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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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SHARED TECHNOLOGIES FAIRCHILD INC.
(Name of Subject Company)
SHARED TECHNOLOGIES FAIRCHILD INC.
(Name of Person Filing Statement)
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COMMON STOCK, PAR VALUE $.004 PER SHARE
(Title of Class of Securities)
8189051011
(CUSIP Number of Class of Securities)
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KENNETH M. DORROS, ESQ.
SECRETARY
SHARED TECHNOLOGIES FAIRCHILD INC.
100 GREAT MEADOW ROAD, SUITE 104
WETHERSFIELD, CONNECTICUT 06109
(860) 258-2400
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications
on Behalf of the Person(s) Filing this Statement)
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COPY TO:
JAMES J. CLARK, ESQ.
CAHILL GORDON & REINDEL
80 PINE STREET
NEW YORK, NEW YORK 10005
(212) 701-3000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Shared Technologies Fairchild Inc., a
Delaware corporation (the "Company") or ("STF") and the address of the principal
executive office of the Company is 100 Great Meadow Road, Suite 104,
Wethersfield, CT 06109. The title of the class of equity securities to which
this statement relates is Common Stock, par value $.004 per share, of the
Company (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the tender offer (the "Offer") disclosed in a
Tender Offer Statement on Schedule 14D-1/13D, dated November 26, 1997 (the
"Schedule 14D-1"), of Moonlight Acquisition Corp., a Delaware corporation
("Purchaser") a wholly owned subsidiary of Intermedia Communications Inc., a
Delaware corporation ("Parent" or "Intermedia"), to purchase up to 4,000,000
Shares at a price of $15.00 per Share (such amount, or any greater amount paid
pursuant to the Offer, the "Per Share Amount"), net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set forth
in the Offer to Purchase dated November 26, 1997 (the "Offer to Purchase"), and
the related Letter of Transmittal.
The Offer is being made pursuant to the Agreement and Plan of Merger among
Parent, Purchaser and the Company, dated as of November 20, 1997 (the "Merger
Agreement"). The Merger Agreement provides, among other things, that, upon the
terms and subject to the conditions contained therein, and in accordance with
the General Corporation Law of the State of Delaware ("DGCL"), as promptly as
practicable after the satisfaction or waiver of the conditions contained
therein, and the purchase of Shares pursuant to the Offer, Purchaser will be
merged with and into the Company (the "Merger").
According to the Schedule 14D-1, the address of the principal executive
office of Purchaser and of Parent is 3625 Queen Palm Drive, Tampa, FL 33619.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this statement, are set forth in Item 1 above.
(b) Each material contract, agreement, arrangement and understanding
between the Company or its affiliates and (i) the Company, its executive
officers, directors or affiliates and (ii) the Purchaser, Parent, its
executive officers, directors or affiliates is described below.
MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement.
The summary is qualified in its entirety by reference to the full text thereof
which is incorporated herein by reference and a copy of which is filed hereto as
Exhibit 1.
THE OFFER. The Merger Agreement provides for the making of the Offer.
Without the prior written consent of the Company, Purchaser has agreed that it
will not (i) decrease or change the form of consideration payable in the Offer,
(ii) decrease the number of Shares sought pursuant to the Offer, (iii) impose
additional conditions to the Offer other than those set forth in "Conditions to
the Offer", or (iv) change the conditions of the Offer (provided that Parent or
Purchaser in its sole discretion may waive any such conditions). The obligation
of Purchaser to consummate the Offer and to accept for payment and to pay for
any Shares tendered pursuant to the Offer will be subject only to the conditions
set forth in "Conditions to the Offer". The Offer may not be extended for more
than 20 days beyond its original scheduled expiration date unless any of the
conditions to the Offer shall not have been satisfied, in which case the Offer
shall remain open until such time as all of the conditions to the Offer have
been satisfied; PROVIDED, HOWEVER, in no event will Purchaser be required to
extend the Offer beyond February 28, 1998.
CONDITIONS OF THE OFFER. Notwithstanding any other provision of the Offer,
Purchaser shall not be required to accept for payment or pay for any Shares
tendered pursuant to the Offer, and may terminate or amend the Offer and may
postpone the acceptance for payment of and payment for Shares tendered, if (i)
any applicable waiting period under the Hart-Scott-Rodino Antitrust Act of 1976,
as amended (the "HSR
Act") shall not have expired or not been terminated prior to the expiration of
the Offer or (ii) at any time on or after the date of the Merger Agreement, and
prior to the acceptance for payment of Shares, any of the following conditions
shall exist: (a) any judgment, order, decree, statute, law, ordinance, rule or
regulation entered, enacted, promulgated, enforced or issued by any court or
other governmental entity of competent jurisdiction or other legal restraint or
prohibition shall be in effect preventing the consummation of the Offer; (b) all
necessary consents and approvals of any federal, state or local governmental
authority or any other third party required for the consummation of the Offer
and the transactions contemplated by the Merger Agreement shall not have been
obtained except for such consents and approvals the failure to obtain which
individually or in the aggregate would not have a material adverse effect on the
Surviving Corporation or a Parent Material Adverse Effect (as defined in the
Merger Agreement); (c) any of the representations and warranties of Company set
forth in the Merger Agreement shall not be true and correct as of July 16, 1997
or any of the representations and warranties set forth in Sections 3.2, 3.3,
3.4, 3.10, 3.14, 3.21, 3.22, 3.23 and 3.29 of the Merger Agreement shall not be
true as of the date Parent shall first accept Shares for payment, where the
failure of such representations and warranties to be so true and correct
(without giving effect to any limitation as to "materiality" or "material
adverse effect" set forth therein) has, or is likely to have, individually or in
the aggregate, a Company Material Adverse Effect (as defined in the Merger
Agreement) or cause any material increase in the consideration required to be
paid by Parent and Purchaser effectively to consummate the Offer or the Merger;
(d) the Company shall not have performed any obligation required to be performed
by it under the Merger Agreement as of the date Parent shall first accept Shares
for payment, where the non-performance of such obligation has, or is likely to
have, individually or in the aggregate, a Company Material Adverse Effect or
cause any material increase in the consideration required to be paid by Parent
and Purchaser effectively to consummate the Offer; (e) the Merger Agreement
shall have been terminated in accordance with its terms; or (f) Purchaser and
the Company shall have agreed that Purchaser shall terminate the Offer or
postpone the acceptance for payment of or payment for Shares thereunder; which,
in the reasonable judgment of Purchaser in any such case, and regardless of the
circumstances (including any action or inaction by Parent or any of its
affiliates) giving rise to any such condition, makes it inadvisable to proceed
with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Purchaser and Parent
and may be asserted by Purchaser or Parent regardless of the circumstances
giving rise to any such condition or may be waived by Purchaser or Parent in
whole or in part at any time and from time to time in their sole discretion. The
failure by Parent or Purchaser at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right; the waiver of any such
right with respect to particular facts and other circumstances shall not be
deemed a waiver with respect to any other facts and circumstances; and each such
right shall be deemed an ongoing right that may be asserted at any time and from
time to time.
THE MERGER. The Merger Agreement provides that upon the terms and subject
to the conditions of the Merger Agreement, and in accordance with relevant law,
Purchaser shall be merged with and into the Company as soon as practicable
following the satisfaction or waiver, if permissible, of the conditions to the
Merger. The Company shall be the Surviving Corporation and shall continue its
existence under the laws of Delaware, and the Certificate of Incorporation and
the Bylaws of Purchaser as in effect immediately prior to the Effective Time (as
defined in the Merger Agreement) shall be the Certificate of Incorporation and
Bylaws of the Surviving Corporation (except the name of the Surviving
Corporation shall be Shared Technologies Fairchild, Inc.). The directors of
Purchaser immediately prior to the Effective Time and the officers of the
Company immediately prior to the Effective Time shall be the directors and
officers, respectively, of the Surviving Corporation until their respective
successors are duly elected and qualified. Each share of the common stock of
Purchaser issued and outstanding immediately prior to the Effective Time shall
be converted into and become one share of common stock of the Surviving
Corporation, which will thereupon become a direct wholly owned subsidiary of
Parent. The parties to the Merger Agreement shall cause the Merger to be
consummated by filing with the Secretary of State of the State of Delaware a
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duly executed and verified certificate of merger, as required by the DGCL. The
Merger will become effective upon such filing or at such time thereafter as is
provided under applicable law.
