, Significant Event or Change of Control, as the case may be. The Transfer Agent shall not issue any fractional shares of Common Stock as a dividend payment. Instead the Transfer Agent shall round the number of shares of Common Stock payable as a dividend hereunder up to the nearest full share of Common Stock. Dividends payable on the Preferred Stock will be computed on the basis of a 360-day year consisting of twelve 30-day months and will be deemed to accumulate on a daily basis. (ii) Dividends on the Preferred Stock shall accumulate and compound quarterly whether or not the Company has earnings or profits, whether or not there are funds legally available for the payment of such dividends and whether or not dividends are declared. Dividends will accumulate and compound quarterly to the extent they are not paid on the Dividend Payment Date for the period to which they relate. The Company shall take all actions required or permitted under the DGCL (x) to permit the payment of dividends on the Preferred Stock, including, without limitation, through the revaluation of its assets in accordance with the DGCL, to make or keep funds legally available for the payment of dividends and (y) to declare and pay such dividends to the extent there are funds legally available therefor. 2 3 (iii) No dividend whatsoever shall be declared or paid upon, or any sum set apart for the payment of dividends upon, any outstanding share of the Preferred Stock with respect to any dividend period unless all dividends for all preceding dividend periods have been declared and paid, or declared and a sufficient sum set apart for the payment of such dividend, upon all outstanding shares of Preferred Stock. Unless full cumulative dividends on all outstanding shares of Preferred Stock for all past dividend periods shall have been declared and paid in full, or declared and a sufficient sum for the payment thereof set apart, then: (A) no dividend (other than a dividend payable solely in shares of any Junior Securities) shall be declared or paid upon, or any sum set apart for the payment of dividends upon, any shares of Junior Securities; (B) no other distribution shall be declared or made upon, or any sum set apart for the payment of any distribution upon, any shares of Junior Securities, other than a distribution consisting solely of Junior Securities; (C) no shares of Junior Securities shall be purchased, redeemed or otherwise acquired or retired for value (excluding an exchange for shares of other Junior Securities) by the Company or any of its Subsidiaries; and (D) no monies shall be paid into or set apart or made available for a sinking or other like fund for the purchase, redemption or other acquisition or retirement for value of any shares of Junior Securities by the Company or any of its Subsidiaries. (iv) Unless full cumulative dividends on all outstanding shares of Preferred Stock for all past dividend periods shall have been declared and paid in full or declared and a sum sufficient for the payment thereof set apart, then: (A) no dividend (other than a dividend payably solely in shares of any Parity Securities or Junior Securities) shall be declared or paid upon, or any sum set apart for the payment of dividends upon, any shares of Parity Securities; (B) no other distribution shall be declared or made upon, or any sum set apart for the payment of any distribution upon, any shares of Parity Securities, other than a distribution consisting solely of Parity Securities; (C) no shares of Parity Securities shall be purchased, redeemed or otherwise acquired or retired for value (excluding an exchange for shares of Junior Securities) by the Company or any of its Subsidiaries; and (D) no monies shall be paid into or set apart or made available for a sinking or other like fund for the purchase, redemption or other acquisition or retirement for value of any shares of Parity Securities by the Company or any of its Subsidiaries. If at any time the Company pays less than the total amount of dividends then accrued with respect to the Preferred Stock, such payment shall be distributed ratably among the holders of Preferred Stock based upon the aggregate accumulated but unpaid dividends on the Preferred Stock held by each holder. When dividends are not paid in full or a sum sufficient for such payment is not set apart as aforesaid, all dividends declared upon any other class or series of Parity Securities shall be declared ratably in proportion to the respective amounts of dividends accumulated and unpaid on the Preferred Stock and accumulated and unpaid on such Parity Securities. (v) Holders of the Preferred Stock shall also be entitled to receive, when, as and if dividends are declared or other distributions made by the Board out of funds of the Company legally available therefor, any dividends or other distributions, whether payable in cash, property or stock, payable to all holders of the Common Stock as if such holder of Preferred Stock held the number of shares of Common Stock into which such shares of Preferred Stock might have been converted pursuant to the terms of Section 3 hereof on the date fixed for the determination of holders of Common Stock entitled to receive such distribution. Any such declared and unpaid dividends will be payable upon a liquidation, dissolution or winding-up, first to the holders of the Preferred Stock and then to the holders of the Common Stock. Notwithstanding anything to the contrary contained herein, no adjustment in the Conversion Price shall be made pursuant to Section 3 below if the Company distributes to each holder of Preferred Stock any dividends or other distribution payable on the Common Stock pursuant to this paragraph 2(v). (vi) When dividends are declared by the Board, the Company shall issue a press release within 3 Business Days of the Record Date setting forth (A) the method of payment for such dividends (cash, Common Stock or a combination thereof) and (B) the Average Stock Price. 3 4 (vii) The Company has reserved and shall continue to reserve, out of its authorized but unissued Common Stock or its Common Stock held in treasury enough shares of Common Stock to permit the payment of dividends on the Preferred Stock pursuant to this Section 2. All shares of Common Stock that may be issued in payment of dividends on the Preferred Stock shall be fully paid and nonassessable. The Company shall endeavor to comply with all securities laws regulating the offer and delivery of shares of Common Stock in payment of dividends and shall endeavor to list such shares of Common Stock on each national securities exchange or automated quotation system on which the Common Stock is listed. In the event that dividends are payable in securities other than Common Stock pursuant to paragraph 2(i), the Company shall use its reasonable efforts to cause the issuer of such other securities to comply with this paragraph 2(vii). 3. Conversion. (i) A holder of shares of Preferred Stock may convert such shares into Common Stock at any time after the Preferred Stock Issue Date, but only in lots of 100 shares of Preferred Stock or integral multiples thereof if less than all of the shares of Preferred Stock then held by such holder are being converted. For the purposes of conversion, each share of Preferred Stock shall be valued at the Liquidation Preference plus all accumulated, compounded and unpaid dividends on such share (which shall include any dividends described in the last sentence of paragraph 3(ii) below), which shall be divided by the Conversion Price in effect on the Conversion Date (as defined below) to determine the number of shares of Common Stock issuable upon conversion. Immediately following such conversion, the rights of the holders of converted Preferred Stock shall cease and the persons entitled to receive the Common Stock upon the conversion of Preferred Stock shall be treated for all purposes as having become the owners of such Common Stock. (ii) To convert Preferred Stock, a holder must (A) surrender the certificate or certificates evidencing the shares of Preferred Stock to be converted, duly endorsed in a form reasonably satisfactory to the Company, at the principal office of the Company or transfer agent for the Preferred Stock, (B) notify the Company at such office that he elects to convert Preferred Stock and the number of shares he wishes to convert, (C) state in writing the name or names in which he wishes the certificate or certificates for shares of Common Stock to be issued, and (D) pay any transfer or similar tax if required (other than any such tax required to be paid by the Company pursuant to paragraph 3(iv)). In the event that a holder fails to notify the Company of the number of shares of Preferred Stock which he wishes to convert, he shall be deemed to have elected to convert all shares represented by the certificate or certificates surrendered for conversion. The date on which the holder satisfies all those requirements is the "Conversion Date." As soon as practical after the Conversion Date, the Company shall deliver a certificate for the number of full shares of Common Stock issuable upon the conversion, and a new certificate representing the unconverted portion, if any, of the shares of Preferred Stock represented by the certificate or certificates surrendered for conversion. The person in whose name the Common Stock certificate is registered shall be treated as the stockholder of record on and after the Conversion Date. If a holder of Preferred Stock converts more than one share at a time, the number of full shares of Common Stock issuable upon conversion shall be based on the total liquidation preference plus the aggregate of accumulated and unpaid dividends of all shares of Preferred Stock converted. If the last day on which Preferred Stock may be converted is not a Business Day, Preferred Stock may be surrendered for conversion on the next succeeding Business Day. If a Conversion Date occurs during the period from the close of business on any Record Date to the opening of business of the corresponding Dividend Payment Date, the registered holder of Preferred Stock so surrendered for conversion shall not be entitled to any dividend payment with respect to the shares of Preferred Stock surrendered for conversion on such Dividend Payment Date. 4 5 (iii) The Company shall not issue any fractional shares of Common Stock upon conversion of Preferred Stock. Instead the Company shall round the results of a conversion up to the nearest full share of Common Stock. (iv) If a holder converts shares of Preferred Stock, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock upon the conversion. However, the holder shall pay any such tax that is due because the shares are issued in a name other than the holder's name. (v) The Company has reserved and shall continue to reserve out of its authorized but unissued Common Stock or its Common Stock held in treasury enough shares of Common Stock to permit the conversion of the Preferred Stock in full. All shares of Common Stock that may be issued upon conversion of Preferred Stock shall be fully paid and nonassessable. The Company shall endeavor to comply with all securities laws regulating the offer and delivery of shares of Common Stock upon conversion of Preferred Stock and shall endeavor to list such shares of Common Stock on each national securities exchange or automated quotation system on which the Common Stock is listed. (vi) If the Company shall pay or make a dividend or other distribution on any class of capital stock of the Company in Common Stock other than the payment of dividends in Common Stock on the Preferred Stock or any other regularly scheduled dividend on any other preferred stock, the Conversion Price in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Conversion Price by a fraction the numerator of which shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and the denominator of which shall be the sum of such number of shares and the total number shares constituting such dividend or other distribution, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination of the holders entitled to such dividends and distributions. For the purposes of this paragraph 3(vi), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company. The Company will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company. Without in any way limiting the requirements of paragraph 2(v), this paragraph 3(vi) shall only apply if the Company has not made an appropriate distribution to the holders of the Preferred Stock pursuant to paragraph 2(v) above. (vii) In case the Company shall issue rights, options or warrants to all holders of its Common Stock entitling them to subscribe for, purchase or acquire shares of Common Stock at a price per share less than the current market price per share (determined as provided in paragraph 3(xiii) below) of the Common Stock on the date fixed for the determination of stockholders entitled to receive such rights, options or warrants, the Conversion Price in effect at the opening of business on the day following the date fixed for such determination shall be reduced by multiplying such Conversion Price by a fraction the numerator of which shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate offering price for the total number of shares of Common Stock so offered for subscription, purchase or acquisition would purchase at such current market price per share and the denominator of which shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription, purchase or acquisition, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination of the holders entitled to such rights, options or warrants. However, upon the expiration of any right, option or warrant to purchase Common Stock, the issuance of which resulted in an adjustment in the Conversion Price pursuant to this paragraph 3(vii), if any such right, option or warrant shall expire and 5 6 shall not have been exercised, the Conversion Price shall be recomputed immediately upon such expiration and effective immediately upon such expiration shall be increased to the price it would have been (but reflecting any other adjustments to the Conversion Price made pursuant to the provisions of this Section 3 after the issuance of such rights, options or warrants) had the adjustment of the Conversion Price made upon the issuance of such rights, options or warrants been made on the basis of offering for subscription or purchase only that number of shares of Common Stock actually purchased upon the exercise of such rights, options or warrants. No further adjustment shall be made upon exercise of any right, option or warrant if any adjustment shall have been made upon the issuance of such security. For the purposes of this paragraph 3(vii), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company. The Company will not issue any rights, options or warrants in respect of shares of Common Stock held in the treasury of the Company. Without in any way limiting the requirements of paragraph 2(v), this paragraph 3(vii) shall only apply if the Company has not made an appropriate distribution to the holders of the Preferred Stock pursuant to paragraph 2(v) above. (viii) In case the outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be reduced, and, conversely, in case the outstanding shares of Common Stock shall each be combined into a smaller number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be increased to equal the product of the Conversion Price in effect on such date and a fraction the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such subdivision or combination, as the case may be, and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such subdivision or combination, as the case may be. Such reduction or increase, as the case may be, shall become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. (ix) In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock (A) evidences of its indebtedness or (B) shares of any class of capital stock, cash or other property or assets (including securities, but excluding (x) any rights, options or warrants referred to in paragraph 3(vii) above and (y) any dividend or distribution referred to in paragraph 3(vi) above), unless with respect to cash dividends, cash distributions and cash repurchases, the sum of (1) all such cash dividends and cash distributions made within the preceding 12 months in respect of which no adjustment has been made and (2) any cash consideration paid in respect of any repurchases of Common Stock by the Company or any of its subsidiaries within the preceding 12 months in respect of which no adjustment has been made, does not exceed 20% of the Company's market capitalization (being the product of the then current market price per share (determined as provided in paragraph 3(xiii) below) of the Common Stock times the aggregate number of shares of Common Stock then outstanding on the date fixed for the determination of the holders of Common Stock entitled to receive such distribution), then in each case, the Conversion Price in effect at the opening of business on the day following the date fixed for the determination of holders of Common Stock entitled to receive such distribution shall be adjusted by multiplying such Conversion Price by a fraction of which the numerator shall be the current market price per share (determined as provided in paragraph 3(xiii) below) of the Common Stock on such date of determination less the then fair market value as determined by the Board (whose determination shall be conclusive) of the portion of the capital stock, cash or other assets or evidences of indebtedness so distributed (and for which an adjustment to the Conversion Price has not previously been made pursuant to the terms of this Section 3) applicable to one share of Common Stock, and the denominator shall be such current market price per share of the Common Stock, such adjustment to become effective immediately after the opening of business on the day following such date of determination 6 7 of the holders entitled to such distribution. Repurchases of Common Stock issued under the Company's stock incentive programs, to the extent permitted by the Company's then existing indentures, shall be excluded from the foregoing clauses (1) and (2). Without in any way limiting the requirements of paragraph 2(v), this paragraph 3(ix) shall only apply if the Company has not made an appropriate distribution to the holders of the Preferred Stock pursuant to paragraph 2(v) above. (x) The reclassification or change of Common Stock into securities, including securities other than Common Stock, (other than any reclassification upon a consolidation or merger to which paragraph 3(xxi) below shall apply) shall be deemed to involve (A) a distribution of such securities other than Common Stock to all holders of Common Stock (and the effective date of such reclassification shall be deemed to be "the date fixed for the determination of holders of Common Stock entitled to receive such distribution" within the meaning of paragraph 2(v) or 3(ix) above), and (B) a subdivision or combination, as the case may be, of the number of shares of Common Stock outstanding immediately prior to such reclassification into the number of shares of Common Stock outstanding immediately thereafter (and the effective date of such reclassification shall be deemed to be "the day upon which such subdivision or combination becomes effective" within the meaning of paragraph 3(viii) above). If the Common Stock shall be reclassified or changed into securities or property other than Common Stock (other than any reclassification upon a consolidation or merger to which paragraph 3(xxi) below shall apply), then and in each such event the holder of each share of Preferred Stock shall have the right thereafter to convert such share into the kind and amount of securities and property receivable upon such reclassification by the holders of the number of shares of Common Stock into which such share of Preferred Stock could have been converted immediately prior to such reclassification, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof. (xi) In case the Company shall issue shares of its Common Stock (excluding shares issued (i) in any of the transactions described in paragraphs 2(v) (only to the extent the holders of the Preferred Stock actually receive such shares of Common Stock), 3(vi), 3(vii), 3(viii) or 3(ix) above, (ii) upon exercise of options or other awards issued pursuant to the Company's employee incentive plans, (iii) upon exercise of options and warrants of the Company outstanding as of the date hereof, (iv) to shareholders of any corporation (which is not an affiliate of the Company) which merges into the Company or a subsidiary of the Company in proportion to their stock holdings of such corporation immediately prior to such merger, upon such merger, (v) as regularly scheduled dividend payments on shares of preferred stock of the Company, (vi) upon conversion or exchange of any preferred stock or convertible debt of the Company, (vii) in a bona fide offering pursuant to a firm commitment underwriting or distribution pursuant to Rule 144A under the Securities Act, or (viii) pursuant to the Company's Incentivized Conversion Program) for a consideration per share less than the current market price per share of Common Stock (as defined in paragraph 3 (xiii) below) in effect immediately prior to the earlier of (x) issuance of such securities, or (y) the date the Company has a contractual obligation to issue such securities (whether or not such obligation is contingent upon the passage of time, the occurrence of certain events or both), then the Conversion Price in effect at the opening of business on the day following the date of issuance of such shares of Common Stock shall be reduced by multiplying such Conversion Price by a fraction (A) the numerator of which shall be the sum of (1) the number of shares of Common Stock outstanding (on a fully diluted basis) immediately prior to such issuance, and (2) the number of shares of Common Stock which the aggregate consideration received by the Company (determined as provided in paragraph 3(xiv) below) for the total number of shares of Common Stock issued would purchase at the current market price per share (as defined in paragraph 3(xiii)), and (B) the denominator of which is the total number of shares of Common Stock outstanding (on a fully diluted basis) immediately after such issuance. 7 8 (xii) In case the Company shall issue any securities (including rights, warrants and options) convertible into, exercisable for or exchangeable for its Common Stock (excluding securities issued (i) as a dividend or distribution to all holders of the Common Stock, (ii) upon exercise of options or other awards issued pursuant to the Company's employee incentive plans, (iii) upon exercise of options and warrants of the Company outstanding as of the date hereof, (iv) to shareholders of any corporation (which is not an affiliate of the Company) which merges into the Company or a subsidiary of the Company in proportion to their stock holdings of such corporation immediately prior to such merger, upon such merger, (v) as regularly scheduled dividend payments on shares of preferred stock of the Company, (vi) upon conversion or exchange of any preferred stock or convertible debt of the Company, (vii) in a bona fide offering pursuant to a firm commitment underwriting or distribution pursuant to Rule 144A under the Securities Act, or (viii) pursuant to the Company's Incentivized Conversion Program) for a consideration per share of Common Stock initially deliverable upon conversion, exercise or exchange of such securities (determined as provided in paragraph 3(xiv) below) less than the current market price per share of Common Stock (as defined in paragraph 3(xiii) below) in effect immediately prior to the earlier of (x) issuance of such securities, or (y) the date the Company has a contractual obligation to issue such securities (whether or not such obligation is contingent upon the passage of time, the occurrence of certain events or both), then the Conversion Price in effect at the opening of business on the day following the date of issuance of such securities shall be reduced by multiplying such Conversion Price by a fraction, (A) the numerator of which shall be the sum of (1) the number of shares of Common Stock outstanding (on a fully diluted basis) immediately prior to the issuance of such securities, and (2) the number of shares of Common Stock which the aggregate consideration received by the Company (determined as provided in paragraph 3(xiv) below) for such securities would purchase at such current market price per share of Common Stock, and (B) the denominator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to such issuance and the maximum number of shares of Common Stock of the Company deliverable upon conversion, exercise or exchange of such securities at the initial conversion, exercise or exchange price or rate. However, upon the expiration of any security convertible into, exercisable for or exchangeable into Common Stock, the issuance of which resulted in an adjustment in the Conversion Price pursuant to this paragraph 3(xii), if any such security shall expire and shall not have been converted, exercised or exchanged, the Conversion Price shall be recomputed immediately upon such expiration and effective immediately upon such expiration shall be increased to the price it would have been (but reflecting any other adjustments to the Conversion Price made pursuant to the provisions of this Section 3 after the issuance of such security) had the adjustment of the Conversion Price made upon the issuance of such security been made on the basis of offering for subscription or purchase only that number of shares of Common Stock actually purchased upon the conversion, exercise or exchange of such security. No further adjustment shall be made upon the conversion, exercise or exchange of such security if any adjustment shall have been made upon the issuance of such security. (xiii) For the purpose of any computation under this Section 3, the current market price per share of Common Stock on any day shall be deemed to be the average of the Closing Prices of the Common Stock for the 10 consecutive Trading Days immediately preceding the Trading Day before the day before the day in question. For the purpose of any computation under paragraphs 4(ii), 5(i) or 6(v) only, if applicable, the term Common Stock as used in the preceding sentence shall include securities issuable to the holders of Common Stock in connection with a Sale of the Company, Significant Event or Change of Control, as the case may be. (xiv) For purposes of any computation respecting consideration received pursuant to paragraphs 3(xi) and 3(xii) above, the following shall apply: 8 9 (A) in the case of the issuance of shares of Common Stock for cash, the consideration shall be the gross proceeds to the Company from such issuance, which shall not include any deductions for any customary commissions, discounts or other expenses incurred by the Company in connection therewith; (B) in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash (subject to clause (C) below) shall be deemed to be the fair market value thereof as determined in good faith by the Board (irrespective of the accounting treatment thereof), whose determination shall be conclusive; (C) in the case of the issuance of shares of Common Stock for a consideration in whole or in part consisting of securities, the value of any securities shall be deemed to be: (x) if traded on a securities exchange or through the Nasdaq National Market, the average of the closing prices of the securities on such exchange or quotation system over the 10 trading day period ending on the trading day immediately preceding the day in question, (y) if actively traded over-the-counter, the average of the closing bid or sale prices (whichever is applicable) over the 10 trading day period ending on the trading day immediately preceding the day in question and (z) if there is no active public market, fair market value thereof, determined as provided in clause (B) above; and (D) in the case of the issuance of securities convertible into, exercisable for or exchangeable for shares of Common Stock, the aggregate consideration received therefor shall be deemed to be the consideration received by the Company for the issuance of such securities plus the minimum additional consideration, if any, to be received by the Company upon the conversion, exercise or exchange thereof (the consideration in each case to be determined in the same manner as provided in clauses (A) through (C) of this paragraph 3(xiv)). (xv) No adjustment in the Conversion Price need be made until all cumulative adjustments amount to 1% or more of the Conversion Price as last adjusted. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 3 shall be made to the nearest 1/1,000th of a cent or to the nearest 1/1,000th of a share, as the case may be. (xvi) For purposes of this Section 3, "Common Stock" includes any stock of any class of the Company which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company and which is not subject to redemption by the Company. However, subject to the provisions of paragraph 3(xxi) below, shares issuable on conversion of shares of Preferred Stock shall include only shares of the class designated as Common Stock of the Company on the Preferred Stock Issue Date or shares of any class or classes resulting from any reclassification thereof and which have no preferences in respect of dividends or amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company and which are not subject to redemption by the Company; provided that, if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. 9 10 (xvii) No adjustment in the Conversion Price shall reduce the Conversion Price below the then par value of the Common Stock. The Company hereby agrees with each holder of Preferred Stock that it shall not increase the par value of the Common Stock above its current par value of $.01 per share. (xviii) Whenever the Conversion Price is adjusted, the Company shall promptly mail to holders of Preferred Stock, first class, postage prepaid, a notice of the adjustment together with a certificate from the Company's independent public accountants briefly stating the facts requiring the adjustment and the manner of computing it. The certificate shall be conclusive evidence that the adjustment is correct. (xix) The Company from time to time may reduce the Conversion Price if it considers such reductions to be advisable in order that any event treated for federal income tax purposes as a dividend of stock or stock rights will not be taxable to the holders of Common Stock by any amount, but in no event may the Conversion Price be less than the par value of a share of Common Stock. Whenever the Conversion Price is reduced pursuant to this paragraph 3(xix), the Company shall mail to holders of Preferred Stock a notice of the reduction. The Company shall mail, first class, postage prepaid, the notice at least 5 days before the date the reduced Conversion Price takes effect pursuant to this paragraph 3(xix). The notice shall state the reduced Conversion Price and the period it will be in effect. A reduction of the Conversion Price does not change or adjust the Conversion Price otherwise in effect for purposes of paragraphs 3(vi) or 3(viii) above. (xx) If: (A) the Company takes any action which would require an adjustment in the Conversion Price pursuant to paragraphs 3(vi) through 3(xii) above; (B) the Company consolidates or merges with, or transfers all or substantially all of its assets to, another corporation, and stockholders of the Company must approve the transaction; or (C) there is a dissolution or liquidation of the Company; the Company shall mail to holders of the Preferred Stock, first class, postage prepaid, a notice stating the proposed record or effective date, as the case may be. The Company shall mail the notice at least 5 days before such proposed record or effective date. However, failure to mail the notice or any defect in it shall not affect the validity of any transaction referred to in clause (A), (B) or (C) of this paragraph 3(xx). (xxi) In the case of any consolidation of the Company or the merger of the Company with or into any other entity or the sale or transfer of all or substantially all the assets of the Company pursuant to which the Company's Common Stock is converted into other securities, cash or assets, upon consummation of such transaction, each share of Preferred Stock shall, unless the election in paragraph 4(ii) has been timely exercised, automatically become convertible into the kind and amount of securities, cash or other assets receivable upon the consolidation, merger, sale or transfer by a holder of the number of shares of Common Stock into which such share of Preferred Stock might have been converted immediately prior to such consolidation, merger, transfer or sale (assuming such holder of Common Stock failed to exercise any rights of election and received per share the kind and amount of consideration receivable per share by a plurality of non-electing shares). Appropriate adjustment (as determined by the Board) shall be made in the application of the provisions herein set forth with respect to the rights and interests thereafter of the holders of Preferred Stock, to the end that the provisions set forth herein (including provisions with respect to changes in and other adjustment of the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other securities or property thereafter deliverable 10 11 upon the conversion of Preferred Stock. If this paragraph 3(xxi) applies to a transaction, paragraphs 3(vi), 3(viii) and 3(x) do not apply to such transaction. (xxii) In any case in which this Section 3 shall require that an adjustment as a result of any event become effective from and after a record date, the Company may elect to defer until after the occurrence of such event the issuance to the holder of any shares of Preferred Stock converted after such record date and before the occurrence of such event of the additional shares of Common Stock issuable upon such conversion over and above the shares issuable on the basis of the Conversion Price in effect immediately prior to adjustment; provided, however, that if such event shall not have occurred and authorization of such event shall be rescinded by the Company, the Conversion Price shall be recomputed immediately upon such recission to the price that would have been in effect had such event not been authorized, provided that such recission is permitted by and effective under applicable laws. (xxiii) The Company will not by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 3 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of the Preferred Stock against impairment to the extent required hereunder. Nothing in this Section 3 shall affect the continued accumulation of dividends on the Preferred Stock in accordance with the terms of this Certificate of Designation. (xxiv) Upon delivery to the Company of the notice referred to in paragraph 3(ii)(B), the right of the Company to redeem the shares of Preferred Stock referred to in such notice shall terminate regardless of whether a notice of redemption pursuant to paragraph 5(ii) has been made by the Company. 4. Liquidation Rights. Upon any liquidation, dissolution or winding up of the Company, voluntary or involuntary: (i) The holders of the Preferred Stock will be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Company to the holders of the Junior Securities by reason of their ownership thereof, but subsequent to the repurchase or payment in full or other satisfaction of the Company's outstanding indebtedness and Senior Securities, an amount per share of Preferred Stock equal to the greater of (A) the Liquidation Preference plus all compounded accumulated but unpaid dividends, if any, to the date fixed for liquidation, dissolution or winding-up (whether or not declared and whether or not funds of the Company are legally available for the payment of dividends), and (B) the amount the holder of one share of Preferred Stock would have received in such liquidation, dissolution or winding up if such share of Preferred Stock had been converted to Common Stock pursuant to Section 3 immediately prior to such event (such greater amount, the "Liquidation Amount"). After payment in full of the Liquidation Amount, such holders will not be entitled to any further participation in any distribution of assets of the Company. If, upon any voluntary or involuntary liquidation, dissolution or winding-up of the Company, the assets of the Company shall be insufficient to pay the full Liquidation Amount with respect to the Preferred Stock and the full liquidation preference plus accumulated and unpaid dividends with respect to all other Parity Securities, the holders of the Preferred Stock and the Parity Securities will share equally and ratably in any distribution of assets of the Company in proportion to the full Liquidation Amount in the case of the Preferred Stock and the full liquidation preference plus accumulated and unpaid dividends in the case of any Parity Securities to which each is entitled. 11 12 (ii) At the written election of the holders of a majority of the then outstanding shares of Preferred Stock (exercised by written notice (the "Liquidation Notice") to the Company within ten Business Days after receipt of notice from the Company (which will be deemed received on the same day the Company delivers such notice by confirmed facsimile), a Sale of the Company shall be deemed to be a liquidation, dissolution or winding up of the Company. If the Liquidation Notice is not timely received by the Company, the holders of the Preferred Stock shall have forfeited this right of election. Within four Business Days of receipt of a Liquidation Notice, the Company shall deliver to the holders of the outstanding shares of Preferred Stock a certificate (a "Liquidation Certificate") certifying whether the Company can then pay the Liquidation Amount in cash pursuant to the terms of its outstanding indebtedness, and if the entire Liquidation Amount cannot be paid in cash, specifying the portion of such amount that can be paid in cash. Within four Business Days of delivery of a Liquidation Certificate providing that the entire Liquidation Amount cannot be paid in cash, the holders of a majority of the then outstanding shares of Preferred Stock may send a written notice to the Company withdrawing the Liquidation Notice. If such holders of the Preferred Stock do not timely deliver such withdrawal notice to the Company, then, if the terms of the Company's outstanding indebtedness do not permit payment of all or any portion of the Liquidation Amount payable pursuant to this paragraph 4(ii) in cash (any such portion of the Liquidation Amount, the "Non-Cash Liquidation Amount"), any such portion of the Liquidation Amount that may be paid in cash shall be paid in cash and, the remainder of the outstanding shares of Preferred Stock shall (not be redeemed or repurchased but instead shall) automatically be converted into the number of shares of Common Stock (or, if applicable, securities issuable to the holders of Common Stock in connection with a Sale of the Company) equal to the Non-Cash Liquidation Amount divided by the current market price per share of Common Stock (as defined in paragraph 3(xiii)). 5. Redemption. (i) If permitted by the terms of the Company's outstanding indebtedness at the time of receipt of the Redemption Notice (as defined below), at any time (i) after the fifth anniversary of the Preferred Stock Issue Date, (ii) within 45 days after the consummation of a Significant Event, or (iii) after an Event of Default (as defined in paragraph 7(vi)) for so long as such Event of Default has not been cured, registered holders of a majority of the shares of outstanding Preferred Stock may require the Company to redeem all, but not less than all, of the outstanding shares of Preferred Stock (an "Optional Redemption") by notifying the Company in writing (the "Redemption Notice") of their intent to exercise the rights afforded by this paragraph 5(i) and specifying a date not less than 30 nor more than 60 days from the date of such notice on which the outstanding shares of Preferred Stock shall be redeemed (the "Optional Redemption Date"). Upon receipt of such notice, the Company shall promptly deliver to the holders of the outstanding shares of Preferred Stock a certificate (a "Redemption Certificate") certifying whether the Company can then pay the Optional Redemption Price (as defined below) in cash pursuant to the terms of its outstanding indebtedness, and if the entire Optional Redemption Price cannot be paid in cash, specifying the portion of such amount that can be paid in cash and specifying the Optional Redemption Date. All recipients of such Redemption Certificate shall be required to participate in the Optional Redemption. Within five Business Days of delivery of a Redemption Certificate providing that the entire Optional Redemption Price cannot be paid in cash, the holders of a majority of the then outstanding shares of Preferred Stock may send a written notice to the Company withdrawing the Redemption Notice (without prejudice to the rights of the holders of Preferred Stock to timely exercise such rights pursuant to this paragraph 5(i) at any time in the future to the extent permitted hereby). If such holders of Preferred Stock do not timely deliver such withdrawal notice to the Company, then, subject to the last sentence of this paragraph 5(i), the Company shall redeem on the Optional Redemption Date all the outstanding shares of Preferred Stock. Each share of Preferred Stock to 12 13 be redeemed shall be redeemed for an amount in cash equal to the sum of the Liquidation Preference plus all compounded, accumulated but unpaid dividends (the "Optional Redemption Price"). If the terms of the Company's outstanding indebtedness do not permit payment of all or any portion of the aggregate Optional Redemption Price in cash (any such portion of the aggregate Optional Redemption Price, the "Non-Cash Redemption Price"), then if the holders of the Preferred Stock do not timely withdraw their Redemption Notice as provided above, on the Optional Redemption Date, any shares of Preferred Stock which may be redeemed for cash shall be redeemed for an amount in cash equal to the Optional Redemption Price and the remainder of the outstanding shares of Preferred Stock shall (not be redeemed or repurchased but instead shall) be automatically converted into the number of shares of Common Stock (or, if applicable, securities issuable to holders of the Common Stock in connection with a Significant Event) equal to the Non-Cash Redemption Price divided by the current market price per share of Common Stock (as defined in paragraph 3(xiii)). (ii) Until the fifth anniversary of the Preferred Stock Issue Date, the shares of Preferred Stock shall not be redeemed by the Company at its option. After the fifth anniversary of the Preferred Stock Issue Date, all, but not less than all, of the outstanding shares of Preferred Stock may be redeemed, at the Company's option, (i) for cash, or (ii) by delivery of the number of shares of Common Stock having a current market price per share (as defined in paragraph 3(xiii)), in each case equal to the redemption prices specified below (expressed as percentages of the Liquidation Preference thereof), together with accumulated, compounded and unpaid dividends (including an amount equal to a prorated dividend for any partial dividend period) to the date of redemption (the "Applicable Redemption Price"), upon not less than 30 nor more than 60 days' prior written notice, if redeemed during the 12-month period commencing on the day and month of the Preferred Stock Issue Date of each of the years set forth below:
