-----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, Jxn/WbzPYa6F1kWIreXISWxCmG+nTKKzkwBGsHMVu0WOZ4SaYvDfKWBA8FH461qi 26GGpw2jrD9BAOhZUIp6xw== 0001047469-97-006307.txt : 19971201 0001047469-97-006307.hdr.sgml : 19971201 ACCESSION NUMBER: 0001047469-97-006307 CONFORMED SUBMISSION TYPE: SC 14D9 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19971128 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SHARED TECHNOLOGIES FAIRCHILD INC CENTRAL INDEX KEY: 0000817632 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-TELEPHONE INTERCONNECT SYSTEMS [7385] IRS NUMBER: 870424558 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 SEC ACT: SEC FILE NUMBER: 005-40041 FILM NUMBER: 97729856 BUSINESS ADDRESS: STREET 1: 100 GREAT MEADOW RD STREET 2: STE 104 CITY: WETHERSFIELD STATE: CT ZIP: 06109 BUSINESS PHONE: 8602582400 MAIL ADDRESS: STREET 1: 100 GREAT MEADOW ROAD SUITE 104 STREET 2: 100 GREAT MEADOW ROAD SUITE 104 CITY: WETHERSFIELD STATE: CT ZIP: 06109 FORMER COMPANY: FORMER CONFORMED NAME: SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP /CT DATE OF NAME CHANGE: 19960430 FORMER COMPANY: FORMER CONFORMED NAME: SHARED TECHNOLOGIES INC DATE OF NAME CHANGE: 19920703 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SHARED TECHNOLOGIES FAIRCHILD INC CENTRAL INDEX KEY: 0000817632 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-TELEPHONE INTERCONNECT SYSTEMS [7385] IRS NUMBER: 870424558 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 BUSINESS ADDRESS: STREET 1: 100 GREAT MEADOW RD STREET 2: STE 104 CITY: WETHERSFIELD STATE: CT ZIP: 06109 BUSINESS PHONE: 8602582400 MAIL ADDRESS: STREET 1: 100 GREAT MEADOW ROAD SUITE 104 STREET 2: 100 GREAT MEADOW ROAD SUITE 104 CITY: WETHERSFIELD STATE: CT ZIP: 06109 FORMER COMPANY: FORMER CONFORMED NAME: SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP /CT DATE OF NAME CHANGE: 19960430 FORMER COMPANY: FORMER CONFORMED NAME: SHARED TECHNOLOGIES INC DATE OF NAME CHANGE: 19920703 SC 14D9 1 SCHEDULE 14D-9 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 --------------------- SHARED TECHNOLOGIES FAIRCHILD INC. (Name of Subject Company) SHARED TECHNOLOGIES FAIRCHILD INC. (Name of Person Filing Statement) ------------------------ COMMON STOCK, PAR VALUE $.004 PER SHARE (Title of Class of Securities) 8189051011 (CUSIP Number of Class of Securities) ------------------------ 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) ------------------------ COPY TO: JAMES J. CLARK, ESQ. CAHILL GORDON & REINDEL 80 PINE STREET NEW YORK, NEW YORK 10005 (212) 701-3000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 2 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. 3 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 4 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. 5 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. 6 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.*
- ------------------------ * 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 EX-1 2 AGREEMENT & PLAN OF MERGER EXHIBIT 1 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PRIVILEGED AND CONFIDENTIAL AGREEMENT AND PLAN OF MERGER Among INTERMEDIA COMMUNICATIONS INC., MOONLIGHT ACQUISITION CORP. and SHARED TECHNOLOGIES FAIRCHILD INC. Dated November 20, 1997 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TABLE OF CONTENTS PAGE I. THE OFFER...............................................................1 I.1. The Offer.....................................................1 I.2. Company Action................................................2 I.3. Voting of Shares Acquired by Purchaser........................4 II. THE MERGER..............................................................4 II.1. Merger; Surviving Corporation.................................4 II.2. Certificate of Incorporation..................................4 II.3. Bylaws........................................................5 II.4. Directors and Officers........................................5 II.5. Effective Time................................................5 II.6. Conversion of Shares..........................................5 II.7. Purchaser Common Stock........................................7 II.8. Surrender of Shares...........................................7 II.9. Company Stock Options and Warrants............................9 II.10. Good Faith Deposit............................................9 II.11. Termination of the Pledge Agreement...........................9 III. REPRESENTATIONS AND WARRANTIES OF COMPANY............................................................9 III.1. Organization and Qualification................................9 III.2. Capital Stock of Subsidiaries................................10 III.3. Capitalization...............................................10 III.4. Authority Relative to this Agreement.........................11 III.5. No Violations, Etc...........................................12 III.6. Commission Filings; Financial Statements.....................13 III.7. Absence of Changes or Events.................................13 III.8. Proxy Statement..............................................14 III.9. Litigation...................................................14 III.10.Title to and Condition of Properties.........................14 III.11.Contracts and Commitments....................................15 III.12.Labor Matters................................................15 III.13.Compliance with Law..........................................15 III.14.Board Recommendation.........................................16 III.15.Patents and Trademarks.......................................16 III.16.Taxes........................................................16 III.17.Employee Benefit Plans; Erisa................................17 III.18.Environmental Matters........................................21 III.19.Disclosure...................................................22 III.20.Absence of Undisclosed Liabilities...........................22 III.21.Finders or Brokers...........................................22 III.22.State Antitakeover Statutes..................................22 III.23.Opinion of Financial Advisor.................................23 III.24.Insurance....................................................23 III.25.Employment and Labor Contracts...............................23 III.26.Pending Transactions.........................................23 III.27.Indemnification Agreements...................................23 III.28.Indemnified Liabilities......................................24 III.29.Commercial Arrangements with Tel-save Holdings, Inc..........24 -i- PAGE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER.........................................................24 IV.1. Organization and Qualification...............................24 IV.2. Authority Relative to this Agreement.........................25 IV.3. No Violations, Etc. ........................................25 IV.4. Proxy Statement..............................................26 IV.5. Finders or Brokers...........................................26 IV.6. Offer Documents..............................................27 V. COVENANTS...........................................................27 V.1. Conduct of Business of Company Pending the Merger............27 V.2. Preparation of the Proxy Statement; Stockholders Meetings....30 V.3. Additional Agreements; Cooperation...........................31 V.4. Publicity....................................................32 V.5. No Solicitation..............................................32 V.6. Access to Information........................................34 V.7. Notification of Certain Matters..............................34 V.8. Resignation of Directors.....................................35 V.9. Indemnification..............................................35 V.10. Fees and Expenses............................................36 V.11. Stockholder Litigation.......................................36 VI. CONDITIONS..........................................................36 VI.1. Conditions to the Merger.....................................36 VI.2. Conditions to Obligations of Parent..........................37 VI.3. Conditions to Obligations of Company.........................37 VII. TERMINATION, AMENDMENT AND WAIVER............................................................38 VII.1. Termination..................................................38 ViI.2. Effect of Termination........................................39 VII.3. Termination Payment. .......................................39 VII.4 Proceeds of the Good Faith Deposit...........................40 VII.5 Amendment....................................................40 VII.6 Waiver.......................................................41 VIII. GENERAL PROVISIONS........................................................41 VIII.1.Definitions..................................................41 VIII.2.Non-survival of Representations, Warranties and Agreements...44 VIII.3.Notices......................................................44 VIII.4.Severability.................................................45 VIII.5.Miscellaneous................................................46 VIII.6.Specific Performance.........................................46 VIII.7.Waiver of Jury Trial.........................................46 -ii- AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER (the "AGREEMENT") being made and entered into as of this 20th day of November, 1997 by and among INTERMEDIA COMMUNICATIONS INC., a Delaware corporation ("PARENT"), MOONLIGHT ACQUISITION CORP., a Delaware corporation which is wholly owned by Parent ("PURCHASER"), and SHARED TECHNOLOGIES FAIRCHILD INC., a Delaware corporation ("COMPANY"). WHEREAS, the Boards of Directors of Parent, Purchaser and Company have each determined that it is in the best interests of their respective stockholders for Parent to acquire Company upon the terms and subject to the conditions set forth herein; and WHEREAS, in furtherance of such acquisition, it is proposed that Purchaser shall make a cash tender offer (the "OFFER") to acquire 4,000,000 of the issued and outstanding shares of Common Stock, par value $.004 per share, of Company ("COMPANY COMMON STOCK") (shares of Company Common Stock being hereinafter collectively referred to as "SHARES") for $15.00 per Share (such amount being hereinafter referred to as the "PER SHARE OFFER AMOUNT") net to the seller in cash, upon the terms and subject to the conditions of this Agreement and the Offer; and WHEREAS, the Board of Directors of Company (the "BOARD") has unanimously approved the making of the Offer and resolved and agreed to recommend that holders of Shares tender their Shares pursuant to the Offer; and WHEREAS, also in furtherance of such acquisition, the Boards of Directors of Parent, Purchaser and Company have each approved the merger (the "MERGER") of Purchaser with and into Company in accordance with the General Corporation Law of the State of Delaware (the "GCL") and upon the terms and subject to the conditions set forth herein. NOW, THEREFORE, the parties hereto agree as follows: I. THE OFFER I.1. THE OFFER. (a) Provided that this Agreement shall not have been terminated in accordance with Section 7.1 and none of the events set forth in Annex A hereto shall have occurred or be existing, Purchaser shall commence the Offer as promptly as reasonably practicable after the date hereof, but in no event later than five business days after the initial public announcement of Purchaser's intention to commence the Offer. The Offer shall, unless extended as provided below, expire 20 business days after the commencement of the Offer. The obligation of Purchaser to accept for payment and pay for Shares tendered pursuant to the Offer shall be subject to the satisfaction of the conditions set forth in Annex A hereto. The number of Shares that Purchaser will accept in the Offer shall be 4,000,000 Shares. Purchaser expressly reserves the right to waive any such condition, to increase the price per Share payable in the Offer, to increase the maximum number of Shares to be purchased in the Offer and to make any other changes in the terms and conditions of the Offer; PROVIDED, HOWEVER, that, without the consent of Company, no change may be made which decreases the price per Share payable in the Offer, which reduces the maximum number of Shares to be purchased in the Offer or which imposes conditions to the Offer in addition to those set forth in Annex A hereto or modifies such conditions, or which changes the form of consideration payable in the Offer. The Per Share Offer Amount shall, subject to applicable withholding of taxes, be net to the seller in cash, upon the terms and subject to the conditions of the Offer. Subject to the terms and conditions of the Offer, Purchaser shall pay, as promptly as practicable after expiration of the Offer, for all Shares validly tendered and not withdrawn. 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. (b) As soon as reasonably practicable on the date of commencement of the Offer, Purchaser shall file with the Securities and Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 (together with all amendments and supplements thereto, the "SCHEDULE 14D-1") with respect to the Offer. The Schedule 14D-1 shall contain or shall incorporate by reference an offer to purchase (the "OFFER TO PURCHASE") and forms of the related letter of transmittal and any related summary advertisement (the Schedule 14D-1, the Offer to Purchase and such other documents, together with all supplements and amendments thereto, being referred to herein collectively as the "OFFER DOCUMENTS"). Company and its counsel shall be given an opportunity to review the Offer Documents prior to their filing with the SEC. Parent, Purchaser and Company agree to correct promptly any information provided by any of them for use in the Offer Documents which shall have become false or misleading, and Parent and Purchaser further agree to take all steps necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC and the other Offer Documents as so corrected to be disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. -2- I.2. COMPANY ACTION. (a) Company hereby approves of and consents to the Offer and represents that (i) the Board, at a meeting duly called and held on November 20, 1997, has unanimously (A) determined that this Agreement and the transactions contemplated hereby, including each of the Offer and the Merger, are fair to and in the best interests of the holders of Shares, (B) approved and adopted this Agreement and the transactions contemplated hereby and (C) recommended that the stockholders of Company accept the Offer and approve and adopt this Agreement and the transactions contemplated hereby, and (ii) Credit Suisse First Boston Corporation ("FIRST BOSTON") has rendered to the Board its opinion that the consideration to be received by the holders of Shares pursuant to each of the Offer and the Merger is fair to the holders of Shares from a financial point of view, subject to the assumptions and qualifications contained in such opinion, and which shall be confirmed promptly in writing. Company hereby consents to the inclusion in the Offer Documents of the recommendation of the Board described in the immediately preceding sentence. Assuming that neither Parent nor Purchaser are Interested Stockholders (as such term is defined in Section 203 of the GCL) immediately prior to the Board taking the action described in this Section 1.2, the approval set forth in clause (a)(i) shall, among other things, satisfy the restrictions on business combinations contained in Section 203 of the GCL with respect to the transactions contemplated hereby. Company has been advised by each of its directors and executive officers that they intend to vote all Shares beneficially owned by them in favor of the approval and adoption by the stockholders of Company of this Agreement and the transactions contemplated hereby. (b) As soon as reasonably practicable on or after the date of commencement of the Offer, Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all amendments and supplements thereto, the "SCHEDULE 14D-9") containing the recommendation of the Board described in Section 1.2(a) and shall disseminate the Schedule 14D-9 to the extent required by Rule 14d-9 promulgated under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and any other applicable federal securities laws. Company, Parent and Purchaser agree to correct promptly any information provided by any of them for use in the Schedule 14D-9 which shall have become false or misleading, and Company further agrees to take all steps reasonably necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. (c) Company shall promptly furnish Purchaser with mailing labels containing the names and addresses of all record holders of Shares and with security position listings of Shares held in stock depositories, each as of a recent date, together -3- with all other available listings and computer files containing names, addresses and security position listings of record holders and beneficial owners of Shares. Company shall furnish Purchaser with such additional information, including, without limitation, updated listings and computer files of stockholders, mailing labels and security position listings, and such other assistance as Parent, Purchaser or their agents may reasonably request. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer or the Merger, Parent and Purchaser shall hold in confidence the information contained in such labels, listings and files, shall use such information only in connection with the Offer and the Merger, and, if this Agreement shall be terminated in accordance with Section 7.1, shall deliver to Company all copies of such information then in their or their agents' possession. I.3. VOTING OF SHARES ACQUIRED BY PURCHASER. During the period beginning on the date on which the Offer is consummated and ending on the later of (a) the date on which this Agreement is terminated, and (b) the date on which Purchaser receives any regulatory approvals necessary to consummate the Merger (as more fully described in Section 6.2(c)), Purchaser hereby agrees to exercise its voting rights in respect of any Shares it owns for the election of directors to the Board in the same proportion as the voting rights of any Shares not owned by Purchaser have been exercised. II. THE MERGER II.1. MERGER; SURVIVING CORPORATION. In accordance with the provisions of this Agreement and the GCL, at the Effective Time (as such term is defined in Section 2.5; other capitalized terms used herein without definition are defined in Section 8.1), Purchaser shall be merged with and into Company, and Company shall be the surviving corporation (hereinafter sometimes called the "SURVIVING CORPORATION") and shall continue its corporate existence under the laws of the State of Delaware. At the Effective Time the separate corporate existence of Purchaser shall cease. All properties, franchises and rights belonging to Company and Purchaser, by virtue of the Merger and without further act or deed, shall be deemed to be vested in the Surviving Corporation, which shall thenceforth be responsible for all the liabilities and obligations of each of Purchaser and Company. II.2. CERTIFICATE OF INCORPORATION. At the Effective Time, the Certificate of Incorporation of Company shall be the Certificate of Incorporation of the Surviving Corporation; PROVIDED, HOWEVER, that, at the Effective Time, the Certificate of Incorporation of the Surviving Corporation shall be amended -4- in its entirety so that it will read as Purchaser's Certificate of Incorporation, except that the name of the Surviving Corporation shall be "SHARED TECHNOLOGIES FAIRCHILD INC.". As so amended, the Certificate of Incorporation of Company as in effect immediately prior to the Effective Time shall thereafter continue in full force and effect as the Certificate of Incorporation of the Surviving Corporation until further altered or amended as provided therein or by law. II.3. BYLAWS. The Bylaws of Purchaser in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation until altered, amended or repealed as provided therein and in the Certificate of Incorporation of the Surviving Corporation. II.4. DIRECTORS AND OFFICERS. The Directors of Purchaser prior to the Effective Time shall be the directors of the Surviving Corporation. The officers of Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation. Each of such directors and officers shall hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation. II.5. EFFECTIVE TIME. The Merger shall become effective at the time of filing of a certificate of merger with the Secretary of State of the State of Delaware in accordance with the provisions of Sections 251 or 253, as the case may be, of the GCL (the "CERTIFICATE OF MERGER"), or at a later time specified as the effective time in the Certificate of Merger, which Certificate of Merger shall be so filed as soon as practicable after the meeting of stockholders contemplated in Section 5.2 and the satisfaction or, if permissible, waiver of the conditions set forth in Article VI. The date and time when the Merger shall become effective are referred to herein as the "EFFECTIVE TIME." Contemporaneously with such filing, a closing shall be held at the offices of Kronish, Lieb, Weiner & Hellman LLP, 1114 Avenue of the Americas, New York, New York 10036, or such other place as shall be agreed to by the parties, for the purpose of confirming the satisfaction or waiver, as the case may be, of the conditions set forth in Article VI. II.6. CONVERSION OF SHARES. (a) Each issued and outstanding share of Company Common Stock immediately prior to the Effective Time (other than shares of Company Common Stock to be cancelled as set forth in Section 2.6(b) and 2.6(c)) shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into, exchanged for and represent the right to receive an amount equal to $15.00 per Share (the "PER SHARE AMOUNT") in cash (the "SHARES CONSIDERATION"), payable, without interest, to the holder of such Share, upon surrender, in the manner described below, of the certificate that formerly evidenced such Share. -5- (b) Each Share and Preferred Share (as defined below) issued and outstanding immediately prior to the Effective Time which is then owned beneficially or of record by Parent or any Subsidiary of Parent shall, by virtue of the Merger and without any action on the part of the holder thereof, be cancelled and retired and cease to exist, without any conversion thereof. (c) Each Share and Preferred Share (as defined below) held in Company's treasury immediately prior to the Effective Time shall, by virtue of the Merger, be cancelled and retired and cease to exist, without any conversion thereof. (d) Each issued and outstanding share of Series D Preferred Stock, par value $.01 per share (the "SERIES D STOCK"), Series I 6% Cumulative Convertible Preferred Stock, par value $.01 per share (the "CONVERTIBLE PREFERRED STOCK"), and Series J Special Preferred Stock, par value $.01 per share (the "SPECIAL PREFERRED STOCK"), of Company (all such shares of Preferred Stock being hereafter collectively referred to as the "PREFERRED SHARES") immediately prior to the Effective Time (other than the Preferred Shares to be cancelled as set forth in Section 2.6(b) and 2.6(c)) shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into, exchanged for and represent the right to receive an amount equal to $15.00 per share of the Series D Stock, $251.21 per share of the Convertible Preferred Stock and $109.44 per share of the Special Preferred Stock (all such amounts collectively, the "PREFERRED PER SHARE AMOUNT") in cash (the "PREFERRED SHARES CONSIDERATION"; the Shares Consideration and the Preferred Shares Consideration collectively, the "MERGER CONSIDERATION"), payable, without interest, to the holder of such Preferred Share, upon surrender in the manner described above of the certificate that formerly evidenced such Preferred Share. (e) Notwithstanding anything in this Section 2.6 to the contrary, Shares which are issued and outstanding immediately prior to the Effective Time and which are held by any stockholder of Company who has not voted such shares in favor of the Merger and who shall have properly exercised its rights of appraisal for such shares in the manner provided by the GCL (the "DISSENTING SHARES") shall not be converted into or be exchangeable for the right to receive the Merger Consideration, unless and until such holder shall have failed to perfect or shall have effectively withdrawn or lost his right to appraisal and payment, as the case may be. If such holder shall have so failed to perfect or shall have effectively withdrawn or lost such right, his shares shall thereupon be deemed to have been converted into and to have become exchangeable for, at the Effective Time, the right to receive the Merger Consideration, without any interest thereon. Company shall give Parent prompt -6- notice of any Dissenting Shares (and shall also give Parent prompt notice of any withdrawals of such demands for appraisal rights) and Parent shall have the right to direct all negotiations and proceedings with respect to any such demands. Neither Company nor the Surviving Corporation shall, except with the prior written consent of Parent, voluntarily make any payment with respect to, or settle or offer to settle, any such demand for appraisal rights. Stockholders of Company who shall have perfected their right of appraisal and not withdrawn or otherwise lost such right of appraisal, shall be entitled to receive payment of the appraised value of the shares of Company Common Stock held by them in accordance with the provisions of Section 262 of the GCL. II.7. PURCHASER COMMON STOCK. Each share of common stock of Purchaser issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of Purchaser or the holder thereof, be converted into and become one fully paid and nonassessable share of common stock of the Surviving Corporation. From and after the Effective Time, each outstanding certificate theretofore representing shares of Purchaser common stock shall be deemed for all purposes to evidence ownership of and to represent the number of shares of Surviving Corporation common stock into which such shares of Purchaser common stock shall have been converted. Promptly after the Effective Time, the Surviving Corporation shall issue to Parent a stock certificate or certificates representing 100 shares of Surviving Corporation common stock in exchange for the certificate or certificates that formerly represented shares of Purchaser common stock, which shall be surrendered by Parent and cancelled. II.8. SURRENDER OF SHARES. (a) Prior to the Effective Time, Parent shall make available, by transferring to the Exchange Agent for the benefit of the stockholders of Company, such amount of cash as shall be payable in exchange for outstanding Shares or Preferred Shares pursuant to Section 2.6 hereof. Such funds shall be invested by the Exchange Agent as directed by Parent, PROVIDED that such investments shall be in obligations of or guaranteed by the United States of America or of any agency thereof and backed by the full faith and credit of the United States of America, or in deposit accounts, certificates of deposit or banker's acceptances of, repurchase or reverse repurchase agreements with, or Eurodollar time deposits purchased from, commercial banks with capital, surplus and undivided profits aggregating in excess of $50 million (based on the most recent financial statements of such bank which are then publicly available at the SEC or otherwise). (b) As soon as practicable after the Effective Time, the Exchange Agent shall mail to each holder of record (other than to holders of Shares or Preferred Shares to be cancelled -7- as set forth in Section 2.6(b) or 2.6(c) or Dissenting Shares) of a certificate or certificates that immediately prior to the Effective Time represented outstanding Shares or Preferred Shares (the "CERTIFICATES") (I) a form letter of transmittal (which shall be in customary form and shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Exchange Agent) and (II) instructions for effecting the surrender of the Certificates in exchange for the Merger Consideration. (c) Upon surrender of a Certificate for cancellation to the Exchange Agent, together with such letter of transmittal, duly executed, and such other agreements as the Exchange Agent shall reasonably request, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration, and the Certificate so surrendered shall forthwith be cancelled. Until surrendered as contemplated by this Section 2.8, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive the Merger Consideration with respect to the Shares or Preferred Shares formerly represented thereby. No interest shall accrue or be paid on the Merger Consideration payable upon the surrender of any Certificate. (d) Any amounts of cash delivered or made available to the Exchange Agent pursuant to this Section 2.8 and not exchanged for Certificates within six months after the Effective Time pursuant to this Section 2.8 shall be returned by the Exchange Agent to Parent, which thereafter shall act as Exchange Agent subject to the rights of holders of unsurrendered Certificates under this Article II. Thereafter such holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat and other similar laws) only as general creditors thereof with respect to any Merger Consideration that may be payable upon due surrender of the Certificates held by them. Notwithstanding the foregoing, neither the Surviving Corporation nor the Exchange Agent shall be liable to any holder of Shares or Preferred Shares for any Merger Consideration delivered in respect of such Share or Preferred Share to a public official pursuant to any abandoned property, escheat or other similar law. (e) If any payment of the Merger Consideration is to be made to a person other than that in which the Certificate surrendered is registered, it shall be a condition of payment that the Certificate so surrendered shall be properly endorsed or otherwise in proper form for transfer and that the person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of the Certificate surrendered or establish -8- to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable. (f) After the Effective Time, there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the Shares or Preferred Shares which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates representing such shares are presented to the Surviving Corporation, they shall be cancelled and exchanged for the Merger Consideration as provided in this Article II. II.9. COMPANY STOCK OPTIONS AND WARRANTS. Prior to the Effective Time, 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 Per Share Amount times the number of Shares subject to such outstanding options or warrants (to the extent then exercisable at prices not in excess of the Per Share Amount) 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. II.10. GOOD FAITH DEPOSIT. Concurrently with the execution and delivery of this Agreement, Purchaser shall pay to Company $26,250,000 (the "GOOD FAITH DEPOSIT"). The proceeds of the Good Faith Deposit shall be disbursed in accordance with Section 7.4. II.11. TERMINATION OF THE PLEDGE AGREEMENT. If the Merger is consummated, then Parent and Purchaser shall terminate the Pledge Agreement, and the Pledge Agent shall return to RHI any collateral which has been pledged pursuant to the Pledge Agreement. III. REPRESENTATIONS AND WARRANTIES OF COMPANY Company hereby makes the following representations and warranties to Parent and Purchaser, which representations and warranties (except for those contained in Sections 3.2, 3.3, 3.4, 3.10, 3.14, 3.21, 3.22, 3.23 and 3.29) shall be deemed to have been made on July 16, 1997: -9- III.1. ORGANIZATION AND QUALIFICATION. Each of Company and its subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Each of Company and its subsidiaries is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties owned or leased or the nature of its activities makes such qualification necessary, except for failures to be so qualified or in good standing which would not, individually or in the aggregate, have a material adverse effect on the general affairs, management, business, operations, condition (financial or otherwise) or prospects of Company and its subsidiaries taken as a whole (a "COMPANY MATERIAL ADVERSE EFFECT"). Section 3.1 of the Disclosure Statement sets forth, with respect to Company and each of its subsidiaries, the jurisdictions in which they are qualified or otherwise licensed as a foreign corporation to do business. Neither Company nor any of its subsidiaries is in violation of any of the provisions of its Certificate of Incorporation (or other applicable charter document) or Bylaws. Company has delivered to Parent accurate and complete copies of the Certificate of Incorporation (or other applicable charter document) and Bylaws, as currently in effect, of each of Company and its subsidiaries. III.2. CAPITAL STOCK OF SUBSIDIARIES. The only direct or indirect subsidiaries of Company are those listed in Section 3.2 of the Disclosure Statement previously delivered by Company to Parent (the "DISCLOSURE STATEMENT"). Company is directly or indirectly the record (except for directors' qualifying shares) and beneficial owner (including all qualifying shares owned by directors of such subsidiaries as reflected in Section 3.2 of the Disclosure Statement) of all the outstanding shares of capital stock of each of its subsidiaries, there are no proxies with respect to such shares, and no equity securities of any of such subsidiaries are or may be required to be issued by reason of any options, warrants, scrip, rights to subscribe for, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of any capital stock of any such subsidiary, and there are no contracts, commitments, understandings or arrangements by which any such subsidiary is bound to issue additional shares of its capital stock or securities convertible into or exchangeable for such shares. Other than as set forth in Section 3.2 of the Disclosure Statement, all of such shares so owned by Company are validly issued, fully paid and nonassessable and are owned by it free and clear of any claim, lien or encumbrance of any kind with respect thereto. Except as disclosed in Section 3.2 of the Disclosure Statement, Company does not directly or indirectly own any interest in any -10- corporation, partnership, joint venture or other business association or entity. III.3. CAPITALIZATION. The authorized capital stock of Company consists of 50,000,000 shares of Company Common Stock, and 25,000,000 shares of preferred stock, $.01 par value per share, of which 1,000,000 shares have been designated Series D Stock, 250,000 shares have been designated Convertible Preferred Stock, and 200,000 shares have been designated Special Preferred Stock. As of the close of business on November 20, 1997, 17,187,605 shares of Company Common Stock were issued and outstanding. All of such issued and outstanding shares are validly issued, fully paid and nonassessable and free of preemptive rights. As of November 20, 1997, (x) 2,051,364 shares of Company Common Stock were reserved for issuance upon exercise of outstanding options and 4,244,740 shares of Company Common Stock were reserved for issuance upon exercise of outstanding convertible preferred securities and (y) 1,873,550 shares of Company Common Stock were reserved for issuance upon exercise of the warrants, all of which warrants, options and Company Stock Option Plans are listed and described in Section 3.3 of the