CONSIDERATION TO BE PAID IN THE MERGER. In the Merger, each Share issued
and outstanding immediately prior to the Effective Time (other than Shares held
by Purchaser, Parent or any subsidiary of Purchaser or Parent or in the treasury
of the Company, all of which shall be cancelled, and other than Dissenting
Shares (as defined in the Merger Agreement)) shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the
right to receive in cash an amount per Share (subject to any applicable
withholding tax) equal to $15.00, without interest.
Additionally, each share of the Series D Preferred Stock, par value $.01 per
share (the "Series D Preferred Stock"), Series I 6% Convertible Preferred Stock
(the "Convertible Preferred Stock") and Series J Special Preferred Stock, par
value $.01 per share (the "Special Preferred Stock") (collectively, the
"Preferred Shares") issued and outstanding immediately prior to the Effective
Time (other than the Preferred Shares held by Purchaser, Parent or any
subsidiary of Purchaser or Parent or in the treasury of the Company, all of
which shall be canceled, and other than Dissenting Shares (as defined in the
Merger Agreement)) shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into the right to receive in cash an
amount per Share (subject to any applicable withholding tax) equal to $15.00 per
share of Series D Preferred Stock, $251.21 per share of Convertible Preferred
Stock and $109.44 per share of Special Preferred Stock, without interest.
COMPANY STOCK OPTIONS AND WARRANTS. Prior to the Effective Time, the
Company shall take all actions necessary (and Parent and Purchaser consent to
the taking of such actions) so that all options and warrants outstanding
immediately prior to the Effective Time under any option plan or warrant
including, without limitation, the 1994 Director's Option Plan (with respect to
which the term of office of each director shall be deemed to have been
terminated on May 1, 1998), the 1996 Equity Incentive Plan and Shared
Technologies, Inc.'s 1987 Stock Option Plan (all such warrants and options
collectively, the ("Company Stock Option Plans") shall be cancelled and
terminated at the Effective Time and that each holder of such options and
warrants shall receive in the Merger a cash payment equal to the difference
between (A) the Merger Consideration (as defined in the Merger Agreement) times
the number of Shares subject to such outstanding options or warrants (to the
extent then exercisable at prices not in excess of the Merger Consideration) and
(B) the aggregate exercise price of all such outstanding options and warrants.
From and after the date hereof, no additional options or warrants shall be
granted under the Company Stock Option Plans.
STOCKHOLDER MEETING. The Merger Agreement provides that the Company will,
as soon as practicable following consummation of the Offer, duly call a meeting
of its stockholders for the purpose of adopting the plan of merger contained in
the Merger Agreement and the transactions contemplated thereby. The Merger
Agreement also provides that, subject to the fiduciary duties of its Board of
Directors under applicable law as set forth in a written opinion of outside
counsel, the Company shall recommend that stockholders of the Company vote in
favor of the adoption of the agreement of merger set forth in the Merger
Agreement.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
representations and warranties of the parties thereto. These include
representations and warranties by the Company with respect to corporate
existence and good standing, capital structure, subsidiaries, corporate
authorization, absence of changes, Commission filings, consents and approvals,
no violations of other agreements, investment banking fees and opinions,
employee benefits, labor relations, litigation, taxes, compliance with
applicable laws, intellectual property, real property, insurance, material
contracts, related party transactions, liens, title to and condition of
properties, environmental matters, absence of undisclosed liabilities, pending
transactions, certain indemnification agreements and other matters.
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Purchaser and Parent have also made certain representations and warranties
with respect to corporate existence and good standing, corporate authorization,
Commission filings, consents and approvals, no violations of other agreements,
investment banking fees and other matters.
CONDUCT OF BUSINESS AND OTHER COVENANTS PENDING THE MERGER. Pursuant to the
Merger Agreement, the Company has agreed that during the period from the date of
the Merger Agreement until the Effective Time, except as otherwise consented to
in writing by Purchaser or Parent or as contemplated by the Merger Agreement, it
and each of its respective subsidiaries will carry on its business in the
ordinary course in substantially the same manner as previously conducted.
Specifically, the Company has agreed not to (a) amend its certificate of
incorporation or bylaws, (b) issue or sell any shares of capital stock or
securities convertible into shares of capital stock, subject to certain
exceptions, (c) effect a stock split or declare or make any dividends or other
distribution on any shares of its capital stock, (d) incur or assume any new
debt or make any loans or capital investments in any other person or entity in
excess of $1.0 million, (e) adopt or amend any employee benefit plan or
severance arrangement or increase the compensation of its directors or officers
or employees generally, subject to certain exceptions, (f) enter into, amend,
modify or relinquish any material rights under any material contract, (g) sell,
lease, mortgage, pledge or otherwise dispose of any assets or property other
than in the ordinary course of business, (h) make or commit to make any material
capital expenditure, (i) change its accounting methods, (j) settle any material
claim, (k) amend certain indemnfication agreements relating to the Merger
Agreement or (l) make any election under the Code that would have a material
adverse effect on the Company or the Merger.
Pursuant to the Merger Agreement, Parent will appoint a senior executive as
a management consultant (the "Consultant") to the Company. The Consultant will
liaise directly with the executive officers of the Company and shall be informed
of and participate in all management decisions. As more fully described in the
Merger Agreement, if the Company does not comply with the management decisions
and the recommendations of the Consultant, the Purchaser, under certain
circumstances, may have the right to terminate the Merger Agreement.
Pursuant to the Merger Agreement Parent, Purchaser and the Company have
agreed to use their respective best efforts to take all actions and to do all
things necessary, proper or advisable to consummate the transactions
contemplated by the Merger Agreement.
Parent, Purchaser and the Company have also entered into covenants regarding
the preparation of the Company's proxy statement, press releases, access to
information, notification if any of the representations and warranties are
materially untrue, the designation of the directors of the Company,
indemnification of directors and officers of the Company, fees and expenses
relating to the Merger and stockholder litigation.
NO SOLICITATION. Pursuant to the Merger Agreement, the Company has agreed
that it will not, and it will not permit any of its subsidiaries, officers,
directors, employees, representatives and agents to, directly or indirectly, (i)
solicit any Company Takeover Proposal (as defined below) or (ii) participate in
any discussions or negotiations regarding any Company Takeover Proposal;
PROVIDED, HOWEVER, that if at any time prior to the Company Meeting, the Company
Board determines in good faith, after consultation with outside counsel that it
is necessary to do so in order to comply with its fiduciary duties to the
Company stockholders under applicable law the Company may, in response to a
Company Takeover Proposal that was not solicited, furnish confidential
information with respect to the Company and participate in negotiations
regarding such Company Takeover Proposal. "Company Takeover Proposal" means any
inquiry, proposal or offer from any person relating to any direct or indirect
acquisition or purchase of 20% or more of the assets of the Company or its
subsidiaries or 20% or more of any class of equity securities of the Company or
any of its subsidiaries, any tender offer or exchange offer that if consummated
would result in any person beneficially owning 20% or more of any class of
equity securities of the Company or any of its subsidiaries, any merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving the Company or any of its subsidiaries, other
than the transactions contemplated by the Merger Agreement, or any other
transaction the consummation of which
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would reasonably be expected to impede, interfere with, prevent or materially
delay the Merger or that would reasonably be expected to dilute materially the
benefits to Parent or Purchaser of the transactions contemplated by the Merger
Agreement.