Year Percentage ---- ---------- 2005.......................................................... 103.50% 2006.......................................................... 102.34% 2007.......................................................... 101.17% 2008 and thereafter........................................... 100.00%
No optional redemption pursuant to this paragraph 5(ii) shall be authorized or made unless, prior to giving the applicable redemption notice, all accumulated, compounded and unpaid dividends for periods ended prior to the date of such redemption notice shall have been paid in cash, Common Stock or a combination thereof. (iii) Notice of any redemption shall be sent by or on behalf of the Company not less than 30 nor more than 60 days prior to the date specified for redemption in such notice (the "Redemption Date"), by first class mail, postage prepaid, to all holders of record of the Preferred Stock at their last addresses as they shall appear on the books of the Company; provided, however, that no failure to give such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of any shares of Preferred Stock except as to the holder to whom the Company has failed to give notice or except as to the holder to whom notice was defective. In addition to any information required by law or by the applicable rules of any exchange upon which Preferred Stock may be listed or admitted to trading, such notice shall state: (i) that such redemption is being made pursuant to the optional redemption provisions hereof; (ii) the Redemption Date; (iii) the Applicable Redemption Price and whether payable 13 14 in cash or Common Stock; (iv) that all the outstanding shares of Preferred Stock are to be redeemed; (v) the place or places where certificates for such shares are to be surrendered for payment of the Applicable Redemption Price; and (vi) that dividends on the shares of Preferred Stock will cease to accumulate on the Redemption Date. Upon the mailing of any such notice of redemption, the Company shall become obligated to redeem at the time of redemption specified thereon all shares called for redemption. (iv) If notice has been mailed in accordance with Section 5(iii) above and if the Applicable Redemption Price is to be paid (x) in cash, on or before the Redemption Date specified in such notice, all funds necessary for such redemption shall have been set aside by the Company, separate and apart from its other funds in trust for the benefit of the holders of the outstanding shares of Preferred Stock, so as to be, and to continue to be available therefor or (y) in shares of Common Stock, on or before the Redemption Date specified in such notice, shares of Common Stock necessary for such redemption shall have been set aside by the Company in trust for the benefit of the holders of the outstanding shares of Preferred Stock, so as to be, and continue to be available therefor, then, from and after the Redemption Date, dividends on the shares of the Preferred Stock so called for redemption shall cease to accumulate, and said shares shall no longer be deemed to be outstanding and shall not have the status of shares of Preferred Stock, and all rights of the holders thereof as stockholders of the Company (except the right to receive from the Company the Applicable Redemption Price) shall cease. Upon surrender, in accordance with said notice, of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Company shall so require and the notice shall so state), such shares shall be redeemed by the Company at the Applicable Redemption Price. (v) The Company shall take all actions required or permitted under the DGCL to permit any such redemption. (vi) Notwithstanding the delivery by the Company of a notice of redemption described in paragraph 5(iii), the holders of the Preferred Stock shall continue to have the rights set forth in paragraph 3(i) to convert the Preferred Stock into Common Stock until the close of business on the day prior to the Redemption Date. 6. Change of Control. (i) Subject to paragraph (6)(v) hereof, upon the occurrence of a Change of Control, the Company shall be required to make an offer (a "Preferred Stock Change of Control Offer") to each holder of shares of Preferred Stock to repurchase all or any part of such holder's shares of Preferred Stock at an offer price in cash equal to 100% of the aggregate Liquidation Preference thereof, plus compounded accumulated and unpaid dividends to the date of repurchase (the "Change of Control Payment"). (ii) Within 30 days following any Change of Control, the Company shall (a) publish a notice of the Change of Control in The Wall Street Journal or a similar daily business publication of national distribution and (b) mail a notice to each holder of Preferred Stock describing the transaction that constitutes the Change of Control, together with such other information as may be required pursuant to the securities laws, and stating: (A) that the Preferred Stock Change of Control Offer is being made pursuant to this Certificate of Designation and that, to the extent lawful, all shares of Preferred Stock validly tendered will be accepted for payment; (B) the purchase price and the purchase date, which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"); (C) that any shares of Preferred Stock not tendered will continue to accumulate dividends in accordance with the terms of this Certificate of Designation; (D) that, unless the Company defaults in the payment of the Change of Control Payment, all shares of Preferred Stock accepted for payment pursuant to the Change of Control Offer shall cease to accumulate dividends on the Change of Control Payment Date; (E) a description of the 14 15 procedures to be followed by such holder in order to have its shares of Preferred Stock repurchased, and (F) whether the Company can then pay the Change of Control Payment in cash pursuant to the terms of its outstanding indebtedness, and if the entire Change of Control Payment cannot be paid in cash, specifying the portion of such amount that can be paid in cash. (iii) On the Change of Control Payment Date, the Company shall, to the extent lawful, (A) accept for payment shares of Preferred Stock validly tendered pursuant to the Preferred Stock Change of Control Offer and (B) promptly mail to each holder of shares of Preferred Stock so accepted payment in an amount equal to the purchase price for such shares and (C) unless the Company defaults in the payment for the shares of Preferred Stock tendered pursuant to the Preferred Stock Change of Control Offer, dividends will cease to accumulate with respect to the shares of Preferred Stock tendered and all rights of holders of such tendered shares will terminate, except for the right to receive payment therefor, on the Change of Control Payment Date. The Company shall publicly announce the results of the Preferred Stock Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. (iv) The Company shall comply with any securities laws and regulations, to the extent such laws and regulations are applicable to the repurchase of shares of the Preferred Stock in connection with a Change of Control. (v) If the holders of the Preferred Stock timely tender their shares of Preferred Stock pursuant to the Preferred Stock Change of Control Offer and if the terms of the Company's outstanding indebtedness do not permit payment of all or any portion of the Change of Control Payment in cash (any such portion of the Change of Control Payment, the "Non-Cash Change of Control Payment"), any such portion of the Change of Control Payment that may be paid in cash shall be paid in cash and, the remainder of the outstanding shares of Preferred Stock shall (not be redeemed or repurchased but instead shall) automatically be converted into the number of shares of Common Stock (or, if applicable, securities issuable to holders of the Common Stock in connection with such Change of Control) equal to the Non-Cash Change of Control Payment divided by the current market price per share of Common Stock (as defined in paragraph 3(xiii)). The Company shall not make a Change of Control Payment in cash until all similar change of control payments required under the Company's outstanding indebtedness and Senior Securities are made in full. (vi) The Company will not repurchase or redeem any Preferred Stock pursuant to this Change of Control provision prior to the Company's repurchase of the Series B Preferred Stock pursuant to the Change of Control covenants in the Series B Preferred Stock and the Company's repurchase or redemption obligation may be concurrent with analogous obligations under Parity Securities. (vii) Notwithstanding the foregoing, the Company shall not be required to make a Preferred Stock Change of Control Offer following a Change of Control if a third party makes the Preferred Stock Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Certificate of Designation applicable to a Preferred Stock Change of Control Offer made by the Company and purchases all of the Preferred Stock validly tendered and not withdrawn under such Preferred Stock Change of Control Offer. 7. Voting Rights. (i) The holders of record of outstanding shares of the Preferred Stock shall be entitled to vote, together with all the outstanding shares of Common Stock, and not by classes, except as otherwise required by Delaware law, on all matters on which holders of Common Stock are entitled to vote. Each outstanding share of Preferred Stock shall be entitled to the number of votes per share equal to the number of shares of 15 16 Common Stock issuable upon conversion of such share of Preferred Stock in accordance with Section 3 hereof as of the date fixed for the determination of holders of Common Stock entitled to vote on such proposal. (ii) The holders of a majority of the outstanding shares of Preferred Stock, voting as a separate single class, shall be entitled to elect two members to the Board, which on the Preferred Stock Issue Date shall be comprised of no more than eight members (not including the two Board members to be elected pursuant to this Section 7). For so long as more than 100,000 shares of Preferred Stock remain outstanding, the Board shall not consist of more than 10 members plus any directors elected pursuant to paragraph 7(vi). Such rights and, if vested, the rights contained in paragraph 7(vi) may be exercised initially (if such two Board members described in the first sentence of this paragraph 7(ii) have not already been appointed by the Board on or prior to the Preferred Stock Issue Date) by the written consent of the holders of Preferred Stock, at a special meeting of the holders of Preferred Stock, called as hereinafter provided, or at any annual meeting of stockholders held for the purpose of electing directors, and thereafter at such annual meetings or by the written consent of the holders of Preferred Stock. The rights contained in this paragraph 7(ii) may be exercised until such time as less than 100,000 shares of Preferred Stock remain outstanding, at which time (upon receipt of written notice by the Chairman of the Board) the term of any such director previously elected pursuant to this Section 7 shall thereupon terminate, and such director shall be deemed to have resigned. If the right set forth in this paragraph 7(ii) and in paragraph 7(vi) shall not have been initially exercised or if any director so elected by the holders of Preferred Stock shall cease to serve as a director before his term shall expire, the holders of Preferred Stock then outstanding, at a special meeting of the holders of Preferred Stock, may elect the initial director or a successor, as the case may be, to hold such office. Upon the written request of holders of record of at least 10% of the Preferred Stock then outstanding, addressed to the Secretary of the Company, a proper officer of the Company shall call a special meeting of holders of Preferred Stock. Such meeting shall be held at the earliest practicable date upon the notice required for annual meetings of stockholders at the place for holding annual meetings of stockholders of the Company or, if none, at a place designated by the Secretary of the Company. If such meeting shall not be called by the proper officers of the Company within 30 days after the personal service of such written request upon the Secretary of the Company, or within 30 days after mailing the same within the United States, by registered mail, addressed to the Secretary of the Company at its principal office (such mailing to be evidenced by the registry receipt issued by the postal authorities), then the holders of record of at least 10% of the shares of Preferred Stock then outstanding may designate in writing a holder of Preferred Stock to call such meeting at the expense of the Company, and such meeting may be called by such person so designated upon the notice required for annual meetings of stockholders and shall be held at the place for holding annual meetings of the Company or, if none, at a place designated by such holder. Any holder of Preferred Stock that would be entitled to vote at such meeting shall have access to the stock books of the Company for the purpose of causing a meeting of stockholders to be called pursuant to the provisions of this paragraph 7(ii). Notwithstanding the provisions of this paragraph, however, no such special meeting shall be called if any such request is received less than 90 days before the date fixed for the next ensuing annual or special meeting of stockholders. The Company will deliver, or will cause to be delivered, to each designee of the holders of the Preferred Stock to the Board: (1) as soon as practical after the end of each month and in any event within thirty (30) days thereafter, a consolidated balance sheet of the Company and its subsidiaries as of the end of such month and consolidated statements of income and cash flows of the Company and its 16 17 Subsidiaries, for each month and for the current fiscal year of the Company to date, all subject to normal year-end audit adjustments, prepared in accordance with generally accepted accounting principles, together with a comparison of such statements to the corresponding periods of the prior fiscal year and to the Company's business plan then in effect and approved by the Board; and (2) an annual budget, a business plan and financial forecasts for the Company for the next fiscal year of the Company, no later than thirty (30) days before the beginning of the Company's next fiscal year, in such manner and form as approved by the Board, which shall include at least a projection of income and a projected cash flow statement for each fiscal quarter in such fiscal year and a projected balance sheet as of the end of each fiscal quarter in such fiscal year. Any material changes in such business plan shall be delivered to each designee of the holders of the Preferred Stock to the Board as promptly as practicable after such changes have been approved by the Board. The Company shall, and shall cause its subsidiaries, officers, directors, employees, auditors and other agents to, (a) afford the officers, employees, auditors and other agents of each designee of the holders of the Preferred Stock to the Board, during normal business hours reasonable access at all reasonable times to its officers, employees, auditors, legal counsel, properties, offices, plants and other facilities and to all books and records, (b) furnish each designee of the holders of the Preferred Stock to the Board with all financial, operating and other data and information as such designee directly or through his agents or representatives, may from time to time reasonably request and (c) afford each designee of the holders of the Preferred Stock to the Board the opportunity to discuss the Company's affairs, finances and accounts with the Company's officers from time to time as each such designee may reasonably request. (iii) For so long as at least 100,000 shares of Preferred Stock are outstanding (or any shares of Preferred Stock are outstanding in the case of paragraphs (A), (B), (F), (G) and (H)), the Company shall not, without the affirmative vote or consent of the holders of at least a majority of the shares of Preferred Stock then outstanding (with shares held by the Company or any of its affiliates not being considered to be outstanding for this purpose) voting or consenting as the case may be, as one class: (A) amend or otherwise alter this Certificate of Designation in any manner that adversely affects the specified rights, preferences, privileges or voting rights of holders of Preferred Stock; (B) authorize, create (by way of reclassification or otherwise) or issue any additional shares of Preferred Stock or decrease the total authorized or outstanding number of shares of Preferred Stock; (C) authorize, create (by way of reclassification or otherwise) or issue any Senior Securities or any obligation or security convertible into or evidencing the right to purchase, shares of any class or series of Senior Securities (except as dividends on the Series B Preferred Stock); (D) consummate the Sale of the Company; (E) redeem, acquire or otherwise purchase (except for repurchases of Common Stock issued under the Company's stock incentive programs to the extent permitted by the terms of all indentures governing the Company's then-outstanding indebtedness) any shares of Common Stock or preferred stock of the Company, unless, in the case of preferred stock, such action is required by the terms of such preferred stock; 17 18 (F) amend or otherwise alter the Certificate of Incorporation or by-laws of the Company in any manner that adversely affects the specified rights, preferences, privileges or voting rights of holders of Preferred Stock; (G) consummate the liquidation, dissolution or winding up of the Company other than in connection with a sale of substantially all the assets or other Sale of the Company; or (H) take any other actions that require a vote of the holders of the Preferred Stock under Delaware law. (iv) Without the consent of each holder affected, an amendment or waiver of the Company's Certificate of Incorporation or of this Certificate of Designation may not (with respect to any shares of Preferred Stock held by a non-consenting holder): (A) alter the voting rights with respect to the Preferred Stock or reduce the percentage of shares of Preferred Stock whose holders must consent to an amendment, supplement or waiver; (B) reduce the Liquidation Preference or Liquidation Amount of the Preferred Stock; (C) reduce the rate of or change the time for payment of dividends on any share of Preferred Stock; (D) make any conversion of shares of Preferred Stock payable in any form other than that stated in this Certificate of Designation; or (E) make any change in the provisions of this Certificate of Designation relating to waivers of the rights of holders of Preferred Stock to receive the Liquidation Preference, Liquidation Amount and dividends on the Preferred Stock. (v) The Company in its sole discretion may without the vote or consent of any holders of the Preferred Stock amend or supplement this Certificate of Designation: (a) to cure any ambiguity, defect or inconsistency, except if such amendment or supplement adversely affects the specified rights, preferences, privileges or voting rights of the holders of the Preferred Stock; (b) to provide for uncertificated Preferred Stock in addition to or in place of certificated Preferred Stock; or (c) to make any change that would provide any additional rights or benefits to the holders of the Preferred Stock or that does not adversely affect the legal rights under this Certificate of Designation of any such holder. Except as set forth above, (x) the creation, authorization or issuance of any shares of Junior Securities, Parity Securities or Senior Securities or (y) the increase or decrease in the amount of authorized capital stock of any class, including any preferred stock, shall not require the consent of the holders of the Preferred Stock and shall not be deemed to affect adversely the rights, preferences, privileges, special rights or voting rights of holders of shares of Preferred Stock. 18 19 (vi) Upon: (A) the failure by the Company to pay any dividend on the Preferred Stock when due and the continuation of such failure for a period of 5 Business Days; (B) the failure of the Company to satisfy any liquidation payment obligation or mandatory or optional redemption or repurchase obligation (including, without limitation, pursuant to any required Change of Control Offer) with respect to the Preferred Stock; (C) the failure of the Company to comply in all material respects with the covenants or agreements set forth in Sections 3.I(e), (f), (h), (i) and (l), and 6 of the Purchase Agreement and Sections 2, 3, 4 and 5 of the Registration Rights Agreement, each between the Company and the initial holder of the Preferred Stock, and the continuance of such failure for 45 consecutive days or more after notice; (D) 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 the payment of which is guaranteed by the Company) whether such indebtedness or guarantee now exists, or is created after the Preferred Stock Issue Date, which default (1) is caused by a failure to pay principal of or premium, if any, or interest on such indebtedness prior to the expiration of the grace period provided in such indebtedness on the date of such default (a "Payment Default") and (2) results in the acceleration of such indebtedness prior to its express maturity and, in each case, 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 and the maturity of which has been so accelerated, aggregates $5.0 million or more; (E) (1) the Company's voluntary or involuntary bankruptcy, receivership, assignment for the benefit of creditors, or liquidation, or (2) acceleration of third party obligations or unsatisfied final and non-appealable judgments (or judgments which the Company has not taken reasonable steps to appeal) in excess of $1 million which remain unsatisfied, are not discharged or remain unstayed for at least 30 consecutive days (each of the events described in clauses (A), (B), (C), (D) and (E) being referred to herein as an "Event of Default"); then the holders of a majority of the outstanding shares of Preferred Stock, voting as a separate single class, shall be entitled to two additional members to the Board and the number of members of the Board shall be immediately and automatically increased by two. The voting rights provided for in this paragraph 7(vi) shall be in addition to the optional redemption rights provided in Section 5, and together, such voting rights and optional redemption rights shall be the exclusive remedies for the holders of the Preferred Stock for any violation by the Company of its obligations under this Certificate of Designation that constitutes an Event of Default. The rights of the holders of Preferred Stock to elect directors to the Board pursuant to this paragraph 7(vi) may be exercised until (i) all dividends in arrears shall have been paid in full, and (ii) all other Events of Default have been cured or waived, at which time the term of such directors previously elected shall thereupon terminate and such directors shall be deemed to have resigned. 8. Reports. The Company shall file within 15 days after it files them with the Commission copies of the annual and quarterly reports and the information, documents, and other reports that the Company is required to file with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act ("SEC Reports") with the Transfer Agent. In the event the Company is not required or shall cease to be required to file SEC Reports, pursuant to the Exchange Act, the Company shall nevertheless continue to file 19 20 such reports with the Commission (unless the Commission shall not accept such a filing) and the Transfer Agent. Whether or not required by the Exchange Act to file SEC Reports with the Commission, so long as any shares of Preferred Stock are outstanding, the Company shall furnish copies of the SEC Reports to the holders of Preferred Stock at the time the Company is required to make such information available to the Transfer Agent and any investors who request it in writing. 9. Amendment. This Certificate of Designation shall not be amended, either directly or indirectly, or through merger or consolidation with another entity, in any manner that would alter or change the powers, preferences or special rights of the Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority or more of the outstanding Preferred Stock, voting separately as a class. 10. Exclusion of Other Rights. Except as may otherwise be required by law, the shares of Preferred Stock shall not have any voting powers, preferences and relative, participating, optional or other special rights, other than those specifically set forth in this resolution (as such resolution may be amended from time to time) and in the Certificate of Incorporation. The shares of Preferred Stock shall have no preemptive or subscription rights. 11. Headings of Subdivisions. The headings of the various subdivisions hereof are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof. 12. Severability of Provisions. If any voting powers, preferences and relative, participating, optional and other special rights of the Preferred Stock and qualifications, limitations and restrictions thereof set forth in this resolution (as such resolution may be amended from time to time) is invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, all other voting powers, preferences and relative, participating, optional and other special rights of Preferred Stock and qualifications, limitations and restrictions thereof set forth in this resolution (as so amended) which can be given effect without the invalid, unlawful or unenforceable voting powers, preferences and relative, participating, optional and other special rights of Preferred Stock and qualifications, limitations and restrictions thereof shall, nevertheless, remain in full force and effect, and no voting powers, preferences and relative, participating, optional or other special rights of Preferred Stock and qualifications, limitations and restrictions thereof herein set forth shall be deemed dependent upon any other such voting powers, preferences and relative, participating, optional or other special rights of Preferred Stock and qualifications, limitations and restrictions thereof unless so expressed herein. 13. Reissuance of Preferred Stock. Shares of Preferred Stock that have been issued and reacquired in any manner, including shares purchased or redeemed or exchanged or converted, shall (upon compliance with any applicable provisions of the laws of Delaware) have the status of authorized but unissued shares of preferred stock of the Company undesignated as to series and may be designated or redesignated and issued or reissued, as the case may be, as part of any series of preferred stock of the Company, provided that any issuance of such shares as Preferred Stock must be in compliance with the terms hereof. 14. Mutilated or Missing Preferred Stock Certificates. If any of the Preferred Stock certificates shall be mutilated, lost, stolen or destroyed, the Company shall issue, in exchange and in substitution for and upon cancellation of the mutilated Preferred Stock certificate, or in lieu of and substitution for the Preferred Stock certificate lost, stolen or destroyed, a new Preferred Stock certificate of like tenor and representing an equivalent amount of shares of Preferred Stock, but only upon receipt of evidence of such loss, theft or 20 21 destruction of such Preferred Stock certificate and indemnity, if requested, reasonably satisfactory to the Company and the transfer agent (if other than the Company). 15. Certain Definitions. As used in this Certificate of Designation, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa), unless the context otherwise requires: "Business Day" means any day except a Saturday, a Sunday, or any day on which banking institutions in New York, New York are required or authorized by law or other governmental action to be closed. "Change of Control" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, (ii) the adoption of a plan relating to the liquidation or dissolution of the Company, (iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" or "group" (as such terms are used in Section 13(d)(3) of the Exchange Act) becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly through one or more intermediaries, of more than 50% of the voting power of the outstanding voting stock of the Company, unless (A) the closing price per share of Common Stock for any five Trading Days within the period of ten consecutive Trading Days ending immediately after the announcement of such Change of Control equals or exceeds 105% of the Conversion Price then in effect or (B) at least 90% of the consideration in the transaction or transactions constituting a Change of Control pursuant to clause (iii) consists of shares of common stock traded or to be traded immediately following such Change of Control on a national securities exchange or the Nasdaq National Market and, as a result of such transaction or transactions, the Preferred Stock becomes convertible solely into such common stock (and any rights attached thereto) or (iv) the first day on which more than a majority of the Board are not Continuing Directors; provided, however, that a transaction in which the Company becomes a subsidiary of another entity shall not constitute a Change of Control if (A) the stockholders of the Company immediately prior to such transaction "beneficially own" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly through one or more intermediaries, at least a majority of the voting power of the outstanding voting stock of the Company immediately following the consummation of such transaction and (B) immediately following the consummation of such transaction, no "person" or "group" (as such terms are defined above), other than such other entity (but including holders of equity interests of such other entity), "beneficially owns" (as such term is defined above), directly or indirectly through one or more intermediaries, more than 50% of the voting power of the outstanding voting stock of the Company. "Closing Price" means, for each Trading Day, the last reported sale price regular way on the Nasdaq National Market or, if the Common Stock is not quoted on the Nasdaq National Market, the average of the closing bid and asked prices in the over-the-counter market as furnished by any New York Stock Exchange member firm selected from time to time by the Company for that purpose. "Commission" means the Securities and Exchange Commission. "Common Stock" means the Common Stock, par value $0.01 per share, of the Company. "Continuing Directors" means, as of any date of determination, any member of the Board who (a) was a member of the Board on the Preferred Stock Issue Date (including, irrespective of the date that they are actually nominated, the two designees to the Board of the holders of the Preferred Stock pursuant to 21 22 paragraph 7(ii)), or (b) was nominated for election to the Board with the approval of, or whose election was ratified by, at least two-thirds of the Continuing Directors who were members of the Board at the time of such nomination or election. "Conversion Price" shall initially mean $36.00 per share and thereafter shall be subject to adjustment from time to time pursuant to the terms of Section 3 hereof. "Event of Default" has the meaning set forth in paragraph 7(vi) hereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Incentivized Conversion Program" means a program which may, from time to time at the option of the Company, be instituted by the Company whereby the Company offers cash and/or non-cash incentives (by way of reducing the conversion price or otherwise) to holders of its outstanding convertible securities to convert such securities into shares of Common Stock. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock Issue Date" means the date on which the Preferred Stock is originally issued by the Company under this Certificate of Designation. "Sale of the Company" means 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 or any merger or consolidation of the Company unless (i) the Company is the surviving entity and no alteration or change is made in the rights, powers, preferences or privileges of the Preferred Stock, or (ii), if the Company is not the surviving entity, (A) the entity formed by such consolidation or merger or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made (in any such case, the "resulting entity") is a corporation organized and existing under the laws of the United States or any State thereof or the District of Columbia, and (B) the Preferred Stock is converted into or exchanged for and becomes shares of such resulting entity, having in respect of such resulting entity the same (or more favorable) powers, preferences and relative, participating, optional or other special rights thereof than the Preferred Stock had immediately prior to such transaction. The resulting entity of such transaction shall thereafter be deemed to be the "Company" for all purposes of this Certificate of Designation. "Series B Preferred Stock" means the Company's outstanding 131/2% Series B Redeemable Exchangeable Preferred Stock due 2009. "Series D Preferred Stock" means the Company's outstanding 7% Series D Junior Convertible Preferred Stock. "Series E Preferred Stock" means the Company's outstanding 7% Series E Junior Convertible Preferred Stock. "Series F Preferred Stock" means the Company's outstanding 7% Series F Junior Convertible Preferred Stock. 