Disclosure Statement. Other than the Company Stock Option Plans and the warrants, Company has no other plan which provides for the grant of options or warrants to purchase shares of capital stock, stock appreciation or similar rights or stock awards. Except as set forth above, there are not now, and at the Effective Time, except for shares of Company Common Stock issued after the date hereof upon the conversion of convertible securities and the exercise of warrants and options outstanding on the date hereof or pursuant to Company's 401(k) Plan, there will not be, any shares of capital stock of Company issued or outstanding or any subscriptions, options, warrants, calls, claims, rights (including without limitation any stock appreciation or similar rights), convertible securities or other agreements or commitments of any character obligating Company to issue, transfer or sell any of its securities. Company has paid all dividends payable through November 28, 1997 in respect of each of the Series D Preferred Stock and the Convertible Preferred Stock. III.4. AUTHORITY RELATIVE TO THIS AGREEMENT. Company is a corporation duly organized, validly existing and in good standing under the laws of Delaware. Company has full corporate power and authority to execute and deliver this Agreement and to consummate the Merger and other transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the consummation of the Merger and other transactions contemplated hereby and thereby have been duly and validly authorized by the Board of Directors of Company and no other corporate proceedings on the part of Company are necessary to authorize this Agreement or to consummate the Merger or other transactions contemplated hereby or thereby (other than, -11- with respect to the Merger, the approval of Company's stockholders pursuant to Section 251(c) of the GCL). This Agreement has been duly and validly executed and delivered by Company and, assuming the due authorization, execution and delivery hereof by Parent and Purchaser, constitutes a valid and binding agreement of Company, enforceable against Company in accordance with its terms, except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors' rights generally or by general equitable or fiduciary principles. III.5. NO VIOLATIONS, ETC. (a) Assuming that all filings, permits, authorizations, consents and approvals or waivers thereof have been duly made or obtained as contemplated by Section 3.5(b) hereof, except as listed in Section 3.5 of the Disclosure Statement, neither the execution and delivery of this Agreement by Company nor the consummation of the Merger or other transactions contemplated hereby or thereby nor compliance by Company with any of the provisions hereof will (i) violate, conflict with, or result in a breach of any provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination or suspension of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of Company or any of its subsidiaries under, any of the terms, conditions or provisions of (x) their respective charters or bylaws, (y) except as set forth in Section 3.5 of the Disclosure Statement, any note, bond, mortgage, indenture or deed of trust, or (z) any license, lease, agreement or other instrument or obligation to which Company or any such subsidiary is a party or to which they or any of their respective properties or assets may be subject, or (ii) subject to compliance with the statutes and regulations referred to in the next paragraph, violate any judgment, ruling, order, writ, injunction, decree, statute, rule or regulation applicable to Company or any of its subsidiaries or any of their respective properties or assets, except, in the case of clauses (i), (z) and (ii) above, for such violations, conflicts, breaches, defaults, terminations, suspensions, accelerations, rights of termination or acceleration or creations of liens, securities interests, charges or encumbrances which would not, individually or in the aggregate, either have a Company Material Adverse Effect or materially impair Company's ability to consummate the Merger or other transactions contemplated hereby. (b) No filing or registration with, notification to and no permit, authorization, consent or approval of any governmental entity (including, without limitation, any federal, state or local regulatory authority or agency) is required by -12- Company in connection with the execution and delivery of this Agreement or the consummation by Company of the Merger or other transactions contemplated hereby or thereby, except (i) in connection with the applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), (ii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, (iii) the approval of Company's stockholders pursuant to the GCL, (iv) filings with applicable state public utility commissions identified in Section 2.5 of the Disclosure Statement, (v) filings with the SEC and (vi) such other filings, registrations, notifications, permits, authorizations, consents or approvals the failure of which to be obtained, made or given would not, individually or in the aggregate, either have a Company Material Adverse Effect or materially impair Company's ability to consummate the Merger or other transactions contemplated hereby or thereby. (c) Company and its subsidiaries are not in violation of or default under, except as set forth in Section 3.5 of the Disclosure Statement, (x) any note, bond, mortgage, indenture or deed of trust, or (y) and license, lease, agreement or other instrument or obligation to which Company or any such subsidiary is a party or to which they or any of their respective properties or assets may be subject, except, in the case of clauses (x) and (y) above, for such violations or defaults which would not, individually or in the aggregate, either have a Company Material Adverse Effect or materially impair Company's ability to consummate the Merger or other transactions contemplated hereby. It is understood that Company has certain covenants in its bank facilities which Company from time to time may violate and that such violations shall not be deemed a breach so long as Company promptly seeks, and in a reasonable period time obtains, waivers of such violations from the lenders under such facilities (unless such lenders have accelerated the indebtedness under such facilities). III.6. COMMISSION FILINGS; FINANCIAL STATEMENTS. Company has filed all forms, reports, schedules, statements and other documents required to be filed by it since December 31, 1994 (as supplemented and amended since the time of filing collectively, the "SEC REPORTS") with the SEC, each of which complied when filed in all material respects with all applicable requirements of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "SECURITIES ACT") and the Exchange Act. The audited consolidated financial statements and unaudited consolidated interim financial statements of Company and its subsidiaries included or incorporated by reference in such SEC Reports have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and present fairly, in all material respects, the financial position and results of -13- operations and cash flows of Company and its subsidiaries on a consolidated basis at the respective dates and for the respective periods indicated (and in the case of all such financial statements that are interim financial statements, contain all adjustments so to present fairly). None of the SEC Reports contained at the time filed any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. III.7. ABSENCE OF CHANGES OR EVENTS. Except as set forth in Section 3.7 of the Disclosure Statement and in Company's Form 10-K for the fiscal year ended December 31, 1996, as filed with the SEC, since December 31, 1996, Company and its subsidiaries have not incurred any material liability, except in the ordinary course of their businesses consistent with their past practices, and there has not been any change, or any event involving a prospective change, in the business, financial condition or results of operations of Company or any of its subsidiaries which has had, or is reasonably likely to have, a Company Material Adverse Effect and Company and its subsidiaries have conducted their respective businesses in the ordinary course consistent with their past practices. III.8. PROXY STATEMENT. None of the information supplied or to be supplied by or on behalf of Company for inclusion or incorporation by reference in the proxy statement, in definitive form, relating to Company Stockholder Meeting (as hereinafter defined), or in the related proxy and notice of meeting, or soliciting material used in connection therewith (referred to herein collectively as the "PROXY STATEMENT") will, at the dates mailed to stockholders and at the time of Company Stockholder Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Proxy Statement (except for information relating solely to Parent and Purchaser) will comply as to form in all material respects with the provisions of the Securities Act and the Exchange Act and the rules and regulations promulgated thereunder. III.9. LITIGATION. Except as set forth in Section 3.9 of the Disclosure Statement, there is no (i) claim, action, suit or proceeding pending or, to the best knowledge of Company or any of its subsidiaries, threatened against or relating to Company or any of its subsidiaries before any court or governmental or regulatory authority or body or arbitration tribunal, or (ii) outstanding judgment, order, writ, injunction or decree, or application, request or motion therefor, of any court, governmental agency or arbitration tribunal in a proceeding to -14- which Company, any subsidiary of Company or any of their respective assets was or is a party except, in the case of clauses (i) and (ii) above, such as would not, individually or in the aggregate, either have a Company Material Adverse Effect or materially impair Company's ability to consummate the Merger. III.10. TITLE TO AND CONDITION OF PROPERTIES. Except as set forth in Section 3.10 of the Disclosure Statement, Company and its subsidiaries have good title to all of the real property and own outright all of the personal property (except for leased property or assets) which is reflected on Company's and its subsidiaries' December 31, 1996 audited consolidated balance sheet contained in Company's Form 10-K for the fiscal year ended December 31, 1996 filed with the SEC except for property since sold or otherwise disposed of in the ordinary course of business and consistent with past practice. III.11. CONTRACTS AND COMMITMENTS. Other than as disclosed in Section 3.11 of the Disclosure Statement, no existing material contract or material commitment of Company or any of its subsidiaries, or as to which any thereof is a party or their respective assets are bound, contains an agreement with respect to any change of control that would be triggered by the Merger. Other than as set forth in Section 3.11 of the Disclosure Statement, neither this Agreement, the Merger nor the other transactions contemplated hereby will result in any outstanding loans or borrowings by Company or any subsidiary of Company becoming due, going into default or giving the lenders or other holders of debt instruments the right to require Company or any of its subsidiaries to repay all or a portion of such loans or borrowings; provided that it is expressly understood and agreed that Company is not making any representations or warranties with respect to the effect of the financial condition or results of operation of Parent and Purchaser. III.12. LABOR MATTERS. Each of Company and its subsidiaries is in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, and neither Company nor any of its subsidiaries is engaged in any unfair labor practice. There is no labor strike, slowdown or stoppage pending (or, to the best knowledge of Company, any labor strike or stoppage threatened) against or affecting Company or any of its subsidiaries. No petition for certification has been filed and is pending before the National Labor Relations Board with respect to any employees of Company or any of its subsidiaries who are not currently organized. III.13. COMPLIANCE WITH LAW. Except for matters set forth in Section 3.13 of the Disclosure Statement, neither Company nor any of its subsidiaries has violated or failed to -15- comply with any statute, law, ordinance, regulation, rule or order of any foreign, federal, state or local government or any other governmental department or agency, or any judgment, decree or order of any court, applicable to its business or operations, except where any such violation or failure to comply would not, individually or in the aggregate, have a Company Material Adverse Effect; the conduct of the business of Company and its subsidiaries is in conformity with all foreign, federal, state and local energy, public utility and health requirements, and all other foreign, federal, state and local governmental and regulatory requirements, except where non-conformities would not, individually or in the aggregate, have a Company Material Adverse Effect. Company and its subsidiaries have all permits, licenses and franchises from governmental agencies required to conduct their businesses as now being conducted, except for such permits, licenses and franchises the absence of which would not, individually or in the aggregate, have a Company Material Adverse Effect. III.14. BOARD RECOMMENDATION. The Board of Directors of Company has, by a majority vote at a meeting of such Board duly held on November 20, 1997, approved and adopted this Agreement, the Merger and the other transactions contemplated hereby, determined that the Merger is fair to the stockholders of Company and recommended that the stockholders of Company approve and adopt this Agreement, the Merger and the other transactions contemplated hereby. III.15. PATENTS AND TRADEMARKS. Company and its subsidiaries own or have the right to use all patents, patent applications, trademarks, trademark applications, trade names, inventions, processes, know-how and trade secrets necessary to the conduct of their respective businesses, except for those which the failure to own or have the right to use would not, individually or in the aggregate, have a Company Material Adverse Effect. III.16. TAXES. "TAX" or "TAXES" shall mean all federal, state, local and foreign taxes, duties, levies, charges and assessments of any nature, including social security payments and deductibles relating to wages, salaries and benefits and payments to subcontractors (to the extent required under applicable Tax law), and also including all interest penalties and additions imposed with respect to such amounts. Except as set forth in Section 3.16 of the Disclosure Statement: (i) Company and its subsidiaries have prepared and timely filed or will timely file with the appropriate governmental agencies all franchise, income and all other material Tax returns and reports required to be filed for any period ending on or before the Effective Time, taking into account any extension of time to file granted to or obtained on behalf of Company and/or its subsidiaries; (ii) all material Taxes of Company and its -16- subsidiaries in respect of the pre-Merger period have been paid in full to the proper authorities, other than such Taxes as are being contested in good faith by appropriate proceedings and/or are adequately reserved for in accordance with generally accepted accounting principles; (iii) all deficiencies resulting from Tax examinations of federal, state and foreign income, sales and franchise and all other material Tax returns filed by Company and its subsidiaries have either been paid or are being contested in good faith by appropriate proceedings; (iv) to the best knowledge of Company, no deficiency has been asserted or assessed against Company or any of its subsidiaries, and no examination of Company or any of its subsidiaries is pending or threatened for any material amount of Tax by any taxing authority; (v) no extension of the period for assessment or collection of any material Tax is currently in effect and no extension of time within which to file any material Tax return has been requested, which Tax return has not since been filed; (vi) no material Tax liens have been filed with respect to any Taxes; (vii) Company and each of its subsidiaries will not make any voluntary adjustment by reason of a change in their accounting methods for any pre-Merger period that would affect the taxable income or deductions of Company or any of its subsidiaries for any period ending after the Effective Date; (viii) Company and its subsidiaries have made timely payments of the Taxes required to be deducted and withheld from the wages paid to their employees; and (ix) Company and its subsidiaries are not parties to any tax sharing or tax matters agreement other than the tax sharing agreement dated March 13, 1996 by and among TFC, RHI and Company. III.17. EMPLOYEE BENEFIT PLANS; ERISA. Except as set forth in Section 3.17 of the Disclosure Statement: (a) There are no "employee pension benefit plans" as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), maintained or contributed to by Company or any of its subsidiaries, or with respect to which Company or any of its subsidiaries contributes or is obligated to make payments thereunder or otherwise may have any liability ("PENSION BENEFITS PLANS"). (b) Company has furnished Purchaser with a true and complete schedule of all "welfare benefit plans" (as defined in Section 3(1) of ERISA), maintained or contributed to by Company or any of its subsidiaries or with respect to which Company or any of its subsidiaries otherwise may have any liability ("WELFARE PLANS"), all multiemployer plans as defined in Section 3(37) of ERISA covering employees employed in the United States to which Company or any of its subsidiaries is required to make contributions or