In the event that prior to the Company Meeting (as defined in the Merger
Agreement) the Board of Directors determines in good faith, after consultation
with outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties to the Company's stockholders under applicable law, the Board
of Directors may (subject to this and the following sentences) (x) withdraw or
modify its approval or recommendation of the merger or (y) approve or recommend
a Superior Proposal (as defined below) or terminate the Merger Agreement (and
concurrently with or after such termination, if it so chooses, cause the Company
to enter into any acquisition agreement with respect to a Superior Proposal),
but in each of the cases set forth in this clause (y) until a time that is after
the fifth business day following the Parent's or Purchaser's receipt of written
notice advising Parent or Purchaser that the Company Board has received a
Superior Proposal, specifying the material terms and conditions of such Superior
Proposal and identifying the person making such Superior Proposal, to the extent
that such identification of such person making such proposal does not breach the
fiduciary duties of the Company Board as advised by outside legal counsel. A
"Superior Proposal" means any bona fide proposal made by a third party to
acquire, directly or indirectly, for consideration consisting of cash and/or
securities, more than 50% of the combined voting power of the shares of the
Company's Common Stock and Company preferred stock then outstanding or all or
substantially all the assets of Company and otherwise on terms that the Board of
Directors determines in its good faith judgment to be more favorable to the
Company's stockholders than the Merger.
FEES AND EXPENSES. The Merger Agreement provides that all costs and
expenses incurred in connection with the Merger Agreement and the transactions
contemplated by the Merger Agreement shall be paid by the party incurring such
expenses, except that the Company will be required to pay a termination fee and
reimburse certain expenses of Parent and Purchaser to Parent or Purchaser under
certain circumstances described in "Termination" below.
CONDITIONS TO THE MERGER. Pursuant to the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction
or waiver, prior to the proposed Effective Time, of the following conditions:
(a) the Merger and the Merger Agreement shall have been validly approved and
adopted by the affirmative votes of the holders of a majority of the outstanding
Shares entitled to vote thereon; (b) the waiting period (and any extension
thereof) applicable to the Merger under the HSR Act shall have been terminated
or shall have expired; and (c) no judgment, order, decree, statute, law
ordinance, rule or regulation entered, enacted, promulgated, enforced or issued
by any court legal restraint or prohibition shall be in effect preventing the
consummation of the Offer or the Merger.
The obligations of Purchaser and Parent to effect the Merger are further
subject to the satisfaction or waiver, where permissible, on or prior to the
proposed Effective Time of the following conditions: (a) all of the
representations and warranties of the Company set forth in the Merger Agreement
shall be true and correct as of July 16, 1997, and the representations and
warranties set forth in Sections 3.2, 3.3, 3.4, 3.10, 3.14, 3.21, 3.22, 3.23 and
3.29 of the Merger Agreement shall be true and correct as of the date of the
Merger Agreement and the Closing Date (as defined in the Merger Agreement), as
if made at and as of such time, except where the failure of such representations
and warranties to be so true and correct (without giving effect to any
limitation as to "materiality" or "material adverse effect" set forth therein)
does not have, and is not likely to have, individually or in the aggregate, a
Company Material Adverse Effect or cause any material increase in the
consideration required to be paid by Parent and Purchaser effectively to
consummate the Merger; (b) the Company shall have performed in all material
respects all obligations required to be performed by it under the Merger
Agreement at or prior to the Closing Date; and (c) all necessary consents and
approvals of any federal, state or local governmental authority or any other
third party required for the consummation of the transactions contemplated by
the Merger Agreement shall have been obtained except for such consents and
approvals the failure to obtain which individually or in the aggregate would not
have a material adverse effect on the Surviving Corporation or a Parent Material
Adverse Effect.
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The obligations of the Company to effect the Merger are further subject to
the satisfaction or waiver, where permissible, on or prior to the proposed
Effective Time of the following conditions: (a) the representations and
warranties of Parent and Purchaser set forth herein shall be true and correct
both when made and at and as of the Closing Date, as if made at and as of such
date, except where the failure of such representations and warranties to be so
true and correct (without giving effect to any limitation as to "materiality" or
"material adverse effect" set forth therein) does not have, and is not likely to
have, individually or in the aggregate, a Parent Material Adverse Effect; and
(b) Parent and Purchaser shall have performed in all material respects all
obligations required to be performed by them under the Merger Agreement at or
prior to the Closing Date.
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval by the stockholders of the
Company: (a) by consent of the Boards of Directors of the Company, Parent and
Purchaser; (b) by Parent and Purchaser upon notice to the Company if any
material default under or material breach of any covenant or agreement in the
Merger Agreement by the Company shall have occurred and shall not have been
cured within ten days after receipt of such notice, or any representation or
warranty contained herein on the part of the Company shall not have been true
and correct in any material respect at and as of the date made; (c) by the
Company upon notice to Parent and Purchaser if any material default under or
material breach of any covenant or agreement in the Merger Agreement by Parent
or Purchaser shall have occurred and shall not have been cured within ten days
after receipt of such notice, or any representation or warranty contained herein
on the part of Parent or Purchaser shall not have been true and correct in any
material respect at and as of the date made; (d) by Parent and Purchaser, on the
one hand, or the Company, on the other, upon notice to the other if the Merger
shall not have become effective on or before September 30, 1998, unless such
date is extended by the consent of the Boards of Directors of the Company,
Parent and Purchaser evidenced by appropriate resolutions; PROVIDED, HOWEVER,
that the right to terminate the Merger Agreement under Section 7.1(d) of the
Merger Agreement shall not be available to any party whose failure to fulfill
any obligation under the Merger Agreement has been the cause of, or resulted in,
the failure of the Effective Time to occur on or before such date; (e) by any of
Parent Purchaser and the Company if the approval of the stockholders of the
Company required for consummation of the Merger shall not have been obtained by
reason of the failure to obtain the required vote at a duly held meeting of
stockholders or any adjournment thereof, (f) by Parent or Purchaser, if Section
5.5 of the Merger Agreement shall be breached by the Company or any of its
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative of the Company, in any material
respect and the Company shall have failed promptly to terminate the activity
giving rise to such breach and use best efforts to cure such breach upon notice
thereof from Parent or Purchaser, or the Company shall breach Section 5.5 of the
Merger Agreement by failing to promptly notify Parent or Purchaser as required
thereunder; (g) by Parent or Purchaser if, at any time, (i) the Company shall
have withdrawn or modified in any manner adverse to Parent or Purchaser its
approval or recommendation of the Merger Agreement or the Merger or failed to
reconfirm its recommendation within 15 business days after a written request to
do so, or recommended any Company Takeover Proposal or (ii) the Board of
Directors of Company or any committee thereof shall have resolved to take any of
the foregoing actions; (h) by the Company if it elects to terminate the Merger
Agreement in accordance with Section 5.5(b) of the Merger Agreement; PROVIDED
that it has complied with all provisions thereof, including the notice
provisions therein, and that it complies with applicable requirements relating
to the payment (including the timing of the payment) of the termination fee
required by Section 7.3 of the Merger Agreement; or (i) by Parent or Purchaser
in accordance with the provisions of the last paragraph of Section 5.1 of the
Merger Agreement; provided that it has complied with all provisions thereof,
including the notice provisions therein.
EFFECT OF TERMINATION. In the event of the termination of the Merger
Agreement pursuant to the provisions of Section 7.1, the provisions of the
Merger Agreement (other than Sections 5.10, 7.2, 7.3 and 7.4 thereof) shall
become void and have no effect, with no liability on the part of any party
hereto or its stockholders or directors or officers in respect thereof, except
as set forth in Sections 7.3 and 7.4 of the Merger Agreement PROVIDED that
nothing contained herein shall be deemed to relieve any party of any liability
it may have to any other party with respect to a breach of its obligations under
the Merger Agreement.