22 23 "Significant Event" means (i) during any period of two consecutive years, individuals who at the beginning of such period constituted the directors of the Company (together with any new directors whose election by such directors or whose nomination for election by the stockholders of the Company was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the directors then in office, (ii) any merger or consolidation with or into any other entity or any other similar transaction, whether in a single transaction or series of related transactions where (A) the stockholders of the Company immediately prior to such transaction in the aggregate cease to own at least 50% of the voting securities of the entity surviving or resulting from such transaction (or the ultimate parent thereof) or (B) any Person or "group" (as such term is defined in Section 13(d)(3) of the Exchange Act) becomes the beneficial owner of more than 50% of the voting securities of the entity surviving or resulting from such transaction (or the ultimate parent thereof), (iii) any transaction or series of related transactions in which in excess of 50% of the Company's voting power is transferred to any Person or group, (iv) the sale, transfer, lease, 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, or (v) any liquidation, dissolution or winding-up of the Company. "Trading Day" means any day on which the Nasdaq National Market or other applicable stock exchange or market is open for business. "Transfer Agent" shall be Continental Stock Transfer & Trust Co. unless and until a successor is selected by the Company. 24 IN WITNESS WHEREOF, the Company has caused this certificate to be duly executed by Robert M. Manning, Senior Vice President and Chief Financial Officer of the Company and attested by David C. Ruberg, Chairman of the Board, President and Chief Executive Officer of the Company, this 2nd day of February, 2000. INTERMEDIA COMMUNICATIONS INC. By: /s/ ROBERT M. MANNING ------------------------ Name: Robert M. Manning Title: Senior Vice President and Chief Financial Officer ATTEST: By: /s/ DAVID C. RUBERG -------------------- Name: David C. Ruberg Title: Chairman of the Board, President and Chief Executive Officer 24 EX-4.2 3 WARRANT AGREEMENT 1 Exhibit 4.2 - -------------------------------------------------------------------------------- WARRANT AGREEMENT Dated as of February 17, 2000 between INTERMEDIA COMMUNICATIONS INC. and ICI VENTURES LLC - -------------------------------------------------------------------------------- 2 WARRANT AGREEMENT dated as of February 17, 2000 between INTERMEDIA COMMUNICATIONS INC., a Delaware corporation (the "Company"), and ICI VENTURES LLC (the "Initial Holder"). NOW, THEREFORE, the parties hereto hereby agree as follows: 1. Grant. The Company hereby grants to the Initial Holder warrants ("Warrants") which shall entitle the registered holder thereof to purchase from the Company, at any time or from time to time hereafter until 5:00 P.M., New York time, on February 17, 2004 (the "Expiration Date"), up to 1,000,000 shares (the "Warrant Shares") of Common Stock, par value $.01 per share, of the Company ("Common Stock"), subject to adjustment as provided in Section 6, at the exercise price of $45.00 per share, subject to adjustment as provided in Section 6 (the "Exercise Price"), all subject to the terms and upon the conditions set forth herein. Each Warrant not exercised or deemed exercised on or prior to the Expiration Date shall become invalid and all rights thereunder, and all rights in respect thereof under this Agreement, shall cease as of that time. 2. Warrant Certificates. The Warrants shall be evidenced by certificates issued pursuant to this Agreement (the "Warrant Certificates") in the form set forth in Exhibit A hereto, with such appropriate insertions, omissions, substitutions, and other variations as are required or permitted by this Agreement. 3. Exercise of Warrant. (a) General. Subject to the provisions of this Agreement, upon surrender to the Company at its principal office of a Warrant Certificate with the annexed Form of Election to Purchase duly executed, together with payment in accordance with Section 3(b) of the Exercise Price then in effect, the Company shall issue and deliver promptly to the registered holder of such Warrant Certificate, a certificate or certificates for the Warrant Shares or other securities or property to which the registered holder is entitled, registered in the name of such registered holder or, upon the written order of such registered holder, in such name or names as such registered holder may designate. Any certificate or certificates representing Warrant Shares shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become the holder of record of the Warrant Shares as of the date of the surrender of such Warrant Certificate (together with such duly executed Form of Election to Purchase) and payment of the Exercise Price. (b) Payment. Payment of the Exercise Price shall be made, at the option of the registered holder of the Warrants, (i) in cash, (ii) by wire transfer payable to the order of the Company, or (iii) on a net basis, such that without the exchange of any funds, such holder receives that number of Warrant Shares that would otherwise be issuable upon a cash exercise of such Warrants less that number of Warrant Shares having a current market price equal to the 1 3 aggregate Exercise Price that would otherwise have been paid by such holder for the number of Warrant Shares with respect to which such Warrant is being exercised. For the purpose of any computation under this paragraph 3(b), the current market price per share of Common Stock on any day shall be deemed to be the average of the Closing Prices of the Common Stock for the 10 consecutive trading days ending on the day before the day the Warrant Certificate (together with a duly executed Form of Election to Purchase) is delivered to the Company. The term "Closing Price" shall mean, for each trading day, the last reported sale price regular way on the Nasdaq National Market or, if the Common Stock is not quoted on the Nasdaq National Market but is listed on a national securities exchange, the last reported sale price on the principal national securities exchange on which the Common Stock is then listed or admitted for trading or, if the Common Stock is neither listed on a national securities exchange nor quoted on the Nasdaq National Market, the average of the closing bid and asked prices in the over-the-counter market as furnished by any New York Stock Exchange member firm selected from time to time by the Company for that purpose. If for any reason the current market price per share cannot be determined pursuant to the foregoing provisions of this paragraph, the current market price per share shall be the fair market value thereof as determined in good faith by the Board of Directors of the Company (the "Board"). (c) Exercise in Whole or in Part. The purchase rights evidenced by a Warrant Certificate shall be exercisable, at the election of the registered holder thereof, in whole or in part, but only for lots of 100 Warrant Shares or integral multiples thereof if less than all the Warrants then held by such registered holder are being exercised. If less than all of the Warrant Shares purchasable under any Warrant Certificate are purchased, the Company shall cancel such Warrant Certificate upon the surrender thereof and shall execute and deliver a new Warrant Certificate of like tenor for the remaining number of Warrant Shares purchasable thereunder. (d) Fractional Shares. No fractional shares of Common Stock shall be issued upon exercise of any Warrants. Instead the Company shall round the results of an exercise up to the nearest full share of Common Stock. (e) Reservation of Shares. The Company will at all times reserve and keep available out of its authorized Common Stock solely for the purpose of issuance upon exercise of the Warrants as herein provided, such number of shares of Common Stock as shall from time to time be issuable upon the exercise of all outstanding Warrants. All shares of Common Stock that may be issued upon exercise of the Warrants will, upon issuance, be validly issued, fully paid and nonassessable and not subject to preemptive rights of any stockholder. 4. Restrictions on Transfer. (a) Warrant Register. The Company shall maintain at its principal office a Warrant Register for registration of Warrant Certificates and transfers thereof. The Company shall initially register the outstanding Warrants in the name of the Initial Holder. The Company 2 4 may deem and treat the registered holder(s) of the Warrant Certificates as the absolute owner(s) thereof and of the Warrants represented thereby (notwithstanding any notation of ownership or other writing on the Warrant Certificates made by any person) for the purpose of any exercise thereof or any distribution to the holder(s) thereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary. For the purpose of this Agreement, all references to a holder herein shall refer to a registered holder of Warrants. (b) Warrants and Warrant Shares Not Registered. Each registered holder of the Warrants, by acceptance thereof, represents and acknowledges that the Warrants and the Warrant Shares which may be purchased upon exercise of a Warrant are not registered under the Securities Act of 1933, as amended (the "Securities Act"), that the issuance of the Warrants and the offering and sale of such Warrant Shares are being made in reliance on the exemption from registration under Section 4(2) of the Securities Act as not involving any public offering and that the Company's reliance on such exemption is predicated in part on the representations made by the Initial Holder of the Warrants to and with the Company that such holder (1) is acquiring the Warrants for investment for its own account, with no present intention of reselling or otherwise distributing the same, (2) is an "accredited investor" as defined in Regulation D under the Securities Act, and (3) has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the investments made or to be made in connection with the acquisition and exercise of the Warrants. Neither the Warrants nor the related Warrant Shares may be transferred except (i) pursuant to an effective registration statement under the Securities Act, (ii) pursuant to Rule 144 under the Securities Act if the transferor delivers a certificate, in form and substance reasonably satisfactory to the Company, that such transfer complies with the requirements of Rule 144, or (iii) pursuant to any other available exemption from registration if such transferee makes the representations set forth in the preceding sentence in writing to the Company and, in the case of clause (iii), with the delivery to the Company of an opinion of counsel reasonably satisfactory to the Company by counsel reasonably satisfactory to the Company (and the Company hereby acknowledges and agrees that Simpson Thacher & Bartlett is reasonably satisfactory to the Company), stating that no registration is required under the Securities Act. (c) Notice and Registration of Transfer. Each registered holder of the Warrants, by acceptance thereof, agrees that prior to any disposition by such holder of the Warrants or of any Warrant Shares, such holder will give written notice to the Company expressing such holder's intention to effect such disposition and describing briefly such holder's intention as to the manner in which the Warrants or the Warrant Shares theretofore issued or thereafter issuable upon exercise hereof, are to be disposed of together with the opinion described in paragraph 4(b) above, if required, whereupon, but only if such transfer is permitted pursuant to paragraph 4(b) above, such transferring holder shall be entitled to dispose of the Warrants and/or the Warrant Shares theretofore issued upon the exercise thereof, all in accordance with the terms of the notice delivered by such holder to the Company. In the event of such transfer, the Company shall register the transfer of any outstanding Warrants in the Warrant Register upon surrender of the Warrant Certificate(s) evidencing such Warrants to the Company at its principal 3 5 office, accompanied by a written instrument of transfer in form reasonably satisfactory to it, duly executed by the registered holder thereof. Upon any such registration or transfer, new Warrant Certificate(s) evidencing such transferred Warrants shall be issued to the transferee(s) and the surrendered Warrant Certificate(s) shall be canceled. 5. Special Agreements of the Company. The Company covenants and agrees as follows: (a) Listing on Securities Exchanges. If the Common Stock is listed on a stock exchange or quoted on the Nasdaq National Market, the Company will use its reasonable best efforts to procure at its sole expense the listing of all Warrant Shares (subject to issuance or notice of issuance) on all stock exchanges on which the Common Stock is then listed, or the quotation of the Warrant Shares on the Nasdaq National Market, as the case may be, and maintain the listing or quotation of such shares and other securities after issuance. (b) Actions in Avoidance; Non-Dilution. The Company will not, by amendment of its Restated Certificate of Incorporation, as amended, or through any reorganization, transfer of assets, consolidation, merger, issue or sale of securities or otherwise, avoid or take any action which would have the effect of avoiding the observance or performance of any of the terms to be observed or performed hereunder by the Company but will at all times in good faith assist in carrying out all of the provisions of the Warrants and in taking all of such action as may be necessary or appropriate in order to protect the rights of the registered holders of the Warrants against impairment. If any shares of Common Stock required to be reserved for purposes of exercise of Warrants would require, under any federal or state law (other than the Securities Act or any state "blue sky" statutes), registration with or approval of any governmental authority, before such shares may be issued upon exercise, the Company will cause such shares to be duly registered or approved by such governmental authority, at its expense. 6. Adjustment of Exercise Price and Number of Warrant Shares Issuable. The number and kind of shares purchasable upon the exercise of Warrants and the Exercise Price shall be subject to adjustment from time to time as follows: (a) In case the Company shall pay or make a dividend or other distribution on any class of capital stock of the Company in Common Stock other than the payment of regularly scheduled dividends on any series of preferred stock, the Exercise Price in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Exercise Price by a fraction the numerator of which shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and the denominator of which shall be the sum of such number of shares and the total number shares constituting such dividend or other distribution, such reduction to become effective immediately after the opening 4 6 of business on the day following the date fixed for such determination of the holders entitled to such dividends and distributions. For the purposes of this paragraph 6(a), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company. The Company will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company. (b) In case the Company shall issue rights, options or warrants to all holders of its Common Stock entitling them to subscribe for, purchase or acquire shares of Common Stock at a price per share less than the current market price per share (determined as provided in paragraph 6(h) below) of the Common Stock on the date fixed for the determination of stockholders entitled to receive such rights, options or warrants, the Exercise Price in effect at the opening of business on the day following the date fixed for such determination shall be reduced by multiplying such Exercise Price by a fraction the numerator of which shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate offering price for the total number of shares of Common Stock so offered for subscription, purchase or acquisition would purchase at such current market price per share and the denominator of which shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription, purchase or acquisition, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination of the holders entitled to such rights, options or warrants. However, upon the expiration of any right, option or warrant to purchase Common Stock, the issuance of which resulted in an adjustment in the Exercise Price pursuant to this paragraph 6(b), if any such right, option or warrant shall expire and shall not have been exercised, the Exercise Price shall be recomputed immediately upon such expiration and effective immediately upon such expiration shall be increased to the price it would have been (but reflecting any other adjustments to the Exercise Price made pursuant to the provisions of this paragraph 6 after the issuance of such rights, options or warrants) had the adjustment of the Exercise Price made upon the issuance of such rights, options or warrants been made on the basis of offering for subscription or purchase only that number of shares of Common Stock actually purchased upon the exercise of such rights, options or warrants. No further adjustment shall be made upon exercise of any right, option or warrant if any adjustment shall have been made upon the issuance of such security. For the purposes of this paragraph 6(b), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company. The Company will not issue any rights, options or warrants in respect of shares of Common Stock held in the treasury of the Company. (c) In case the outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Exercise Price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be reduced, and, conversely, in case the outstanding shares of Common Stock shall each be combined into a smaller number of shares of Common Stock, the Exercise Price in effect at the opening of business on the day following the day upon which such combination becomes 5 7 effective shall be increased to equal the product of the Exercise Price in effect on such date and a fraction the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such subdivision or combination, as the case may be, and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such subdivision or combination, as the case may be. Such reduction or increase, as the case may be, shall become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. (d) In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock (A) evidences of its indebtedness or (B) shares of any class of capital stock, cash or other property or assets (including securities, but excluding (x) any rights, options or warrants referred to in paragraph 6(b) above and (y) any dividend or distribution referred to in paragraph 6(a) or 6(c) above), unless with respect to cash dividends, cash distributions and cash repurchases, the sum of (1) all such cash dividends and cash distributions made within the preceding 12 months in respect of which no adjustment has been made and (2) any cash consideration paid in respect of any repurchases of Common Stock by the Company or any of its subsidiaries within the preceding 12 months in respect of which no adjustment has been made, does not exceed 20% of the Company's market capitalization (being the product of the then current market price per share (determined as provided in paragraph 6(h) below) of the Common Stock times the aggregate number of shares of Common Stock then outstanding on the date fixed for the determination of the holders of Common Stock entitled to receive such distribution), then in each case, the Exercise Price in effect at the opening of business on the day following the date fixed for the determination of holders of Common Stock entitled to receive such distribution shall be adjusted by multiplying such Exercise Price by a fraction of which the numerator shall be the current market price per share (determined as provided in paragraph 6(h) below) of the Common Stock on such date of determination less the then fair market value as determined by the Board (whose determination shall be conclusive) of the portion of the capital stock, cash or other assets or evidences of indebtedness so distributed (and for which an adjustment to the Exercise Price has not previously been made pursuant to the terms of this paragraph 6) applicable to one share of Common Stock, and the denominator shall be such current market price per share of the Common Stock, such adjustment to become effective immediately after the opening of business on the day following such date of determination of the holders entitled to such distribution. The repurchases of Common Stock issued under the Company's stock incentive programs, to the extent permitted by the Company's then existing indentures, shall be excluded from the foregoing clauses (1) and (2). (e) The reclassification or change of Common Stock into securities, including securities other than Common Stock, (other than any reclassification upon a consolidation or merger to which paragraph 6(o) below shall apply) shall be deemed to involve (A) a distribution of such securities other than Common Stock to all holders of Common Stock (and the effective date of such reclassification shall be deemed to be "the date fixed for the determination of holders of Common Stock entitled to receive such distribution" within the meaning of paragraph 6(d) above), and (B) a subdivision or combination, as the case may be, of the number of shares of 6 8 Common Stock outstanding immediately prior to such reclassification into the number of shares of Common Stock outstanding immediately thereafter (and the effective date of such reclassification shall be deemed to be "the day upon which such subdivision or combination becomes effective" within the meaning of paragraph 6(c) above). (f) In case the Company shall issue shares of its Common Stock (excluding shares issued (i) in any of the transactions described in paragraphs 6(a) - (d) above, (ii) pursuant to the grant of awards or the exercise of options or other awards issued under the Company's employee incentive plans, (iii) upon exercise of options and warrants of the Company outstanding as of the date hereof, (iv) to shareholders of any corporation (which is not an affiliate of the Company) which merges into the Company or a subsidiary of the Company in proportion to their stock holdings of such corporation immediately prior to such merger, upon such merger, (v) as regularly scheduled dividend payments on shares of preferred stock of the Company, (vi) upon conversion or exchange of any preferred stock or convertible debt of the Company, (vii) in a bona fide offering pursuant to a firm commitment underwriting or distribution pursuant to Rule 144A under the Securities Act or (viii) pursuant to the Company's Incentivized Conversion Program) for a consideration per share less than the current market price per share of Common Stock (as defined in paragraph 6 (h) below) in effect immediately prior to the earlier of (x) the issuance of such securities or (y) the date the Company has a contractual obligation to issue such securities (whether or not such contractual obligation is contingent upon the passage of time or the occurrence of certain events or both), then the Exercise Price in effect at the opening of business on the day following the date of issuance of such shares of Common Stock shall be reduced by multiplying such Exercise Price by a fraction (A) the numerator of which shall be the sum of (1) the number of shares of Common Stock outstanding (on a fully diluted basis) immediately prior to such issuance, and (2) the number of shares of Common Stock which the aggregate consideration received by the Company for the total number of shares of Common Stock issued would purchase at the current market price per share (as defined in paragraph 6(h)), and (B) the denominator of which is the total number of shares of Common Stock outstanding (on a fully diluted basis) immediately after such issuance. For the purposes of this Agreement, the Company's Incentivized Conversion Program means a program which may, from time to time at the option of the Company, be instituted by the Company whereby the Company offers cash and/or non-cash incentives (by way of reducing the conversion price or otherwise) to holders of its outstanding convertible securities to convert such securities into shares of Common Stock. (g) In case the Company shall issue any securities (including rights, warrants and options) convertible into, exercisable for or exchangeable for its Common Stock (excluding securities issued (i) in any of the transactions described in paragraphs 6(b) and (d) above, (ii) pursuant to the grant of awards or the exercise of options or other awards issued under the Company's employee incentive plans, (iii) upon exercise of options and warrants of the Company outstanding as of the date hereof, (iv) to shareholders of any corporation (which is not an affiliate of the Company) which merges into the Company or a subsidiary of the Company in proportion to their stock holdings of such corporation immediately prior to such merger, upon 7 9 such merger, (v) as regularly scheduled dividend payments on shares of preferred stock of the Company, (vi) upon conversion or exchange of any preferred stock or convertible debt of the Company, (vii) in a bona fide offering pursuant to a firm commitment underwriting or distribution pursuant to Rule 144A under the Securities Act or (viii) pursuant to the Company's Incentivized Conversion Program) for a consideration per share of Common Stock initially deliverable upon conversion, exercise or exchange of such securities (determined as provided in paragraph 6(i) below) less than the current market price per share of Common Stock (as defined in paragraph 6(h) below) in effect immediately prior to the earlier of (x) the issuance of such securities or (y) the date the Company has a contractual obligation to issue such securities (whether or not such contractual obligation is contingent upon the passage of time or the occurrence of certain events or both), then the Exercise Price in effect at the opening of business on the day following the date of issuance of such securities shall be reduced by multiplying such Exercise Price by a fraction, (A) the numerator of which shall be the sum of (1) the number of shares of Common Stock outstanding (on a fully diluted basis) immediately prior to the issuance of such securities, and (2) the number of shares of Common Stock which the aggregate consideration received by the Company (determined as provided in paragraph 6(i) below) for such securities would purchase at such current market price per share of Common Stock, and (B) the denominator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to such issuance and the maximum number of shares of Common Stock of the Company deliverable upon conversion, exercise or exchange of such securities at the initial conversion, exercise or exchange price or rate. However, upon the expiration of any security convertible into, exercisable for or exchangeable into Common Stock, the issuance of which resulted in an adjustment in the Exercise Price pursuant to this paragraph 6(g), if any such security shall expire and shall not have been converted, exercised or exchanged, the Exercise Price shall be recomputed immediately upon such expiration and effective immediately upon such expiration shall be increased to the price it would have been (but reflecting any other adjustments to the Exercise Price made pursuant to the provisions of this paragraph 6 after the issuance of such security) had the adjustment of the Exercise Price made upon the issuance of such security been made on the basis of offering for subscription or purchase only that number of shares of Common Stock actually purchased upon the conversion, exercise or exchange of such security. No further adjustment shall be made upon the conversion, exercise or exchange of such security if any adjustment shall have been made upon the issuance of such security. (h) For the purpose of any computation under this Section 6, the current market price per share of Common Stock on any day shall be deemed to be the average of the Closing Prices of the Common Stock for the 10 consecutive trading days immediately preceding the trading day before the day in question; provided that, in the case of paragraph 6(d), if the period between the date of the public announcement of the dividend or distribution and the date for the determination of holders of Common Stock entitled to receive such dividend or distribution shall be less than 20 trading days, the period shall be such lesser number of trading days but, in any event, not less than five trading days. 8 10 (i) For purposes of any computation respecting consideration received pursuant to paragraphs 6(f) and (g) above, the following shall apply: (A) in the case of the issuance of shares of Common Stock for cash, the consideration shall be the gross proceeds to the Company from such issuance, which shall not include any deductions for any commissions, discounts or other expenses incurred by the Company in connection therewith; (B) in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash or, subject to clause C, securities, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board (irrespective of the accounting treatment thereof), whose determination shall be conclusive; (C) in the case of the issuance of shares of Common Stock for a consideration in whole or in part consisting of securities, the value of any securities shall be deemed to be: (x) if traded on a securities exchange or through the Nasdaq National Market, the average of the closing prices of the securities on such quotation system over the 10 trading day period ending on the trading day immediately preceding the day in question, (y) if actively traded over-the-counter, the average of the closing bid or sale prices (whichever is applicable) over the 10 day period ending on the trading day immediately preceding the day in question and (z) if there is no active public market, the fair market value thereof, determined as provided in clause (B) above; and (D) in the case of the issuance of securities convertible into, exercisable for or exchangeable for shares of Common Stock, the aggregate consideration received therefor shall be deemed to be the consideration received by the Company for the issuance of such securities plus the additional consideration, if any, to be received by the Company upon the conversion, exercise or exchange thereof (the consideration in each case to be determined in the same manner as provided in clauses (A) through (C) of this paragraph 6(i)). (j) No adjustment in the Exercise Price need be made until all cumulative adjustments amount to 1% or more of the Exercise Price as last adjusted. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this paragraph 6 shall be made to the nearest 1/1,000th of a cent or to the nearest 1/1,000th of a share, as the case may be. 9 11 (k) For purposes of this paragraph 6, "Common Stock" includes any stock of any class of the Company which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company and which is not subject to redemption by the Company. However, subject to the provisions of paragraph 6(n) below, shares issuable on exercise of the Warrants shall include only shares of the class designated as Common Stock of the Company on the date hereof or shares of any class or classes resulting from any reclassification thereof and which have no preferences in respect of dividends or amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company and which are not subject to redemption by the Company; provided that, if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. (l) No adjustment in the Exercise Price shall reduce the Exercise Price below the then par value of the Common Stock. The Company hereby agrees with each holder of Warrants that it shall not increase the par value of the Common Stock above its current par value of $.01 per share. No adjustment in the Exercise Price need be made under paragraphs 6(a), 6(b) and 6(d) above if the Company issues or distributes to each registered holder of Warrants the shares of Common Stock, evidences of indebtedness, assets or other property, rights, options or warrants referred to in those paragraphs which each registered holder would have been entitled to receive had the Warrants been exercised prior to the happening of such event or the record date with respect thereto. (m) Whenever the Exercise Price is adjusted pursuant to paragraphs 6(a), 6(b), 6(c), 6(d), 6(f) or 6(g) above, (A) the number of Warrant Shares purchasable upon exercise of any Warrant shall be adjusted by multiplying such number of Warrant Shares by a fraction the numerator of which is the Exercise Price immediately prior to such adjustment and the denominator of which is the Exercise Price immediately after such adjustment and (B) the Company shall promptly mail to registered holders of Warrants, first class, postage prepaid, a notice of the adjustment together with a certificate from the Company's independent public accountants briefly stating the facts requiring the adjustment and the manner of computing it. The certificate shall be conclusive evidence that the adjustment is correct. (n) If: (A) the Company takes any action which would require an adjustment in the Exercise Price pursuant to this paragraph 6; (B) the Company consolidates or merges with, or transfers all or substantially all of its assets to, another corporation, and stockholders of the Company must approve the transaction; or 10 12 (C) there is a dissolution or liquidation of the Company; the Company shall mail to registered holders of the Warrants, first class, postage prepaid, a notice stating the proposed record or effective date, as the case may be. The Company shall mail the notice at least 5 days before such proposed record or effective date. However, failure to mail the notice or any defect in it shall not affect the validity of any transaction referred to in clause (A), (B) or (C) of this paragraph 6(n). (o) In the case of any consolidation of the Company or the merger of the Company with or into any other entity or the sale or transfer of all or substantially all the assets of the Company pursuant to which the Company's Common Stock is converted into other securities, cash or assets or other property, upon consummation of such transaction, each Warrant shall automatically thereafter become exercisable for the kind and amount of securities, cash or other assets or other property receivable upon the consolidation, merger, sale or transfer by a holder of the number of shares of Common Stock into which such Warrant might have been converted immediately prior to such consolidation, merger, transfer or sale (assuming such holder of Common Stock failed to exercise any rights of election and received per share the kind and amount of consideration receivable per share by a plurality of non-electing shares). Appropriate adjustment (as determined by the Board) shall be made in the application of the provisions herein set forth with respect to the rights and interests thereafter of the holders of Warrants, to the end that the provisions set forth herein (including provisions with respect to changes in and other adjustment of the Exercise Price and the number of shares of Common Stock issuable upon the exercise of the Warrants) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other securities or assets or property thereafter deliverable upon the exercise of Warrants. If this paragraph 6(o) applies to any transaction, paragraphs 6(a), 6(c) and 6(e) do not apply to such transaction. (p) In any case in which this paragraph 6 shall require that an adjustment as a result of any event become effective from and after a record date, the Company may elect to defer until after the occurrence of such event the issuance to the holder of any Warrants exercised after such record date and before the occurrence of such event of the additional shares of Common Stock issuable upon such conversion over and above the shares issuable on the basis of the Exercise Price and number of Warrant Shares in effect immediately prior to adjustment; provided, however, that if such event shall not have occurred and authorization of such event shall be rescinded by the Company, the Exercise Price and number of Warrant Shares shall be recomputed immediately upon such recission to the price that would have been in effect had such event not been authorized, provided that such recission is permitted by and effective under applicable laws. (q) If any event occurs as to which the foregoing provisions of this paragraph 6 are not strictly applicable or, if strictly applicable, would not, in the good faith judgment of the Board, fairly and adequately protect the purchase rights of the Warrants in accordance with the essential intent and principles of such provisions, then the Board shall make such adjustments in 11 13 the application of such provisions, in accordance with such essential intent and principles, as shall be reasonably necessary, in the good faith opinion of the Board, to protect such purchase rights as aforesaid. 7. Exchange and Replacement of Warrant Certificates. Each Warrant Certificate is exchangeable without expense, upon the surrender thereof by the registered holder thereof at the principal executive office of the Company, for a new Warrant Certificate of like tenor and date representing in the aggregate the right to purchase the same number of Warrant Shares in such denominations as shall be designated by the registered holder thereof at the time of such surrender. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Warrant Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of such Warrant Certificate, if mutilated, the Company will make and deliver a new Warrant Certificate of like tenor, in lieu thereof. 8. Payment of Taxes. The Company will pay all documentary stamp taxes attributable to the initial issuance of the Warrants and of the Warrant Shares upon the exercise of Warrants; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance of any Warrant Certificates or any certificates for Warrant Shares in a name other than that of the registered holder of such Warrant Certificate, and the Company shall not be required to issue or deliver such Warrant Certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the reasonable satisfaction of the Company that such tax has been paid. 9. Statement on Warrants. Irrespective of any adjustment in the number or kind of shares issuable upon the exercise of the Warrants or the Exercise Price, Warrant Certificates theretofore or thereafter issued may continue to express the same number and kind of shares and the same Exercise Price as are stated in the Warrant Certificates initially issuable pursuant to this Agreement. 10. Registration. The Company acknowledge that registered holders shall have the registration rights set forth in the Registration Rights Agreement dated the date hereof between the Company and the Initial Holder. 