otherwise may have any liability, all stock bonus, stock option, restricted stock, stock appreciation right, stock purchase, bonus, incentive, deferred compensation, -17- severance and vacation or other employee benefit plans, programs or arrangements that are not Pension Benefit Plans or Welfare Plans maintained or contributed to by Company or a subsidiary or with respect to which Company or any subsidiary otherwise may have any liability ("OTHER PLANS"). (c) Company and each of its subsidiaries, and each of the Pension Benefit Plans, Welfare Plans and Other Plans (collectively, the "PLANS"), are in compliance with the applicable provisions of ERISA, the Code and other applicable laws except where the failure to comply would not, individually or in the aggregate, have a Company Material Adverse Effect. (d) All contributions to, and payments from, the Plans which are required to have been made in accordance with the Plans and, when applicable, Section 302 of ERISA or Section 412 of the Code, have been timely made except where the failure to make such contributions or payments on a timely basis would not, individually or in the aggregate, have a Company Material Adverse Effect. All contributions required to have been made in accordance with Section 302 of ERISA or Section 412 of the Code to any employee pension benefit plan (as defined in Section 3(2) of ERISA) maintained by Company or any ERISA Affiliate have been timely made except where the failure to make such contributions on a timely basis would not individually or in the aggregate have a Company Material Adverse Effect. For purposes of this Agreement, "ERISA AFFILIATE" shall mean any person (as defined in Section 3(9) of ERISA) that is a member of any group of persons described in Section 414(b), (c), (m) or (o) of the Code of which Company or a subsidiary of Company is a member. (e) The Pension Benefit Plans intended to qualify under Section 401 of the Code are so qualified and have been determined by the Internal Revenue Service ("IRS") to be so qualified and nothing has occurred with respect to the operation of such Pension Benefit Plans which would cause the loss of such qualification or exemption or the imposition of any material liability, penalty or tax under ERISA or the Code. Such plans have been or will be, on a timely basis, (i) amended to comply with changes to the Code made by the Tax Reform Act of 1986, the Unemployment Compensation Amendments of 1992, the Omnibus Budget Reconciliation Act of 1993, and other applicable legislative, regulatory or administrative requirements; and (ii) submitted to the Internal Revenue Service for a determination of their tax qualification, as so amended; and no such amendment will adversely affect the qualification of such plans. (f) Each Welfare Plan that is intended to qualify for exclusion of benefits thereunder from the income of participants or for any other tax-favored treatment under any -18- provisions of the Code (including, without limitation, Sections 79, 105, 106, 125 or 129 of the Code) is and has been maintained in compliance in all material respects with all pertinent provisions of the Code and Treasury Regulations thereunder. (g) Except as disclosed in Company's Form 10-K for the fiscal year ended December 31, 1996, there are (i) no investigations, audits or examinations pending, or to the best knowledge of Company, threatened by any governmental entity involving any of the Plans, (ii) no termination proceedings involving the Plans and (iii) no pending or, to the best of Company's knowledge, threatened claims (other than routine claims for benefits), suits or proceedings against any Plan, against the assets of any of the trusts under any Plan or against any fiduciary of any Plan with respect to the operation of such plan or asserting any rights or claims to benefits under any Plan or against the assets of any trust under such plan, which would, in the case of clause (i), (ii) or (iii) of this paragraph (g), give rise to any liability which would, individually or in the aggregate, have a Company Material Adverse Effect, nor, to the best of Company's knowledge, are there any facts which would give rise to any liability which would, individually or in the aggregate, have a Company Material Adverse Effect in the event of any such investigation, audit, examination, claim, suit or proceeding. (h) None of Company, any of its subsidiaries or any employee of the foregoing, nor any trustee, administrator, other fiduciary or any other "party in interest" or "disqualified person" with respect to the Pension Benefit Plans or Welfare Plans, has engaged in a "prohibited transaction" (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which presents a material risk of resulting in a tax or penalty on Company or any of its subsidiaries under Section 4975 of the Code or Section 502(i) of ERISA which would, individually or in the aggregate, have a Company Material Adverse Effect. (i) Neither the Pension Benefit Plans subject to Title IV of ERISA nor any trust created thereunder has been terminated nor have there been any "reportable events" (as defined in Section 4043 of ERISA and the regulations thereunder) with respect to either thereof which would, individually or in the aggregate, have a Company Material Adverse Effect nor has there been any event with respect to any Pension Benefit Plan requiring disclosure under Section 4063(a) of ERISA or any event with respect to any Pension Benefit Plan requiring disclosure under Section 4041(c)(3)(C) of ERISA which would, individually or in the aggregate, have a Company Material Adverse Effect. -19- (j) Neither Company nor any ERISA Affiliate of Company has incurred any currently outstanding liability to the Pension Benefit Guaranty Corporation (the "PBGC") or to a trustee appointed under Section 4042(b) or (c) of ERISA other than for the payment of premiums, all of which have been paid when due. No Pension Benefit Plan has applied for, or received, a waiver of the minimum funding standards imposed by Section 412 of the Code. The information supplied to the actuary by Company or any of its subsidiaries for use in preparing the most recent actuarial report for Pension Benefit Plans is complete and accurate in all material respects. (k) Neither Company, any of its subsidiaries nor any of their ERISA Affiliates has any liability (including any contingent liability under Section 4204 of ERISA) with respect to any multiemployer plan, within the meaning of Section 3(37) of ERISA (a "MULTIEMPLOYER PLAN"), covering employees employed in the United States. (l) With respect to each of the Plans, true, correct and complete copies of the following documents have been made available to Parent (i) the current plans and related trust documents, including amendments thereto, (ii) any current summary plan descriptions, (iii) the most recent Forms 5500 (if any) filed with respect to each such Plan, (iv) the three most recent financial statements and actuarial reports, if applicable (v) the most recent IRS determination letter, if applicable, (vi) if any application for an IRS determination letter is pending, copies of all such applications for determination including attachments, exhibits and schedules thereto, (vii) all material agreements (including settlement agreements or other similar agreements relating to any Plan); and (viii) all material correspondence between Company and any of its subsidiaries and the IRS, PBGC, Department of Labor or any other governmental entity relating to any of the Plans. (m) Neither Company, any of its subsidiaries, any organization to which Company is a successor or parent corporation, within the meaning of Section 4069(b) of ERISA, nor any of their ERISA Affiliates has engaged in any transaction described in Section 4069(a) of ERISA, the liability for which would, individually or in the aggregate, have a Company Material Adverse Effect. (n) Except as disclosed in Section 2.17 of the Disclosure Statement, none of the Welfare Plans maintained by Company or any of its subsidiaries are retiree life or retiree health insurance plans which provide for continuing benefits or coverage for any participant or any beneficiary of a participant following termination of employment, except as may be required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), or except where the full expense -20- of such coverage or benefits is paid by the participant or the participant's beneficiary. Company and each of its subsidiaries which maintain a "group health plan" within the meaning of Section 5000(b)(1) of the Code have complied with the notice and continuation requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title I of ERISA and the regulations thereunder except where the failure to comply would not, individually or in the aggregate, have a Company Material Adverse Effect. (o) No liability under any Plan has been funded nor has any such obligation been satisfied with the purchase of a contract from an insurance company as to which Company or any of its subsidiaries has received notice that such insurance company is in rehabilitation. (p) The consummation of the transactions contemplated by this Agreement will not either alone or in connection with an employee's termination of employment or other event result in an increase in the amount of compensation or benefits or accelerate the vesting or timing of payment of any benefits or compensation payable to or in respect of any employee of Company or any of its subsidiaries. III.18. ENVIRONMENTAL MATTERS. Except as set forth in Section 3.18 of the Disclosure Statement and except for such matters as would not, individually or in the aggregate, have a Company Material Adverse Effect: (a) Company and its subsidiaries have obtained all Environmental Permits and all licenses and other authorizations and have made all registrations and given all notifications that are required under any applicable Environmental Law. (b) Except as set forth in Section 3.18 of the Disclosure Statement, there is no Environmental Claim pending against Company and its subsidiaries under an Environmental Law. (c) Except as set forth in Section 3.18 of the Disclosure Statement, Company and its subsidiaries are in compliance with all terms and conditions of their Environmental Permits, and are in compliance with all applicable Environmental Laws. (d) Except as set forth in Section 3.18 of the Disclosure Statement, Company and its subsidiaries did not generate, treat, store, transport, discharge, dispose of or release any Hazardous Materials on or from any property now or previously owned, leased or used by Company and its subsidiaries. (e) For purposes of Section 3.18(a): -21- (i) "Environment" shall mean any surface water, ground water, or drinking water supply, land surface or subsurface strata, or ambient air and includes, without limitation, any indoor location; (ii) "Environmental Claim" means any written notice or written claim by any person alleging potential liability (including, without limitation, potential liability for investigatory costs, cleanup costs, governmental costs, or harm injuries or damages to any person, property or natural resources, and any fines or penalties) arising out of, based upon, resulting from or relating to (1) the emission, discharge, disposal or other release or threatened release in or into the Environment of any Hazardous Materials or (2) circumstances forming the basis of any violation, or alleged violation, of any applicable Environmental Law; (iii) "Environmental Laws" means any federal, state, and local laws, codes, and regulations as now or previously in effect relating to pollution, the protection of human health, the protection of the Environment or the emission, discharge, disposal or other release or threatened release of Hazardous Materials in or into the Environment; (iv) "Environmental Permit" shall mean a permit, identification number, license or other written authorization required under any applicable Environmental Law; and (v) "Hazardous Materials" shall mean all pollutants, contaminants, or chemical, hazardous or toxic materials, substances, constituents or wastes, including, without limitation, asbestos or asbestos-containing materials, polychlorinated biphenyls and petroleum, oil, or petroleum or oil derivatives or constituents, including, without limitation, crude oil or any fraction thereof. III.19. DISCLOSURE. All of the facts and circumstances not required to be disclosed as exceptions under or to any of the foregoing representations and warranties made by Company, in this Article III by reason of any minimum disclosure requirement in any such representation and warranty would not, in the aggregate, have a Company Material Adverse Effect. III.20. ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in Section 3.20 of the Disclosure Statement, neither Company nor any of its subsidiaries has any liabilities or obligations of any nature, whether absolute, accrued, unmatured, contingent or otherwise, or any unsatisfied judgments or any leases of personality or realty or unusual or extraordinary commitments, except the liabilities recorded on Company's consolidated balance sheet at December 31, 1996 included in the financial statements referred in Section 3.6 and the notes -22- thereto, and except for liabilities or obligations incurred in the ordinary course of business and consistent with past practice since December 31, 1996 that would not individually or in the aggregate have a Company Material Adverse Effect. III.21. FINDERS OR BROKERS. Except as set forth in Section 3.21 of the Disclosure Statement, none of Company, the subsidiaries of Company, the Board of Directors of Company or any member of the Board of Directors of Company has employed any investment banker, broker, finder or intermediary in connection with the transactions contemplated hereby who might be entitled to a fee or any commission in connection with the Merger, and Section 3.21 of the Disclosure Statement sets forth the maximum consideration (present and future) agreed to be paid to each such party. III.22. STATE ANTITAKEOVER STATUTES. Company has granted all approvals and taken all other steps necessary to exempt the Merger and the other transactions contemplated hereby from the requirements and provisions of Section 203 of the GCL and any other applicable state antitakeover statute or regulation such that none of the provisions of such Section 203 or any other "business combination," "moratorium," "control share" or other state antitakeover statute or regulation (x) prohibits or restricts Company's ability to perform its obligations under this Agreement or its ability to consummate the Merger and the other transactions contemplated hereby, (y) would have the effect of invalidating or voiding this Agreement or any provision hereof, or (z) would subject Parent to any material impediment or condition in connection with the exercise of any of its rights under this Agreement. III.23. OPINION OF FINANCIAL ADVISOR. Company has received the opinion of First Boston dated the date of this Agreement, to the effect that, as of such date, the Merger Consideration is fair from a financial point of view to the holders of shares of Company Common Stock. III.24. INSURANCE. Section 3.24 of the Disclosure Statement lists all insurance policies in force on the date hereof covering the businesses, properties and assets of Company and its subsidiaries, and all such policies are currently in effect. III.25. EMPLOYMENT AND LABOR CONTRACTS. Neither Company nor any of its subsidiaries is a party to any employment contract or other similar contract or any other contract for the provision of management or consulting services to Company or any of its subsidiaries with any past or present officer, director, employee or, to the best of Company's knowledge, any entity affiliated with any past or present officer, -23- director or employee other than the agreements executed by employees generally, the forms of which have been delivered to Parent. III.26. PENDING TRANSACTIONS. Section 3.26 of the Disclosure Statement lists the status of the Pending Transactions. III.27. INDEMNIFICATION AGREEMENTS. Each of the RHI Indemnification Agreement, the FHC Indemnification Agreement and the Pledge Agreement is a valid and binding agreement of Company and, to the knowledge of Company, each of such agreements is enforceable against RHI Holdings, Inc. ("RHI") and The Fairchild Corporation ("TFC"), Fairchild Holding Corp. ("FHC"), and RHI, respectively, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors' rights generally or by general equitable or fiduciary principles. Each of the RHI Indemnification Agreement, the FHC Indemnification Agreement and the Pledge Agreement shall inure to the benefit of the Surviving Corporation and shall be enforceable by the Surviving Corporation except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors' rights generally or by general equitable or fiduciary principles. As of the date hereof, Company has no knowledge of any liabilities or claims for which Company is indemnified under the RHI Indemnification Agreement and FHI Indemnification Agreement (other than (i) the contingent liabilities related to a dispute with the United States Government under government contract accounts rules concerning potential liability arising out of the use of and accounting for approximately $50.0 million in excess pension funds relating to certain government contracts in the discontinued aerospace business of Fairchild Industries, Inc. ("FII"), the nonsurviving constituent corporation in their merger of March 13, 1996, with Shared Technologies, Inc.; (ii) all non-telecommunications environmental liabilities of FII; and (iii) approximately $50.0 million (at June 30, 1995 of costs associated with post-retirement healthcare benefits of FII) as such items are described in Company's Annual Report on Form 10-K for the year ended December 31, 1996) that would (were the indemnification under the RHI Indemnification Agreement and FHI Indemnification Agreement not available), individually or in the aggregate, have a Company Material Adverse Effect. III.28. INDEMNIFIED LIABILITIES. Notwithstanding all of the representations and warranties contained in this Article III (except for Section 3.27), it is hereby agreed that Company need not disclose as exceptions to any of the foregoing representations and warranties any losses, liabilities and damages or actions or claims for which Company is indemnified -24- under each of the FHI Indemnification Agreement and the RHI Indemnification Agreement. III.29. COMMERCIAL ARRANGEMENTS WITH TEL-SAVE HOLDINGS, INC. Except as disclosed in Schedule A attached hereto, neither Company nor any of its subsidiaries or affiliates has entered into, or is a party to, any commercial contracts, agreements, leases, plans, instruments, registrations, licenses, permits, commitments, arrangements or undertakings with Tel-Save Holdings, Inc. or any of its subsidiaries or affiliates, whether written or oral. IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER Each of Parent and Purchaser jointly and severally represents and warrants to Company as follows: IV.1. ORGANIZATION AND QUALIFICATION. Each of Parent and Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Each of Parent and Purchaser is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties owned or leased or the nature of its activities makes such qualification necessary, except for failures to be so qualified or in good standing which would not, individually or in the aggregate, have a material adverse effect on Parent's or Purchaser's ability to consummate the Offer, the Merger or the other transactions contemplated hereby (a "PARENT MATERIAL ADVERSE EFFECT"). Neither Parent nor Purchaser is in violation of any of the provisions of its Certificate of Incorporation (or other applicable charter document) or Bylaws. IV.2. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and Purchaser has full corporate power and authority to execute and deliver this Agreement and to consummate the Offer, the Merger and other transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the Offer, the Merger and other transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Parent and Purchaser and no other corporate proceedings on the part of Parent and Purchaser are necessary to authorize this Agreement or to consummate the Offer, the Merger or other transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by each of Parent and Purchaser and, assuming the due authorization, execution and delivery hereof by Company, constitutes a valid and binding agreement of Parent and Purchaser, enforceable against Parent and Purchaser in accordance with its terms, except to the -25- extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors' rights generally or by general equitable or fiduciary principles. IV.3. NO VIOLATIONS, ETC. (a) Assuming that all filings, permits, authorizations, consents and approvals or waivers thereof have been duly made or obtained as contemplated by Section 4.3(b) hereof, neither the execution and delivery of this Agreement by Parent and Purchaser nor the consummation of the Offer, the Merger or other transactions contemplated hereby nor compliance by Parent and Purchaser with any of the provisions hereof will (i) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination or suspension of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of Parent and Purchaser under, any of the terms, conditions or provisions of (x) their respective charters or bylaws or (y) any note, bond, mortgage, indenture or deed of trust, or (ii) subject to compliance with the statutes and regulations referred to in the next paragraph, violate any judgment, ruling, order, writ, injunction, decree, statute, rule or regulation applicable to Parent or Purchaser or any of their respective properties or assets, except, in the case of clause (ii) above, for such violations, conflicts, breaches, defaults, terminations, suspensions, accelerations, rights of termination or acceleration or creations of liens, security interests, charges or encumbrances which would not, individually or in the aggregate, have a Parent Material Adverse Effect. (b) No filing or registration with, notification to and no permit, authorization, consent or approval of any governmental entity is required by Parent or Purchaser in connection with the execution and delivery of this Agreement or the consummation by Parent and Purchaser of the Offer, the Merger or other transactions contemplated hereby, except (i) in connection with the applicable requirements of the HSR Act, (ii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, (iii) filings with the SEC and state securities administrators, (iv) filings with the Federal Communications Commission or any applicable state public utility commissions or applicable state or local regulatory agency or authority, and (v) such other filings, registrations, notifications, permits, authorizations, consents or approvals the failure of which to be obtained, made or given would not, individually or in the aggregate, have a Parent Material Adverse Effect. -26- (c) As of the date hereof (x) Parent and Purchaser are not in violation of or default under any note, bond, mortgage, indenture or deed of trust, or (y) any license, lease, agreement or other instrument or obligation to which Parent is a party or to which they or any of their respective properties or assets may be subject, except, in the case of clauses (x) and (y) above, for such violations or defaults which would not, individually or in the aggregate, have a Parent Material Adverse Effect. IV.4. PROXY STATEMENT. None of the information supplied or to be supplied by or on behalf of Parent and Purchaser for inclusion or incorporation by reference in the Proxy Statement will, at the dates mailed to stockholders and at the time of Company Stockholder Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. IV.5. FINDERS OR BROKERS. None of Parent, Purchaser, the Board of Directors of Parent or Purchaser or any member of the Board of Directors of Parent or Purchaser has employed any investment banker, broker, finder or intermediary in connection with the transactions contemplated hereby who might be entitled to a fee or any commission in connection with the Offer or the Merger other than Bear, Stearns & Co., Inc., whose fees shall be paid by Parent. IV.6. OFFER DOCUMENTS. The Offer Documents will not, at the time the Offer Documents are filed with the SEC or are first published, sent or given to stockholders of Company, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading. Notwithstanding the foregoing, Parent and Purchaser make no representation or warranty with respect to any information supplied by Company or any of its representatives which is contained in any of the foregoing documents or the Offer Documents. The Offer Documents shall comply in all material respects as to form with the requirements of the Exchange Act and the rules and regulations thereunder. V. COVENANTS V.1. CONDUCT OF BUSINESS OF COMPANY PENDING THE MERGER. Except as contemplated by this Agreement or as expressly agreed to in writing by Parent, during the period from the date of this Agreement to the Effective Time, each of Company and its subsidiaries will conduct their respective operations according to its ordinary course of business consistent -27- with past practice, and will use all commercially reasonable efforts to preserve intact its business organization, to keep available the services of its officers and employees and to maintain satisfactory relationships with suppliers, distributors, customers and others having business relationships with it and will take no action which would materially adversely affect the ability of the parties to consummate the transactions contemplated by this Agreement. Without limiting the generality of the foregoing, and except as otherwise expressly provided in this Agreement, prior to the Effective Time, Company will not, nor will it permit any of its subsidiaries to, without the prior written consent of Parent, which consent shall not be unreasonably withheld: (a) amend its certificate of incorporation or bylaws; (b) authorize for issuance, issue, sell, deliver, grant any options for, or otherwise agree or commit to issue, sell or deliver any shares of any class of its capital stock or any securities convertible into shares of any class of its capital stock, except (i) pursuant to and in accordance with the terms of currently outstanding convertible securities, warrants and options, and (ii) shares granted to employees as matching contributions pursuant to Company's 401(k) Plan in an aggregate amount not to exceed 40,000 shares; (c) split, combine or reclassify any shares of its capital stock, declare, set aside or pay any dividend (other than a dividend of stock of Shared Technologies Cellular, Inc. owned by Company) or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock or purchase, redeem or otherwise acquire any shares of its own capital stock or of any of its subsidiaries, except as otherwise expressly provided in this Agreement; (d) (i) create, incur, assume, maintain or permit to exist any debt for borrowed money other than under existing lines of credit in the ordinary course of business consistent with past practice; (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person except for (a) its wholly owned subsidiaries, and (b) STF Canada, Inc. in the ordinary course of business and consistent with past practices; or (iii) make any loans, advances or capital contributions to, or investments in, any other person except for STF Canada, Inc. in an aggregate amount not to exceed $1,000,000; (e) (i) increase in any manner the compensation of (x) any employee except in the ordinary course of business consistent with past practice or (y) any of its directors or -28- officers; (ii) pay or agree to pay any pension, retirement allowance or other employee benefit not required, or enter into or agree to enter into any agreement or arrangement with any director or officer or employee, whether past or present, relating to any such pension, retirement allowance or other employee benefit, except as required under currently existing agreements, plans or arrangements; (iii) grant any severance or termination pay to, or enter into any employment or severance agreement with, (x) any employee except in the ordinary course of business consistent with past practice or (y) any of its directors or officers except for honorarium payments to outside directors of Company in an amount not to exceed $300,000 in the aggregate; or (iv) except as may be required to comply with applicable law, become obligated (other than pursuant to any new or renewed collective bargaining agreement) under any new pension plan, welfare plan, multiemployer plan, employee benefit plan, benefit arrangement, or similar plan or arrangement, which was not in existence on the date hereof, including any bonus, incentive, deferred compensation, stock purchase, stock option, stock appreciation right, group insurance, severance pay, retirement or other benefit plan, agreement or arrangement, or employment or consulting agreement with or for the benefit of any person, or amend any of such plans or any of such agreements in existence on the date hereof; provided, however, that this clause (iv) shall not prohibit Company from renewing any such plan, agreement or arrangement already in existence on terms no more favorable to the parties to such plan, agreement or arrangement; (f) except as otherwise expressly contemplated by this Agreement, enter into any other agreements, commitments or contracts, except agreements, commitments or contracts for the purchase, sale or lease of goods or services involving payments or receipts by Company or its subsidiaries not in excess of $50,000, other than (i) customer agreements, (ii) leases for rental space in an amount not to exceed $250,000 for any lease or (iii) developer agreements in an amount not to exceed $250,000 for any agreement; provided, however, that Company will not enter into agreements with any local exchange carriers, competitive local exchange carriers or incumbent local exchange companies which require a financial commitment by Company or any of its subsidiaries or which limit the ability of Company or any of its subsidiaries to conduct their respective business; (g) authorize, recommend, propose or announce an intention to authorize, recommend or propose, or enter into any agreement in principle or an agreement with respect to, any plan of liquidation or dissolution, any acquisition of a material amount of assets or securities, any sale, transfer, lease, license, pledge, mortgage, or other disposition or encumbrance of a material amount of assets or securities or any material -29- change in its capitalization, or any entry into a material contract or any amendment or modification of any material contract or any release or relinquishment of any material contract rights; (h) authorize or commit to make capital expenditures in excess of $200,000 for any one order in Company's service business (other than purchases by Company's systems business in the ordinary course of business consistent with past practice); (i) make any change in the accounting methods or accounting practices followed by Company; (j) settle any action, suit, claim, investigation or proceeding (legal, administrative or arbitrative) in excess of $50,000 without the consent of the Parent; provided, however, that Company may settle the matter set forth in item 2 of Section 3.9 of the Disclosure Statement as previously discussed with Parent; make any election under the Code which would have a Company Material Adverse Effect; (l) amend, change or alter in any respect any of the RHI Indemnification Agreement, the FHC Indemnification Agreement or the Pledge Agreement (except as specifically contemplated by this Agreement); or (m) agree to do any of the foregoing. Promptly following execution and delivery of this Agreement, Parent shall appoint a senior executive (the "CONSULTANT") to act as a management consultant and advisor to the Company relative to the conduct of its business in the ordinary course, including the activities described in clauses (d)-(j) of this Section 5.1. The Consultant shall liaise directly with the chief executive officer and chief operating officer of the Company and shall be informed of, and participate as a consultant in, all management decisions made by such officers. In the event that the Company determines to implement management decisions contrary to the advice of the Consultant, and the Consultant determines in his good faith judgment, that such management decisions either alone or taken together with other management decisions implemented against the advice of the Consultant, could lead to a Company Material Adverse Effect, the Consultant shall promptly notify the Executive Committee of the Board of Directors of the Company in writing of his determination and his contrary recommendation (the "CONSULTANT NOTICE"). In the event the Executive Committee of the Board of Directors does not cause management of the Company to act in accordance with the recommendations of the Consultant set forth in the Consultant Notice by directing management so -30- to act in writing within five days of receipt of the Consultant Notice, Parent and Purchaser may, by delivery of written notice to the Company within 30 days following the expiration of such five day period, terminate this Agreement in accordance with the provisions of Section 7.1(i) hereof. The written consent or recommendation of the Consultant with respect to any matter shall be deemed to be the consent of Parent thereto. V.2. PREPARATION OF THE PROXY STATEMENT; STOCKHOLDERS MEETINGS. (a) As soon as practicable following the date hereof, Company shall prepare and file the Proxy Statement with the SEC under the Exchange Act, and shall use its reasonable best efforts to have the Proxy Statement cleared by the SEC. Parent, Purchaser and Company shall cooperate with each other in the preparation of the Proxy Statement, and Company shall notify Parent of the receipt of any comments of the SEC with respect to the Proxy Statement and of any requests by the SEC for any amendment or supplement thereto or for additional information and shall provide to Parent promptly copies of all correspondence between Company or any representative of Company and the SEC. Company shall give Parent and its counsel the opportunity to review the Proxy Statement prior to its being filed with the SEC and shall give Parent and its counsel the opportunity to review all amendments and supplements to the Proxy Statement and all responses to requests for additional information and replies to comments prior to their being filed with, or sent to, the SEC, and prior to the filing of the Proxy Statement, any amendments or supplements to the Proxy Statement or any other correspondence to the SEC (collectively, the "PROXY FILINGS"), the Proxy Filings shall be reasonably satisfactory to Parent. Each of Company, Parent and Purchaser agrees to use its reasonable best efforts, after consultation with the other parties hereto, to respond promptly to all such comments of and requests by the SEC and to cause the Proxy Statement and all required amendments and supplements thereto to be mailed to the holders of Shares entitled to vote at the Stockholders' Meeting at the earliest practicable time. (b) Company shall, as soon as practicable after the date hereof, duly call, give notice of, convene and hold a meeting of its stockholders (the "COMPANY STOCKHOLDER MEETING"), as promptly as practicable after the date hereof, for the purpose of obtaining the approval (the "COMPANY STOCKHOLDER APPROVAL") of a majority of the stockholders of Company of this Agreement and shall, through its Board of Directors, recommend to its stockholders the approval and adoption of this Agreement, the Merger and the other transactions contemplated hereby, and shall use all commercially reasonable efforts to solicit from its stockholders proxies in favor of approval and adoption of this Agreement; provided, however, that such -31- recommendation is subject to any action required by the fiduciary duties of the Board of Directors. V.3. ADDITIONAL AGREEMENTS; COOPERATION. (a) Subject to the terms and conditions herein provided, each of the parties hereto agrees to use its best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement, and to cooperate with each other in connection with the foregoing, including using its best efforts (i) to obtain all necessary waivers, consents and approvals from other parties to loan agreements, material leases and other material contracts that are specified on Schedule 5.3 to the Disclosure Statement, (ii) to obtain all necessary consents, approvals and authorizations as are required to be obtained under any federal, state or foreign law or regulations, (iii) to defend all lawsuits or other legal proceedings challenging this Agreement or the consummation of the transactions contemplated hereby, (iv) to lift or rescind any injunction or restraining order or other order adversely affecting the ability of the parties to consummate the transactions contemplated hereby, (v) to effect all necessary registrations and filings, including, but not limited to, filings under the HSR Act and submissions of information requested by governmental authorities, (vi) provide all necessary information for the Proxy Statement and (vii) to fulfill all conditions to this Agreement. (b) Each of the parties hereto agrees to furnish to the other party hereto such necessary information and reasonable assistance as such other party may request in connection with its preparation of necessary filings or submissions to any regulatory or governmental agency or authority, including, without limitation, any filing necessary under the provisions of the HSR Act or any other applicable Federal or state statute. At any time upon the written request of Parent, Company shall advise Parent of the number of shares of Company Common Stock or any series of Preferred Stock outstanding on such date. V.4. PUBLICITY. Company, Parent and Purchaser agree to consult with each other in issuing any press release and with respect to the general content of other public statements with respect to the transactions contemplated hereby, and shall not issue any such press release prior to such consultation, except as may be required by law. V.5. NO SOLICITATION. (a) Company shall not, nor shall it permit any of its subsidiaries to, nor shall it authorize or permit any of its officers, directors or employees or any investment banker, financial advisor, attorney, accountant -32- or other representative retained by it or any of its subsidiaries to, directly or indirectly, (i) solicit any Company Takeover Proposal (as hereinafter defined) or (ii) participate in any discussions or negotiations regarding any Company Takeover Proposal; provided, however, that if, at any time prior to Company Stockholders Meeting, the Board of Directors of Company 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 Company's stockholders under applicable law the Company may, in response to a Company Takeover Proposal that was not solicited, and subject to compliance with Section 5.5(c), (x) furnish information with respect to Company to any person pursuant to a customary confidentiality agreement (as determined by Company after consultation with its outside counsel) and (y) participate in negotiations regarding such Company Takeover Proposal. Without limiting the foregoing, it is understood that any violation of the restrictions set forth in the preceding sentence by any director or executive officer of Company or any of its subsidiaries, whether or not such person is purporting to act on behalf of Company or any of its subsidiaries or otherwise, shall be deemed to be a breach of this Section 5.5(a) by Company. For purposes of this Agreement, "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 Company or its subsidiaries or 20% or more of any class of equity securities of 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 Company or any of its subsidiaries, any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving Company or any of its subsidiaries, other than the transactions contemplated by this Agreement, or any other transaction the consummation of which would reasonably be expected to impede, interfere with, prevent or materially delay the Merger or which would reasonably be expected to dilute materially the benefits to Parent of the transactions contemplated by this Agreement. (b) Except as set forth in this Section 5.5, neither the Board of Directors of Company nor any committee thereof shall (i) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Parent, the approval or recommendation by such Board of Directors or such committee of the Merger or this Agreement, (ii) approve or recommend, or propose publicly to approve to recommend, any Company Takeover Proposal or (iii) cause Company to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement (each, a "COMPANY ACQUISITION AGREEMENT") related to any Company Takeover Proposal. Notwithstanding the foregoing, in the event that prior to the Company Stockholders Meeting the Board of Directors of Company determines in good faith, after -33- consultation with outside counsel, that it is necessary to do so in order to comply with its fiduciary duties to Company's stockholders under applicable law, the Board of Directors of Company may (subject to this and the following sentences) (x) withdraw or modify its approval or recommendation of the Merger and this Agreement or (y) approve or recommend a Company Superior Proposal (as defined below) or terminate this Agreement (and concurrently with or after such termination, if it so chooses, cause Company to enter into any Company Acquisition Agreement with respect to any Company Superior Proposal) but in each of the cases set forth in this clause (y), no action shall be taken by Company pursuant to clause (y) until a time that is after the fifth business day following Parent's receipt of written notice advising Parent that the Board of Directors of Company has received a Company Superior Proposal, specifying the material terms and conditions of such Company Superior Proposal and identifying the person making such Company Superior Proposal, to the extent such identification of the person making such proposal does not breach the fiduciary duties of the Board of Directors as advised by outside legal counsel. For purposes of this Agreement, a "COMPANY 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 Company 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 of Company determines in its good faith judgment (based on the advice of a financial advisor of nationally recognized reputation) to be more favorable to Company's stockholders than the Merger. (c) In addition to the obligations of Company set forth in paragraphs (a) and (b) of this Section 5.5, Company shall immediately advise Parent orally and in writing of any request for information or of any Company Takeover Proposal, the material terms and conditions of such request or Company Takeover Proposal, and to the extent such disclosure is not a breach of the fiduciary duties of the Board of Directors as advised by outside legal counsel, the identity of the person making such request or Company Takeover Proposal. (d) Nothing contained in this Section 5.5 shall prohibit Company from taking and disclosing to its stockholders a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act, or from making any disclosure to Company's stockholders if, in the good faith judgment of the Board of Directors of Company, after consultation with outside counsel, failure so to disclose would be inconsistent with its fiduciary duties to Company's stockholders under applicable law; provided, however, neither Company nor its Board of Directors nor any committee thereof shall, except as permitted by Section 5.5(b), -34- withdraw or modify, or propose publicly to withdraw or modify, its position with respect to this Agreement or the Merger or approve or recommend, or propose publicly to approve or recommend, a company Takeover Proposal. V.6. ACCESS TO INFORMATION. From the date of this Agreement until the Effective Time, Company shall provide Parent and its authorized representatives (including counsel, environmental and other consultants, accountants and auditors) full access during normal business hours to all facilities, personnel and operations and to all books and records of it and its subsidiaries, will permit Parent to make such inspections as it may reasonably require and will cause its officers and those of its subsidiaries to furnish Parent with such financial and operating data and with respect to its business and properties as Parent may from time to time reasonably request. V.7. NOTIFICATION OF CERTAIN MATTERS. Company or Parent, as the case may be, shall promptly notify the other of (i) its obtaining of actual knowledge as to the matters set forth in clauses (x) and (y) below, or (ii) the occurrence, or failure to occur, of any event, which occurrence or failure to occur would be likely to cause (x) any representation or warranty contained in Section 3.2, 3.3, 3.4, 3.10, 3.14, 3.21, 3.22, 3.23 or 3.29 to be untrue or inaccurate in any material respect at any time from the date hereof to the Effective Time, or (y) any material failure of Company or Parent, as the case may be, or of any officer, director, employee or agent thereof, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by its under this Agreement; provided, however, that no such notification shall affect the representations or warranties of the parties or the conditions to the obligations of the parties hereunder. V.8. RESIGNATION OF DIRECTORS. At or prior to the Effective Time, Company shall take all commercially reasonable efforts to deliver to Parent the resignations of such directors of Company and its subsidiaries as Parent shall specify, effective at the Effective Time. V.9. INDEMNIFICATION. (a) As of the date of this Agreement and for a period of six years following the Effective Time of the Merger, Parent and the Surviving Corporation will indemnify and hold harmless any persons who were directors or officers of Company or a subsidiary of Company prior to the Effective Time of the Merger (the "INDEMNIFIED PERSONS") to the fullest extent such person could have been indemnified under the GCL or under the certificate of incorporation or bylaws of Company or the certificate of incorporation or bylaws of any subsidiary of Company in effect immediately prior to the Effective Time of the Merger, with respect to any act or failure to -35- act by any such Indemnified Person prior to the Effective Time of the Merger. (b) Any determination required to be made with respect to whether an Indemnified Person's conduct complies with the standards set forth under the GCL or other applicable corporate law shall be made by independent counsel selected by the Indemnified Persons and reasonably acceptable to Parent and the Surviving Corporation. Parent or the Surviving Corporation shall pay such counsel's fees and expenses (it being agreed that neither the Indemnified Persons, Parent nor the Surviving Corporation shall challenge any such determination by such independent counsel). (c) The provisions of this Section 5.9 are for the benefit of the Indemnified Persons, any of whom shall have all rights at law and in equity to enforce the rights hereunder. (d) In the event that Parent or the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges into any other person and Parent or the Surviving Corporation or such successor or assign is not the continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfers all or substantially all of its properties and assets to any person, then, and in each case, proper provision shall be made so that such person or the continuing or surviving corporation assumes the obligations set forth in this Section 5.9. (e) Parent shall cause the Surviving Corporation to maintain in effect for not less than five years from the Effective Time the current policies of directors' and officers' liability insurance maintained by Company and its subsidiaries (provided that Parent may substitute therefor policies of at least the same coverage containing terms and conditions which are no less advantageous to the Indemnified Parties in all material respects so long as no lapse in coverage occurs as a result of such substitution) with respect to all matters, including the transactions contemplated hereby, occurring prior to, and including the Effective Time, provided that, in the event that any claim is asserted or made within such five year period, such insurance shall be continued in respect of any such claim until final disposition of any and all such claims, provided, further, that Parent shall not be obligated to make annual premium payments for such insurance to the extent such premiums exceed 200% of the premiums paid as of the date hereof by Company for such insurance. V.10. FEES AND EXPENSES. Whether or not the Merger is consummated, Company and Parent shall bear their respective expenses incurred in connection with the Merger, including, without limitation, the preparation, execution and performance -36- of this Agreement and the transactions contemplated hereby, and all fees and expenses of investment bankers, finders, brokers, agents, representatives, counsel and accountants. V.11. STOCKHOLDER LITIGATION. Each of Company and Parent shall give the other the reasonable opportunity to participate in the defense of any stockholder litigation against or in the name of Company or Parent, as applicable, and/or their respective directors relating to the transactions contemplated by this Agreement. VI. CONDITIONS VI.1. CONDITIONS TO THE MERGER. The obligations of each party to effect the Merger shall be subject to the satisfaction or waiver, at or prior to the Effective Time, of each of the following conditions: (a) The Merger and this Agreement shall have been validly approved and adopted by the affirmative votes of the holders of a majority of the outstanding shares of Company Common Stock 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. (c) No 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 or the Merger. VI.2. CONDITIONS TO OBLIGATIONS OF PARENT. The obligation of Parent to effect the Merger is further subject to satisfaction or waiver of the following conditions: (a) All of the representations and warranties of Company set forth herein 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 shall be true and correct as of the date hereof and the Closing Date, 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. -37- (b) Company shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date. (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 this Agreement shall have been obtained except for such consents and approvals the failure to obtain which individually or in the aggregate would not have material adverse effect on the Surviving Corporation or a Parent Material Adverse Effect. VI.3. CONDITIONS TO OBLIGATIONS OF COMPANY. The obligation of Company to effect the Merger is further subject to satisfaction or waiver 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 whether 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. (b) Parent and Purchaser shall have performed in all material respects all obligations required to be performed by them under this Agreement at or prior to the Closing Date. VII. TERMINATION, AMENDMENT AND WAIVER VII.1. TERMINATION. This Agreement may be terminated at any time prior to the Effective Time, whether before or after approval by the stockholders of Company: (a) by consent of the Boards of Directors of Company, Parent and Purchaser; (b) by Parent and Purchaser upon notice to Company if any material default under or material breach of any covenant or agreement in this Agreement by 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 Company shall not have been true and correct in any material respect at and as of the date made; (c) by Company upon notice to Parent and Purchaser if any material default under or material breach of any covenant or agreement in this Agreement by Parent or Purchaser shall have occurred and shall not have been cured within ten -38- 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 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 Company, Parent and Purchaser evidenced by appropriate resolutions; PROVIDED, HOWEVER, that the right to terminate this Agreement under this Section 7.1(d) shall not be available to any party whose failure to fulfill any obligation under this 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 Company if the approval of the stockholders of 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 shall be breached by Company or any of its officers, directors or employees or any investment banker, financial advisor, attorney, accountant or other representative of Company, in any material respect and 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 Company shall breach Section 5.5 by failing to promptly notify Parent or Purchaser as required thereunder; (g) by Parent or Purchaser if, at any time, (i) Company shall have withdrawn or modified in any manner adverse to Parent or Purchaser its approval or recommendation of this 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 this Agreement in accordance with Section 5.5(b); 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; or (i) by Parent or Purchaser in accordance with the provisions of the last paragraph of Section 5.1 of this Agreement; provided that it has complied with all provisions thereof, including the notice provisions therein. -39- VII.2. EFFECT OF TERMINATION. In the event of the termination of this Agreement pursuant to the provisions of Section 7.1, the provisions of this Agreement (other than Sections 5.10, 7.2, 7.3 and 7.4 hereof) 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, 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 this Agreement. VII.3. TERMINATION PAYMENT. As compensation for entering into this Agreement, taking action to consummate the transactions hereunder and incurring the costs and expenses related thereto and other losses and damages, including the foregoing of other opportunities, Company and Parent agree as follows: (a) 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 this Agreement (including the preparation and negotiation of this 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 this Agreement pursuant to Sections 7.1(b), 7.1(f), 7.1(g) or 7.1(i) hereof. (ii) Company shall have exercised its right to terminate this Agreement pursuant to Section 7.1(e) or Section 7.1(h). (c) Company shall not be obligated to make any payment pursuant to this Section 7.3, if at the time such payment becomes due Parent or Purchaser is in material breach of its obligations under this Agreement. VII.4. PROCEEDS OF THE GOOD FAITH DEPOSIT. (a) Subject to Section 7.4(c), Company shall pay out from the proceeds of the Good Faith Deposit an amount equal to $15,000,000 (the "TERMINATION FEE") to Tel-Save Holdings, Inc. ("TEL-SAVE") to satisfy termination fees arising from Company's termination of that certain Agreement and Plan of Merger dated as of July 16, 1997 among Tel-Save, TSHCo, Inc. and Company. (b) Subject to Section 7.4(c), Company shall pay the Good Faith Deposit (less the Termination Fee) to Tel-Save in exchange for the termination of any options to purchase Company -40- Common Stock held by Tel-Save under that certain Option Agreement dated as of July 16, 1997 by and between Tel-Save and Company. (c) In the event that Parent or Purchaser terminates this Agreement pursuant to Section 7.1(a), 7.1(b), 7.1(f), 7.1(g) or 7.1(i) or Company terminates this Agreement other than pursuant to Section 7.1(c) or Section 7.1(d), then Company must repay to Purchaser the Good Faith Deposit (including any Termination Fee which has been paid to Tel-Save). VII.5. AMENDMENT. This Agreement may be amended by the parties hereto only in a writing signed on behalf of each of them, at any time before or after approval of the Agreement by the stockholders of Company, but after such approval no amendment shall be made which alters the Merger Consideration without the further approval of the stockholders of Company other than Parent; provided that no amendment or consent given or made on behalf of Company shall be effective unless approved by a majority of the members of the Board as constituted as of the date hereof (or of any successor directors duly elected by such members). VII.6. WAIVER. Any term or provision of this Agreement (other than the requirements for approval by the stockholders of Company) may be waived in writing at any time by the party which is, or whose stockholders are, entitled to the benefits thereof. VIII. GENERAL PROVISIONS VIII.1. DEFINITIONS. As used in the Agreement, the following terms have the following respective meanings: AGREEMENT: as defined in the recitals. BOARD: as defined in the recitals. CERTIFICATE OF MERGER: as defined in Section 2.5. CERTIFICATES: as defined in Section 2.8(b). CLOSING DATE: means the date on which the Effective Time occurs. COBRA: as defined in Section 3.17(n). CODE: means the Internal Revenue Code of 1986, as amended. COMPANY: as defined in the first paragraph of this Agreement. -41- COMPANY ACQUISITION AGREEMENT: as defined in Section 5.5(b). COMPANY COMMON STOCK: means issued and outstanding shares of Common Stock, par value $.004 per share, of Company. Company Material Adverse Effect: as defined in Section 3.1. COMPANY STOCKHOLDER APPROVAL: as defined in Section 5.2(b). COMPANY STOCKHOLDER MEETING: as defined in Section 5.2(b). COMPANY STOCK OPTION PLANS: as defined in Section 2.9. COMPANY SUPERIOR PROPOSAL: as defined in Section 5.5(b). COMPANY TAKEOVER PROPOSAL: as defined in Section 5.5(a). CONSULTANT: as defined in Section 5.1. CONSULTANT NOTICE: as defined in Section 5.1. CONVERTIBLE PREFERRED STOCK: as defined in Section 2.6(d). DISCLOSURE STATEMENT: as defined in Section 3.2. DISSENTING SHARES: as defined in Section 2.6(e). EFFECTIVE TIME: as defined in Section 2.5. ERISA: the Employee Retirement Income Security Act of 1974, as amended. ERISA AFFILIATE: as defined in Section 3.17(d). EXCHANGE ACT: as defined in Section 1.2(b). EXCHANGE AGENT: Continental Stock Transfer & Trust Company or such other a bank or trust company to be designated by Parent prior to the Effective Time to act as exchange agent. FHC: means Fairchild Holding Corp. FHC INDEMNIFICATION AGREEMENT: means the Indemnification Agreement between FHC and Company dated March 13, 1996. -42- FII: as defined in Section 3.27. FIRST BOSTON: as defined in Section 1.2(a). GCL: as defined in the recitals. GOOD FAITH DEPOSIT: as defined in Section 2.10. HSR ACT: as defined in Section 3.5(b). INDEMNIFIED PERSONS: as defined in Section 5.9(a). IRS: as defined in Section 3.17(e). MERGER: as defined in the recitals. MERGER CONSIDERATION: as defined in Section 2.6(d). MULTIEMPLOYER PLAN: as defined in Section 3.17(k). OFFER DOCUMENTS: as defined in Section 1.1(b). OFFER TO PURCHASE: as defined in Section 1.1(b). OTHER PLANS: as defined in Section 3.17(b). PARENT: as defined in the first paragraph of this Agreement. Parent Material Adverse Event: as defined in Section 4.1. PBGC: as defined in Section 3.17(j). PENDING TRANSACTIONS: means the pending transactions regarding ICS Communications, Inc. and GE Capital-Rescum, L.L.P. PENSION BENEFIT PLANS: as defined in Section 3.17(a). PER SHARE AMOUNT: as defined in Section 2.6(a). PER SHARE OFFER AMOUNT: as defined in the recitals. PERSON: an individual, partnership, joint venture, corporation, trust, unincorporated organization and a government or any department or agency thereof. PLANS: as defined in Section 3.17(c). -43- PLEDGE AGENT: shall mean Gadsby & Hannah. PLEDGE AGREEMENT: means the Pledge Agreement dated as of March 13, 1996 by RHI in favor of Gadsby & Hannah as pledge agent. PREFERRED PER SHARE AMOUNT: as defined in Section 2.6(d). PREFERRED SHARES: as defined in Section 2.6(d). PROXY FILINGS: as defined in Section 5.2(a). PROXY STATEMENT: as defined in Section 3.8. PURCHASER: as defined in the first paragraph of this Agreement. RHI: means RHI Holdings, Inc. RHI INDEMNIFICATION AGREEMENT: means the Indemnification Agreement dated March 13, 1996 by and among TFC, RHI and Company. SCHEDULE 14D-1: as defined in Section 1.1(b). SCHEDULE 14D-9: as defined in Section 1.2(b). SEC: as defined in Section 1.1(b). SEC REPORTS: as defined in Section 3.6. SECURITIES ACT: as defined in Section 3.6. SERIES D STOCK: as defined in Section 2.6(d). SHARES: means collectively, all shares of Company Common Stock. SHARES CONSIDERATION: as defined in Section 2.6(a). SPECIAL PREFERRED STOCK: as defined in Section 2.6(d). SUBSIDIARY: with respect to any Person, any corporation or other business entity, a majority (by number of votes) of the shares of capital stock (or other voting interests) of which at the time outstanding is owned by such Person directly or indirectly through Subsidiaries. SURVIVING CORPORATION: as defined in Section 2.1. -44- TEL-SAVE: as defined in Section 7.4(a). TERMINATION FEE: as defined in Section 7.4(a). TFC: means The Fairchild Corporation. TAX or TAXES: as defined in Section 3.16. WELFARE PLANS: as defined in Section 3.17(b). VIII.2. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. No representations, warranties or agreements in this Agreement or in any instrument delivered by Parent, Purchaser or Company pursuant to this Agreement shall survive the Merger. VIII.3. NOTICES. All notices, requests, claims, demands, consents and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by fax or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): if to Parent or Purchaser, a copy to: Intermedia Communications Inc. 3625 Queen Palm Drive Tampa, Florida 33619 Attention: Chief Financial Officer Telecopy: (813) 829-2470 with a copy to: Kronish, Lieb, Weiner & Hellman LLP 1114 Avenue of the Americas New York, NY 10036 Attention: Ralph J. Sutcliffe, Esq. Telecopy: (212) 479-6275 if to Company, a copy to: Shared Technologies Fairchild Inc. 100 Great Meadow Road, Suite 104 Wethersfield, CT 06109 Telecopy No.: (860) 258-2455 Attention: Kenneth M. Dorros, Esq. with a copy to: Cahill Gordon & Reindel 80 Pine Street -45- New York, NY 10005 Telecopy No.: (212) 269-5420 Attention: James J. Clark, Esq.. and The Fairchild Corporation 300 West Service Road P.O. Box 10803 Chantilly, VA 22021 Telecopy No.: (703) 478-5775 Attention: Donald E. Miller, Esq. VIII.4. SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated thereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement including the Merger, be consummated as originally contemplated to the fullest extent possible. VIII.5. MISCELLANEOUS. This Agreement (including the exhibits, documents and instruments referred to herein or therein) (A) constitutes the entire agreement and supersedes all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof and thereof; (B) is not intended to confer upon any other person other than the parties hereto any rights or remedies hereunder; (C) shall not be assigned by operation of law or otherwise, except that each of Parent and Purchaser may assign its rights and obligations hereunder without the consent of Company to one or more direct or indirect Subsidiaries of Parent (it being recognized that such an assignment shall not release or discharge the assignor from its obligations under this Agreement); and (D) shall be governed in all respects, including validity, interpretation and effect, by the laws of the State of Delaware. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. This Agreement may be executed in two or more counterparts which together shall constitute a single instrument. -46- VIII.6. SPECIFIC PERFORMANCE. The parties agree that due to the unique subject matter of this transaction, monetary damages will be insufficient to compensate the non-breaching party in the event of a breach of any part of this Agreement. Accordingly, the parties agree that the non-breaching party shall be entitled (without prejudice to any other right or remedy to which it may be entitled) to an appropriate decree of specific performance, or an injunction restraining any violation of this Agreement or other equitable remedies to enforce this Agreement (without establishing the likelihood of irreparable injury or posting bond or other security), and the breaching party waives in any action or proceeding brought to enforce this Agreement the defense that there exists an adequate remedy at law. VIII.7. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY OR AGAINST IT ON ANY MATTERS WHATSOEVER, IN CONTRACT OR IN TORT, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT. [Remainder of Page Intentionally Left Blank] IN WITNESS WHEREOF, Parent, Purchaser and Company have caused this Agreement to be executed by their respective duly authorized officers on the date first above written. INTERMEDIA COMMUNICATIONS INC. By: _______________________ Name: Title: MOONLIGHT ACQUISITION CORP. By: _______________________ Name: Title: SHARED TECHNOLOGIES FAIRCHILD INC. By: _______________________ Name: _____________________ Title: _____________________ -47- SCHEDULE A Long Distance Services Agreement, dated November 13, 1997, between Company and Tel-Save Holdings, Inc. ANNEX A Conditions to 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 HSR Act shall not have expired or been terminated prior to the expiration of the Offer, or (ii) at any time on or after the date of this 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 this 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; (c) any of the representations and warranties of Company set forth in the 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 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 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) Company shall not have performed any obligation required to be performed by it under this 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 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. -2- EX-2 3 STOCK PURCHASE AGREEMENT EXHIBIT 2 STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT (this "AGREEMENT"), dated as of November 24, 1997, between INTERMEDIA COMMUNICATIONS INC., a Delaware corporation ("BUYER"), RHI HOLDINGS, INC., a Delaware corporation (the "SELLER") and Shared Technologies Fairchild Inc., a Delaware corporation (the "COMPANY"). R E C I T A L S : Seller desires to sell to Buyer and Buyer desires to purchase from Seller, all right, title and interest in and to 250,000 shares of Series I 6% Cumulative Convertible Preferred Stock, par value $.01 per share (the "PREFERRED STOCK") issued by the Company and owned by Seller, all upon the terms and subject to conditions contained herein. NOW, THEREFORE, in consideration of the mutual promises and agreements set forth herein, the parties hereto hereby agree as follows: 1. PURCHASE AND SALE 1.1. PURCHASE AND SALE. In consideration of the payment by Buyer of the Convertible Purchase Price (as defined in Section 1.2(a) below), Seller hereby agrees to sell, assign, transfer, convey and deliver to Buyer, and Buyer hereby agrees to purchase, acquire and take assignment and delivery of, all the right, title and interest of Seller on the day designated by Seller (the "Closing Date") in and to the Preferred Stock. 1.2. PURCHASE PRICE. The aggregate purchase price for the Convertible Preferred Stock (the "CONVERTIBLE PURCHASE PRICE") shall be $62,827,425 plus any accrued dividends from November 24, 1997 to the Closing Date. The Convertible Purchase Price is payable on the Closing Date in cash, by certified or bank check or by wire transfer of immediately available funds to such accounts as the Seller may designate in writing. 1.3. DELIVERY OF THE PREFERRED STOCK. On the Closing Date, Seller shall deliver to Buyer certificate(s) representing the Preferred Stock duly endorsed in blank or accompanied by stock powers or other instruments of transfer duly endorsed in blank, and bearing or accompanied by all requisite stock transfer stamps. -2- 2. REPRESENTATIONS AND WARRANTIES OF SELLER Seller hereby represents and warrants to Buyer and the Company as follows: 2.1. ORGANIZATION OF SELLER. Seller is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation. 2.2. AUTHORITY. Seller has all requisite power and authority to execute and deliver this Agreement and to carry out its obligations hereunder. Seller has obtained all necessary corporate approvals for the execution and delivery of this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered by Seller and (assuming due authorization, execution and delivery by the other parties hereto) constitutes Seller's legal, valid and binding obligation, enforceable against it in accordance with its terms. 2.3. AUTHORIZED CAPITAL. Seller owns the Preferred Stock beneficially and of record, free and clear of all liens, pledges, security interests, claims, voting restrictions and agreements, proxies or other encumbrances ("LIENS"), except as may be otherwise provided for (i)in that certain Shareholder's Agreement, dated March 13, 1996, among Seller, the Company and Anthony D. Autorino and that certain Pledge Agreement dated as of March 13, 1996 by RHI in favor of Gadsby & Hannah as pledge agent (the "PLEDGE AGREEMENT") and (ii) that certain Amended and Restated Pledge Agreement dated as of July 18, 1997 between RHI and Citicorp USA Inc. (the "CITICORP PLEDGE AGREEMENT"). Upon consummation of the transactions contemplated hereby, Buyer will acquire good and marketable title to the Convertible Preferred Stock free and clear of any Liens. 2.4. BROKERS, FINDERS, ETC. All negotiations relating to this Agreement and the transactions contemplated hereby have been carried on without the participation of any person or entity acting on behalf of Seller in such manner as to give rise to any valid claim against Buyer for any brokerage or finder's fee, commission or similar compensation. 2.5. NO MISSTATEMENTS OR OMISSIONS. No representation or warranty made in this Agreement by Seller is false or misleading as to any material fact, or omits to state a material fact required to make any of the statements made herein not misleading in any material respect. -3- 3. REPRESENTATIONS AND WARRANTIES OF BUYER Buyer hereby represents and warrants to Seller and the Company as follows: 3.1. ORGANIZATION OF BUYER. Buyer is a corporation duly organized, validly existing and in good standing under the laws of Delaware. 3.2. AUTHORITY. Buyer has all requisite power and authority to execute and deliver this Agreement and to carry out its obligations hereunder. Buyer has obtained all necessary corporate approvals for the execution and delivery of this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered by Buyer and (assuming due authorization, execution and delivery by the other parties hereto) constitutes Buyer's legal, valid and binding obligation, enforceable against it in accordance with its terms. 3.3. BROKERS, FINDERS, ETC. All negotiations relating to this Agreement and the transactions contemplated hereby have been carried on without the participation of any person or entity acting on behalf of Buyer in such manner as to give rise to any valid claim against Seller for any brokerage or finder's fee, commission or similar compensation, other than Bear, Stearns & Co. Inc., whose fees shall be paid by Buyer. 