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TERMINATION PAYMENT. As compensation for entering into the Merger
Agreement, taking action to consummate the transactions hereunder and incurring
the related costs and expenses related thereto and other losses and damages,
including the foregoing of other opportunities, Company and Parent have agreed
that the Company shall pay to Parent the sum of $10.0 million plus all
reasonably documented out-of-pocket expenses (including, but not limited to, the
reasonable fees and expenses of counsel and its other advisers) of Parent and
Purchaser incurred in connection with the transactions contemplated by the
Merger Agreement (including the preparation and negotiation of the Merger
Agreement) promptly after, but in no event later than two days following,
whichever of the following first occurs: (i) Parent or Purchaser shall have
exercised its right to terminate the Merger Agreement pursuant to (b), (f), (g)
or (i) of the "Termination" section above; or (ii) the Company shall have
exercised its right to terminate the Merger Agreement pursuant to (e) or (h) of
the "Termination" section above. The Company shall not be obligated to make any
such payment if at the time such payment becomes due Parent or Purchaser is in
material breach of its obligations under the Merger Agreement.
Pursuant to the Merger Agreement, Parent has paid to the Company $26,250,000
as a "Good Faith Deposit." The Company has paid from the proceeds of the Good
Faith Deposit an amount equal to $15,000,000 to Tel-Save Holdings, Inc.
("Tel-Save") to satisfy termination fees arising from Company's termination of
the Tel-Save Merger Agreement (the "Tel-Save Merger Agreement"). Company has
paid an amount equal to $11,250,000 to Tel-Save in exchange for the termination
of any options to purchase Company Common Stock held by Tel-Save under that
certain Option Agreement dated as of July 16, 1997 by and between Tel-Save and
Company. In the event that Parent or Purchaser terminates the Merger Agreement
pursuant to Section (a), (b), (f), (g) or (i) of the "Termination" section above
or Company terminates the Merger Agreement other than pursuant to Section (c) or
(d) of the "Termination" section above, then Company must repay all such amounts
to Purchaser.
PARTIES IN INTEREST. Nothing in the Merger Agreement is intended to confer
upon any person, other than the parties thereto, any rights or remedies.
TIMING. The exact timing and details of the Merger will depend upon legal
requirements and a variety of other factors. Although Parent has agreed to cause
the Merger to be consummated on the terms and subject to the conditions set
forth above, there can be no assurance as to the timing of the Merger.
PUBLIC ANNOUNCEMENTS. Parent and the Company agreed to consult with each
other before issuing any press release or otherwise making any public statements
with respect to the Merger Agreement or any transaction contemplated therein and
not to issue any such press release or make any such public statement prior to
such consultation, except as may be required by law.
NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. No
representations, warranties or agreements in the Merger Agreement or in any
instrument delivered by Parent, Purchaser or the Company pursuant to the Merger
Agreement will survive the Merger.
DELAWARE LAW. The Board of Directors of the Company has approved the Merger
Agreement and the transactions contemplated thereby, including the Offer, the
Stock Purchase Agreement and the Merger. Accordingly, the restrictions of
Section 203 of the DGCL do not apply to the transactions contemplated by the
Offer, the Stock Purchase Agreement and the Merger Agreement. Section 203 of the
DGCL prevents an "interested stockholder" (generally, a stockholder owning or
having the right to acquire 15% or more of a corporation's outstanding voting
stock or an affiliate or associate thereof) from engaging in a "business
combination" (defined to include a merger and certain other transactions) with a
Delaware corporation for a period of three years following the date on which
such stockholder became an interested stockholder unless (i) prior to such time,
the corporation's board of directors approved either the business combination or
the transaction which resulted in such stockholder becoming an interested
stockholder, (ii) upon consummation of the transaction which resulted in such
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the corporation's voting stock
7
outstanding at the time the transaction commenced (excluding shares owned by
certain employee stock plans and persons who are directors and also officers of
the corporation) or (iii) at or subsequent to such time the business combination
is approved by the corporation's board of directors and authorized at an annual
or special meeting of stockholders, and not by written consent, by the
affirmative vote of at least 66 2/3% of the outstanding voting stock not owned
by the interested stockholder. As described above, the foregoing description of
Section 203 of the DGCL does not apply to the Offer, the Stock Purchase
Agreement or the Merger.
APPRAISAL RIGHTS. No appraisal rights are available to holders of Shares in
connection with the Offer. However, if the Merger is consummated, holders of
Shares will have certain rights under Section 262 of the DGCL to demand
appraisal of, and payment in cash for the fair value of, their Shares. Such
rights, if the statutory procedures are complied with, could lead to a judicial
determination of the fair value (excluding any element of value arising from
accomplishment or expectation of the Merger) required to be paid in cash to such
holders for their Shares. Any such judicial determination of the fair value of
Shares could be based upon considerations other than or in addition to the Offer
Price and the market value of the Shares, including asset values and the
investment value of the Shares. The value so determined could be more or less
than the Offer Price or the Merger Consideration.
If any holder of Shares who demands appraisal under Section 262 of the DGCL
fails to perfect, or effectively withdraws or loses such stockholder's right to
appraisal, as provided in the DGCL, the Shares of such holder will be converted
into the Merger Consideration in accordance with the Merger Agreement. A
stockholder may withdraw such stockholder's demand for appraisal by delivery to
Purchaser of a written withdrawal of such stockholder's demand for appraisal and
acceptance of the Merger.
Failure to follow the steps required by Section 262 of the DGCL for
perfecting appraisal rights may result in the loss of such rights.
STOCK PURCHASE AGREEMENT
In connection with the execution of the Merger Agreement, Parent, Purchaser
and Company entered into a stock purchase agreement (the "Stock Purchase
Agreement"). The following is a summary of the material terms of the Stock
Purchase Agreement. This summary is not a complete description of the terms and
conditions thereof and is qualified in its entirety by reference to the full
text thereof which is filed hereto as Exhibit 2.
Pursuant to the terms of the Stock Purchase Agreement, Parent purchased all
of the shares of the Convertible Preferred Stock owned by RHI Holdings, Inc.
("RHI") on November 25, 1997, consisting of 250,000 shares of the Convertible
Preferred Stock, for an aggregate purchase price of $62,833,815. The 250,000
shares of the Convertible Preferred Stock which were sold to Parent by RHI
constitute all of the issued and outstanding shares of the Convertible Preferred
Stock.
LOAN AGREEMENT
In connection with the execution of the Merger Agreement, Parent, Purchaser
and Company entered into a loan agreement (the "Loan Agreement"). The following
is a summary of the material terms of the Loan Agreement. This summary is not a
complete description of the terms and conditions thereof and is qualified in its
entirety by reference to the full text thereof which is filed hereto as Exhibit
3.
Pursuant to the terms of the Loan Agreement if the Company elects to redeem
the Special Preferred Stock, Parent will lend to the Company $21,918,000 in
accordance with the terms of the promissory note to be issued by the Company.
Payments of the principal amount on the promissory note shall be made at the
same time and on the same terms as payments of the liquidation preference were
required to be made under the terms of the Special Preferred Stock issued by the
Company. Interest on the promissory note shall accrue and be payable on the same
terms as dividends were payable under the terms of the Special
8
Preferred Stock. In the event that the Company does not elect to redeem the
Special Preferred Stock pursuant to the terms of the Loan Agreement, then all
issued and outstanding shares of the Special Preferred Stock will be redeemed
for cash in the Merger pursuant to the terms of the Merger Agreement. On
November 24, 1997 the Company redeemed the Special Preferred Stock and the
Purchaser loaned the Company $21,899,455 in cash for such redemption.
STOCK OPTION AGREEMENT
Simultaneously with the execution of the Merger Agreement, Parent and
certain investors named therein (the "Investors") entered into a stock option
agreement (the "Stock Option Agreement") pursuant to which Intermedia was
granted irrevocable stock options to purchase from certain investors of the
Company their outstanding common stock of the Company, which together with
shares owned directly by Intermedia gives Intermedia control of approximately
50.7% of the Company's outstanding shares of common stock on a fully diluted
basis. The following is a summary of the material terms of the Stock Option
Agreement. This summary is not a complete description of the terms and
conditions thereof and is qualified in its entirety by reference to the full
text thereof which is filed hereto as Exhibit 4.