11. Notices. All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to have been duly made when delivered by hand or sent by facsimile transmission (with receipt confirmed), or, if timely delivered to an air courier guaranteeing overnight delivery service, on the next business day, or five business days after being deposited in the mail, first class, certified or registered, postage prepaid, return receipt requested, in each 12 14 case addressed as follows (or to such other place or places as either of the parties shall designate by written notice to the other): (i) if to registered holder, to the address set forth on the Warrant Register maintained by the Company; and (ii) if to the Company, to: Intermedia Communications Inc. 3625 Queen Palm Drive Tampa, Florida 33619 Attention: Chief Financial Officer Facsimile: (813) 774-2470 with a copy to: Kronish Lieb Weiner & Hellman LLP 1114 Avenue of Americas New York, NY 10036-7798 Attention: Ralph J. Sutcliffe Facsimile: (212) 997-3527 12. Amendment. The Company with the consent of the registered holders of the unexercised Warrants evidencing at least a majority of the Warrant Shares underlying the unexercised Warrants may amend or supplement this Agreement or waive compliance by the Company in a particular instance with any provision of this Agreement; provided that without the consent of each registered holder affected, no such amendment shall (with respect to Warrants held by a non-consenting registered holder) increase the Exercise Price or decrease the number of Warrant Shares issuable upon exercise of any Warrant . 13. Successors. Except as otherwise provided herein, all the covenants and provisions of this Agreement by or for the benefit of the Company and the registered holderS of the Warrants shall inure to the benefit of their respective successors and assigns hereunder. 14. Governing Law. This Agreement and each Warrant Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be construed in accordance with the laws of such State (without regard to the conflicts of law principles thereof). 15. Benefits of This Agreement. Nothing in this Agreement shall be construed to give to any person other than the Company and the registered holders of the unexercised Warrant Certificates any legal or equitable right, remedy or claim under this Agreement; and this Agreement shall be for the sole and exclusive benefit of the Company and 13 15 such registered holders. Prior to the exercise of the Warrants, no holder of a Warrant Certificate, as such, shall be entitled to any rights of a stockholder of the Company, including, without limitation, the right to receive dividends or subscription rights, the right to vote, to consent, to exercise any preemptive right, to receive any notice of meetings of stockholders for the election of directors of the Company or any other matter or to receive any notice of any proceedings of the Company, except as may be specifically provided for herein. The holders of the Warrants are not entitled to share in the assets of the Company in the event of the liquidation, dissolution or winding up of the Company's affairs. 16. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and such counterparts shall together constitute one and the same instrument. 17. Headings. The headings in this Agreement are intended solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement. 18. Remedies. The Company and the holder hereof each stipulates that the remedies at law of each party hereto in the event of any default or threatened default by the other party in the performance or compliance with any of the terms of this Warrant are not and will not be adequate and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise. 19. Severability. The provisions of this Agreement are severable, and if any clause or provision shall be held invalid, illegal or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect in that jurisdiction only such clause or provision, or part thereof, and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of this Agreement in any jurisdiction. [Signature Page Follows] 14 16 IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be duly executed as of the day and year first above written. INTERMEDIA COMMUNICATIONS INC. By: /s/ DAVID C. RUBERG --------------------------------- Name: David C. Ruberg Title: President and Chief Executive Officer ICI VENTURES LLC By: /s/ ALEX NAVAB --------------------------------- Name: Alex Navab Title: President 15 17 EXHIBIT A [FORM OF WARRANT CERTIFICATE] THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN. EXERCISABLE ON OR BEFORE 5:00 P.M., NEW YORK TIME, on February 17, 2004 No. W- WARRANT CERTIFICATE This Warrant Certificate certifies that, for value received, _________________ having an address at ______________ ("Holder"), is the registered holder of warrants (the "Warrants") to purchase, at any time and from time to time after the date hereof until 5:00 P.M. New York time, on February 17, 2004, up to 1,000,000 fully-paid and non-assessable shares (subject to adjustment in certain events) of Common Stock, $.01 par value ("Common Stock"), of INTERMEDIA COMMUNICATIONS INC., a Delaware corporation (the "Company"), at the exercise price per share of $45.00, subject to adjustment in certain events (the "Exercise Price"), upon surrender of this Warrant Certificate, together with the attached Form of Election to Purchase duly executed, and payment of the Exercise Price at the principal office of the Company, but subject to the terms and conditions set forth herein and in the Warrant Agreement dated as of February 17, 2000 between the Company and the Initial Holder (the "Warrant Agreement"). Payment of the Exercise Price shall be made, at the option of the Holder (i) in cash, (ii) by wire transfer payable to the order of the Company, or (iii) on a net basis, such that without the exchange of any funds, the Holder receives that number of Warrant Shares that -i- 18 would otherwise be issuable upon a cash exercise of this Warrant less that number of Warrant Shares having a current market price (as defined in paragraph 3(b) of the Warrant Agreement) equal to the aggregate Exercise Price that would otherwise have been paid by such holder for the number of Warrant Shares with respect to which this Warrant is being exercised. This Warrant may be exercised at such times and in such amounts as are provided for in the Warrant Agreement. Each Warrant not exercised on or prior to February 17, 2004 shall become invalid and all rights hereunder, and all rights in respect thereof under the Warrant Agreement, shall cease as of that time. The Warrants evidenced by this Warrant Certificate are issued pursuant to the Warrant Agreement, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder(s) hereof upon written request directed to the Company. The Warrant Agreement provides that upon the occurrence of certain events, the Exercise Price and the type and/or number of the Company's securities issuable upon exercise of the Warrants may, subject to certain conditions, be adjusted. Upon due presentment for registration of transfer of this Warrant Certificate at the principal office of the Company, a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided herein and in the Warrant Agreement, without any charge except for any tax or other governmental charge imposed in connection therewith which is not payable by the Company pursuant to paragraph 8 of the Warrant Agreement. Upon the exercise of less than all of the Warrants evidenced by this Certificate, the Company shall forthwith issue to the holder hereof a new Warrant Certificate representing such numbered of unexercised Warrants. The Company may deem and treat the registered holder(s) hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof and of any distribution to the holder(s) hereof and for all other purposes, and the Company shall not be affected by any notice to the contrary. All terms used in this Warrant Certificate which are not defined herein and are defined in the Warrant Agreement shall have the meanings assigned to them in the Warrant Agreement. -ii- 19 IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed under its corporate seal. Dated: ___, 2000 INTERMEDIA COMMUNICATIONS INC. By: ---------------------------- Name: Title: 20 [FORM OF ASSIGNMENT] (To be executed by the registered holder if such holder desires to transfer the Warrant Certificate.) FOR VALUE RECEIVED, ________________________ hereby sells, assigns and transfers unto ________________________________, whose address is __________________________, this Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ___________________________, Attorney to transfer the within Warrant Certificate on the books of the within-named Company, with full power of substitution. Dated: Signature:____________________ (Signature must conform in all respects to name of holder as specified on the face of the Warrant Certificate. Signature must be guaranteed by a bank or trust company having an office or correspondent in the United States or a broker or dealer which is a member of a registered securities exchange or the National Association of Securities Dealers, Inc.) ------------------------- (Insert Social Security or Other Identifying Number of Holder) 21 [FORM OF ELECTION TO PURCHASE] The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to purchase ________________ shares of Common Stock and herewith: (choose one by marking "X" in the space provided) ____ tenders payment for such shares, to the order of INTERMEDIA COMMUNICATIONS INC., in the amount of $________ in accordance with the terms of the Warrant Agreement. ___ requests that such exercise be on a net basis in accordance with the terms of the Warrant Agreement. The undersigned requests that a certificate for such shares of Common Stock be registered in the name of _________________________________________, whose address is _____________________________________________ and that such certificate be delivered to _______________________________________ whose address is __________________________________________________. Dated: Signature: ___________________ (Signature must conform in all respects to name of holder as specified on the face of the Warrant Certificate. Signature must be guaranteed by a bank or trust company having an office or correspondent in the United States or a broker or dealer which is a member of a registered securities exchange or the National Association of Securities Dealers, Inc.) ------------------------- (Insert Social Security or Other Identifying Number of Holder) EX-4.3 4 WARRANT AGREEMENT 1 Exhibit 4.3 -------------------------------------------- WARRANT AGREEMENT Dated as of February 17, 2000 between INTERMEDIA COMMUNICATIONS INC. and ICI VENTURES LLC -------------------------------------------- 2 WARRANT AGREEMENT dated as of February 17, 2000 between INTERMEDIA COMMUNICATIONS INC., a Delaware corporation (the "Company"), and ICI VENTURES LLC (the "Initial Holder"). NOW, THEREFORE, the parties hereto hereby agree as follows: 1. Grant. The Company hereby grants to the Initial Holder warrants ("Warrants") which shall entitle the registered holder thereof to purchase from the Company, at any time or from time to time hereafter until 5:00 P.M., New York time, on February 17, 2004 (the "Expiration Date"), up to 1,000,000 shares (the "Warrant Shares") of Common Stock, par value $.01 per share, of the Company ("Common Stock"), subject to adjustment as provided in Section 6, at the exercise price of $40.00 per share, subject to adjustment as provided in Section 6 (the "Exercise Price"), all subject to the terms and upon the conditions set forth herein. Each Warrant not exercised or deemed exercised on or prior to the Expiration Date shall become invalid and all rights thereunder, and all rights in respect thereof under this Agreement, shall cease as of that time. 2. Warrant Certificates. The Warrants shall be evidenced by certificates issued pursuant to this Agreement (the "Warrant Certificates") in the form set forth in Exhibit A hereto, with such appropriate insertions, omissions, substitutions, and other variations as are required or permitted by this Agreement. 3. Exercise of Warrant. (a) General. Subject to the provisions of this Agreement, upon surrender to the Company at its principal office of a Warrant Certificate with the annexed Form of Election to Purchase duly executed, together with payment in accordance with Section 3(b) of the Exercise Price then in effect, the Company shall issue and deliver promptly to the registered holder of such Warrant Certificate, a certificate or certificates for the Warrant Shares or other securities or property to which the registered holder is entitled, registered in the name of such registered holder or, upon the written order of such registered holder, in such name or names as such registered holder may designate. Any certificate or certificates representing Warrant Shares shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become the holder of record of the Warrant Shares as of the date of the surrender of such Warrant Certificate (together with such duly executed Form of Election to Purchase) and payment of the Exercise Price. (b) Payment. Payment of the Exercise Price shall be made, at the option of the registered holder of the Warrants, (i) in cash, (ii) by wire transfer payable to the order of the Company, or (iii) on a net basis, such that without the exchange of any funds, such holder receives that number of Warrant Shares that would otherwise be issuable upon a cash exercise of such Warrants less that number of Warrant Shares having a current market price equal to the 1 3 aggregate Exercise Price that would otherwise have been paid by such holder for the number of Warrant Shares with respect to which such Warrant is being exercised. For the purpose of any computation under this paragraph 3(b), the current market price per share of Common Stock on any day shall be deemed to be the average of the Closing Prices of the Common Stock for the 10 consecutive trading days ending on the day before the day the Warrant Certificate (together with a duly executed Form of Election to Purchase) is delivered to the Company. The term "Closing Price" shall mean, for each trading day, the last reported sale price regular way on the Nasdaq National Market or, if the Common Stock is not quoted on the Nasdaq National Market but is listed on a national securities exchange, the last reported sale price on the principal national securities exchange on which the Common Stock is then listed or admitted for trading or, if the Common Stock is neither listed on a national securities exchange nor quoted on the Nasdaq National Market, the average of the closing bid and asked prices in the over-the-counter market as furnished by any New York Stock Exchange member firm selected from time to time by the Company for that purpose. If for any reason the current market price per share cannot be determined pursuant to the foregoing provisions of this paragraph, the current market price per share shall be the fair market value thereof as determined in good faith by the Board of Directors of the Company (the "Board"). (c) Exercise in Whole or in Part. The purchase rights evidenced by a Warrant Certificate shall be exercisable, at the election of the registered holder thereof, in whole or in part, but only for lots of 100 Warrant Shares or integral multiples thereof if less than all the Warrants then held by such registered holder are being exercised. If less than all of the Warrant Shares purchasable under any Warrant Certificate are purchased, the Company shall cancel such Warrant Certificate upon the surrender thereof and shall execute and deliver a new Warrant Certificate of like tenor for the remaining number of Warrant Shares purchasable thereunder. (d) Fractional Shares. No fractional shares of Common Stock shall be issued upon exercise of any Warrants. Instead the Company shall round the results of an exercise up to the nearest full share of Common Stock. (e) Reservation of Shares. The Company will at all times reserve and keep available out of its authorized Common Stock solely for the purpose of issuance upon exercise of the Warrants as herein provided, such number of shares of Common Stock as shall from time to time be issuable upon the exercise of all outstanding Warrants. All shares of Common Stock that may be issued upon exercise of the Warrants will, upon issuance, be validly issued, fully paid and nonassessable and not subject to preemptive rights of any stockholder. 4. Restrictions on Transfer. (a) Warrant Register. The Company shall maintain at its principal office a Warrant Register for registration of Warrant Certificates and transfers thereof. The Company shall initially register the outstanding Warrants in the name of the Initial Holder. The Company 2 4 may deem and treat the registered holder(s) of the Warrant Certificates as the absolute owner(s) thereof and of the Warrants represented thereby (notwithstanding any notation of ownership or other writing on the Warrant Certificates made by any person) for the purpose of any exercise thereof or any distribution to the holder(s) thereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary. For the purpose of this Agreement, all references to a holder herein shall refer to a registered holder of Warrants. (b) Warrants and Warrant Shares Not Registered. Each registered holder of the Warrants, by acceptance thereof, represents and acknowledges that the Warrants and the Warrant Shares which may be purchased upon exercise of a Warrant are not registered under the Securities Act of 1933, as amended (the "Securities Act"), that the issuance of the Warrants and the offering and sale of such Warrant Shares are being made in reliance on the exemption from registration under Section 4(2) of the Securities Act as not involving any public offering and that the Company's reliance on such exemption is predicated in part on the representations made by the Initial Holder of the Warrants to and with the Company that such holder (1) is acquiring the Warrants for investment for its own account, with no present intention of reselling or otherwise distributing the same, (2) is an "accredited investor" as defined in Regulation D under the Securities Act, and (3) has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the investments made or to be made in connection with the acquisition and exercise of the Warrants. Neither the Warrants nor the related Warrant Shares may be transferred except (i) pursuant to an effective registration statement under the Securities Act, (ii) pursuant to Rule 144 under the Securities Act if the transferor delivers a certificate, in form and substance reasonably satisfactory to the Company, that such transfer complies with the requirements of Rule 144, or (iii) pursuant to any other available exemption from registration if such transferee makes the representations set forth in the preceding sentence in writing to the Company and, in the case of clause (iii), with the delivery to the Company of an opinion of counsel reasonably satisfactory to the Company by counsel reasonably satisfactory to the Company (and the Company hereby acknowledges and agrees that Simpson Thacher & Bartlett is reasonably satisfactory to the Company), stating that no registration is required under the Securities Act. (c) Notice and Registration of Transfer. Each registered holder of the Warrants, by acceptance thereof, agrees that prior to any disposition by such holder of the Warrants or of any Warrant Shares, such holder will give written notice to the Company expressing such holder's intention to effect such disposition and describing briefly such holder's intention as to the manner in which the Warrants or the Warrant Shares theretofore issued or thereafter issuable upon exercise hereof, are to be disposed of together with the opinion described in paragraph 4(b) above, if required, whereupon, but only if such transfer is permitted pursuant to paragraph 4(b) above, such transferring holder shall be entitled to dispose of the Warrants and/or the Warrant Shares theretofore issued upon the exercise thereof, all in accordance with the terms of the notice delivered by such holder to the Company. In the event of such transfer, the Company shall register the transfer of any outstanding Warrants in the Warrant Register upon surrender of the Warrant Certificate(s) evidencing such Warrants to the Company at its principal 3 5 office, accompanied by a written instrument of transfer in form reasonably satisfactory to it, duly executed by the registered holder thereof. Upon any such registration or transfer, new Warrant Certificate(s) evidencing such transferred Warrants shall be issued to the transferee(s) and the surrendered Warrant Certificate(s) shall be canceled. 5. Special Agreements of the Company. The Company covenants and agrees as follows: (a) Listing on Securities Exchanges. If the Common Stock is listed on a stock exchange or quoted on the Nasdaq National Market, the Company will use its reasonable best efforts to procure at its sole expense the listing of all Warrant Shares (subject to issuance or notice of issuance) on all stock exchanges on which the Common Stock is then listed, or the quotation of the Warrant Shares on the Nasdaq National Market, as the case may be, and maintain the listing or quotation of such shares and other securities after issuance. (b) Actions in Avoidance; Non-Dilution. The Company will not, by amendment of its Restated Certificate of Incorporation, as amended, or through any reorganization, transfer of assets, consolidation, merger, issue or sale of securities or otherwise, avoid or take any action which would have the effect of avoiding the observance or performance of any of the terms to be observed or performed hereunder by the Company but will at all times in good faith assist in carrying out all of the provisions of the Warrants and in taking all of such action as may be necessary or appropriate in order to protect the rights of the registered holders of the Warrants against impairment. If any shares of Common Stock required to be reserved for purposes of exercise of Warrants would require, under any federal or state law (other than the Securities Act or any state "blue sky" statutes), registration with or approval of any governmental authority, before such shares may be issued upon exercise, the Company will cause such shares to be duly registered or approved by such governmental authority, at its expense. 6. Adjustment of Exercise Price and Number of Warrant Shares Issuable. The number and kind of shares purchasable upon the exercise of Warrants and the Exercise Price shall be subject to adjustment from time to time as follows: (a) In case the Company shall pay or make a dividend or other distribution on any class of capital stock of the Company in Common Stock other than the payment of regularly scheduled dividends on any series of preferred stock, the Exercise Price in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Exercise Price by a fraction the numerator of which shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and the denominator of which shall be the sum of such number of shares and the total number shares constituting such dividend or other distribution, such reduction to become effective immediately after the opening 4 6 of business on the day following the date fixed for such determination of the holders entitled to such dividends and distributions. For the purposes of this paragraph 6(a), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company. The Company will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company. (b) In case the Company shall issue rights, options or warrants to all holders of its Common Stock entitling them to subscribe for, purchase or acquire shares of Common Stock at a price per share less than the current market price per share (determined as provided in paragraph 6(h) below) of the Common Stock on the date fixed for the determination of stockholders entitled to receive such rights, options or warrants, the Exercise Price in effect at the opening of business on the day following the date fixed for such determination shall be reduced by multiplying such Exercise Price by a fraction the numerator of which shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate offering price for the total number of shares of Common Stock so offered for subscription, purchase or acquisition would purchase at such current market price per share and the denominator of which shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription, purchase or acquisition, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination of the holders entitled to such rights, options or warrants. However, upon the expiration of any right, option or warrant to purchase Common Stock, the issuance of which resulted in an adjustment in the Exercise Price pursuant to this paragraph 6(b), if any such right, option or warrant shall expire and shall not have been exercised, the Exercise Price shall be recomputed immediately upon such expiration and effective immediately upon such expiration shall be increased to the price it would have been (but reflecting any other adjustments to the Exercise Price made pursuant to the provisions of this paragraph 6 after the issuance of such rights, options or warrants) had the adjustment of the Exercise Price made upon the issuance of such rights, options or warrants been made on the basis of offering for subscription or purchase only that number of shares of Common Stock actually purchased upon the exercise of such rights, options or warrants. No further adjustment shall be made upon exercise of any right, option or warrant if any adjustment shall have been made upon the issuance of such security. For the purposes of this paragraph 6(b), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company. The Company will not issue any rights, options or warrants in respect of shares of Common Stock held in the treasury of the Company. (c) In case the outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Exercise Price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be reduced, and, conversely, in case the outstanding shares of Common Stock shall each be combined into a smaller number of shares of Common Stock, the Exercise Price in effect at the opening of business on the day following the day upon which such combination becomes 5 7 effective shall be increased to equal the product of the Exercise Price in effect on such date and a fraction the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such subdivision or combination, as the case may be, and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such subdivision or combination, as the case may be. Such reduction or increase, as the case may be, shall become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. (d) In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock (A) evidences of its indebtedness or (B) shares of any class of capital stock, cash or other property or assets (including securities, but excluding (x) any rights, options or warrants referred to in paragraph 6(b) above and (y) any dividend or distribution referred to in paragraph 6(a) or 6(c) above), unless with respect to cash dividends, cash distributions and cash repurchases, the sum of (1) all such cash dividends and cash distributions made within the preceding 12 months in respect of which no adjustment has been made and (2) any cash consideration paid in respect of any repurchases of Common Stock by the Company or any of its subsidiaries within the preceding 12 months in respect of which no adjustment has been made, does not exceed 20% of the Company's market capitalization (being the product of the then current market price per share (determined as provided in paragraph 6(h) below) of the Common Stock times the aggregate number of shares of Common Stock then outstanding on the date fixed for the determination of the holders of Common Stock entitled to receive such distribution), then in each case, the Exercise Price in effect at the opening of business on the day following the date fixed for the determination of holders of Common Stock entitled to receive such distribution shall be adjusted by multiplying such Exercise Price by a fraction of which the numerator shall be the current market price per share (determined as provided in paragraph 6(h) below) of the Common Stock on such date of determination less the then fair market value as determined by the Board (whose determination shall be conclusive) of the portion of the capital stock, cash or other assets or evidences of indebtedness so distributed (and for which an adjustment to the Exercise Price has not previously been made pursuant to the terms of this paragraph 6) applicable to one share of Common Stock, and the denominator shall be such current market price per share of the Common Stock, such adjustment to become effective immediately after the opening of business on the day following such date of determination of the holders entitled to such distribution. The repurchases of Common Stock issued under the Company's stock incentive programs, to the extent permitted by the Company's then existing indentures, shall be excluded from the foregoing clauses (1) and (2). (e) The reclassification or change of Common Stock into securities, including securities other than Common Stock, (other than any reclassification upon a consolidation or merger to which paragraph 6(o) below shall apply) shall be deemed to involve (A) a distribution of such securities other than Common Stock to all holders of Common Stock (and the effective date of such reclassification shall be deemed to be "the date fixed for the determination of holders of Common Stock entitled to receive such distribution" within the meaning of paragraph 6(d) above), and (B) a subdivision or combination, as the case may be, of the number of shares of 6 8 Common Stock outstanding immediately prior to such reclassification into the number of shares of Common Stock outstanding immediately thereafter (and the effective date of such reclassification shall be deemed to be "the day upon which such subdivision or combination becomes effective" within the meaning of paragraph 6(c) above). (f) In case the Company shall issue shares of its Common Stock (excluding shares issued (i) in any of the transactions described in paragraphs 6(a) - (d) above, (ii) pursuant to the grant of awards or the exercise of options or other awards issued under the Company's employee incentive plans, (iii) upon exercise of options and warrants of the Company outstanding as of the date hereof, (iv) to shareholders of any corporation (which is not an affiliate of the Company) which merges into the Company or a subsidiary of the Company in proportion to their stock holdings of such corporation immediately prior to such merger, upon such merger, (v) as regularly scheduled dividend payments on shares of preferred stock of the Company, (vi) upon conversion or exchange of any preferred stock or convertible debt of the Company, (vii) in a bona fide offering pursuant to a firm commitment underwriting or distribution pursuant to Rule 144A under the Securities Act or (viii) pursuant to the Company's Incentivized Conversion Program) for a consideration per share less than the current market price per share of Common Stock (as defined in paragraph 6 (h) below) in effect immediately prior to the earlier of (x) the issuance of such securities or (y) the date the Company has a contractual obligation to issue such securities (whether or not such contractual obligation is contingent upon the passage of time or the occurrence of certain events or both), then the Exercise Price in effect at the opening of business on the day following the date of issuance of such shares of Common Stock shall be reduced by multiplying such Exercise Price by a fraction (A) the numerator of which shall be the sum of (1) the number of shares of Common Stock outstanding (on a fully diluted basis) immediately prior to such issuance, and (2) the number of shares of Common Stock which the aggregate consideration received by the Company for the total number of shares of Common Stock issued would purchase at the current market price per share (as defined in paragraph 6(h)), and (B) the denominator of which is the total number of shares of Common Stock outstanding (on a fully diluted basis) immediately after such issuance. For the purposes of this Agreement, the Company's Incentivized Conversion Program means a program which may, from time to time at the option of the Company, be instituted by the Company whereby the Company offers cash and/or non-cash incentives (by way of reducing the conversion price or otherwise) to holders of its outstanding convertible securities to convert such securities into shares of Common Stock. (g) In case the Company shall issue any securities (including rights, warrants and options) convertible into, exercisable for or exchangeable for its Common Stock (excluding securities issued (i) in any of the transactions described in paragraphs 6(b) and (d) above, (ii) pursuant to the grant of awards or the exercise of options or other awards issued under the Company's employee incentive plans, (iii) upon exercise of options and warrants of the Company outstanding as of the date hereof, (iv) to shareholders of any corporation (which is not an affiliate of the Company) which merges into the Company or a subsidiary of the Company in proportion to their stock holdings of such corporation immediately prior to such merger, upon 7 9 such merger, (v) as regularly scheduled dividend payments on shares of preferred stock of the Company, (vi) upon conversion or exchange of any preferred stock or convertible debt of the Company, (vii) in a bona fide offering pursuant to a firm commitment underwriting or distribution pursuant to Rule 144A under the Securities Act or (viii) pursuant to the Company's Incentivized Conversion Program) for a consideration per share of Common Stock initially deliverable upon conversion, exercise or exchange of such securities (determined as provided in paragraph 6(i) below) less than the current market price per share of Common Stock (as defined in paragraph 6(h) below) in effect immediately prior to the earlier of (x) the issuance of such securities or (y) the date the Company has a contractual obligation to issue such securities (whether or not such contractual obligation is contingent upon the passage of time or the occurrence of certain events or both), then the Exercise Price in effect at the opening of business on the day following the date of issuance of such securities shall be reduced by multiplying such Exercise Price by a fraction, (A) the numerator of which shall be the sum of (1) the number of shares of Common Stock outstanding (on a fully diluted basis) immediately prior to the issuance of such securities, and (2) the number of shares of Common Stock which the aggregate consideration received by the Company (determined as provided in paragraph 6(i) below) for such securities would purchase at such current market price per share of Common Stock, and (B) the denominator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to such issuance and the maximum number of shares of Common Stock of the Company deliverable upon conversion, exercise or exchange of such securities at the initial conversion, exercise or exchange price or rate. However, upon the expiration of any security convertible into, exercisable for or exchangeable into Common Stock, the issuance of which resulted in an adjustment in the Exercise Price pursuant to this paragraph 6(g), if any such security shall expire and shall not have been converted, exercised or exchanged, the Exercise Price shall be recomputed immediately upon such expiration and effective immediately upon such expiration shall be increased to the price it would have been (but reflecting any other adjustments to the Exercise Price made pursuant to the provisions of this paragraph 6 after the issuance of such security) had the adjustment of the Exercise Price made upon the issuance of such security been made on the basis of offering for subscription or purchase only that number of shares of Common Stock actually purchased upon the conversion, exercise or exchange of such security. No further adjustment shall be made upon the conversion, exercise or exchange of such security if any adjustment shall have been made upon the issuance of such security. (h) For the purpose of any computation under this Section 6, the current market price per share of Common Stock on any day shall be deemed to be the average of the Closing Prices of the Common Stock for the 10 consecutive trading days immediately preceding the trading day before the day in question; provided that, in the case of paragraph 6(d), if the period between the date of the public announcement of the dividend or distribution and the date for the determination of holders of Common Stock entitled to receive such dividend or distribution shall be less than 20 trading days, the period shall be such lesser number of trading days but, in any event, not less than five trading days. 8 10 (i) For purposes of any computation respecting consideration received pursuant to paragraphs 6(f) and (g) above, the following shall apply: (A) in the case of the issuance of shares of Common Stock for cash, the consideration shall be the gross proceeds to the Company from such issuance, which shall not include any deductions for any commissions, discounts or other expenses incurred by the Company in connection therewith; (B) in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash or, subject to clause C, securities, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board (irrespective of the accounting treatment thereof), whose determination shall be conclusive; (C) in the case of the issuance of shares of Common Stock for a consideration in whole or in part consisting of securities, the value of any securities shall be deemed to be: (x) if traded on a securities exchange or through the Nasdaq National Market, the average of the closing prices of the securities on such quotation system over the 10 trading day period ending on the trading day immediately preceding the day in question, (y) if actively traded over-the-counter, the average of the closing bid or sale prices (whichever is applicable) over the 10 day period ending on the trading day immediately preceding the day in question and (z) if there is no active public market, the fair market value thereof, determined as provided in clause (B) above; and (D) in the case of the issuance of securities convertible into, exercisable for or exchangeable for shares of Common Stock, the aggregate consideration received therefor shall be deemed to be the consideration received by the Company for the issuance of such securities plus the additional consideration, if any, to be received by the Company upon the conversion, exercise or exchange thereof (the consideration in each case to be determined in the same manner as provided in clauses (A) through (C) of this paragraph 6(i)). (j) No adjustment in the Exercise Price need be made until all cumulative adjustments amount to 1% or more of the Exercise Price as last adjusted. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this paragraph 6 shall be made to the nearest 1/1,000th of a cent or to the nearest 1/1,000th of a share, as the case may be. 9 11 (k) For purposes of this paragraph 6, "Common Stock" includes any stock of any class of the Company which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company and which is not subject to redemption by the Company. However, subject to the provisions of paragraph 6(n) below, shares issuable on exercise of the Warrants shall include only shares of the class designated as Common Stock of the Company on the date hereof or shares of any class or classes resulting from any reclassification thereof and which have no preferences in respect of dividends or amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company and which are not subject to redemption by the Company; provided that, if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. (l) No adjustment in the Exercise Price shall reduce the Exercise Price below the then par value of the Common Stock. The Company hereby agrees with each holder of Warrants that it shall not increase the par value of the Common Stock above its current par value of $.01 per share. No adjustment in the Exercise Price need be made under paragraphs 6(a), 6(b) and 6(d) above if the Company issues or distributes to each registered holder of Warrants the shares of Common Stock, evidences of indebtedness, assets or other property, rights, options or warrants referred to in those paragraphs which each registered holder would have been entitled to receive had the Warrants been exercised prior to the happening of such event or the record date with respect thereto. (m) Whenever the Exercise Price is adjusted pursuant to paragraphs 6(a), 6(b), 6(c), 6(d), 6(f) or 6(g) above, (A) the number of Warrant Shares purchasable upon exercise of any Warrant shall be adjusted by multiplying such number of Warrant Shares by a fraction the numerator of which is the Exercise Price immediately prior to such adjustment and the denominator of which is the Exercise Price immediately after such adjustment and (B) the Company shall promptly mail to registered holders of Warrants, first class, postage prepaid, a notice of the adjustment together with a certificate from the Company's independent public accountants briefly stating the facts requiring the adjustment and the manner of computing it. The certificate shall be conclusive evidence that the adjustment is correct. (n) If: (A) the Company takes any action which would require an adjustment in the Exercise Price pursuant to this paragraph 6; (B) the Company consolidates or merges with, or transfers all or substantially all of its assets to, another corporation, and stockholders of the Company must approve the transaction; or 10 12 (C) there is a dissolution or liquidation of the Company; the Company shall mail to registered holders of the Warrants, first class, postage prepaid, a notice stating the proposed record or effective date, as the case may be. The Company shall mail the notice at least 5 days before such proposed record or effective date. However, failure to mail the notice or any defect in it shall not affect the validity of any transaction referred to in clause (A), (B) or (C) of this paragraph 6(n). (o) In the case of any consolidation of the Company or the merger of the Company with or into any other entity or the sale or transfer of all or substantially all the assets of the Company pursuant to which the Company's Common Stock is converted into other securities, cash or assets or other property, upon consummation of such transaction, each Warrant shall automatically thereafter become exercisable for the kind and amount of securities, cash or other assets or other property receivable upon the consolidation, merger, sale or transfer by a holder of the number of shares of Common Stock into which such Warrant might have been converted immediately prior to such consolidation, merger, transfer or sale (assuming such holder of Common Stock failed to exercise any rights of election and received per share the kind and amount of consideration receivable per share by a plurality of non-electing shares). Appropriate adjustment (as determined by the Board) shall be made in the application of the provisions herein set forth with respect to the rights and interests thereafter of the holders of Warrants, to the end that the provisions set forth herein (including provisions with respect to changes in and other adjustment of the Exercise Price and the number of shares of Common Stock issuable upon the exercise of the Warrants) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other securities or assets or property thereafter deliverable upon the exercise of Warrants. If this paragraph 6(o) applies to any transaction, paragraphs 6(a), 6(c) and 6(e) do not apply to such transaction. (p) In any case in which this paragraph 6 shall require that an adjustment as a result of any event become effective from and after a record date, the Company may elect to defer until after the occurrence of such event the issuance to the holder of any Warrants exercised after such record date and before the occurrence of such event of the additional shares of Common Stock issuable upon such conversion over and above the shares issuable on the basis of the Exercise Price and number of Warrant Shares in effect immediately prior to adjustment; provided, however, that if such event shall not have occurred and authorization of such event shall be rescinded by the Company, the Exercise Price and number of Warrant Shares shall be recomputed immediately upon such recission to the price that would have been in effect had such event not been authorized, provided that such recission is permitted by and effective under applicable laws. (q) If any event occurs as to which the foregoing provisions of this paragraph 6 are not strictly applicable or, if strictly applicable, would not, in the good faith judgment of the Board, fairly and adequately protect the purchase rights of the Warrants in accordance with the essential intent and principles of such provisions, then the Board shall make such adjustments in 11 13 the application of such provisions, in accordance with such essential intent and principles, as shall be reasonably necessary, in the good faith opinion of the Board, to protect such purchase rights as aforesaid. 7. Exchange and Replacement of Warrant Certificates. Each Warrant Certificate is exchangeable without expense, upon the surrender thereof by the registered holder thereof at the principal executive office of the Company, for a new Warrant Certificate of like tenor and date representing in the aggregate the right to purchase the same number of Warrant Shares in such denominations as shall be designated by the registered holder thereof at the time of such surrender. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Warrant Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of such Warrant Certificate, if mutilated, the Company will make and deliver a new Warrant Certificate of like tenor, in lieu thereof. 8. Payment of Taxes. The Company will pay all documentary stamp taxes attributable to the initial issuance of the Warrants and of the Warrant Shares upon the exercise of Warrants; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance of any Warrant Certificates or any certificates for Warrant Shares in a name other than that of the registered holder of such Warrant Certificate, and the Company shall not be required to issue or deliver such Warrant Certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the reasonable satisfaction of the Company that such tax has been paid. 9. Statement on Warrants. Irrespective of any adjustment in the number or kind of shares issuable upon the exercise of the Warrants or the Exercise Price, Warrant Certificates theretofore or thereafter issued may continue to express the same number and kind of shares and the same Exercise Price as are stated in the Warrant Certificates initially issuable pursuant to this Agreement. 10. Registration. The Company acknowledge that registered holders shall have the registration rights set forth in the Registration Rights Agreement dated the date hereof between the Company and the Initial Holder. 11. Notices. All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to have been duly made when delivered by hand or sent by facsimile transmission (with receipt confirmed), or, if timely delivered to an air courier guaranteeing overnight delivery service, on the next business day, or five business days after being deposited in the mail, first class, certified or registered, postage prepaid, return receipt requested, in each 12 14 case addressed as follows (or to such other place or places as either of the parties shall designate by written notice to the other): (i) if to registered holder, to the address set forth on the Warrant Register maintained by the Company; and (ii) if to the Company, to: Intermedia Communications Inc. 3625 Queen Palm Drive Tampa, Florida 33619 Attention: Chief Financial Officer Facsimile: (813) 774-2470 with a copy to: Kronish Lieb Weiner & Hellman LLP 1114 Avenue of Americas New York, NY 10036-7798 Attention: Ralph J. Sutcliffe Facsimile: (212) 997-3527 12. Amendment. The Company with the consent of the registered holders of the unexercised Warrants evidencing at least a majority of the Warrant Shares underlying the unexercised Warrants may amend or supplement this Agreement or waive compliance by the Company in a particular instance with any provision of this Agreement; provided that without the consent of each registered holder affected, no such amendment shall (with respect to Warrants held by a non-consenting registered holder) increase the Exercise Price or decrease the number of Warrant Shares issuable upon exercise of any Warrant . 13. Successors. Except as otherwise provided herein, all the covenants and provisions of this Agreement by or for the benefit of the Company and the registered holderS of the Warrants shall inure to the benefit of their respective successors and assigns hereunder. 14. Governing Law. This Agreement and each Warrant Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be construed in accordance with the laws of such State (without regard to the conflicts of law principles thereof). 15. Benefits of This Agreement. Nothing in this Agreement shall be construed to give to any person other than the Company and the registered holders of the unexercised Warrant Certificates any legal or equitable right, remedy or claim under this Agreement; and this Agreement shall be for the sole and exclusive benefit of the Company and 13 15 such registered holders. Prior to the exercise of the Warrants, no holder of a Warrant Certificate, as such, shall be entitled to any rights of a stockholder of the Company, including, without limitation, the right to receive dividends or subscription rights, the right to vote, to consent, to exercise any preemptive right, to receive any notice of meetings of stockholders for the election of directors of the Company or any other matter or to receive any notice of any proceedings of the Company, except as may be specifically provided for herein. The holders of the Warrants are not entitled to share in the assets of the Company in the event of the liquidation, dissolution or winding up of the Company's affairs. 16. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and such counterparts shall together constitute one and the same instrument. 17. Headings. The headings in this Agreement are intended solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement. 18. Remedies. The Company and the holder hereof each stipulates that the remedies at law of each party hereto in the event of any default or threatened default by the other party in the performance or compliance with any of the terms of this Warrant are not and will not be adequate and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise. 19. Severability. The provisions of this Agreement are severable, and if any clause or provision shall be held invalid, illegal or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect in that jurisdiction only such clause or provision, or part thereof, and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of this Agreement in any jurisdiction. [Signature Page Follows] 14 16 IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be duly executed as of the day and year first above written. INTERMEDIA COMMUNICATIONS INC. By: /s/ DAVID C. RUBERG ------------------------ Name: David C. Ruberg Title: President and Chief Executive Officer ICI VENTURES LLC By: /s/ ALEX NAVAB ------------------------- Name: Alex Navab Title: President 15 17 EXHIBIT A [FORM OF WARRANT CERTIFICATE] THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN. EXERCISABLE ON OR BEFORE 5:00 P.M., NEW YORK TIME, on February 17, 2004 No. W- WARRANT CERTIFICATE This Warrant Certificate certifies that, for value received, _________________ having an address at ______________ ("Holder"), is the registered holder of warrants (the "Warrants") to purchase, at any time and from time to time after the date hereof until 5:00 P.M. New York time, on February 17, 2004, up to 1,000,000 fully-paid and non-assessable shares (subject to adjustment in certain events) of Common Stock, $.01 par value ("Common Stock"), of INTERMEDIA COMMUNICATIONS INC., a Delaware corporation (the "Company"), at the exercise price per share of $40.00, subject to adjustment in certain events (the "Exercise Price"), upon surrender of this Warrant Certificate, together with the attached Form of Election to Purchase duly executed, and payment of the Exercise Price at the principal office of the Company, but subject to the terms and conditions set forth herein and in the Warrant Agreement dated as of February 17, 2000 between the Company and the Initial Holder (the "Warrant Agreement"). Payment of the Exercise Price shall be made, at the option of the Holder (i) in cash, (ii) by wire transfer payable to the order of the Company, or (iii) on a net basis, such that without the exchange of any funds, the Holder receives that number of Warrant Shares that -i- 18 would otherwise be issuable upon a cash exercise of this Warrant less that number of Warrant Shares having a current market price (as defined in paragraph 3(b) of the Warrant Agreement) equal to the aggregate Exercise Price that would otherwise have been paid by such holder for the number of Warrant Shares with respect to which this Warrant is being exercised. This Warrant may be exercised at such times and in such amounts as are provided for in the Warrant Agreement. Each Warrant not exercised on or prior to February 17, 2004 shall become invalid and all rights hereunder, and all rights in respect thereof under the Warrant Agreement, shall cease as of that time. The Warrants evidenced by this Warrant Certificate are issued pursuant to the Warrant Agreement, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder(s) hereof upon written request directed to the Company. The Warrant Agreement provides that upon the occurrence of certain events, the Exercise Price and the type and/or number of the Company's securities issuable upon exercise of the Warrants may, subject to certain conditions, be adjusted. Upon due presentment for registration of transfer of this Warrant Certificate at the principal office of the Company, a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided herein and in the Warrant Agreement, without any charge except for any tax or other governmental charge imposed in connection therewith which is not payable by the Company pursuant to paragraph 8 of the Warrant Agreement. Upon the exercise of less than all of the Warrants evidenced by this Certificate, the Company shall forthwith issue to the holder hereof a new Warrant Certificate representing such numbered of unexercised Warrants. The Company may deem and treat the registered holder(s) hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof and of any distribution to the holder(s) hereof and for all other purposes, and the Company shall not be affected by any notice to the contrary. -ii- 19 All terms used in this Warrant Certificate which are not defined herein and are defined in the Warrant Agreement shall have the meanings assigned to them in the Warrant Agreement. IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed under its corporate seal. Dated: ___, 2000 INTERMEDIA COMMUNICATIONS INC. By:_____________________________ Name: Title: 20 [FORM OF ASSIGNMENT] (To be executed by the registered holder if such holder desires to transfer the Warrant Certificate.) FOR VALUE RECEIVED, ________________________ hereby sells, assigns and transfers unto ________________________________, whose address is __________________________, this Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ___________________________, Attorney to transfer the within Warrant Certificate on the books of the within-named Company, with full power of substitution. Dated: Signature: ------------------------ (Signature must conform in all respects to name of holder as specified on the face of the Warrant Certificate. Signature must be guaranteed by a bank or trust company having an office or correspondent in the United States or a broker or dealer which is a member of a registered securities exchange or the National Association of Securities Dealers, Inc.) -------------------------------- (Insert Social Security or Other Identifying Number of Holder) 21 [FORM OF ELECTION TO PURCHASE] The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to purchase ________________ shares of Common Stock and herewith: (choose one by marking "X" in the space provided) ____ tenders payment for such shares, to the order of INTERMEDIA COMMUNICATIONS INC., in the amount of $________ in accordance with the terms of the Warrant Agreement. ___ requests that such exercise be on a net basis in accordance with the terms of the Warrant Agreement. The undersigned requests that a certificate for such shares of Common Stock be registered in the name of _________________________________________, whose address is _____________________________________________ and that such certificate be delivered to _______________________________________ whose address is _____________________________________________. Dated: Signature: ------------------- (Signature must conform in all respects to name of holder as specified on the face of the Warrant Certificate. Signature must be guaranteed by a bank or trust company having an office or correspondent in the United States or a broker or dealer which is a member of a registered securities exchange or the National Association of Securities Dealers, Inc.) ------------------------- (Insert Social Security or Other Identifying Number of Holder) EX-4.4 5 REGISTRATION RIGHTS AGREEMENT 1 Exhibit 4.4 THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered into as of February 17, 2000, between Intermedia Communications Inc., a Delaware corporation (the "Company") and ICI Ventures LLC (the "Purchaser"). This Agreement is made pursuant to the Purchase Agreement, dated January 11, 2000 (the "Purchase Agreement"), by and among the Company and the Purchaser. In order to induce the Purchaser to purchase 200,000 shares of the Company's 7% Series G Junior Convertible Participating Preferred Stock, par value $1.00 per share (the "Series G Preferred Stock"; provided, that references herein to the Series G Preferred Stock shall be deemed to include any preferred stock and warrants issued upon a recapitalization of the Series G Preferred Stock) and warrants to purchase 1,000,000 shares of the Company's common stock, par value $.01 per share (the "Common Stock") at $40.00 per share and warrants to purchase 1,000,000 shares of the Common Stock at $45.00 per share, in each case, subject to adjustment (collectively, the "Warrants"), the Company has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Purchaser set forth in Section 4 of the Purchase Agreement. In consideration of the foregoing, the parties hereto agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: "Act" means the Securities Act of 1933, as amended from time to time and the rules and regulations of the SEC promulgated thereunder. "Business Day" means any day except a Saturday, Sunday or other day in the City of New York on which banks are authorized to close. "Conversion Shares" means the shares of Common Stock or other securities issued or issuable upon the conversion or a change of control payment with respect to the Series G Preferred Stock. "Dividend Shares" means the shares of Common Stock or other securities issued or issuable as dividends or other distributions on the Series G Preferred Stock. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time and the rules and regulations of the SEC promulgated thereunder. "Holder" means the Purchaser, for so long as the Purchaser owns any Series G Preferred Stock, any Warrants or any Registrable Securities, and its successors, assigns and 2 direct and indirect transferees who become registered owners of Series G Preferred Stock, Warrants or Registrable Securities. "NASD" means the National Association of Securities Dealers, Inc. "Person" means an individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. "Prospectus" means the prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all documents incorporated by reference into such Prospectus. "Registrable Securities" shall mean any of (a) the Conversion Shares, (b) the Warrant Shares (c) the Dividend Shares and (d) any other securities issued or issuable with respect to the Conversion Shares, Warrant Shares or Dividend Shares by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise until such date as such security (i) is effectively registered under the Act and disposed of in accordance with a registration statement, (ii) is distributed to the public pursuant to Rule 144 under the Act or (iii) has ceased to be outstanding. For purposes of this Agreement, any required calculation of the amount of, or percentage of, Registrable Securities shall be based on the number of shares of Common Stock which are Registrable Securities, including shares issuable upon the conversion, exchange or exercise of any security convertible, exchangeable or exercisable into Common stock (including the Series G Preferred Stock and the Warrants). "Registration Statement" shall mean any registration statement of the Company which covers any of the Registrable Securities pursuant to the provisions of this Agreement and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all documents incorporated by reference therein. "Rule 144" shall mean Rule 144 under the Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the SEC providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of an issuer of such securities being free of the registration and prospectus delivery requirements of the Act. "Rule 144A" shall mean Rule 144A under the Act as such Rule may be amended from time to time. "SEC" shall mean the Securities and Exchange Commission. 2 3 "Shelf Registration" shall mean a Registration Statement for an offering to be made on a continuous basis pursuant to the Shelf Rules. "Shelf Rules" shall mean Rule 415 (or any successor rule) under the Securities Act and the rules and regulations promulgated thereunder for the distribution of securities of certain issuers on a continuous or delayed basis. "Warrant Shares" means the shares of Common Stock or other securities issued or issuable upon the exercise of the Warrants. SECTION 2. REGISTRATION RIGHTS. (a) Demand Registration. (i) Request for Registration. At any time, the Holders of Series G Preferred Stock, Warrants, Conversion Shares, Dividend Shares and/or Warrant Shares representing not less than 15% of the aggregate number of Registrable Securities (or such lesser amount if the request relates to all remaining Registrable Securities) (the "Demand Party") may make four written requests for registration under the Act of their Registrable Securities (a "Demand Registration"); provided that no transferee of the Purchaser or of any such transferee shall be permitted to request a registration pursuant to this Section 2(a) unless the right to make such a request was transferred by the Purchaser (or any transferee) to such transferee. Any such request will specify the number of Registrable Securities proposed to be sold and will also specify the intended method of disposition thereof. Subject to the other provisions of this Section 2(a), the Company shall give written notice of such registration request within 10 days after the receipt thereof to all other Holders. Within 30 days after receipt of such notice by any Holder, such Holder may request in writing that its Registrable Securities be included in such registration and the Company shall include in the Demand Registration the Registrable Securities of any such Holder requested to be so included. Each such request shall specify the number of Registrable Securities proposed to be sold and the intended method of disposition thereof. Upon a demand, the Company will: (x) prepare and file within 30 days after a request has been made and use its best efforts to cause to become effective within 150 days of such demand a Registration Statement in respect of all the Registrable Securities which Holders request for inclusion therein; and (y) keep such Registration Statement continuously effective for the shorter of (A) 180 days (or, in the case of a Shelf Registration registering Dividend Shares, the later of (1) the second anniversary of the effective date of such Shelf Registration, and (2) 90 days after the redemption of the Series G Preferred Stock by the Company; provided, that any post-effective amendment to a Shelf Registration registering additional Dividend Shares shall not count as a Demand Registration) (the "Fixed Effectiveness Period") and (B) such period of time as all of the Registrable Securities included in such Registration 3 4 Statement have been sold thereunder (the shorter of (A) or (B), the "Effectiveness Period"); provided that if such demand occurs during a Black Out Period (as defined below) or other period (not to exceed 135 days) during which the Company is prohibited or restricted from issuing or selling Common Stock pursuant to any underwriting or purchase agreement relating to an underwritten Rule 144A offering or registered public offering of Common Stock or securities convertible into or exchangeable for Common Stock (a "Lock Up Period"), the Company shall not be required to notify the Holders of such demand or file such Registration Statement prior to the end of the Black Out Period or Lock Up Period, as the case may be, in which event, the Company will use its best efforts to cause such Registration Statement to become effective no later than the later of (A) 150 days after the original demand and (B) 60 days after the end of the Black Out Period or Lock Up Period, as the case may be; and provided, further, that the Company may postpone the filing of any Registration Statement (and, in the case of a Pending Event Suspension only, suspend the effectiveness of any registration, suspend the use of any Prospectus and shall not be required to amend or supplement the Registration Statement, any related Prospectus or any document incorporated therein by reference (other than an effective Registration Statement being used in an underwritten offering)) (A) for a period not to exceed an aggregate of 60 days (a "Pending Event Suspension Period") in the event that (1) an event or circumstance occurs and is continuing as a result of which the Registration Statement, any related Prospectus or any document incorporated therein by reference as then amended or supplemented would, in the Company's good faith judgment, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (2) the disclosure relates to a material business transaction which has not yet been publicly disclosed and the disclosure of which, in the good faith judgment of the Board, after consultation with its outside securities counsel, could reasonably be expected to have a material adverse effect on the business, operations or prospects of the Company or (B) in the event that the Company, for its own account, has pending or is currently engaged in the process of and proposes to register shares of Common Stock for sale in an underwritten public offering on Form S-1, S-2 or S-3, their successor forms or any other form under the Securities Act appropriate for a primary public offering by the Company (other than for the purpose of making an acquisition or in connection with option plans), for a period not to exceed 65 days commencing on the date of pricing of such public offering and ending 60 days after the consummation of such public offering (a "Pending Registration Suspension Period" and, together with a Pending Event Suspension Period, a "Black Out Period"); provided, further that the Fixed Effectiveness Period shall be extended by the number of days in any Black Out Period occurring during the Effectiveness Period. Subject to Section 2(a)(ii), the Company shall only be required to register Registrable Securities pursuant to this Section 2(a) four times. In the event of the occurrence of any Black Out Period or Lock Up Period, the Company will promptly notify the Holders of Registrable Securities thereof in writing. If the Company shall postpone the filing of a Registration Statement, the Holders of Registrable 4 5 Securities requesting registration thereof shall have the right to withdraw the request for registration by giving written notice to the Company within 30 days after receipt of notice of postponement from the Company and, in the event of such withdrawal, such request shall not be counted for purposes of the requests permitted to be made under this Section 2(a). The Company shall not be permitted to assert more than one Black Out Period or Lock Up Period in any 360-day period. (ii) Effective Registration. Except as specifically provided herein, the Company is only required to effect four registrations as Demand Registrations under this Agreement (whether or not all of the Holders of Registrable Securities elect to participate in such Demand Registration on the basis set forth herein). A registration will not be deemed to have been effected as a Demand Registration, and thereby satisfy the obligation of the Company hereunder, unless it has been declared effective by the SEC and the Company has complied in all material respects with its obligations under this Agreement with respect thereto; provided that if, after it has become effective, (x) the offering of Registrable Securities pursuant to such registration is or becomes the subject of any stop order, injunction or other order or requirement of the SEC or any other governmental or administrative agency, or if any court prevents or otherwise limits the sale of Registrable Securities pursuant to the registration (for any reason other than the act or omissions of the Holders) for the period of time contemplated hereby, or (y) (A) a Pending Event Suspension Period occurs, (B) the market price of the Common Stock on the day prior to the occurrence of the Pending Event Suspension Period is greater than the market price of the Common Stock on the day that the Pending Event Suspension Period has terminated, and (C) the Holders do not sell all the Registrable Securities included in such registration, such registration will be deemed not to have been effected. If (x) a registration requested pursuant to this Section 2(a) is deemed not to have been effected or (y) the registration requested pursuant to this Section 2(a) does not remain effective for the Effectiveness Period, then such requested registration shall not count as a Demand Registration and the Company shall continue to be obligated to effect the number of Demand Registrations required to be effected immediately prior to the time such request had been made pursuant to this Section 2(a). The Holders of Registrable Securities shall be permitted to withdraw all or any part of the Registrable Securities from a Demand Registration at any time prior to the effective date of such Demand Registration. If a Registration Statement is filed pursuant to a Demand Registration, and subsequently a sufficient number of the Registrable Securities are withdrawn from the Demand Registration so that such Registration Statement does not cover that number of Registrable Securities at least equal to 15% of the Registrable Securities (or such lesser number as permitted by Section 2(a) (i)), the Holders who have not withdrawn their Registrable Securities shall have the opportunity to include an additional number of Registrable Securities in the Demand Registration so that such Registration Statement covers that number of Registrable Securities at least equal to 15% of the Registrable Securities (or such lesser number as permitted by Section 2(a) (i)). If an additional number of Registrable Securities is not so included, the Company may withdraw the Registration Statement. Such withdrawn Registration Statement will not count as a Demand Registration and the Company shall continue to be obligated to effect the number of Demand Registrations required 5 6 to be effected immediately prior to the time the request with respect to such withdrawn Registration Statement was made pursuant to this Section 2(a). (iii) Priority in Demand Registrations Pursuant to Section 2(a). If a Demand Registration pursuant to this Section 2(a) involves an underwritten offering and the lead managing underwriter advises the Company in writing that, in its view, the total number of Registrable Securities requested by the Holders to be included in such registration, together with any other securities permitted to be included in such registration, is such as to adversely affect the success of such offering, including the price at which such securities can be sold, as contemplated by the Holders: first, the securities permitted to be included in such registration, other than the Registrable Securities of the Holders included in such registration shall be reduced in their entirety before any reduction of Registrable Securities; and second, to the extent the reduction set forth in the immediately preceding clause is insufficient to reduce the number of securities requested for inclusion in such registration to a number, which, in the view of such lead managing underwriter, can be sold without adversely affecting the success of the offering, including the price at which such securities can be sold, as contemplated by the Holders, the number of such Registrable Securities to be included in such registration shall be allocated at the option of the Demand Party, pro rata among all requesting Holders on the basis of the relative number of Registrable Securities then held by each such Holder (provided that any Registrable Securities thereby allocated to any such Holder that exceed such Holder's request shall be reallocated among the remaining requesting Holders in like manner) or as specified by the Demand Party. In the event that the number of Registrable Securities requested to be included in such registration is less than the number which, in the view of the lead managing underwriter, can be sold without adversely affecting the success of such offering, including the price at which such securities can be sold, as contemplated by the Holders, the Company may include in such registration securities that the Company or any other Person proposes to sell up to the number of securities that, in the view of the lead managing underwriter, can be sold without adversely affecting the success of such offering, including the price at which such securities can be sold, as contemplated by the Holders. If the managing underwriter of any underwritten offering shall advise the Holders participating in a registration pursuant to this Section 2(a) that the Registrable Securities covered by the Registration Statement cannot be sold in such offering within a price range acceptable to the Demand Party, then the Demand Party shall have the right to notify the Company that it has determined that the registration statement be abandoned or withdrawn, in which event the Company shall abandon or withdraw such Registration Statement. Nothing in this Section 2(a) shall operate to limit the right of any Holder to request the registration of Common Stock issuable upon conversion of the Series G Preferred Stock or the exercise of the Warrants or, to the extent permissible hereunder, any other securities convertible into or exchangeable or exercisable for the Registrable Securities, held by such Holder notwithstanding the fact that at the time of request such Holder does not hold the Common Stock or such other Registrable Securities. 