OPTION. To induce Parent and Purchaser to enter into the Merger Agreement
and subject to the terms and conditions set forth in the Stock Option Agreement,
each of the Investors has granted Parent its respective Investor option to
purchase its respective Option Shares (as defined in the Stock Option Agreement)
at $15.00 per Share. Parent may assign to any subsidiary or affiliate of Parent
(including Purchaser) the right to exercise the Investor options. Each Investor
option may be exercised individually from each Investor, in whole or in part, at
any time or from time to time, on or after November 20, 1997 and prior to the
close of business on the earlier of (i) the second business day after the
termination of the Merger Agreement; (ii) the Effective Time; and (iii) the date
of the termination of the Stock Option Agreement (such earliest date, the
'Termination Date").
VOTING OF SHARES. Each Investor, until the Termination Date, shall cause
the Shares owned by such Investor to be voted at any meeting of the stockholders
of the Company or in any consent in lieu of such a meeting in favor of the
consummation of the transactions contemplated by the Merger Agreement, against
any transactions inconsistent therewith, and as otherwise reasonably requested
by Purchase in order to carry out the purposes of the Merger Agreement.
IRREVOCABLE PROXY. Each Investor has irrevocably appointed Parent, until
the Termination Date, as its attorney and proxy pursuant to the provisions of
Section 212 of the DGCL, with full power of substitution, to vote and take other
actions (by written consent or otherwise) in favor of the consummation of the
transactions contemplated by the Merger Agreement, against any transactions
inconsistent therewith, and as otherwise reasonably required in order to carry
out the purposes of the Merger Agreement with respect to the Option Shares (and
all other securities issued to such Investor in respect of the Shares) which
each Investor is entitled to vote at any meeting of stockholders of the Company
(whether annual or special and whether or not an adjourned or postponed meeting)
or in respect of any consent in lieu of any such meeting or otherwise. This
proxy and power of attorney is irrevocable and coupled with an interest in favor
of Parent. Each Investor has revoked all other proxies and powers of attorney
with respect to the Option Shares (and all other securities issued to such
Investor in respect of the Option Shares) which it may have heretofore appointed
or granted. No subsequent proxy or power of attorney may be given or written
consent executed (and if given or executed, will not be effective) by the
Investors with respect thereto.
RESTRICTIONS ON TRANSFER. Each Investor has covenanted and agreed that,
until the expiration of the Investor options as provided in the Stock Option
Agreement, except as contemplated by the Stock Option Agreement, the Investor
shall not, and shall not offer or agree to, sell, transfer, tender, assign,
hypothecate or otherwise dispose of, or create or permit to exist any security
interest, lien, claim, pledge, option, right of first refusal, agreement,
limitation on the Investor's voting rights, charge or other encumbrance of any
nature whatsoever with respect to the Option Shares.
9
NO SOLICITATION. Except as provided in the Stock Option Agreement, each
Investor shall not, directly or indirectly, through any agent or representative
or otherwise, (i) solicit, initiate or encourage the submission of any proposal
or offer from any individual, corporation, partnership, limited partnership,
syndicate, person (including, without limitation, a person" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended), trust,
association or entity or government, political subdivision, agency or
instrumentality of a government (collectively, other than Parent and any
affiliate of Parent, a "Person") relating to (a) any acquisition or purchase of
all or any of the Option Shares or (b) any acquisition or purchase of all or any
portion of the assets of, or any equity interest in, the Company or any
subsidiary of the Company or any business combination with the Company or any
subsidiary of the Company or (ii) participate in any negotiations regarding, or
furnish to any Person any information with respect to, or otherwise cooperate in
any way with, or assist or participate or facilitate or encourage, any effort or
attempt by any Person to do or seek any of the foregoing. Each Investor
immediately shall cease and cause to be terminated all existing discussions or
negotiations of the Investor and its agents or other representatives with any
Person conducted heretofore with respect to any of the foregoing. Each Investor
shall notify Parent promptly if any such proposal or offer, or any inquiry or
contact with any Person with respect thereto, is made and shall, in any such
notice to Parent, indicate in reasonable detail the identity of the Person
making such proposal, offer, inquiry or contact and the terms and conditions of
such proposal, offer, inquiry or contact.
SETTLEMENT AGREEMENT
In connection with entering into the Merger Agreement, the Company,
Intermedia, Purchaser, Tel-Save and a wholly owned subsidiary of Tel-Save, have
entered into a Settlement Agreement which provides, among other things, for (i)
a dismissal of the litigation commenced by Intermedia in Chancery Court of
Delaware, New Castle County seeking to enjoin the Tel-Save Merger; (ii) releases
and covenants not to sue in connection with the Merger Agreement and the
termination of the Tel-Save merger agreement; and (iii) an agreement by Tel-Save
that for a period of one year or the earlier termination of the Merger
Agreement, Tel-Save will not to acquire or make any attempts to acquire the
Company. This summary is not a complete description of the terms thereof and is
qualified in its entirety by reference to the full text thereof which is filed
hereto as Exhibit 5.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendations of the Board of Directors.
The Board of Directors has unanimously approved the Merger Agreement and the
transactions contemplated thereby and determined that each of the Offer and the
Merger is fair to, and in the best interests of, the stockholders of the
Company. The Board of Directors unanimously recommends that all holders of
Shares accept the Offer and tender their Shares pursuant to the Offer.
(b) Background: Reasons for the Recommendation.
Since the third quarter of 1996, STF has from time to time explored the
possibility of either a sale of STF or a strategic merger with a third party in
the telecommunications industry.
In the third quarter of 1996, Credit Suisse First Boston Corporation
("CSFB"), acting as financial advisor for STF, arranged for a meeting between
Mr. Autorino, Mr. Ruberg, the Chairman and Chief Executive Officer of Intermedia
and Intermedia's financial advisors, Bear Stearns & Co., to explore the
possibility of a merger transaction. Intermedia entered into a confidentiality
agreement, filed hereto as Exhibit 6 with STF on September 18, 1996 and visited
STF's facilities on a number of occasions.
In discussions with STF, Intermedia raised the possibility of a stock merger
at a ratio of approximately .4 shares of Intermedia common stock for every share
of STF Common Stock. Under the Intermedia proposal, the conversion ratio would
have resulted in an exchange of $12 of Intermedia stock (then trading
10
at $30 per share) for every share of STF Common Stock, with, however, a right on
the part of Intermedia to terminate the transaction if the price of its stock
fell below $25 per share or rose above $35 per share. Given the lack of
substantial liquidity of Intermedia's common stock, Intermedia's highly
leveraged capital structure, and the need to obtain the prior approval of
Intermedia's bondholders, this proposal was deemed unacceptable by
representatives of STF.
On January 22, 1997, a meeting was held between Mr. Autorino and others on
behalf of STF and Mr. Ruberg and others on behalf of Intermedia. At the meeting,
Intermedia revised their proposal such that one-half of the consideration would
be in common stock of Intermedia and one-half in a form of preferred stock, with
the STF Special Preferred held by RHI to be acquired for $10 per share in cash.
Because the preferred stock of Intermedia to be paid to stockholders of STF was
not convertible into common stock, and because of continued concerns regarding
the liquidity of Intermedia's common stock and its highly leveraged capital
structure, the proposal was deemed to be unacceptable by STF.
In March 1997, a discussion took place between Mr. Steiner, Vice-Chairman of
the STF Board and Chairman and Chief Executive Officer of The Fairchild
Corporation ("TFC"), a holder of approximately 40% of the STF Common Stock, and
Mr. Ruberg in which Mr. Steiner invited Intermedia to make a further proposal.
None was made at the meeting or at any time prior to July 14, 1997.
The price of Intermedia's stock experienced volatility during the fourth
quarter of 1996 and the first quarter of 1997. During the fourth quarter of
1996, Intermedia's stock closed as high as $33 3/4 and as low as $21 1/2. During
the first quarter of 1997, it ranged from a high of $26 to a low of $13 7/8 the
price at which it closed on the last day of the quarter.