6 7 (iv) Selection of Underwriter. If the Holders so elect, the offering of such Registrable Securities pursuant to such Demand Registration shall be in the form of an underwritten offering. The investment banker or investment bankers and manager or managers that will administer such underwritten offering will be selected by the Holders of a majority in number of the Registrable Securities included in such offering; provided, that such investment bankers and managers must be reasonably satisfactory to the Company. (v) Registration Statement Form. The Company shall select the Registration Statement form for any registration pursuant to this Section 2(a); provided, that if any registration requested pursuant to this Section 2(a) which is proposed by the Company to be effected by the filing of a registration statement on Form S-3 (or any successor or similar short-form registration statement) shall be in connection with an underwritten public offering, and if the managing underwriter shall advise the Company in writing that, in its opinion, the use of another form of registration statement is of material importance to the success of such proposed offering, then such registration shall be effected on such other form; provided, further, that if any dividends on the Series G Preferred Stock are paid other than in cash, at any time thereafter the Purchaser may request that one registration pursuant to Section 2(a) be a Shelf Registration. Purchaser may request that additional registrations pursuant to Section 2(a) be Shelf Registrations (but only with respect to registering Dividend Shares) if the Company is unable to register all Dividend Shares. (b) Piggy-Back Registration. (i) Notice of Registration. If at any time after the date hereof, the Company proposes to file a Registration Statement on Form S-1, S-2 or S-3, their successor forms or any other form under the Act appropriate for a primary public offering (other than for the purpose of making an acquisition or in connection with option plans) with respect to an underwritten offering of any class of Common Stock by the Company for its own account or for the account of any of its respective securityholders (a "Proposed Registration") then the Company shall give prompt written notice of such Proposed Registration to the Holders of Registrable Securities (a "Company Notice") and such Company Notice shall offer such Holders the opportunity to register such number of Registrable Securities as each such Holder may request by written notice delivered to the Company within 10 days of receipt of the Company Notice by such Holder (a "Piggy-Back Registration"). Any such request by a Holder shall specify the Registrable Securities intended to be disposed of by such Holder and the intended method of distribution thereof. The Company shall use its best efforts to cause the managing underwriter or underwriters of such Proposed Registration to permit the Registrable Securities requested to be included in a Piggy-Back Registration to be included on the same terms and conditions as any similar securities of the Company or any other securityholder included therein and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method of distribution thereof; provided, however, in no event shall the Company be required to reduce the number of securities proposed to be sold by the Company or alter the terms of the securities proposed to be sold by the Company in order to induce the managing underwriter or underwriters 7 8 to permit Registrable Securities to be included. The Company may withdraw a Proposed Registration at any time prior to the time it becomes effective; provided that the Company shall give prompt notice thereof to participating Holders. No registration effected under this Section 2(b) shall relieve the Company of its obligation to effect a registration upon the request of Holders pursuant to Section 2(a). Nothing in this Section 2(b) shall operate to limit the right of any Holder to request the registration of Common Stock issuable upon conversion of the Series G Preferred Stock or the exercise of the Warrants or, to the extent permissible hereunder, any other securities convertible into or exchangeable or exercisable for the Registrable Securities, held by such Holder notwithstanding the fact that at the time of request such Holder does not hold the Common Stock or such other Registrable Securities. (ii) Reduction of Offering. If the lead managing underwriter of any Proposed Registration has informed, in writing, the Company and the Holders of the Registrable Securities requesting inclusion in such offering that it is its view that the total number of securities which the Company, the Holders and any other Persons desiring to participate in such registration intend to include in such offering is such as to adversely affect the success of such offering, including the price at which such securities can be sold, then the number of Registrable Securities to be offered for the account of such Holders and the number of such securities to be offered for the account of all such other Persons (other than the Company) participating in such registration shall be reduced or limited pro rata in proportion to the respective number of securities requested to be registered to the extent necessary to reduce the total number of securities requested to be included in such offering to the number of securities, if any, recommended by such lead managing underwriter, unless such offering is being made pursuant to exercise of a demand registration right granted by the Company to other Persons, in which case the number of securities to be offered for the account of all Persons not exercising demand registration rights (including the Holders) shall be eliminated or reduced pro rata in proportion to the respective number of securities requested to be registered by such Persons to reduce the total number of securities requested to be included in such offering to the number of securities, if any, recommended by such lead managing underwriter before any reduction is made in securities requested to be registered by Persons exercising a demand registration right. (iii) Withdrawal Election. Any Holder may elect to withdraw its request to include Registrable Securities in any Proposed Registration by giving written notice to the Company of its request to withdraw prior to the effectiveness of the Registration Statement (a "Withdrawal Election"); provided that a Withdrawal Election shall be irrevocable and, after making a Withdrawal Election, a Holder shall no longer have any right to include Registrable Securities in the registration as to which such Withdrawal Election was made. (c) Lock Up of Holders. If the Company has complied in all material respects with its obligations with respect to a Demand Registration or a Piggy-Back Registration that is a 8 9 firm commitment underwritten public offering, all Holders of Series G Preferred Stock, Warrants and Registrable Securities, upon request of the lead managing underwriter with respect to such underwritten public offering, agree not to sell or otherwise dispose of any Series G Preferred Stock, Warrants or any Registrable Securities owned by them (other than as part of such underwritten public offering) for a period not to exceed 90 days from the consummation of such underwritten public offering (or such lesser period as the managing underwriters may permit) and the Company hereby also so agrees; provided that Registrable Securities which had been requested for inclusion in a Demand Registration or a Piggy-Back Registration but which were not so included pursuant to Section 2(a)(iii) or Section 2(b)(ii) shall only be subject to the restriction on sale and disposition in this Section 2(c) for a period not to exceed 30 days from the consummation of such underwritten public offering. SECTION 3. REGISTRATION PROCEDURES. (a) General Provisions In connection with the obligations of the Company with respect to any Registration Statement to be filed pursuant to Sections 2(a) or 2(b) hereof, the Company shall: (i) A reasonable period of time prior to the effectiveness of a Registration Statement or Prospectus and a reasonable period of time prior to the filing of any amendment or supplement thereto, furnish to the Holders of the Registrable Securities included in such Registration Statement, and the managing underwriters, if any, copies of all such documents substantially in the form filed or proposed to be filed, which documents will be subject to the review of such Holders, and such underwriters, if any, and use best efforts to cause the officers and directors of the Company, counsel to the Company and independent certified public accountants to the Company to respond to such reasonable inquiries as shall be necessary, in the opinion of respective counsel to such Holders and such underwriters, to conduct a reasonable investigation within the meaning of the Act. The Company shall not cause to become effective any such Registration Statement or related Prospectus or any amendments or supplements thereto to which the underwriters, if any, or the Holders of a majority of the Registrable Securities included in such Registration Statement shall reasonably object on a timely basis; (ii) Other than during a Black Out Period arising out of an event described in clause (A) of the definition of "Black Out Period": prepare and file with the SEC such amendments, including post-effective amendments, to each Registration Statement as may be necessary to keep such Registration Statement continuously effective for the applicable time period required hereunder; cause the related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so amended or supplemented to be filed pursuant to Rule 424 under the Act; and comply with the provisions of the Act and the Exchange Act with respect to the disposition of all securities covered by such Registration Statement during such period in 9 10 accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement as so amended or in such Prospectus as so amended or supplemented; (iii) Notify the holders of Registrable Securities to be sold and the managing underwriters, if any, promptly, and (if requested by any such person), confirm such notice in writing, (1)(A) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and (B) with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (2) of any comments from the SEC or of any request by the SEC or any other Federal or state governmental authority for amendments or supplements to a Registration Statement or related Prospectus or for additional information, (3) of the issuance by the SEC, any state securities commission, any other governmental agency or any court of any stop order, order or injunction suspending or enjoining the use of a Prospectus or the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (4) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, and (5) of the happening of any event or information becoming known that makes any statement made in a Registration Statement or related Prospectus untrue in any material respect or that requires the making of any changes in such Registration Statement or Prospectus so that, in the case of a Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of a Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (iv) Use its best efforts to avoid the issuance of or, if issued, obtain the withdrawal of any order enjoining or suspending the use of a Prospectus or the effectiveness of a Registration Statement or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction described in Section 3(a)(viii), at the earliest practicable moment; (v) If requested by the selling Holders or the managing underwriters, if any, other than during a Black Out Period arising out of an event described in clause (A) of the definition of "Black Out Period," (x) promptly incorporate in a Prospectus supplement or post-effective amendment such information as the selling Holders or the managing underwriters, if any, reasonably believe is required to be included therein, and (y) make all required filings of such Prospectus supplement or such post-effective amendment under the Act as soon as practicable after the Company has received notification of the matters to be incorporated in such Prospectus supplement or post-effective amendment; (vi) Furnish to each Holder of Registrable Securities to be sold pursuant to a Registration Statement and each managing underwriter, if any, without charge, at least one 10 11 conformed copy of such Registration Statement and each amendment thereto, including financial statements and schedules and exhibits thereto and, to the extent requested by such Holder or managing underwriter, all documents incorporated or deemed to be incorporated therein by reference (including those previously furnished or incorporated by reference) as soon as practicable after the filing of such documents with the SEC; (vii) Deliver to each Holder of Registrable Securities to be sold pursuant to a Registration Statement, and the underwriters, if any, without charge, as many copies of the Prospectus (including each form of prospectus) and each amendment or supplement thereto as such persons reasonably request; and the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders of Registrable Securities and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto; (viii) Prior to any public offering of Registrable Securities, use its best efforts to register or qualify or cooperate with the Holders of Registrable Securities to be sold, the underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions as any such Holder or underwriter reasonably requests in writing; keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective hereunder and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by the applicable Registration Statement; provided, however, that the Company shall not be required to (x) qualify generally to do business in any jurisdiction where it is not then so qualified or (y) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not so subject; (ix) In connection with any sale or transfer of Registrable Securities that will result in such securities no longer being Registrable Securities, cooperate with the Holders thereof and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, which certificates shall not bear any restrictive legends and to enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters, if any, or such Holders may request at least two Business Days prior to any sale of Registrable Securities; (x) Other than during a Black Out Period arising out of an event described in clause (A) of the definition of "Black Out Period," upon the occurrence of any event contemplated by Section 3(a)(iii)(5), as promptly as practicable, prepare a supplement or amendment, including, if appropriate, a post-effective amendment, to each Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter 11 12 delivered, such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (xi) Enter into such agreements (including an underwriting agreement in form, scope and substance as is customary in underwritten offerings, including customary indemnity provisions) and take all such other reasonable actions in connection therewith (including those reasonably requested by the managing underwriters, if any) in order to expedite or facilitate the disposition of such Registrable Securities, and, if the registration is an underwritten registration or if otherwise requested by the Selling Holders, (1) make such representations and warranties to the underwriters, if any, and selling Holders with respect to the business of the Company and its subsidiaries, the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings, and confirm the same if and when requested; (2) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters if any, addressed to each of the underwriters, if any, and selling Holders), covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such underwriters or selling Holders; (3) use their best efforts to obtain customary "cold comfort" letters and updates thereof from the independent certified public accountants of the Company addressed (where reasonably possible) to each of the underwriters, if any, and selling Holders, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings; and (4) deliver such documents and certificates as may be reasonably requested by the managing underwriters, if any, to evidence the continued validity of the representations and warranties made pursuant to clause (1) above and to evidence compliance with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company; (xii) Make available for inspection by a representative of any underwriter participating in any such disposition of Registrable Securities, and any attorney, consultant, accountant or other agent retained by such selling Holders or underwriter, at the offices where normally kept, during reasonable business hours, all pertinent financial and other records, corporate documents and properties of the Company and its subsidiaries (including with respect to businesses and assets acquired or to be acquired to the extent that such information is available to the Company), and cause the officers, directors, agents and employees of the Company and its subsidiaries to supply all information in each case reasonably requested by any such representative, underwriter, attorney, consultant, accountant or other agent in connection with such Registration Statement; (xiii) Comply with all applicable rules and regulations of the SEC and make generally available to their securityholders earnings statements satisfying the provisions of 12 13 Section 11(a) of the Act and Rule 158 under the Act, no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) (x) commencing at the end of any fiscal quarter in which Registrable Securities are sold to underwriters in a firm commitment or reasonable efforts underwritten offering and (y) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter after the effective date of a Registration Statement, which statement shall cover said period, consistent with the requirements of Rule 158 under the Act; (xiv) Cause all Registrable Securities covered by the Registration Statement to be either listed on each securities exchange on which similar securities issued by the Company are then listed or quoted on the Nasdaq National Market System if similar securities issued by the company are then quoted thereon (notwithstanding that at the time of such request, the Holders hold only securities convertible into or exercisable or exchangeable for securities which are then listed or quoted); (xv) Cooperate with each seller of Registrable Securities covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the NASD; (xvi) Use its best efforts to cause such Registrable Securities covered by such Registration Statement to be registered with or approved by such other governmental authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities; provided, however, that the Company shall not be required to (x) qualify generally to do business in any jurisdiction where it is not then so qualified or (y) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not so subject; and (xvii) Use its best efforts to make available the executive officers of the Company to participate with the Holders of Registrable Securities and any underwriters in any "road shows" or other selling efforts that may be reasonably requested by the Holders in connection with the methods of distribution for the Registrable Securities. (b) Information to be Furnished by Holders. The Company may require a Holder of Registrable Securities to be included in a Registration Statement to furnish to the Company such information regarding (w) the intended method of distribution of such Registrable Securities, (x) such Holder, (y) the Registrable Securities held by such Holder and (z) such other matters as are required by law to be disclosed in such Registration Statement with respect to a selling Holder, and the Company may exclude from such Registration Statement the Registrable Securities of any Holder who fails to furnish such information within a reasonable time after receiving such request. The Company shall not 13 14 be required to provide indemnification to any underwriter or any other person relating to information referred to in clauses (w), (x), (y) and (z) provided to the Company in writing specifically for inclusion in such Registration Statement. (c) Restriction on Holders. Each Holder of Registrable Securities agrees by acquisition of such Registrable Securities that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(a)(iii)(2)-(5) hereof, such Holder will forthwith discontinue disposition of such Registrable Securities covered by such Registration Statement or Prospectus until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(a)(x) hereof, or until it is advised in writing (the "Advice") by the Company that the use of the applicable Prospectus may be resumed. If the Company shall give any such notice, the Fixed Effectiveness Period shall be extended by the number of days during such period from and including the date of the giving of such notice to and including the date when each Holder of Registrable Securities covered by such Registration Statement shall have received (x) the copies of the supplemented or amended Prospectus contemplated by Section 3(a)(x) hereof or (y) the Advice. SECTION 4. REGISTRATION EXPENSES (a) All expenses incident to the Company's performance of or compliance with this Agreement will be borne by the Company, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all SEC and securities exchange or NASD registration and filing fees and expenses (including, if applicable, the fees and expenses of any "qualified independent underwriter," as such term is defined in Schedule E to the bylaws of the NASD, and of its counsel); (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws (including fees and disbursements of counsel for the underwriters in connection with blue sky qualifications); (iii) all expenses of printing (including printing certificates for the Conversion Shares, the Warrant Shares and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company and, in accordance with Section 4(b) below, the Holders of Registrable Securities; (v) all application and filing fees in connection with listing the Conversion Shares, the Warrant Shares and the Dividend Shares on a national exchange or automated quotation system; (vi) all fees and disbursements of independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance); (vii) any fees and disbursements of underwriters customarily paid by the issuers or sellers of securities, including liability insurance if the Company so desires or if the underwriters so require, and (viii) expenses incurred in connection with any road show (excluding the out-of-pocket expenses of the Purchaser). 14 15 The Company will, in any event, bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company. Each Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Securities pursuant to a Registration Statement. (b) In connection with any Registration Statement required by this Agreement, the Company will reimburse the Holders of Registrable Securities being registered pursuant to a Demand Registration or Piggy-Back Registration, as applicable, for the reasonable fees and disbursements of not more than one counsel chosen by the Holders of a majority of the Registrable Securities for whose benefit such Registration Statement is being prepared. SECTION 5. INDEMNIFICATION (a) The Company agrees to indemnify and hold harmless each selling Holder, each person, if any, who controls or is controlled by a selling Holder within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and the respective affiliates, officers, directors, partners, members, employees, stockholders, representatives and agents of any selling Holder or any controlling or controlled person and each Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such seller or any such underwriter within the meaning of the Act to the fullest extent lawful, from and against any and all losses, liabilities, claims, damages and expenses whatsoever (including but not limited to attorneys' fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any investigation, litigation or other action, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation) (collectively "Losses"), joint or several, to which they or any of them may become subject under the Act, the Exchange Act or otherwise, insofar as such Losses arise out of, relate to or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or any Prospectus, or in any supplement thereto or amendment thereof, or arise out of, relate to or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the case of any Prospectus, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company will not be liable in any such case to the extent, but only to the extent, that (i) any such Losses arise out of, relate to or are based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of such party expressly for use therein and (ii) the foregoing indemnity with respect to any untrue statement contained in or omitted from a Registration Statement or the Prospectus shall not inure to the benefit of any party (or any person controlling such party) who is obligated 15 16 to deliver a prospectus in transactions in a security as to which a Registration Statement has been filed pursuant to the Act and from whom the person asserting any such Losses purchased any of the Registrable Securities to the extent that it is finally judicially determined that such Losses resulted solely from the fact that such party sold Registrable Securities to a person to whom there was not sent or given, at or prior to the written confirmation of such sale, a copy of the Registration Statement or the Prospectus, as amended or supplemented, and (x) the Company shall have previously and timely furnished sufficient copies of the Registration Statement or Prospectus, as so amended or supplemented, to such party in accordance with this Agreement and (y) the Registration Statement or Prospectus, as so amended or supplemented, would have corrected such untrue statement or omission of a material fact. This indemnity agreement will be in addition to any liability which the Company may otherwise have, including, under this Agreement. This indemnity shall survive the transfer of securities by any seller. (b) Each selling Holder of Registrable Securities that are included in the securities as to which any registration under Section 2(a) or 2(b)is being effected, severally and not jointly, shall indemnify and hold harmless the Company, the other selling Holders and each person, if any, who controls or is controlled by any such party within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and each Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls any such underwriter within the meaning of the Act, against any Losses, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or otherwise, insofar as such Losses arise out of, relate to or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or any Prospectus, or in any amendment thereof or supplement thereto, or arise out of, relate to or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the case of any Prospectus, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that any such Losses arise out of, relate to or are based upon any untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Holder expressly for use therein. This indemnity will be in addition to any liability which a Holder may otherwise have, including under this Agreement. In no event, however, shall the liability of any selling Holder hereunder be greater in amount than (x) the dollar amount of the proceeds received by such Holder upon its sale of the Registrable Securities giving rise to such indemnification obligation less (y) the dollar amount paid by the Purchaser for the Series G Preferred Stock and/or Warrants pursuant to which such Registrable Securities were issued. This indemnity shall survive the transfer of securities by any seller. (c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify each party against whom indemnification is to be sought in writing of the commencement thereof (but 16 17 the failure so to notify an indemnifying party shall not relieve it from any liability which it may have under this Section 5, except to the extent that it has been prejudiced in any material respect by such failure, or from any liability which it may otherwise have). In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein, and to the extent it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party. Notwithstanding the foregoing, the indemnified party or parties shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless (i) the employment of such counsel shall have been authorized in writing by the indemnifying parties in connection with the defense of such action, (ii) the indemnifying parties shall not have employed counsel to take charge of the defense of such action within a reasonable time after notice of commencement of the action, or (iii) such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to those available to one or all of the indemnifying parties (in which case the indemnifying party or parties shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events such fees and expenses of counsel shall be borne by the indemnifying parties; provided, however, that the indemnifying party under subsection (a) or (b) above, shall only be liable for the legal expenses of one counsel (in addition to any local counsel) for all indemnified parties in each jurisdiction in which any claim or action is brought. Anything in this subsection to the contrary notwithstanding, an indemnifying party shall not be liable for any settlement of any claim or action effected without its prior written consent, provided, however, that such consent was not unreasonably withheld. No indemnifying party will settle any action or proceeding or consent to the entry of any judgment without the prior written consent of the indemnified party, unless such settlement or judgment (i) includes as an unconditional term thereof the giving by the claimant or plaintiff of a release to such indemnified party from all liability in respect of such action or proceeding and (ii) does not involve the imposition of equitable remedies or the imposition of any obligations on such indemnified party and does not otherwise adversely affect such indemnified party, other than as a result of the imposition of financial obligations for which such indemnified party will be indemnified hereunder. (d) In order to provide for contribution in circumstances in which the indemnification provided for in this Section 5 is for any reason held to be unavailable or is insufficient to hold harmless a party indemnified thereunder, the Company and each selling Holder shall contribute to the aggregate Losses of the nature contemplated by such indemnification provision in such proportion as is appropriate to reflect the relative benefits received by the Company from the issuance of the shares of Series G Preferred Stock and/or Warrants pursuant to which the Registrable Securities sold by such Holder were issued and by any such Holder from its sale of Registrable Securities or, if such allocation is not permitted by applicable law or indemnification is not available as a result of the indemnifying party not having 17 18 received notice as provided in this Section 5, in such proportion as is appropriate to reflect not only the relative benefits referred to above but also the relative fault of the Company and the Holders in connection with the statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations. The relative benefits received by the Company and any Holder shall be deemed to be in the same proportion as (x) the total proceeds received by the Company from the issuance of the shares of Series G Preferred Stock and/or Warrants pursuant to which the Registrable Securities which would otherwise give rise to the indemnification obligation were issued and (y) the total proceeds received by such Holder upon its sale of the Registrable Securities less the amount paid by the Purchaser for the Series G Preferred Stock and/or Warrants pursuant to which such Registrable Securities were issued. The relative fault of the Company and of the Holders shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Holders and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 5 were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to above. Notwithstanding the provisions of this Section 5, (i) no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the total received by such Holder with respect to the sale of its Registrable Securities exceeds the sum of (A) the amount paid by the Purchaser for the Series G Preferred Stock and/or Warrants pursuant to which such Registrable Securities were issued plus (B) the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission and (ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 5, (A) each person, if any, who controls a Holder within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and (B) the respective officers, directors, partners, members, employees, stockholders, representatives and agents of a Holder or any controlling person shall have the same rights to contribution as such Holder, and each person, if any, who controls or is controlled by the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act shall have the same rights to contribution as the Company, subject in each case to clauses (i) and (ii) of this Section 5(d). Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties under this Section 5, notify such party or parties from whom contribution may be sought, but the failure to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have under this Section 5 or otherwise. No party shall be liable for contribution with respect to any action or claim settled without its prior written consent; provided, however, that such written consent was not unreasonably withheld. 18 19 (e) Indemnification similar to that specified in this Section 5 (with appropriate modifications) shall be given by the Company and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any law or with any governmental authority other than as required by the Act. SECTION 6. REQUIRED REPORTS The Company covenants that it will use its best efforts to file the reports required to be filed by it under the Act and the Exchange Act (or, if the Company is not required to file such reports, it will, upon the request of any Holder, make publicly available such information), and it will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell shares of Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements. SECTION 7. MISCELLANEOUS (a) Remedies. Each Holder, in addition to being entitled to exercise all rights provided herein, will be entitled to specific performance of its rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) No Inconsistent Agreements. The Company will not on or after the date of this Agreement enter into any agreement with respect to its securities that conflicts with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's securities under any agreement in effect on the date hereof. (c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of a majority of the outstanding Registrable Securities, and the consent of the Holders of a majority of the outstanding Registrable Securities shall be binding on every Holder of Registrable Securities. 19 20 (d) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the Company; and (ii) if to the Company: Intermedia Communications Inc. 3625 Queen Palm Drive Tampa, Florida 33619 Telecopier No.: (813) 774-2470 Attention: Chief Financial Officer With a copy to: Kronish Lieb Weiner & Hellman LLP 1114 Avenue of the Americas, 46th Floor New York, New York 10036 Telecopier No.: (212) 997-3527 Attention: Ralph J. Sutcliffe All such notices and communications shall be deemed to have been duly given at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery. (e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Registrable Securities; provided that the right to request registration pursuant to Section 2(a) shall not inure to the benefit of any person other than the Purchaser and any transferee of the Purchaser (or any subsequent transferee) to whom such right is specifically transferred. (f) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 20 21 (h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (i) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (j) Entire Agreement. This Agreement together with the other Operative Documents (as defined in the Purchase Agreement) is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the Registrable Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. [SIGNATURE PAGE FOLLOWS] 21 22 IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above. INTERMEDIA COMMUNICATIONS INC. By: /s/ DAVID C. RUBERG ------------------- Name: David C. Ruberg Title: President and Chief Executive Officer ICI VENTURES LLC By: /s/ ALEX NAVAB -------------- Name: Alex Navab Title: President S-1 EX-10.1 6 PURCHASE AGREEMENT 1 Exhibit 10.1 INTERMEDIA COMMUNICATIONS INC. 200,000 Shares of 7% Series G Junior Convertible Participating Preferred Stock and Warrants to Purchase 2,000,000 Shares of Common Stock PURCHASE AGREEMENT JANUARY 11, 2000 2 INTERMEDIA COMMUNICATIONS INC. PURCHASE AGREEMENT January 11, 2000 ICI Ventures LLC c/o Kohlberg Kravis Roberts & Co. L.P. 9 West 57th Street New York, New York 10019 Ladies and Gentlemen: Intermedia Communications Inc., a corporation organized and existing under the laws of Delaware (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to ICI Ventures LLC ("you" or the "Purchaser"), or to issue to one of its subsidiaries (the "Selling Subsidiary") and to cause the Selling Subsidiary to sell to you, an aggregate of 200,000 shares of its 7% Series G Junior Convertible Participating Preferred Stock, par value $1.00 per share, liquidation preference $1,000 per share (the "Series G Preferred Stock") and warrants (the "Warrants") to purchase initially up to 2,000,000 shares of its common stock, par value $0.01 per share (the "Common Stock"). The Series G Preferred Stock is to be authorized and issued pursuant to the provisions of a Certificate of Designation of Voting Power, Designation Preferences and Relative, Participating, Optional or Other Special Rights and Qualifications, Limitations and Restrictions (the "Certificate of Designation") in the form attached hereto as Exhibit D to be filed with the Secretary of State of the State of Delaware. Continental Stock Transfer & Trust Company will be transfer agent and registrar for the Series G Preferred Stock. The Warrants will be issued pursuant to two separate warrant agreements, one reflecting Warrants to purchase 1,000,000 shares of Common Stock at $40 per share and one reflecting Warrants to purchase 1,000,000 shares of Common Stock at $45 per share, in each case, subject to adjustment as provided in such warrant agreements (collectively, the "Warrant Agreement") in the forms attached hereto as Exhibits B-1 and B-2, each to be dated the Closing Date, between you and the Company. The Series G Preferred Stock, the Warrants, the shares of Common Stock issuable upon conversion, as dividends or distributions on, or as a change 1 3 of control payment of the Series G Preferred Stock (the "Conversion Shares") and the shares of Common Stock issuable upon exercise of the Warrants (the "Warrant Shares") are collectively referred to herein as the "Securities". References herein to Series G Preferred Stock shall be deemed to be references to any shares of any new series of preferred stock issued in connection with any recapitalization contemplated by Section 4(I)(m) hereof, and references to the Warrants and Warrant Shares shall include any warrants (and the shares of Common Stock receivable upon exercise of such warrants) received in such recapitalization. Upon original issuance thereof, and until such time as the same is no longer required under the applicable requirements of the Securities Act of 1933, as amended (the "Securities Act"), the Securities (and all securities issued in exchange therefor or in substitution thereof) shall bear the following legend: "THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM." Holders (including subsequent transferees) of the Securities will have the registration rights set forth in the registration rights agreement (the "Registration Rights Agreement") in the form attached hereto as Exhibit C, to be dated the Closing Date for so long as such Securities constitute "Registrable Securities" (as defined in such agreement). This Agreement, the Securities, the Certificate of Designation, the Warrant Agreement, and the Registration Rights Agreement are hereinafter sometimes referred to collectively as the "Operative Documents." 