On January 8, 1997, Mr. Autorino met in Tulsa, Oklahoma with Keith E.
Bailey, Chairman and CEO of The Williams Companies, Inc., corporate parent of
WilTel Communications, LLC ("WilTel"). WilTel entered into a confidentiality
agreement with STF and commenced examination of STF's financial information. Mr.
Autorino indicated to Mr. Bailey that STF was looking for a price in excess of
$10 per share. WilTel made no proposal.
On February 13, 1997, Mr. Autorino met again with Mr. Bailey in Houston,
Texas. Representatives from SG Warburg were also in attendance. No agreement was
reached.
Providence Equity Partners ("Providence") entered into a confidentiality
agreement on June 13, 1997 in order to examine information relating to STF.
Thereafter, in a conversation with Mr. Donald Miller, a director of STF and a
Senior Vice President of TFC, a representative of Providence offered to pay $9
in cash for STF, which price was deemed to be inadequate.
On June 5, 1997, Mr. Daniel Borislow, Chairman and CEO of Tel-Save and Mr.
Edward B. Meyercord, III, Executive Vice President of Tel-Save, met with Mr.
Borer and Mr. Steiner to discuss possible synergies between STF and Tel-Save.
Mr. Borer visited the offices of Tel-Save in New Hope, Pennsylvania on June 9 to
discuss Tel-Save and its business. On June 10, in a conversation with Mr.
Steiner, Mr. Borislow indicated a willingness on the part of Tel-Save to
consider a merger of Tel-Save and STF at a price of $11 per share in Tel-Save
Common Stock. Mr. Steiner expressed his belief that STF might be willing to
consider favorably a transaction with Tel-Save in that price range. Mr. Borislow
indicated that he would contact STF when, and if, Tel-Save was prepared to enter
into further discussions.
On June 12, 1997, a meeting was held at TFC's offices, at which Mr. Steiner,
Mr. Autorino, various other executives and directors from STF and Salomon
Brothers Inc ("Salomon Brothers") discussed the interest of Tel-Save in merging
with STF and other strategic alternatives. Mr. Steiner and Mr. Autorino also
spoke with Mr. Borislow by telephone and discussed further the possibility of a
merger at a price of $11 per share in Tel-Save Common Stock. Mr. Borislow again
indicated that he would contact STF when, and if, Tel-Save was prepared to enter
into further discussions.
11
On July 7, 1997, Tel-Save contacted STF indicating that Tel-Save was
prepared to pursue the earlier discussions. A conference call was held on July
8, 1997 between Mr. Borislow and Mr. Meyercord of Tel-Save and representatives
of STF, including certain executive officers of STF, STF's attorneys and STF's
financial advisor, Salomon Brothers, and certain officers of TFC, to discuss the
possible terms of a merger, but no agreement was reached. Tel-Save and STF
entered into a reciprocal confidentiality agreement on July 11, 1997 in order to
conduct due diligence investigations with respect to each other. discussions
between representatives of Tel-Save and STF continued between July 10 and July
13 on due diligence issues, the terms of a possible transaction and the language
of a possible merger agreement. On July 11, 1997, Mr. Vincent DiVincenzo, STF's
Chief Financial Officer, and Mr. Paul R. Barry, Jr., STF's Senior Vice President
of Business Development, met with Tel-Save employees and representatives from
Salomon Brothers, Deutsche Morgan Grenfell ("DMG"), BDO Seidman, LLP and Arthur
Andersen LLP at the offices of Tel-Save to pursue further due diligence
inquiries regarding Tel-Save and STF.
On the morning of July 14, 1997, in response to trading activity in STF's
common stock, STF publicly announced that it was engaged in discussions
regarding a possible sale or merger of STF. On the afternoon of July 14, Mr.
Autorino received a telephone call from Robert M. Manning, Senior Vice President
and Chief Financial Officer of Intermedia, expressing renewed interest on the
part of Intermedia in a transaction with STF at $12 per share payable in cash.
Mr. Autorino invited representatives of Intermedia to meet with him the next day
in STF's offices in Wethersfield, Connecticut.
On July 15, 1997, Mr. Manning and others from Intermedia met with
representatives of STF in STF's Wethersfield offices. At that time, the
representatives of Intermedia indicated that it would only pay one-half of the
purchase price in cash with the remainder in stock of Intermedia. They also
stated that Intermedia would pay cash for the Special Preferred Stock held by
RHI. Mr. Steiner spoke by telephone with Mr. David C. Ruberg, Chairman and CEO
of Intermedia, who did not attend the meeting in Wethersfield, and inquired
whether any proposal that Intermedia intended to make would be subject to
further due diligence or other conditions. Mr. Ruberg said he did not know but
would call back Mr. Steiner and list all conditions. Mr. Ruberg returned Mr.
Steiner's call, but was unable to state what conditions or contingencies would
be placed on any offer Intermedia might make. He also noted that he would be
unable to attend any meetings.
Later on the evening of July 15, 1997, in the offices of Intermedia's
financial advisor, representatives of Intermedia and STF met again. At that
meeting, Intermedia indicated that it would not pay any portion of the
acquisition price in cash and that the consideration for any merger would be
paid entirely in the stock of Intermedia, and that Intermedia was not willing to
enter into any definitive agreement with STF until the close of trading on July
18, 1997.
On the morning of July 16, 1997, Mr. Borislow telephoned Mr. Autorino and
advised him that the Board of Directors of Tel-Save had voted to approve a
transaction with STF and that he was flying to New York to conclude a deal with
STF. Mr. Borislow indicated that, if no deal were signed with STF on that day,
Tel-Save would terminate all further discussions.
Representatives of STF and Tel-Save met in New York on July 16. STF informed
Tel-Save that it had received an offer from Intermedia and asked Tel-Save to
improve its offer. Tel-Save reiterated its intention to terminate further
discussions if no merger agreement were signed that day. After further
discussion, including discussions with its financial advisor, Salomon Brothers,
Tel-Save indicated that it would pay a minimum price of $11.25 per share of
Tel-Save Common Stock for each share of STF, with a formula that would permit
the price paid to the stockholders of STF to rise by 30% of any amount above $20
at which the Tel-Save shares trade over fifteen consecutive trading days ending
on the trading day three trading days immediately prior to the time of the
merger, while still allowing STF to terminate the merger agreement if the price
of Tel-Save Common Stock fell below $10 per share for any period of twenty
consecutive trading days. The Tel-Save Common Stock closed at $21 per share on
July 16. Representatives of STF also advised Tel-Save that it would only sign an
agreement that contained a satisfactory provisions permitting the STF
12
Board to terminate any merger agreement if it deemed it necessary to do so in
order to fulfill its fiduciary obligations to STF's stockholders. Tel-Save
stated that it would agree to such a provisions in the merger agreement, subject
to certain conditions.
In light of (i) STF's concerns that Intermedia would be unwilling or unable
to conclude a transaction, particularly in light of its inability to reach
agreement on a transaction earlier in the year, its failure to pursue actively a
transaction thereafter and its unwillingness to enter into a definitive
agreement prior to the evening of July 18, and the reasons therefor, (ii) the
continued volatility of Intermedia's stock price, (iii) Intermedia's highly
leveraged capital structure, (iv) the fact that Intermedia's proposal was
subject to uncertain conditions, (v) Tel-Save's stated intention to terminate
its offer if a definitive agreement was not signed on July 16, 1997, (vi) STF's
ability to terminate the merger agreement with Tel-Save if a superior proposal
were made and (vii) the unwillingness of RHI, STF's largest stockholder, to
approve a transaction that did not provide for cash payment of the STF Special
Preferred, STF determined to concentrate its efforts on a transaction with
Tel-Save.