1. Representations and Warranties of the Company and the Purchaser. I. The Company represents and warrants to, and agrees with, you that: (a) Each of the Company and the subsidiaries listed on Annex I (the "Subsidiaries") (i) has been duly organized and is validly existing as a corporation in good standing under the laws of its respective jurisdiction of incorporation, (ii) has all requisite corporate power and authority to carry on its business as it is currently being conducted and to own, lease and operate its properties, and (iii) is duly qualified and in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification except, with respect to clauses (i) (as it relates to good standing, other than good standing of the Company in the State of Delaware) and (iii), where the failure to be so qualified or in good standing does not and could not reasonably be expected to (x) individually 2 4 or in the aggregate, result in a material adverse effect on the properties, business, results of operations, condition (financial or otherwise), affairs or prospects of the Company and the Subsidiaries, taken as a whole, (y) interfere with or adversely affect the issuance or marketability of the Securities pursuant hereto or (z) in any manner draw into question the validity of this Agreement (any of the events set forth in clauses (x), (y) or (z), a "Material Adverse Effect"). (b)(i) As of November 30, 1999, the capitalization of the Company consisted of the following: (1) 150,000,000 shares of Common Stock, (A) 51,823,129 shares of which were issued and outstanding, (B) 10,096,491 shares of which were reserved for future issuance to employees pursuant to outstanding stock options under the Stock Option Plans (as defined below), (C) 17,617,317 shares of which were reserved for future issuance upon the conversion or exercise of securities convertible into or exercisable for shares of Common Stock and (D) 4,645,823 shares of which were reserved for future issuance for the payment of dividends on the Existing Preferred Stock (as defined below); and (2) 2,000,000 shares of Preferred Stock, par value $1.00 per share (the "Preferred Stock"), (A) 600,000 of which were designated Series B Redeemable Exchangeable Preferred Stock (the "Series B Preferred Stock"), 421,890 of which were issued and outstanding, (B) 40,000 of which were designated Series C Preferred Stock, none of which were issued and outstanding, (C) 69,000 of which were designated Series D Junior Convertible Preferred Stock, 53,729 of which were issued and outstanding, (D) 87,500 of which were designated Series E Junior Convertible Preferred Stock, 64,892 of which were issued and outstanding, and (E) 92,000 of which were designated Series F Junior Convertible Preferred Stock, 79,600 of which were issued and outstanding (collectively, the "Existing Preferred Stock"). Except upon the exercise of options described in clause (i)(B), upon conversion of the Existing Preferred Stock or the Existing Warrants (as defined below) or as dividends on the Existing Preferred Stock, since November 30, 1999, no shares of Common Stock or Preferred Stock have been issued. The rights, preferences, privileges and restrictions of the Existing Preferred Stock are as stated in the charter of the Company and such other certificates of designation as have been delivered to Purchaser on or prior to the date hereof. The terms of the Existing Warrants are as stated in the forms of warrants and/or warrant agreements as have been delivered to Purchaser on or prior to the date hereof. The Company has delivered to Purchaser true and correct copies of its charter and by-laws as amended to the date hereof. All of the outstanding shares of capital stock of the Company have been duly authorized, validly issued, and are fully paid and non-assessable and were not issued in violation of any preemptive or similar rights. The Series G Preferred Stock and Warrants, when issued, delivered 3 5 and sold in accordance with this Agreement, the Conversion Shares when issued and delivered in accordance with the terms of the Certificate of Designation and the Warrant Shares when issued and sold in accordance with the terms of the Warrant Agreement, will be duly authorized and validly issued, fully paid and non-assessable, and will not have been issued in violation of or subject to any preemptive or similar rights. (ii) The Company has delivered to Purchaser copies of the 1992 Stock Option Plan, the Long-Term Incentive Plan, the 1997 Stock Option Plan for the Benefit of Employees of Digex, Incorporated and the 1997 Equity Participation Plan for the Benefit of Employees of Digex, Incorporated (collectively referred to as the "Stock Option Plans"). Except as set forth in Schedule 1.I(c), other than (w) the 10,096,491 shares reserved for issuance upon the exercise of options outstanding under the Stock Option Plans, (x) the stock options issued pursuant to the Stock Option Plans, (y) outstanding shares of Existing Preferred Stock convertible into 17,001,314 shares of Common Stock and (z) outstanding warrants to purchase 616,003 shares of Common Stock (the "Existing Warrants"), there are no outstanding subscriptions, options, calls, warrants, rights (including conversion or preemptive rights and rights of first refusal), proxy or stockholder agreements, or agreements of any kind for the purchase or acquisition from the Company or any Subsidiary of any of their securities, nor has the Company taken or agreed to take any action to issue or grant the same. Except as described in this Agreement or set forth on Schedule 1.I(c), (x) there are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any securities of the Company or any voting or equity securities or interests of any Subsidiary, (y) there is no voting trust, proxy, stockholder or other agreements or understandings to which the Company or any of its Subsidiaries or, to the knowledge of the Company, any of its stockholders is a party or is bound with respect to the voting or transfer of the capital stock or other voting securities of the Company or any of its Subsidiaries and (z) there are no other subscriptions, options, calls, warrants or other rights (including registration rights, whether demand or piggyback registration rights), agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Company or any of its Subsidiaries to which the Company or any of its Subsidiaries is a party. Except as set forth on Schedule 1.I(c), the consummation of the transactions contemplated by this Agreement and the other Operative Documents will not trigger the anti-dilution provisions or other price adjustment mechanisms of any outstanding subscriptions, options, calls, warrants, commitments, contracts, preemptive rights, rights of first refusal, demands, conversion rights or other agreements or arrangements of any character or nature whatsoever under which the Company is or may be obligated to issue or acquire shares of any of its capital stock. (c) Except as disclosed on Schedule 1.I(c), all of the outstanding capital stock of, or other ownership interests in, the Subsidiaries are owned by the Company free and clear of any security interest, claim, lien, limitation on voting rights or encumbrance; and all such securities have been duly authorized, validly issued and are fully paid and non-assessable and were not issued in violation of any preemptive or similar rights. Except as disclosed on Schedule 1.I(c), there are not, and will not be as a result of the transactions contemplated hereby, any outstanding subscriptions, 4 6 rights, warrants, calls, commitments of sale or options to acquire or instruments convertible into or exchangeable for, any capital stock or other equity interest of the Company or any Subsidiary (other than the Securities). (d) The Common Stock is registered pursuant to Section 12(g) of the Securities Exchange Act of 1934 (the "Exchange Act") and is listed for quotation on the Nasdaq National Market System ("Nasdaq"), and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or delisting the Common Stock from Nasdaq, nor has the Company received any notification that the Commission or Nasdaq is contemplating terminating such registration or listing. (e) The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under the Operative Documents and to consummate the transactions contemplated hereby and thereby, including, without limitation, the corporate power and authority to issue, sell and deliver the Securities as provided herein and in the other Operative Documents. (f) This Agreement has been duly and validly authorized, executed and delivered by the Company and is the legal, valid and binding agreement of the Company, enforceable against the Company in accordance with its terms subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of equity. (g) The shares of Series G Preferred Stock have been duly and validly authorized for issuance and sale by the Company pursuant to this Agreement and, when issued, delivered and paid for in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable and entitled to the rights, privileges and preferences set forth in the Certificate of Designation, and the issuance of such shares of Series G Preferred Stock will not be subject to any preemptive or similar rights. (h) The Certificate of Designation has been duly authorized by all necessary corporate and any necessary stockholder action and, on the Closing Date, will have been duly executed by the Company and filed with the Secretary of State of the State of Delaware. (i) Each of the Registration Rights Agreement and each Warrant Agreement has been duly and validly authorized by the Company and, when duly executed and delivered by the Company, will be the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of equity and limitations on the validity or enforceability of provisions relating to rights of indemnity and contribution set forth therein. 5 7 (j) The Warrants have been duly and validly authorized for issuance and sale by the Company pursuant to this Agreement and, when issued, delivered and paid for in accordance with this Agreement, will be the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with their terms and entitled to the benefits of the Warrant Agreement, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of equity. (k) The Warrants are exercisable for Warrant Shares in accordance with the terms of the Warrant Agreement and the Series G Preferred Stock is convertible into Conversion Shares in accordance with the terms of the Certificate of Designation. The Warrant Shares and Conversion Shares have been duly authorized for issuance by the Company and, when issued upon exercise of the Warrants in accordance with the terms thereof or upon conversion of, as dividends or distributions on, or as a change of control payment with respect to the Series G Preferred Stock in accordance with the terms thereof, will be validly issued, fully paid and non-assessable, free of any preemptive or similar rights. The Company has reserved sufficient shares of Common Stock for issuance upon the exercise of the Warrants and the conversion of the Series G Preferred Stock (l) Neither the Company nor any Subsidiary is, nor after giving effect to the consummation of the transactions contemplated hereby or by the other Operative Documents will be, (i) in violation of its charter or bylaws, (ii) in default in the performance of any bond, debenture, note, indenture, mortgage, deed of trust or other agreement or instrument to which it is a party or by which it is bound or to which any of its properties is subject, or (iii) in violation of any local, state or federal law, statute, ordinance, rule, regulation, requirement, judgment or court decree applicable to the Company or any Subsidiary or any of their assets or properties (whether owned or leased) other than, in the case of clauses (ii) and (iii), any default or violation that (A) would not reasonably be expected to have a Material Adverse Effect or (B) which is disclosed in the registration statements or reports filed since January 1, 1999 and prior to the date hereof by the Company and the Subsidiaries with the Securities and Exchange Commission (the "Commission") pursuant to the rules promulgated by the Commission under the Securities Act or the Exchange Act (collectively, "SEC Filings") or on Schedule 1.I(l). There exists no condition that, with notice, the passage of time or otherwise, would constitute a default under any such document or instrument, except as would not reasonably be expected to have a Material Adverse Effect or as disclosed or on Schedule 1.I(l). (m) None of (i) the execution, delivery or performance by the Company of this Agreement or the other Operative Documents, (ii) the issuance and sale of the Series G Preferred Stock and Warrants and (iii) the consummation by the Company of the transactions contemplated hereby or by the other Operative Documents violate, conflict with or constitute a breach of any of the terms or provisions of, or a default under (or an event that with notice or the lapse of time, or both, would constitute a default), or require consent under, or result in the imposition of a lien on any properties of the Company or any Subsidiary, or an acceleration of any indebtedness of the Company or any Subsidiary pursuant to, (A) the charter or bylaws of the Company or any 6 8 Subsidiary, (B) any bond, debenture, note, indenture, mortgage, deed of trust, contract or other agreement or instrument to which the Company or any Subsidiary is a party or by which any of them or their properties is or may be bound, (C) any statute, rule or regulation applicable to the Company or any Subsidiary or any of their assets or properties or (D) any judgment, order or decree of any court or governmental agency or authority having jurisdiction over the Company or any Subsidiary or any of their assets or properties, except in the case of clauses (B), (C) and (D) for such violations, conflicts, breaches, defaults, consents, impositions of liens or accelerations that (x) would not singly, or in the aggregate, have a Material Adverse Effect or (y) which are disclosed on Schedule 1.I(m). Other than as described on Schedule 1.I(m), no consent, approval, authorization or order of, or filing, registration, qualification, license or permit of or with, (i) any court or governmental agency, body or administrative agency or (ii) any other person is required for (A) the execution, delivery and performance by the Company of this Agreement or the other Operative Documents, (B) the issuance and sale of the Series G Preferred Stock and Warrants (or the issuance of the Conversion Shares or the Warrant Shares) and (C) the consummation by the Company of the transactions contemplated hereby or by the other Operative Documents, except (x) the filing of a Notification and Report Form by the Company under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (y) such as may be required under the Securities Act and state securities or Blue Sky laws and regulations in connection with compliance by the Company with its obligations under the Registration Rights Agreement or (z) where the failure to obtain any such consent, approval, authorization or order of, or filing, registration, qualification, license or permit would not reasonably be expected to result in a Material Adverse Effect. (n) Except as set forth on Schedule 1.I(n), there is (i) no action, suit or proceeding before or by any court, arbitrator or governmental agency or official, domestic or foreign, pending or, to the best knowledge of the Company or any Subsidiary, threatened or contemplated to which the Company or any Subsidiary is a party or to which the business or property of the Company or any Subsidiary is subject, (ii) no statute, rule, regulation or order that has been enacted, adopted or issued by any governmental agency or that has been proposed by any governmental body or (iii) no injunction, restraining order or order of any nature by a federal or state court or foreign court of competent jurisdiction to which the Company or any Subsidiary is or may be subject or to which the business, assets, or property of the Company or any Subsidiary are or may be subject, that, in the case of clauses (i), (ii) and (iii) above, (w) is required to be disclosed in the SEC Filings and that is not so disclosed, or (x) could reasonably be expected to, individually or in the aggregate, result in a Material Adverse Effect. (o) No action has been taken and no statute, rule, regulation or order has been enacted, adopted or issued by any governmental agency that prevents the issuance of the Series G Preferred Stock or Warrants or the Conversion Shares or Warrant Shares; no injunction, restraining order or order of any kind by a federal or state court of competent jurisdiction has been issued that prevents the issuance of the Series G Preferred Stock or Warrants, or that could reasonably be 7 9 expected to adversely affect the consummation of the transactions contemplated by this Agreement or the other Operative Documents. (p) Except as set forth in the SEC Filings or on Schedule 1.I(p), there is (i) no unfair labor practice complaint pending against the Company or any Subsidiary nor, to the best knowledge of the Company, threatened against any of them, before the National Labor Relations Board, any state or local labor relations board or any foreign labor relations board, and no grievance or significant arbitration proceeding arising out of or under any collective bargaining agreement is so pending against the Company or any Subsidiary nor, to the best knowledge of the Company, threatened against any of them, (ii) no strike, labor dispute, slowdown or stoppage pending against the Company or any Subsidiary nor, to the best knowledge of the Company, threatened against the Company or any Subsidiary and (iii) to the best knowledge of the Company, no union representation question existing with respect to the employees of the Company or any Subsidiary that, in the case of clauses (i), (ii) or (iii) above, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. To the best knowledge of the Company, no collective bargaining organizing activities are taking place with respect to the Company or any Subsidiary. Except as set forth on Schedule 1.I(p), neither the Company nor any Subsidiary has violated (A) any federal, state or local law or foreign law relating to discrimination in hiring, promotion or pay of employees, (B) any applicable wage or hour laws or (C) any provision of the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, "ERISA"), which in the case of clause (A), (B) or (C) above, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Except as set forth on Schedule 1.I(p), with respect to any employee benefit plan, policy, program or arrangement sponsored or maintained by the Company or any subsidiary for the benefit of any of its current or former employees or directors, (x) no event has occurred and no condition exists that would subject the Company or any Subsidiary, either directly or by reason of its affiliation with any member of its controlled group of organizations (within the meaning of sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended (the "Code")) to any tax, fine, lien, penalty or other liability imposed by applicable laws, rules and regulations and (y) no payment of money or other property, or acceleration or provision of any rights or benefits, will be due to any such current or former employee or director as a result of the transaction contemplated by this Agreement, whether or not such payment, acceleration or provision would constitute a parachute payment within the meaning of Section 280G of the Code, which in the case of clause (x) could reasonably be expected to result in a Material Adverse Effect. (q) Neither the Company nor any Subsidiary has (i) violated any environmental, safety or similar law or regulation applicable to it or its business or property relating to the protection of human health and safety, the environment or Hazardous Substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii) lacks any permit, license or other approval required of it under applicable Environmental Laws, (iii) has released, generated or disposed of any pollutant, contaminant, toxic substance, hazardous waste, hazardous material, or hazardous substance, or any 8 10 oil, petroleum or petroleum product, each as defined or listed in, or classified pursuant to, any Environmental Laws ("Hazardous Substance") in a manner which could reasonably be expected to give rise to a liability under or relating to any Environmental Laws or (iv) is violating any term or condition of such permit, license or approval, which in the case of clause (i), (ii), (iii) or (iv) could reasonably be expected to, either individually or in the aggregate, have a Material Adverse Effect. (r) Each of the Company and the Subsidiaries has (i) good and marketable title to all of the properties and assets owned by it, free and clear of all liens, charges, encumbrances and restrictions, except such as are described in the SEC Filings or on Schedule 1.I(r) or as would not have a Material Adverse Effect, (ii) peaceful and undisturbed possession of its properties under all material leases to which it is a party as lessee, (iii) all licenses, certificates, permits, authorizations, approvals, franchises and other rights from, and has made all declarations and filings with, all federal, state and local authorities, all self-regulatory authorities and all courts and other tribunals (each an "Authorization") necessary to engage in the business conducted by it in the manner currently conducted, except as described in the SEC Filings or on Schedule 1.I(r) or where failure to hold such Authorizations would not, individually or in the aggregate, have a Material Adverse Effect and (iv) no reason to believe that any governmental body or agency is considering limiting, suspending or revoking any such Authorization. Except where the failure to be in full force and effect would not, individually or in the aggregate, have a Material Adverse Effect, all such Authorizations are valid and in full force and effect, and each of the Company and the Subsidiaries is in compliance in all material respects with the terms and conditions of all such Authorizations and with the rules and regulations of the regulatory authorities having jurisdiction with respect thereto. All material leases to which the Company or any Subsidiary is a party are valid and binding, and no default by the Company or any Subsidiary has occurred and is continuing thereunder and, to the best knowledge of the Company and the Subsidiaries, no defaults by the landlord are existing under any such lease except for any of the foregoing that could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. (s) Except as described in the SEC Filings or as set forth on Schedule 1.I(r), each of the Company and the Subsidiaries owns, possesses or has the right to employ all patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, software, systems or procedures), trademarks, service marks and trade names, inventions, computer programs, technical data and information (collectively, the "Intellectual Property") necessary for the operation of the Company as now operated by it or as proposed to be operated by it free and clear of and without violating any right, claimed right, charge, encumbrance, pledge, security interest, restriction or lien of any kind of any other person and neither the Company nor any Subsidiary has received any notice of infringement of or conflict with asserted rights of others with respect to any of the foregoing, except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The use of the Intellectual Property in connection with the business and operations of the 9 11 Company and the Subsidiaries does not infringe on the rights of any person, except as could not reasonably be expected to have a Material Adverse Effect. (t) Neither the Company nor any Subsidiary nor, to the best knowledge of the Company, any of their respective officers, directors, partners, employees, agents or affiliates or any other person acting on behalf of the Company or any Subsidiary has, directly or indirectly, given or agreed to give any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business) to any customer, supplier, employee or agent of a customer or supplier, official or employee of any governmental agency (domestic or foreign), instrumentality of any government (domestic or foreign) or any political party or candidate for office (domestic or foreign) or other person who was, is or may be in a position to help or hinder the business of the Company or any Subsidiary (or assist the Company or any Subsidiary in connection with any actual or proposed transaction), which (i) could reasonably be expected to subject the Company or any Subsidiary, or any other individual or entity, to any damage or penalty in any civil, criminal or governmental litigation or proceeding (domestic or foreign), (ii) if not given in the past, could reasonably have been expected to have a Material Adverse Effect or (iii) if not continued in the future, could reasonably be expected to have a Material Adverse Effect. (u) All material tax returns required to be filed by or with respect to the Company and the Subsidiaries in all jurisdictions have been so filed. All material taxes, including withholding taxes, penalties and interest, assessments, fees and other charges due or claimed to be due from such entities or that are due and payable have been paid (whether or not shown on any tax returns), other than those being contested in good faith and for which adequate reserves have been provided or those currently payable without penalty or interest. There are no material proposed additional tax assessments against the Company or the assets or property of the Company or any Subsidiary. There are no liens for taxes on any assets of the Company or any Subsidiary other than for current taxes not yet due and payable. The Company has made adequate (in accordance with generally accepted accounting principles) charges, accruals and reserves in the applicable financial statements included in the SEC Filings in respect of all federal, state, local and foreign income and franchise taxes for all periods presented therein as to which the tax liability of the Company or any of its consolidated Subsidiaries has not been finally determined. (v) Neither the Company nor any Subsidiary is (i) an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended (the "Investment Company Act"), or (ii) a "holding company" or a "subsidiary company" or an "affiliate" of a holding company within the meaning of the Public Utility Holding Company Act of 1935, as amended. (w) Except as disclosed in the SEC Filings or on Schedule 1.I(w), there are no holders of securities of the Company or any Subsidiary who, by reason of the execution by the Company of this Agreement or the consummation by the Company of the transactions contemplated 10 12 hereby, including the filing of any registration statement which the Company may be required to file pursuant to the terms of the Registration Rights Agreement, have the right to request or demand that the Company or any Subsidiary register under the Securities Act or analogous foreign laws and regulations securities held by them, other than such that have been duly waived. (x) Each of the Company and the Subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences therein. (y) Each of the Company and the Subsidiaries maintains insurance covering its properties, operations, personnel and businesses. Such insurance insures against such losses and risks as are adequate in accordance with customary industry practice to protect the Company and the Subsidiaries and their respective businesses. Neither the Company nor any Subsidiary has received notice from any insurer or agent of such insurer that substantial capital improvements or other expenditures will have to be made in order to continue such insurance. All such insurance is outstanding and duly in force on the date hereof, subject only to changes made in the ordinary course of business, consistent with past practice, which do not, singly or in the aggregate, materially alter the coverage thereunder or the risks covered thereby. (z) No registration under the Securities Act of the Series G Preferred Stock or Warrants is required for the sale of the Series G Preferred Stock and Warrants as contemplated hereby or the issuance of the Conversion Shares and the Warrant Shares, as the case may be, upon conversion or exercise thereof by the Purchaser, assuming the accuracy of the representations contained in Section 1.II herein. (aa) Except for liabilities included or reserved for on the audited consolidated balance sheet of the Company included in its Annual Report on Form 10-K for the year ended December 31, 1998 (the "1998 10-K") and the unaudited consolidated balance sheet of the Company included in its Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 (the "September 10-Q") and except as set forth in the SEC Filings or on Schedule 1.I(aa), neither the Company nor any Subsidiary had, and since such date none of them has incurred any liabilities or obligations, direct or contingent, that were, are or will be material, in the aggregate, to the Company and the Subsidiaries taken as a whole. Since December 31, 1998, except for liabilities specifically described in the SEC Filings or as set forth on Schedule 1.I(aa), (i) there has not been, singly or in the aggregate, any Material Adverse Effect or any change or development that could reasonably be expected to result in a Material Adverse Effect; (ii) the Company and its Subsidiaries have carried 11 13 on their respective businesses only in the ordinary and usual course consistent with their past practices and (iii) there has been no dividend or distribution of any kind declared, paid or made by the Company or any Subsidiary on any class of its capital stock. (bb) The Company has filed with the Commission all forms, reports, schedules, proxy statements (collectively, and in each case including all exhibits and schedules thereto and documents incorporated by reference therein, the "Company SEC Reports") required to be filed by the Company with the Commission since January 1, 1997. As of its date of filing, each Company SEC Report complied in all material respects with the requirements of the Exchange Act or the Securities Act and the rules and regulations promulgated thereunder and none of such Company SEC Reports (including any and all financial statements included therein) contained when filed or (except to the extent revised or superceded by a subsequent filing with the SEC prior to the date hereof) contains any untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. Except as set forth on Schedule 1.I(bb), each of the financial statements, together with the related notes, included in the Company SEC Reports complied as to form in all material respects, as of its date of filing with the Commission with all applicable accounting requirements and the published rules and regulations of the Commission with respect thereto and present fairly in all material respects the consolidated financial position of the Company and the Subsidiaries as of and at the dates indicated and the results of their operations and cash flows for the periods specified. Except as set forth on Schedule 1.I(bb), such financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved, except as may be expressly stated in the related notes thereto. (cc) There are no contracts, agreements or understandings between the Company and any other person that would give rise to a valid claim against you or the Company for a brokerage commission, finder's fee or like payment in connection with the issuance, purchase and sale of the Securities, other than with Bear, Stearns & Co. Inc., whose fees shall be paid by the Company. (dd) Each of the Company and the Subsidiaries has implemented Year 2000 compliance programs designed to ensure that its computer systems and applications, databases, automated systems, and other computer and telecommunications equipment owned or leased by the Company or its Subsidiaries and all products and services distributed or sold thereby (collectively, the "Systems") will function properly as to the processing, calculating, comparing, sequencing or the use of date related data beyond 1999. Adequate resources have been allocated for this purpose and the Company's and the Subsidiaries' Year 2000 date conversion programs have been completed on a timely basis, except as would not have a Material Adverse Effect. No fact has come to the Company's attention that causes the Company to believe that there has been or will be any such malfunction in the Systems that could reasonably expected to have a Material Adverse Effect. 12 14 (ee) The Company does not have, and as of the Closing Date will not have, any direct or indirect subsidiaries other than those listed on Annex I and other than those which are not material. No subsidiary of the Company not listed on Annex I is (x) material to the business and operations of the Company or (y) a "significant subsidiary" as defined in Article I, Rule 1-02 of Regulation S-X promulgated pursuant to the Securities Act, as such regulation is in effect on the date hereof. The Company acknowledges that for purposes of the opinions to be delivered pursuant to Section 4 hereof, counsel to the Company will rely upon the accuracy and truth of the foregoing representations and hereby consents to such reliance. II. The Purchaser represents and warrants to, and agrees with, the Company that: (a) The Purchaser has all requisite power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. (b) This Agreement has been duly and validly authorized, executed and delivered by the Purchaser and is the legal, valid and binding agreement of the Purchaser, enforceable against the Purchaser in accordance with its terms subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of equity. (c) No consent, approval, authorization or order of, or filing, registration, qualification, license or permit of or with, (i) any court or governmental agency, body or administrative agency or (ii) any other person is required for (A) the execution, delivery and performance by the Purchaser of this Agreement or any other Operative Document and (B) the consummation by the Purchaser of the transactions contemplated hereby except for the filing of a Notification and Report Form by the Purchaser under the HSR Act. (d) The Purchaser (i) understands that the Series G Preferred Stock and Warrants to be issued pursuant to this Agreement, the Conversion Shares which may be issued upon conversion of the Series G Preferred Stock and the Warrant Shares which may be issued upon exercise of the Warrants have not been registered for sale under any federal or state securities laws and that such Securities are being offered and sold to the Purchaser pursuant to an exemption from registration provided under Section 4(2) of the Securities Act, (ii) agrees that the Purchaser is acquiring such Securities for its own account for investment purposes and without a view to any distribution thereof, (iii) is an "accredited investor" as defined in Regulation D under the Securities Act, (iv) acknowledges that the representations and warranties set forth in this Section 1.II are given with the intention that the Company rely on them for purposes of claiming such exemption, and 13 15 (v) understands that it must bear the economic risk of the investment in such Securities for an indefinite period of time as such Securities cannot be sold unless subsequently registered under such laws or unless an exemption from registration is available. (e) The Purchaser agrees that the Securities issued pursuant to this Agreement will not be sold or otherwise transferred for value unless (i) a registration statement with respect thereto has become effective under the Securities Act, (ii) the sale or transfer is pursuant to Rule 144 under the Securities Act or any similar provision or (iii) the sale or transfer is pursuant to another exemption from registration and, in the case of clause (iii), there is presented to the Company an opinion, reasonably satisfactory to the Company, of counsel reasonably satisfactory to the Company (and the Company hereby acknowledges and agrees that Simpson Thacher & Bartlett is reasonably satisfactory to the Company) that such registration is not required, and the Purchaser consents that any transfer agent of the Company may be instructed not to transfer any such Securities unless it receives satisfactory evidence of compliance with the foregoing provisions. (f) The Purchaser (i) is aware of the Company's business and affairs and financial condition and has acquired sufficient information about the Company and the Subsidiaries to reach an informed and knowledgeable decision to acquire the Securities issued pursuant to this Agreement, (ii) has reviewed the recent SEC Filings, (iii) has discussed the Company and its plans, operations and financial condition with the Company's officers, (iv) has received such information as it has deemed necessary and appropriate to enable it to evaluate the financial risk inherent in making an investment in the Securities, (v) has received satisfactory information concerning the business and financial condition of the Company and the Subsidiaries in response to inquiries in respect thereof, (vi) has sufficient knowledge and experience in financial and business matters and the Internet, technology and telecommunications businesses so as to be capable of evaluating the merits and risks of its investment in the Securities, the exercise of the Warrants or the conversion of the Series G Preferred Stock, and (vii) is capable of bearing the economic risks of such investment, including a complete loss of its investment in the Securities. Notwithstanding the foregoing, all representations and warranties made by the Company in this Agreement will be deemed to have been relied upon by the Purchaser. The Purchaser acknowledges that, for purposes of the opinions to be delivered pursuant to Section 4 hereof, counsel to the Company will rely upon the accuracy and truth of the foregoing representations and hereby consents to such reliance. 2. Purchase, Sale and Delivery of the Series G Preferred Stock and Warrants. (a) On the basis of the representations, warranties, covenants and agreements herein contained, but subject to the terms and conditions herein set forth, the Company agrees to sell to you, or to cause the Selling Subsidiary to sell to you, and you agree to purchase from the 14 16 Company or the Selling Subsidiary, as the case may be, for an aggregate purchase price of $200,000,000 (the "Purchase Price"), 200,000 shares of Series G Preferred Stock and the Warrants to purchase initially 2,000,000 shares of Common Stock (each as more fully described in the second paragraph of this Agreement). (b) Payment of the purchase price for, and delivery of certificates for, the Series G Preferred Stock and Warrants (the "Closing") shall be made at the offices of Kronish Lieb Weiner & Hellman LLP, 1114 Avenue of the Americas, New York, New York 10036, or at such other place as shall be agreed upon by you and the Company, at 10:00 A.M. on the fifth business day following the satisfaction or waiver of the conditions set forth in Section 4 hereof or such other time not later than fifteen business days after such date as shall be agreed upon by you and the Company (such time and date of payment and delivery being herein called the "Closing Date"). Payment of the Purchase Price (subject to Section 8) shall be made to the Company or the Selling Subsidiary, as the case may be, by wire transfer in same day funds, against delivery to you of certificates for the Series G Preferred Stock and Warrants to be purchased. (c) If during the period from the date of this Agreement to the Closing Date (the "Pre-Closing Period") the Company shall take any action which would have resulted in an adjustment pursuant to the provisions in Section 3 of the Certificate of Designation and Section 6 of the Warrant Agreement had the Series G Preferred Stock and Warrants been issued on the date hereof, the Company and the Purchaser shall negotiate in good faith to agree on an appropriate adjustment to the terms of this Agreement or the terms of the Certificate of Designation and the Warrant Agreement, as the case may be, so that the conversion price of the Series G Preferred Stock and the exercise price and/or the number of shares for which the Warrants are then exercisable will be adjusted to provide the Purchaser with such terms that Purchaser would have received if such event had occurred after the Closing. 