On July 16, 1997, a Special Meeting of the Board of Directors of STF was
held at which recent developments were reviewed. A representative of Salomon
Brothers, in its capacity as a financial advisor to STF, compared the Tel-Save
offer with features of the proposal from Intermedia. Thereafter, representatives
of DMG made a presentation to the Board relating to the fairness of the Tel-Save
offer and the expected synergies from the proposed merger. DMG opined that, as
of that date, the Tel-Save offer was fair to the holders of the common stock of
STF from a financial point of view. At a meeting of the STF Board held on July
16, 1997, the STF Board approved the merger with Tel-Save and STF. On July 16,
1997, Tel-Save and a wholly owned subsidiary of Tel-Save entered into a merger
agreement with STF. STF and Tel-Save subsequently called for special meetings of
their respective shareholders to be held on December 1, 1997 to approve the
merger of STF into the Tel-Save subsidiary.
On Friday, November 14, 1997, Mr. Ruberg of Intermedia telephoned Mr.
DiVincenzo indicating a desire to speak to Mr. Autorino. On November 15, Mr.
Autorino called Mr. Ruberg who advised him of Intermedia's present interest in
acquiring STF. Mr. Autorino told Mr. Ruberg that, pursuant to the terms of the
Tel-Save merger agreement, he was not able to discuss such interest except in
the context of a written offer.
On Monday, November 17, 1997, Mr . Ruberg transmitted to Mr. Autorino a
written offer to acquire STF by means of a merger in which holders of common
stock of STF would receive $15.00 per share in cash, subject to certain terms
and conditions. By its terms, the offer was to expire on November 25 at 8 a.m.
(EST).
On the same day, Intermedia filed a lawsuit in Chancery Court, Delaware
against STF, its directors and Tel-Save, seeking, among other relief, to enjoin
steps to consummate a merger with Tel-Save, captioned INTERMEDIA COMMUNICATIONS,
INC., ET AL. v. SHARED TECHNOLOGIES FAIRCHILD, INC., ET AL., C.A. 10638.
Late in the day on November 17, 1997, the STF Board met with respect to the
Intermedia offer. Consistent with the terms of the Tel-Save merger agreement,
the Board voted to authorize discussions with representatives of Intermedia
concerning its offer and the furnishing of information to them as appropriate.
The Board directed CSFB, as its financial advisor, to explore the conditions to
the Intermedia offer. CSFB telephoned Mr. Ruberg and arranged to meet the next
day.
On November 18, 1997, CSFB and STF's counsel met with Mr. Ruberg and
Intermedia's financial advisor and counsel. Following such meeting, the STF
Board met to hear a report from CSFB and STF's counsel outlining the principal
terms of the Intermedia offer. At the meeting, Mr. Steiner read a letter
addressed to the STF Board from Mr. Borislow of Tel-Save in which Tel-Save
offered to lock in the exchange ratio in the Tel-Save merger agreement at a
fixed level of .575 Tel-Save shares for each STF share. At the then current
price of Tel-Save shares, the revised exchange ratio would result in STF
shareholders receiving $13.23 in Tel-Save stock for each share of STF. Mr.
Borislow also requested the STF
13
Board to agree to amend the merger agreement to eliminate the STF Board's
ability to terminate the merger agreement. He further stated that Tel-Save was
giving the STF Board until the conclusion of its meeting to accept this offer.
Mr. Steiner spoke with both Mr. Ruberg and Mr. Borislow, after the
conclusion of the November 18 STF Board meeting, and arranged to meet with them
the next day. In addition, on the evening of November 18, Mr. Steiner and Donald
Miller, an executive of TFC and a director of STF, met with Mr. Ruberg and
discussed various aspects of the Intermedia proposal with him. On November 19,
1997, Mr. Steiner and Mr. Autorino met separately and jointly with Messrs.
Ruberg and Manning of Intermedia and Mr. Borislow and other representatives of
Tel-Save to explore various alternatives. In the course of these discussions,
Intermedia expressed a willingness to (a) reimburse certain expenses of STF
which would be due Tel-Save in the event of a termination of the Tel-Save merger
agreement; and (b) pay Tel-Save certain sums to purchase certain 12 1/4% Senior
Subordinated Discount Notes Due 2006 of STF held by Tel-Save and for Tel-Save to
agree to amend a Long Distance Agreement entered into by Tel-Save and STF on
November 13, 1997 to permit an early termination thereof without penalty to STF.
On the evening of November 19 and during the day on November 20, 1997,
representatives of Intermedia, STF and Tel-Save met to explore such proposals
and negotiate the terms thereof. On the evening of November 20, 1997, the STF
Board met and, after receiving the oral opinion of CSFB that the revised
Intermedia offer was fair from a financial point of view to the shareholders of
STF (other than Intermedia, TFC and RHI), voted to terminate the Tel-Save merger
agreement and approve the Intermedia merger agreement. The Board also approved
the vesting of certain director stock options; the redemption of the Special
Preferred Stock held by RHI (subject to bank approval) with the proceeds of a
loan made by Intermedia and the waiver of certain transfer restrictions in a
shareholder agreement with Mr. Autorino and a subsidiary of TFC. On the morning
of November 21, 1997, the merger agreement with Intermedia was publicly
announced and the Delaware litigation brought by Intermedia was dismissed with
prejudice.
In reaching its conclusion to approve the Intermedia merger agreement, the
STF Board considered the following material information and factors:
(1) the familiarity of the Board of Directors with STF's business,
financial condition, results of operations, properties and prospects as an
independent entity, and the nature of the industry in which it operates;
(2) the terms and structure of the transaction and the terms and
conditions of the Merger Agreement, particularly that Intermedia was
offering $15.00 in cash and would commence a tender offer almost immediately
for up to 4,000,000 shares of STF Common Stock and that there were fewer
conditions to closing than in the Tel-Save merger agreement;
(3) that the economic terms of the Intermedia proposal were superior to
those offered in the Tel-Save merger agreement and represented a significant
premium to STF's stock price prior to the Intermedia proposal;
(4) the oral opinion of CSFB to the STF Board that, based upon and
subject to certain factors and assumptions, as of such date, the
consideration to be received from Intermedia was fair from a financial point
of view to the holders of STF Common Stock (other than Intermedia, TFC and
RHI);
(5) the ability of STF to consummate the Offer and the Merger without
having to raise additional financing; and
(6) the willingness of TFC and Mr. Autorino to enter into the Stock
Option Agreement.
The foregoing discussion of the information and factors considered and given
weight by the STF Board is not intended to be exhaustive. In view of the wide
variety of factors considered in connection with its evaluation of the Merger,
the STF Board did not find it practicable to and did not attempt to rank or
14
assign relative weights to these factors. In addition, individual members of the
STF Board may have given different weights to different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company has retained CSFB to act as its exclusive financial advisor in
connection with any proposed acquisition of the Company. Pursuant to the
engagement letter between the Company and CSFB, the Company has agreed to pay
CSFB a fee of $5,000,000 for CSFB's financial advisory services. The Company has
agreed to reimburse CSFB for all out-of-pocket expenses incurred by CSFB in
connection with its activities under such engagement letter, including fees and
expenses of CSFB's legal counsel. The Company has agreed to pay DMG $600,000 for
DMG's services in rendering the fairness opinion with respect to the Tel-Save
merger agreement. Salomon Brothers will receive $2,000,000 from the Company for
advisory work performed in connection with the sale of the Company.
Neither the Company nor any person acting on its behalf has employed,
retained or compensated any other person to make solicitations or
recommendations to security holders on its behalf concerning the Offer or the
Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best of the Company's knowledge, no transactions in the Shares
have been effected during the past 60 days by the Company or, to the best of the
Company's knowledge, by any executive officer, director, affiliate or subsidiary
of the Company.
(b) To the best of the Company's knowledge, except for shares the sale of
which may trigger liability for the holder(s) under Section 16 (b) of the
Securities Exchange Act of 1934, as amended, each executive officer, director
and affiliate of the Company currently intends to tender all Shares over which
he or she has sole dispositive power in the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth above in Items 3(b) and 4(b), no negotiation is
being undertaken or is underway by the Company in response to the Offer which
relates to or would result in (i) an extraordinary transaction, such as a merger
or reorganization, involving the Company or any subsidiary of the Company; (ii)
a purchase, sale or transfer of a material amount of assets by the Company or
any subsidiary of the Company; (iii) a tender offer for or other acquisition of
securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company.