3. Covenants of the Company and the Purchaser. I. The Company covenants and agrees: (a) To do and perform all things required to be done and performed under this Agreement by it prior to or after the Closing Date and to use its best efforts to satisfy all conditions precedent on its part to the delivery of the Series G Preferred Stock and the Warrants. (b) To comply with the agreements in the Certificate of Designation, the Warrant, the Registration Rights Agreement and any other Operative Documents. (c) Except as otherwise contemplated by the terms of this Agreement and except for changes resulting from the conduct of the business of the Company and the Subsidiaries in the 15 17 ordinary course, during the Pre-Closing Period, the Company shall use commercially reasonable efforts to preserve intact its and its Subsidiaries' current business organizations, keep available the services of their current officers and employees and preserve their relationships with customers, suppliers, licensors, licensees, advertisers, distributors and others having business dealings with them to the end that their goodwill and ongoing businesses shall be unimpaired. Without limiting the generality of the foregoing, during the Pre-Closing Period, each of the Company and its Subsidiaries shall not, without the prior written consent of Purchaser, take any of the actions specified under Section 7 of the Certificate of Designation which would require the consent of the holders of the Series G Preferred Stock if such action were taken immediately following the Closing Date. (d) During the Pre-Closing Period, the Company shall, and shall cause its Subsidiaries, officers, directors, employees, auditors and other agents to, (a) afford the officers, employees, auditors and other agents of Purchaser, during normal business hours reasonable access at all reasonable times to its officers, employees, auditors, legal counsel, properties, offices, plants and other facilities and to all books and records, (b) furnish Purchaser with all financial, operating and other data and information as Purchaser, through its officers, employees or agents, may from time to time reasonably request and (c) afford Purchaser the opportunity to discuss the Company's affairs, finances and accounts with the Company's officers on a regular basis. Any information obtained by the Purchaser and its representatives pursuant to this provision shall be "Evaluation Material" (as defined in the Confidentiality Agreement, dated September 13, 1999, between the Company and Kohlberg Kravis Roberts & Co. L.P. (the "Confidentiality Agreement"). (e) During the period that Purchaser has designees on the Board of Directors of the Company (the "Board"), the Company agrees to maintain Directors and Officers Insurance in the amount of at least $50 million. (f) From and after the Closing, the Company shall at all times reserve and keep available for issuance (a) such reasonable number of authorized shares (until such shares are actually issued as dividends) of Common Stock sufficient for payment of the dividends on the Series G Preferred Stock for a period of five years, (b) a number of shares of Common Stock sufficient for the issuance of the Warrant Shares and (c) such number of its authorized but unissued shares of Common Stock as shall be sufficient to permit the issuance of all of the Conversion Shares. (g) The Company shall promptly make any and all filings which it is required to make under the HSR Act, for the sale of the Series G Preferred Stock, the Warrants, the Conversion Shares and the Warrant Shares and the Company agrees to furnish Purchaser with such necessary information and reasonable assistance as Purchaser may reasonably request in connection with its preparation of any necessary filings or submissions to the Federal Trade Commission ("FTC") or the Antitrust Division of the U.S. Department of Justice (the "Antitrust Division"), including, without limitation, any filings or notices necessary under the HSR Act. Any such actions, if necessary, with 16 18 respect to the conversion of the Conversion Shares and the exercise of the Warrant Shares shall be taken by the Company at such times as Purchaser reasonably shall request. The Company shall, at its own expense, use all reasonable efforts to respond to any request for additional information, or other formal or informal request for information, witnesses or documents which may be made by any governmental authority pertaining to the Company with respect to the sale of the Series G Preferred Stock, the Warrants, the Conversion Shares and the Warrant Shares and shall keep Purchaser fully apprised of its actions with respect thereto. (h) Prior to the Closing, the Company shall take all action necessary to increase the size of the Board by two (2) members (but to no more than ten (10) members) and to elect two (2) designees of the Purchaser (as the holder of the Series G Preferred Stock) to the Board. (i) On or prior to the Closing Date, the Board will adopt a resolution providing that the Purchaser's beneficial ownership of the Series G Preferred Stock, the Warrants, the Conversion Shares and the Warrant Shares shall not result in Purchaser becoming an "Acquiring Person" pursuant to the terms of the Rights Agreement dated as of March 7, 1996, between the Company and Continental Stock Transfer and Trust Company, as amended by Amendment No. 1 dated as of February 20, 1997, and as further amended by Amendment No. 2 dated as of January 27, 1998. (j) Prior to the Closing, the Purchaser shall provide the Company with a proposed reasonable allocation of the Purchase Price between the Series G Preferred Stock and the Warrants and the Company shall agree to such allocation. (k) At any time or from time to time after the date hereof, the parties agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to evidence or effectuate the consummation of the transactions contemplated hereby and to otherwise carry out the intent of the parties hereunder. (l) The Company shall make all necessary applications with all applicable state regulatory authorities within 20 days of the date of this Agreement but in any event prior to the Closing and shall use its best efforts to obtain any necessary approvals of the issuance of the Series G Preferred Stock, the Warrants, the Conversion Shares and the Warrant Shares from all applicable state regulatory authorities. (m) At any time after the Closing, at Purchaser's request, the Company and the Purchaser shall use their best efforts to (a) negotiate in good faith and agree to terms of a new series of preferred stock of the Company and warrants (which terms, in the aggregate, shall be no less favorable to the Company than the terms of the Series G Preferred Stock) and (b) cause a 17 19 recapitalization to be consummated pursuant to which all outstanding shares of Series G Preferred Stock would be exchanged for such new securities. II. The Purchaser covenants and agrees: (a) To do and perform all things required to be done and performed under this Agreement by it prior to the Closing Date and to use its best efforts to satisfy all conditions precedent on its part to the purchase of the Series G Preferred Stock and the Warrants. (b) Purchaser shall promptly make any and all filings which it is required to make under the HSR Act with respect to the purchase of the Series G Preferred Stock, the Warrants, the Conversion Shares and the Warrant Shares and Purchaser agrees to furnish the Company with such necessary information and reasonable assistance as it may request in connection with its preparation of any necessary filings or submissions to the FTC or the Antitrust Division, including, without limitation, any filings or notices necessary under the HSR Act. Purchaser shall, at its own expense, use all reasonable efforts to response promptly to any request for additional information, or other formal or informal request for information, witnesses or documents which may be made by any governmental authority pertaining to Purchaser with respect to the purchase of the Series G Preferred Stock, the Warrants, the Conversion Shares and the Warrant Shares and shall keep the Company fully apprised of its actions with respect thereto. 4. Conditions of the Company's and the Purchaser's Obligations. I. The obligations of the Purchaser to purchase and pay for the Series G Preferred Stock and Warrants, as provided herein, shall be subject to the following conditions: (a) All of the representations and warranties of the Company contained in this Agreement shall be true and correct on the date hereof and on the Closing Date with the same force and effect as if made on and as of the date hereof and the Closing Date, respectively. The Company shall have performed or complied with all of the agreements herein contained and required to be performed or complied with by it at or prior to the Closing Date. (b) No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any governmental agency which would, as of the Closing Date, prevent the issuance of the Securities or which has the effect of rendering it unlawful to consummate the transactions contemplated hereby and by the other Operative Documents; no action, suit or proceeding shall have been commenced and be pending against the Company or any of its subsidiaries before any court or arbitrator or any governmental body, agency or official which seeks 18 20 to prevent the issuance of the Securities, provided that this condition shall not apply if Purchaser or any of its affiliates shall have directly encouraged such action, suit or proceeding. (c) The Purchaser shall have received a certificate, dated the Closing Date, signed on behalf of the Company by each of the Company's Chief Executive Officer and Chief Financial Officer in form and substance reasonably satisfactory to the Purchaser, confirming, as of the Closing Date, the matters set forth in paragraph (a) of this Section 4.I. (d) The Purchaser shall have received on the Closing Date an opinion, dated the Closing Date, in form and substance satisfactory to the Purchaser and counsel to the Purchaser, of Kronish Lieb Weiner & Hellman LLP, counsel for the Company, to the effect set forth in Exhibit A.1 hereto. (e) The Purchaser shall have received on the Closing Date an opinion, dated the Closing Date, in form and substance satisfactory to the Purchaser and counsel to the Purchaser, of Kelley Drye & Warren LLP, special telecommunications counsel for the Company, to the effect set forth in Exhibit A.2 hereto. (f) All notifications required pursuant to the HSR Act, to carry out the transactions contemplated by this Agreement shall have been made, and the applicable waiting period and any extensions thereof shall have expired or been terminated. (g) The Company shall have delivered to the Purchaser an executed counterpart of each Warrant Agreement, substantially in the forms of Exhibits B-1 and B-2, executed warrant certificates in the forms attached to the Warrant Agreement, evidencing the Warrants, and an executed counterpart of the Registration Rights Agreement, substantially in the form of Exhibit C. (h) The Company shall have authorized, executed and filed the Certificate of Designation, substantially in the form of Exhibit D, in accordance with Delaware law and the Purchaser shall have received an original, duly executed copy thereof. (i) The Company shall have taken all actions required by Sections 3.I(h), (i) and (l). (j) The Company shall have paid to Purchaser, or an affiliate of Purchaser designated by Purchaser, the amount provided for in Section 8 hereof. (k) The Alliance Agreement between Microsoft Corporation and Digex, Incorporated shall have been executed and the Purchase Agreement between Microsoft Corporation and Digex, Incorporated pursuant to which Microsoft shall purchase preferred stock and warrants 19 21 to purchase common stock of Digex, Incorporated shall have been executed and the transactions contemplated by such Purchase Agreement shall have been consummated. II. The obligations of the Company to deliver the Series G Preferred Stock and the Warrants as provided herein shall be subject to the following conditions: (a) All the representations and warranties of the Purchaser contained in this Agreement shall be true and correct on the date hereof and on the Closing Date with the same force and effect as if made on and as of the date hereof and Closing Date, respectively. The Purchaser shall have performed or complied with all of the agreements contained herein and required to be performed or complied with by it at or prior to the Closing Date. (b) No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any governmental agency which would, as of the Closing Date, prevent the issuance of the Securities or which has the effect of rendering it unlawful to consummate the transactions contemplated hereby and by the other Operative Documents; no action, suit or proceeding shall have been commenced and be pending against the Company or any of its subsidiaries before any court or arbitrator or any governmental body, agency or official which seeks to prevent the issuance of the Securities, provided that this condition shall not apply if the Company or any of its affiliates shall have directly encouraged such action, suit or proceeding. (c) The Company shall have received a certificate, dated as of the Closing Date, signed on behalf of the Purchaser by an authorized officer of the Purchaser, in form and substance reasonably satisfactory to the Company, confirming as of the Closing Date the matters set forth in paragraph (a) of this Section 4.II. (d) All notifications required pursuant to the HSR Act, to carry out the transactions contemplated by this Agreement shall have been made, and the applicable waiting period and any extensions thereof shall have expired or been terminated. 5. Survival of Representations and Warranties; Indemnities. I. (a) The representations and warranties contained in Sections 1.I(b), (g), (h), (j) and (k) of this Agreement shall survive indefinitely. (b) All other representations and warranties contained in Section 1.I of this Agreement shall survive until the later of (x) the first anniversary of the Closing Date and (y) 30 20 22 days after the filing by the Company of its Annual Report of Form 10-K for the year ended December 31, 2000. (c) The representations and warranties contained in Section 1.II(d) and (f) of this Agreement shall survive until the expiration of the applicable statute of limitations with respect to the subject matter of each such representation or warranty. The remaining representations and warranties contained in Section 1.II of this Agreement shall survive until the later of (x) the first anniversary of the Closing Date, and (y) 30 days after the filing by the Company of its Annual Report of Form 10-K for the year ended December 31, 2000. (d) The representations and warranties contained in Section 1 of this Agreement, and the rights and remedies that may be exercised by any person seeking indemnification hereunder, shall not be limited or otherwise affected by or as a result of any information furnished to, or any investigation made by, any such person or its representatives. (e) For purposes of this Agreement, each statement or other item of information set forth by the Company on any Schedule hereto shall be deemed to be a representation and warranty made by the Company in this Agreement. (f) From and after the Closing Date and subject to Sections 5.I(a), (b), (d), (h) and (j), the Company (the "Purchaser Indemnitor") shall defend, indemnify and hold harmless Purchaser and its Affiliates and each director, officer, member, partner, employee and agent of such Persons (the "Purchaser Indemnitees") against any loss, damage, claim, liability, judgment or settlement of any nature or kind, including all costs and expenses relating thereto, including without limitation, interest, penalties and reasonable attorneys' fees (collectively, "Damages"), arising out of, resulting from or relating to: (x) the breach of any representation or warranty contained in Section 1.I, or any certificate delivered by the Company pursuant hereto; and (y) the breach by the Company of any covenant or agreement (whether to be performed prior to or after the Closing) contained in this Agreement, or any certificate delivered by the Company pursuant hereto. (g) From and after the Closing Date and subject to Sections 5.I(a), (c), (d), (h) and (j), Purchaser (the "Company Indemnitor" and collectively with the Purchaser Indemnitor, the "Indemnitors") shall defend, indemnify and hold harmless the Company and its affiliates and each director, officer, member, partner, employee and agent of such persons (the "Company Indemnitees" and collectively with the Purchaser Indemnitees, the "Indemnitees") against any Damages arising out of, resulting from or relating to: 21 23 (x) the breach of any representation or warranty contained in Section 1.II; and (y) the breach by Purchaser of any covenant or agreement (whether to be performed prior to or after the Closing) contained in this Agreement. (h) An Indemnitor shall not have liability under Section 5.I(f) or 5.I(g) until the aggregate amount of Damages theretofore incurred by the Purchaser Indemnitees or the Company Indemnitees, as applicable, exceeds an amount equal to $6.0 million (the "Deductible"), in which case the Purchaser Indemnitees or the Company Indemnitees, as applicable, shall be entitled to Damages only in the amount by which all Damages exceed the Deductible. The limitations on the indemnification obligations set forth in this clause (h) shall not apply to any covenants or agreements of the parties of this Agreement. In addition, notwithstanding the provisions of the first sentence of this clause (h) above, the limitations on the indemnification obligations of the parties set forth therein shall not apply to breaches of the representations and warranties referred to in Section 5.I(a). (i) The indemnification remedies provided in this Section 5.I shall be exclusive; provided, that nothing herein shall relieve any party from liability in the case of fraud. (j) The indemnification obligations of the parties hereto for any breach of a representation and warranty described in Section 1 of this Agreement shall survive for only the period applicable to such representations and warranties as set forth in Section 5.I(a) of this Agreement, and thereafter all such representations and warranties of the applicable Indemnitor under this Agreement shall be extinguished; provided, however, that such indemnification obligation shall not be extinguished in the event of Damages incurred as a result of an Action that was instituted or begun prior to the expiration of the survival period set forth in Section 5.I(a), (b) or (c) if noticed in writing to the applicable Indemnitor by the applicable Indemnitee within 30 days of such Indemnitee receiving notice thereof. Subject to the proviso at the end of the immediately preceding sentence, no claim for the recovery of such Damages may be asserted by an Indemnitee after such period. II. The Company agrees to indemnify and hold harmless Purchaser, its respective directors and officers and its affiliates (and the directors, officers, partners, affiliates and controlling persons thereof, each, an "Indemnified Party") from and against any and all liability, including, without limitation, all losses, liabilities, damages, deficiencies, obligations, costs, fines and assessments, penalties, claims, actions, injuries, demands, suits, judgments, proceedings, investigations, arbitrations (including stockholder claims, actions, injuries, demands, suits, judgments, proceedings, investigations or arbitrations) and reasonable expenses, including, without limitation, reasonable accountant's and reasonable attorney's fees and expenses not subject to the provisions of Section 5.I above (together the "Losses"), incurred by the Purchaser or an Indemnified Party before or after the date of this Agreement and arising out of or directly resulting from, (i) the operations of the Company, (ii) the Purchaser's purchase and/or any Indemnified Party's ownership 22 24 of the Securities or any shares of Common Stock or other securities of the Company issued with respect thereto, (iii) the transactions contemplated by this Agreement, the Registration Rights Agreement, the Certificate of Designation and the Warrant Agreement, or (iv) any litigation to which the Purchaser or an Indemnified Party is made a party in its capacity as a stockholder or owner of securities (or as partner, director, officer, affiliate or controlling person of the Purchaser) of the Company; provided, that (w) the foregoing indemnification rights in this Section 5.II shall not be available to the extent that any such Losses are incurred as a result of the Indemnified Party's willful misconduct or gross negligence, (x) the indemnification rights set forth in clause (i) of this Section 5.II shall not be available to the extent that any such Losses are incurred as a result of non-compliance by Purchaser and its representatives on the Board with all laws and regulations applicable to them, (y) the indemnification rights set forth in clause (ii) of this Section 5.II shall not be available to the extent that any such Losses are incurred as a result of non-compliance by Purchaser with all laws and regulations applicable to it and (z) the indemnification rights set forth in clause (iii) of this Section 5.II shall not be available to the extent any such Losses are incurred as a result of non-compliance by Purchaser with its obligations under the Operative Documents. For purposes of this Section 5.II, Purchaser and its representatives shall be deemed to have complied with all laws and regulations applicable to them and their obligations under the Operative Documents and each Indemnified Party shall be deemed not to have engaged in willful misconduct or gross negligence absent a final non-appealable judgment of a court of competent jurisdiction to the contrary. 6. Governance Provisions. (a) If at any time there are no longer more than 100,000 shares of Series G Preferred Stock outstanding and (i) at such time, Purchaser and its affiliates hold in the aggregate at least 3,780,000 shares of Common Stock (assuming the conversion of all shares of Series G Preferred Stock held by Purchaser and its affiliates and the exercise of all Warrants held by Purchaser and such affiliates), Purchaser shall have the right to appoint two members of the Board as more fully described in paragraph 7(ii) of the Certificate of Designation, or (ii) at such time, Purchaser and its affiliates hold in the aggregate at least 1,890,000 shares of Common Stock (assuming the conversion of all shares of Series G Preferred Stock held by Purchaser and such affiliates and the exercise of all Warrants held by Purchaser and such affiliates), Purchaser shall have the right to appoint one member of the Board as more fully described in paragraph 7(ii) of the Certificate of Designation. From such time and for so long as Purchaser or any transferee of Purchaser who has received an assignment of rights pursuant to paragraph (c) below shall be entitled to any such rights, the Company shall take such action as may be required under applicable law to cause the Board to consist of not more than ten directors (12 directors if directors have been elected to the Board pursuant to paragraph 7(vi) of the Certificate of Designation), to include in the slate of nominees recommended by the Board the designees of Purchaser and to use its best efforts to cause the election of each such nominee of Purchaser to the Board. In the event that Purchaser has the 23 25 right to elect two nominees to the Board, the Company shall also take such action as may be required under applicable law to cause the Purchaser's nominees to be divided as equally as practicable among each class of directors. In the event that a vacancy is created at any time by the death, disability, retirement, resignation or removal (with or without cause) of any designee of Purchaser, the remaining directors and the Company shall cause the vacancy created thereby to be filled by a new designee of Purchaser as soon as possible, who is designated in the manner specified in this clause (a), and the Company hereby agrees to take, at any time and from time to time, all actions necessary to accomplish the same. For purposes of any measurement of Purchaser's and its affiliates' ownership of Common Stock pursuant to this clause (a), any shares of Series G Preferred Stock, Common Stock or Warrants held by a transferee to whom rights were transferred under clause (c) below shall be included in any such measurement so long as such transferee or subsequent transferee is entitled to retain such right pursuant to clause (c). If at any time Purchaser and its affiliates cease to own at least 3,780,000 shares of Common Stock, upon receipt of written notice from the Chairman of the Board, the term of one of Purchaser's designees on the Board pursuant to this Section 6(a) shall thereupon terminate and such director shall be deemed to have resigned. If at any time Purchaser and its affiliates cease to own at least 1,890,000 shares of Common Stock, upon receipt of written notice from the Chairman of the Board, the term of Purchaser's remaining designee on the Board pursuant to this Section 6(a) shall thereupon terminate and such director shall be deemed to have resigned. The numbers of shares contained in this Section 6(a) shall be adjusted as appropriate to reflect any adjustments pursuant to Section 3 of the Certificate of Designation and Section 6 of the Warrant Agreement. (b) For so long as Purchaser and its affiliates hold in the aggregate at least 1,323,000 shares of Common Stock (assuming conversion of all shares of Series G Preferred Stock held by Purchaser and such affiliates and the exercise of all Warrants held by Purchaser and such affiliates), Purchaser shall also have the rights of the holders of the Series G Preferred Stock described in the last two paragraphs of paragraph 7(ii) and in paragraph 8 of the Certificate of Designation and the Company shall provide such information and access to the Purchaser. All such information provided to Purchaser and its representatives shall be "Evaluation Material" as such term is defined in the Confidentiality Agreement, and notwithstanding any term or other expiration of the obligations contained in the Confidentiality Agreement, shall be subject to Purchaser's obligations of confidentiality set forth in the Confidentiality Agreement for two years following the receipt of such information by Purchaser and its representatives. The numbers of shares contained in this Section 6(b) shall be adjusted as appropriate to reflect any adjustments pursuant to Section 3 of the Certificate of Designation and Section 6 of the Warrant Agreement. (c) No transferee of Purchaser or of any such transferee shall have any rights or obligations under this Section 6, except that if a transferee of Purchaser together with its affiliates acquires from Purchaser and its affiliates Series G Preferred Stock, Common Stock or Warrants representing at least 50% of the shares of Common Stock acquired at the Closing by Purchaser 24 26 (assuming the conversion of the Series G Preferred Stock and the exercise of the Warrants) then, in the sole discretion of Purchaser, Purchaser may assign to such transferee all or a portion of the rights and obligations of Purchaser under Section 6(a) and 6(b) (and such rights shall be further transferable to any further transferee subject to this Section 6(c)). Any such transferee or subsequent transferee shall cease to have the right to elect more than one Board member pursuant to this clause (c) at such time as such transferee or subsequent transferee shall own, together with its affiliates, less than 50% of the shares acquired at the Closing by Purchaser (assuming the conversion of the Series G Preferred Stock and the exercise of the Warrants). Any such transferee or subsequent transferee shall cease to have the rights to elect any Board members pursuant to this clause (c) and the rights described in clause (b) at such time as such transferee or subsequent transferee shall own, together with its affiliates, less than 25% of the shares acquired at the Closing by Purchaser (assuming the conversion of the Series G Preferred Stock and the exercise of the Warrants). At any such time as a transferee's rights to elect members of the Board expires pursuant to this paragraph (c), the term of such transferee's designees on the Board pursuant to this paragraph (c) shall thereupon terminate and such director or directors, as the case may be, shall be deemed to have resigned. The numbers of shares contained in this Section 6(c) shall be adjusted as appropriate to reflect any adjustments pursuant to Section 3 of the Certificate of Designation and Section 6 of the Warrant Agreement. (d) The Company acknowledges that Purchaser may transfer shares of Series G Preferred Stock and retain the right to designate one or two members of the Board under the terms of the Certificate of Designation by agreement with such transferee. (e) The Company shall reimburse each director appointed pursuant to Section 7 of the Certificate of Designation or this Section 6 for his reasonable out-of-pocket expenses incurred by him for the purpose of attending meetings of the Board or any committee of the Board. 7. Effective Date of Agreement; Termination. (a) This Agreement shall become effective upon the execution and delivery of a counterpart hereof by each of the parties hereto. (b) This Agreement may be terminated at any time prior to the Closing: (i) by the mutual written consent of the parties hereto; or (ii) by Purchaser or the Company in the event that prior to the Closing any governmental or regulatory authority shall have issued an order, decree or ruling or taken any other action which has the effect of restraining, enjoining or otherwise prohibiting the transactions contemplated by this 25 27 Agreement and such order, decree, ruling or other action shall have become final and non-appealable; or (iii) by Purchaser or the Company in the event that the Closing has not occurred prior to the earlier of (1) the fifteenth business day following the satisfaction or waiver of all of the conditions to the obligations of the parties set forth in Section 4 or (2) March 31, 2000; provided, however, that the right to terminate this Agreement under this Section 5(b)(iii) shall not be available to any party whose failure to fulfill its obligation to consummate the transactions contemplated hereby upon satisfaction or waiver of all of the conditions to the obligations of the parties set forth in Section 4 or whose non-performance shall have been the cause of, or shall have resulted in, the failure of the Closing to occur on or prior to such date. (c) Any notice of termination pursuant to this Section 5 shall be by telephone, telecopy, telex or telegraph, confirmed in writing by letter. (d) In the event of termination of this Agreement as provided in this Section 5, this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto, provided, however, that nothing herein shall limit the right of any party hereto to seek damages for breach of this Agreement. 8. Expenses. The Company shall bear its own expenses with respect to the transactions contemplated by this Agreement. On the Closing Date, the Company shall pay to the Purchaser or its designees $6 million, reflecting, as Purchaser shall determine in its sole discretion, a transaction fee and expenses payable to consultants, investment bankers, accountants and counsel incurred for the benefit of the Company in connection with the issuance of the Securities. In no event shall any fees be payable pursuant to this Section 8 in the event the Closing does not occur. Purchaser may, at its option, net any such amounts payable to it or its designees under this Section 8 against amounts payable to the Company at the Closing in respect of the Purchase Price. 9. Notices. All communications hereunder, except as may be otherwise specifically provided herein, shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified; (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day; (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) one (1) business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the addresses set forth below: 26 28 (x) if sent to the Purchaser, c/o Kohlberg Kravis Roberts & Co. L.P., 9 West 57th Street, New York, New York 10019, Attention: Alexander Navab, Jr., telecopy number: (212) 750-0003, with a copy to Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York 10017, Attention: David J. Sorkin, telecopy number: (212) 455-2502; and (y) if sent to the Company, to Intermedia Communications Inc., 3625 Queen Palm Drive, Tampa, Florida 33619, Attention: Chief Financial Officer, telecopy number: (813) 774-2470, with a copy to Kronish Lieb Weiner & Hellman LLP, 1114 Avenue of the Americas, 46th Floor, New York, New York 10036, Attention: Ralph J. Sutcliffe, telecopy number: (212) 997-3527. 10. Parties. This Agreement shall inure solely to the benefit of, and shall be binding upon, the Purchasers, the Company and their respective successors and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provision herein contained. The term "successors and assigns" shall not include a purchaser except as expressly contemplated herein, in its capacity as such, of Securities from the Purchaser. This Agreement may not be assigned without the prior written consent of the other party, except that Purchaser may assign its rights and obligations hereunder to any affiliate or affiliates or to any transferee of Purchaser or any subsequent transferee pursuant to Section 6(c). 11. Construction. This Agreement shall be construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed within New York, without giving any effect to any provisions thereof relating to conflicts of law. TIME IS OF THE ESSENCE IN THIS AGREEMENT. 12. Captions. The captions included in this Agreement are included solely for convenience of reference and are not to be considered a part of this Agreement. 13. Counterparts. This Agreement may be executed in various counterparts which together shall constitute one and the same instrument. 14. Entire Agreement. This Agreement and the Exhibits hereto, the other Operative Documents and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein and therein. 15. Severability. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 27 29 16. Amendment and Waiver. This Agreement may be amended or modified, and the rights of the Company or Purchaser hereunder may only be waived, upon the written consent of the Company and Purchaser. 17. No Recourse. Notwithstanding anything that may be expressed or implied in this Agreement, the Company and Purchaser covenant, agree and acknowledge that no recourse under this Agreement or any of the other Operative Documents or any documents or instruments delivered in connection with this Agreement or any of the other Operative Documents shall be had against any current or future director, officer, employee, general or limited partner, member, affiliate or assignee of Purchaser or of any of the foregoing, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law, it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise incurred by any current or future officer, agent or employee of Purchaser or any current or future member of Purchaser or any current or future director, officer, employee, partner, member, affiliate or assignee of any of the foregoing, as such for any obligation of Purchaser under this Agreement, any other Operative Document or any documents or instruments delivered in connection with this Agreement or any other Operative Document for any claim based on, in respect of or by reason of such obligations or their creation. [SIGNATURE PAGE FOLLOWS] 28 30 If the foregoing correctly sets forth the understanding between you and the Company, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement among us. Very truly yours, INTERMEDIA COMMUNICATIONS INC. By: /s/ DAVID C. RUBERG Name: David C. Ruberg Title: President and Chief Executive Officer Accepted as of the date first above written: ICI VENTURES LLC By: /s/ ALEX NAVAB __________________________ Name: Alex Navab Title: President S-1 EX-99.1 7 PRESS RELEASE 1 Exhibit 99.1 Thursday February 17, 3:41 pm Eastern Time Company Press Release Intermedia Successfully Completes KKR Investment Digex Share Offering Declared Effective TAMPA, Fla.--(BUSINESS WIRE)--Feb. 17, 2000--Intermedia Communications Inc. (Nasdaq:ICIX - news) today announced that it has successfully completed the sale of $200 million of convertible preferred stock and warrants to an affiliate of Kohlberg Kravis Roberts & Co. In conjunction with the investment, James H. Greene, Jr. and Alex Navab of KKR have joined Intermedia's Board of Directors. Intermedia and Digex, Incorporated (Nasdaq:DIGX - news) also announced the completion of the sale of 12.65 million shares of Digex common stock at $90.00 per share. 10.65 million shares were sold by Intermedia and 2.0 million shares were issued by Digex. "The investment from KKR is an important strategic milestone for Intermedia," said Robert M. Manning, Intermedia's Chief Financial Officer. "Also, due to strong demand we increased the size of the Digex offering. The successful Digex public offering is a strong endorsement of Digex's leadership position in managed Web hosting. By raising over $1 billion, we have secured long-term funding for Digex and Intermedia and created the ability to reduce Intermedia's debt levels." About Intermedia Intermedia Communications Inc. is one of the nation's fastest growing communications companies and is focused on the next generation of integrated, data-centric solutions for business customers. Intermedia's unique perspective on the dynamic business communications marketplace allows it to tailor a suite of video, voice, data and advanced network services to the individual needs of more than 90,000 small and medium sized business customers. Intermedia's enhanced data portfolio includes the densest frame relay network available, optical networking, a full range of business Internet connectivity and Web hosting services and offers seamless end-to-end service to virtually anywhere in the world. Intermedia is headquartered in Tampa, Florida and can be found at www.intermedia.com. Internet Users: Intermedia news releases, investor contacts and other useful information are available on Intermedia's Web site at www.intermedia.com. To receive news releases by e-mail or to request that information be mailed to you, please visit the Investor Relations section of the Web site, and go to the "Request Information" link. Contact: Intermedia Communications, Tampa Curtis Lightburn, Vice President, Investor Relations 813/829-2403 cglightburn@intermedia.com or Media: Intermedia Communications, Tampa Alan Hill, Director, Public Relations 813/829-4409 jahill@intermedia.com -----END PRIVACY-ENHANCED MESSAGE-----