(b) Except as set forth above or in Items 3(b) or 4(b) above, there are no
transactions, Board resolutions, agreements in principle or signed contracts in
response to the Offer that relate to or would result in one or more of the
events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
15
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 Agreement and Plan of Merger, dated as of November 20, 1997 among the Company,
Purchaser and the Parent.
Exhibit 2 Stock Purchase Agreement dated as of November 24, 1997 among Parent, RHI
Holdings, Inc. and the Company.
Exhibit 3 Loan Agreement dated as of November 20, 1997 between Purchaser and Company.
Exhibit 4 Stock Option Agreement dated as of November 20, 1997 among Purchaser, Company
and certain Investors named therein.
Exhibit 5 Settlement Agreement dated as of November 20, 1997 among Parent, the Purchaser,
the Company and Tel-Save Holdings, Inc.
Exhibit 6 Confidentiality Agreement dated as of September 18, 1996 among the Parent and
the Company.
Exhibit 7 Fairness Opinion of Credit Suisse First Boston Corporation dated as of November
26, 1997 (included as Annex A hereto).
Exhibit 8 Offer to Purchase.*
Exhibit 9 Letter of Transmittal.*
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* Included in the materials sent to stockholders of the Company
16
ANNEX A
November 26, 1997
The Board of Directors
Shared Technologies Fairchild Inc.
100 Great Meadow Road
Wethersfield, CT 06109
Dear Sirs and Madam:
You have asked us to advise you with respect to the fairness to the stockholders
of Shared Technologies Fairchild Inc. (the "Company"), other than Intermedia
Communications Inc. (the "Acquiror") and The Fairchild Corporation and RHI
Holdings, Inc. (collectively, "Fairchild/RHI"), from a financial point of view,
of the consideration to be received by such stockholders pursuant to the terms
of the Agreement and Plan of Merger, dated as of November 20, 1997 (the "Merger
Agreement"), among the Company, the Acquiror, and Moonlight Acquisition Corp.
(the "Sub"). The Merger Agreement provides, among other things, that (i) the Sub
will commence, as soon as practicable, a cash tender offer to acquire 4,000,000
of the issued and outstanding shares of Company common stock, par value $0.004
per share (the "Common Shares") at a price of $15.00 per Common Share, net to
the seller (the "Offer"); (ii) promptly following the consummation of the Offer,
the Sub will be merged with and into the Company with the Company as the
surviving corporation (the "Merger"); (iii) the Company will become a wholly
owned subsidiary of the Acquiror as a result of the Merger; and (iv) each of the
then outstanding Common Shares will be converted into the right to receive
$15.00 cash.
Immediately prior to the execution of the Merger Agreement, the Acquiror entered
into a stock option agreement (the "Option Agreement") with certain stockholders
of the Company granting the Acquiror an exclusive and irrevocable option to (i)
purchase from Fairchild/RHI (x) 6,225,000 Common Shares at $15.00 net to the
seller in cash per share and (y) 250,000 shares of the Company's Convertible
Preferred Stock at $15.00 multiplied by the number of shares of Common Stock
into which such share of the Company's Convertible Preferred Stock is
convertible; (ii) purchase from Anthony D. Autorino 870,416 Common Shares and
options to purchase 296,667 Common Shares at $15.00 net to the seller in cash
per share; and (iii) purchase from Jeffrey J. Steiner up to 47,500 Common Shares
and options to purchase 116,667 Common Shares at $15.000 net to the seller in
cash per share. The Option Agreement also provides for each stockholder named in
the preceding sentence to irrevocably appoint the Acquiror its attorney and
proxy to, among other things, vote and take other actions in favor of the
consummation of the transactions contemplated by the Merger Agreement. The
shares to which the Acquiror was granted an irrevocable option to purchase under
the Option Agreement, together with the shares owned directly by the Acquiror,
will give the Acquiror control of slightly in excess of 50% of the Company's
common stock on a fully diluted basis.
In arriving at our opinion, we have reviewed certain publicly available business
and financial information relating to the Company, as well as the Merger
Agreement. We have also reviewed certain other information, including financial
forecasts, provided to us by the Company and have met with the Company's
management to discuss the business and prospects of the Company.
We have also considered certain financial and stock market data of the Company,
and we have compared those data with similar data for other publicly held
companies in businesses similar to the Company and we have considered the
financial terms of certain other business combinations and other transactions
which have recently been effected. We also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects.
With respect to the financial forecasts, we have assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the Company's management as to the future financial performance
of the Company. In addition, we have not been requested to make, and have not
made, an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of the Company, nor have we been furnished with any
such evaluations or appraisals. Our opinion is necessarily based upon financial,
economic, market and other conditions as they exist as of the date hereof and as
can be evaluated on the date hereof.
We have acted as financial advisor to the Company in connection with the Merger
and will receive a fee for our services, a significant portion of which is
contingent upon the consummation of the Merger. We will also receive a fee for
rendering this opinion. In the past, we have performed certain investment
banking services for the Company and the Acquiror and have received customary
fees for such services.
In the ordinary course of our business, we and our affiliates may actively trade
the debt and equity securities of both the Company and the Acquiror for our and
such affiliates' own accounts and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
It is understood that this letter is for the information of the Company in
connection with its consideration of the Offer and the Merger, does not
constitute a recommendation to any stockholder as to how such stockholder should
vote on the proposed Merger or whether such stockholder should tender shares
pursuant to the Offer and is not to be quoted or referred to, in whole or in
part, in any registration statement, prospectus or proxy statement, or in any
other document used in connection with the offering or sale of securities, nor
shall this letter be used for any other purposes, without our prior written
consent.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the consideration to be received by the stockholders of the Company in
the Offer and the Merger is fair to such stockholders, other than the Acquiror
and Fairchild/RHI, from a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
NOVEMBER 26, 1997
Dear Stockholders:
I am pleased to inform you that on November 20, 1997, Shared Technologies
Fairchild Inc. entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Intermedia Communications Inc. ("Parent") and Moonlight
Acquisition Corp. ("Purchaser"), a wholly owned subsidiary of Parent, pursuant
to which Purchaser commenced on November 26, 1997 a tender offer for up to
4,000,000 shares of Shared Technologies Common Stock for $15.00 per share in
cash.
Following the completion of the tender offer, upon the terms and subject to
conditions of the Merger Agreement, Purchaser will be merged into Shared
Technologies (the "Merger"), and each share of Shared Technologies Common Stock
will be converted into the right to receive $15.00 in cash, the same price per
share paid pursuant to the tender offer.
Your Board of Directors has unanimously approved the tender offer and the
Merger, has determined that the tender offer and the Merger are fair to, and in
the best interests of Shared Technologies and its stockholders, and recommends
that stockholders accept the tender offer and tender all their shares pursuant
to the offer.
In arriving at its decision, your Board of Directors gave careful
consideration to a number of factors. Among these was the written opinion of
Credit Suisse First Boston Corporation, financial advisor to Shared
Technologies, that, as of the date of such opinion and on the basis of and
subject to the matters set forth therein, the cash consideration to be received
by the holders of Shared Technologies Common Stock in the tender offer and the
Merger was fair, from a financial point of view, to such holders. The opinion of
Credit Suisse First Boston Corporation is attached hereto as Annex A.
Accompanying this letter is a copy of Shared Technologies' Solicitation
Recommendation on Schedule 14D-9, Purchaser's Offer to Purchase and related
materials, including a Letter of Transmittal for use in tendering shares. These
documents set forth the terms and conditions of the tender offer and provide
instructions as to how you may tender your shares. You are urged to read all the
materials carefully and consider all the factors set forth therein before making
a decision with respect to the tender offer.
Sincerely,
Anthony D. Autorino
Chairman and Chief Executive Officer