3.4. NO MISSTATEMENTS OR OMISSIONS. No representation or warranty made in this Agreement by Buyer is false or misleading as to any material fact stated therein, or omits to state a material fact required to make any of the statements made therein not misleading in any material respect. 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to Seller and Buyer as follows: 4.1. ORGANIZATION OF THE COMPANY. The Company is a corporation duly organized, validly existing and in good standing under the laws of Delaware. 4.2. AUTHORITY. The Company has all requisite power and authority to execute and deliver this Agreement and to carry out its obligations hereunder. The Company has obtained all necessary corporate approvals for the execution and delivery of this Agreement and the performance of its -4- obligations hereunder. This Agreement has been duly executed and delivered by the Company and (assuming due authorization, execution and delivery by the other parties hereto) constitutes the Company's legal, valid and binding obligation, enforceable against it in accordance with its terms. 4.3. NO MISSTATEMENTS OR OMISSIONS. No representation or warranty made in this Agreement by the Company is false or misleading as to any material fact stated therein, or omits to state a material fact required to make any of the statements made therein not misleading in any material respect. 5. INDEMNIFICATION 5.1. INDEMNIFICATION BY SELLER. Seller agrees to defend, indemnify and hold harmless Buyer, any subsidiary or affiliate thereof and its officers, directors, shareholders and controlling persons, employees, agents, successors and assigns from and against any and all liabilities, losses, damages, claims, costs, expenses, judgments, interest and penalties (including, without limitation, attorneys', accountants' and outside advisors' fees and disbursements) (collectively, "LOSSES") incurred as a result of, arising out of or resulting from (i) the breach of any representation or warranty made by Seller and contained in this Agreement or (ii) the breach of any covenant or agreement made by Seller and contained in this Agreement. 5.2. INDEMNIFICATION BY BUYER. Buyer agrees to defend, indemnify and hold harmless Seller, any subsidiary or affiliate thereof and its officers, directors, shareholders and controlling persons, employees, agents, successors and assigns from and against any and all Losses incurred as a result of, arising out of or resulting from (i) the breach of any representation or warranty made by Buyer and contained in this Agreement or (ii) the breach of any covenant or agreement made by Buyer and contained in this Agreement. 5.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations, warranties, covenants and agreements made by Buyer and Seller shall survive the signing and consummation of this Agreement. All representations, covenants and warranties made by Seller in this Agreement will be deemed to have been relied upon by Buyer (notwithstanding any investigation by Buyer). All representations, covenants and warranties made by Buyer in this Agreement will be deemed to have been relied upon by Seller (notwithstanding any investigation by Seller). -5- 5.4. NOTICE OF CLAIMS. An indemnified party shall give prompt written notice to the indemnifying party of any claim against the indemnified party which might give rise to a claim by the indemnified party against the indemnifying party under the indemnification provisions contained herein, stating the nature and basis of the claim and the actual or estimated amount thereof, PROVIDED, HOWEVER, that failure to give such notice will not effect the obligation of the indemnifying party to provide indemnification in accordance with the terms of Section 5.1 or 5.2 unless, and only to the extent that, the indemnifying party is actually prejudiced thereby. In the event that any action, suit or proceeding is brought against any indemnified party with respect to which the indemnifying party may have liability under the indemnification provisions contained herein, the indemnifying party shall, upon written acknowledgement by the indemnifying party that such action, suit or proceeding is an indemnifiable Loss pursuant to Section 5.1 or 5.2, have the right, at the cost and expense of the indemnifying party, to defend such action in the name and on behalf of the indemnified party (using counsel satisfactory to the indemnified party), and, in connection with any such action, the indemnified party and the indemnifying party agree to render to each other such assistance as may reasonably be required in order to ensure proper and adequate defense of such action, PROVIDED, HOWEVER, that an indemnified party shall have the right to retain its own counsel, with fees and expenses paid by the indemnifying party, if representation of such indemnified party by counsel retained by the indemnifying party would be inappropriate because of actual or potential differing interests between such indemnified party and the indemnifying party. If the indemnifying party shall fail to defend such action, suit or proceeding, then the indemnified party shall have the right to defend such action without prejudice to its rights to indemnification under Section 5.1 or 5.2 and, in connection therewith, the indemnified party and the indemnifying party agree to render to each other such assistance as may reasonably be required in order to ensure proper and adequate defense of such action. Neither the indemnified party nor the indemnifying party shall make any settlement of any claim which might give rise to liability of the indemnifying party under the indemnification provisions contained herein without the written consent of each party, which consent shall not be unreasonably withheld, delayed or conditioned. 6. OTHER AGREEMENTS 6.1. TERMINATION OF PLEDGE. Each of Buyer and the Company hereby consents to the termination of the Pledge -6- Agreement and the release of the proceeds from the sale of the Preferred Stock to Seller pursuant hereto, subject to any claims of Citicorp USA Inc. pursuant to the Citicorp Pledge Agreement. 7. GENERAL 7.1. EXPENSES. All expenses of the preparation, execution and consummation of this Agreement and of the transactions contemplated hereby including, without limitation, attorneys', accountants' and outside advisors' fees and disbursements, shall be borne by the party incurring such expense. 7.2. ENTIRE AGREEMENT. This Agreement contains the entire understanding of the parties and supersede all prior agreements and understandings relating to the subject matter hereof and this Agreement shall not be amended except by a written instrument hereafter signed by all of the parties hereto. 7.3. ASSIGNMENT. None of the parties hereto may assign its rights or delegate its obligations under this Agreement without the written consent of the other parties hereto. This Agreement and all of the provisions hereof shall be binding upon and inure only to the benefit of the parties hereto and their respective heirs, executors, personal representatives and successors. 7.4. FURTHER ACTION. Each of the parties hereto shall use all reasonable efforts to do, or cause to be done, all things necessary, proper or advisable under applicable law to carry out the provisions of this Agreement and shall execute and deliver such documents and other papers as may be required to carry out the provisions of this Agreement. 7.5. NOTICES. All notices, requests, claims, demands and ther communications hereunder shall be in writing and shall be deemed given if delivered personally or by fax or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): if to Buyer, a copy to: Intermedia Communications Inc. 3625 Queen Palm Drive Tampa, Florida 33619 -7- Attention: Chief Financial Officer Telecopy: (813) 829-2470 with a copy to: Kronish, Lieb, Weiner & Hellman LLP 1114 Avenue of the Americas New York, NY 10036 Attention: Ralph J. Sutcliffe, Esq. Telecopy: (212) 479-6275 if to Seller, a copy to: RHI Holdings, Inc. c/o The Fairchild Corporation 300 West Service Road P.O. Box 10803 Chantilly, VA 22021 Telecopy No.: (703) 478-5775 Attention: Donald E. Miller, Esq. if to the Company, a copy to: Shared Technologies, Inc. 100 Great Meadow Road, Suite 104 Wethersfield, CT 06109 Telecopy No.: (860) 258-2455 Attention: Kenneth M. Dorros, Esq. with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Telecopy No.: (212) 269-5420 Attention: James J. Clark, Esq. 7.6. SPECIFIC PERFORMANCE. The parties agree that due to the unique subject matter of this transaction, monetary damages will be insufficient to compensate the non-breaching party in the event of a breach of any part of this Agreement. Accordingly, the parties agree that the non-breaching party shall be entitled (without prejudice to any other right or remedy to which it may be entitled) to an appropriate decree of specific performance, or an injunction restraining any violation of this Agreement or other equitable remedies to enforce this Agreement (without establishing the likelihood of irreparable injury or posting bond or other security), and the -8- breaching party waives in any action or proceeding brought to enforce this Agreement the defense that there exists an adequate remedy at law. 7.7. SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated thereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement be consummated as originally contemplated to the fullest extent possible. 7.8. HEADINGS. The headings of Sections and Subsections are for reference only and shall not limit or control the meaning thereof. 7.9. COUNTERPARTS. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 7.10. GOVERNING LAW. THE VALIDITY AND CONSTRUCTION OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS (AND NOT THE PRINCIPLES OF CONFLICT OF LAWS) OF THE STATE OF DELAWARE. 7.11. VENUE. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT SHALL BE BROUGHT EXCLUSIVELY IN THE COURTS OF THE STATE OF DELAWARE OR OF THE UNITED STATES OF AMERICA RESIDING IN THE STATE OF DELAWARE AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HERETO HEREBY ACCEPT FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HEREBY WAIVES, AND AGREES NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR PROCEEDING FOR THE INTERPRETATION OR ENFORCEMENT OF THIS AGREEMENT THAT IT IS NOT SUBJECT THERETO OR THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN SAID COURTS OR THAT THIS AGREEMENT MAY NOT BE ENFORCED IN OR BY SAID COURTS OR THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT -9- THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR (PROVIDED THAT PROCESS SHALL BE SERVED IN ANY MANNER REFERRED TO IN THE FOLLOWING SENTENCE) THAT SERVICE OF PROCESS UPON SUCH PARTY IS INEFFECTIVE. EACH PARTY AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION, SUIT OR PROCEEDING AGAINST IT WITH RESPECT TO THIS AGREEMENT MAY BE MADE UPON IT IN ANY MANNER PERMITTED BY THE LAWS OF THE STATE OF DELAWARE OR THE FEDERAL LAWS OF THE UNITED STATES. SERVICE OF PROCESS IN ANY MANNER REFERRED TO IN THE PRECEDING SENTENCE SHALL BE DEEMED, IN EVERY RESPECT, EFFECTIVE SERVICE OF PROCESS UPON SUCH PARTY. [SIGNATURE PAGE FOLLOWS] -10- 7.12. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY OR AGAINST IT ON ANY MATTERS WHATSOEVER, IN CONTRACT OR IN TORT, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT. IN WITNESS WHEREOF, and intending to be legally bound thereby, the parties hereto have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the date and year first above written. INTERMEDIA COMMUNICATIONS INC. By: ______________________ Name: Title: RHI HOLDINGS, INC. By: ______________________ Name: Title: SHARED TECHNOLOGIES FAIRCHILD INC. By: ______________________ Name: Title: By signing below each of Shared Technologies Fairchild Inc. (formerly known as Shared Technologies, Inc.), RHI Holdings, Inc. and Anthony D. Autorino hereby consent to the transactions contemplated by this Agreement and hereby amend the terms of that certain Shareholder's Agreement, dated March 13, 1996, to the extent necessary to permit the transactions contemplated by the terms of this Agreement. SHARED TECHNOLOGIES FAIRCHILD INC. -11- By: ______________________ Name: Title: RHI HOLDINGS, INC. By: ______________________ Name: Title: ___________________________ ANTHONY D. AUTORINO EX-3 4 LOAN AGREEMENT Exhibit 3 LOAN AGREEMENT LOAN AGREEMENT (this "Agreement"), dated as of November 20, 1997, between INTERMEDIA COMMUNICATIONS INC., a Delaware corporation ("Buyer") and SHARED TECHNOLOGIES FAIRCHILD INC., a Delaware corporation (the "Company"). R E C I T A L S : - - - - - - - - The Company desires to redeem 200,000 shares of Series J Special Preferred Stock, par value $.01 per share (the "SPECIAL PREFERRED STOCK") issued by the Company and owned by RHI Holdings, Inc. ("RHI"), and Buyer agrees to loan to the Company certain funds to facilitate such redemption, all upon the terms and subject to conditions contained herein. NOW, THEREFORE, in consideration of the mutual promises and agreements set forth herein, the parties hereto hereby agree as follows: 1. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents and warrants to the Company as follows: 1.1 ORGANIZATION OF BUYER. Buyer is a corporation duly organized, validly existing and in good standing under the laws of Delaware. 1.2 AUTHORITY. Buyer has all requisite power and authority to execute and deliver this Agreement and to carry out its obligations hereunder. Buyer has obtained all necessary corporate approvals for the execution and delivery of this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered by Buyer and (assuming due authorization, execution and delivery by the Company) constitutes Buyer's legal, valid and binding obligation, enforceable against it in accordance with its terms. 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to Buyer as follows: -2- 2.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly organized, validly existing and in good standing under the laws of Delaware. 2.2 AUTHORITY. The Company has all requisite power and authority to execute and deliver this Agreement and the Promissory Note (as defined below) and to carry out its obligations hereunder. The Company has obtained all necessary corporate approvals for the execution and delivery of this Agreement and the Promissory Note and the performance of its obligations hereunder and thereunder. This Agreement has been duly executed and delivered by the Company and (assuming due authorization, execution and delivery by Buyer) constitutes the Company's legal, valid and binding obligation, enforceable against it in accordance with its terms. 3. THE LOAN If the Company elects to redeem the Special Preferred Stock, Buyer shall lend to Company $21,918,000 in accordance with the terms of the Promissory Note attached hereto as Exhibit A (the "PROMISSORY NOTE"), the Company shall borrow such amount from Buyer and execute the Promissory Note and Buyer shall execute a Subordination Agreement in the form attached hereto as Exhibit B. 4. GENERAL 4.1 EXPENSES. All expenses of the preparation, execution and consummation of this Agreement and of the transactions contemplated hereby including, without limitation, attorneys, accountants and outside advisors, fees and disbursements, shall be borne by the party incurring such expense. 4.2 ENTIRE AGREEMENT. This Agreement contains the entire understanding of the parties and supersede all prior agreements and understandings relating to the subject matter hereof and this Agreement shall not be amended except by a written instrument hereafter signed by all of the parties hereto. 4.3 ASSIGNMENT. None of the parties hereto may assign its rights or delegate its obligations under this Agreement without the written consent of the other parties hereto. This Agreement and all of the provisions hereof shall be binding upon and inure only to the benefit of the parties hereto and their respective heirs, executors, personal representatives and successors. -3- 4.4 FURTHER ACTION. Each of the parties hereto shall use all reasonable efforts to do, or cause to be done, all things necessary, proper or advisable under applicable law to carry out the provisions of this Agreement and shall execute and deliver such documents and other papers as may be required to carry out the provisions of this Agreement. 4.5 NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by fax or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): if to Buyer, a copy to: Intermedia Communications Inc. 3625 Queen Palm Drive Tampa, Florida 33619 Attention: Chief Financial Officer Telecopy: (813) 829-2470 with a copy to: Kronish, Lieb, Weiner & Hellman LLP 1114 Avenue of the Americas New York, NY 10036 Attention: Ralph J. Sutcliffe, Esq. Telecopy: (212) 479-6275 if to the Company, a copy to: Shared Technologies, Inc. 100 Great Meadow Road, Suite 104 Wethersfield, CT 06109 Telecopy No.: (860) 258-2455 Attention: Kenneth M. Dorros, Esq. with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Telecopy No.: (212) 269-5420 Attention: James J. Clark, Esq. 4.6 SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other -4- conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated thereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement be consummated as originally contemplated to the fullest extent possible. 4.7 HEADINGS. The headings of Sections and Subsections are for reference only and shall not limit or control the meaning thereof. 4.8 COUNTERPARTS. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 4.9 GOVERNING LAW. THE VALIDITY AND CONSTRUCTION OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS (AND NOT THE PRINCIPLES OF CONFLICT OF LAWS) OF THE STATE OF DELAWARE. 4.10 VENUE. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT SHALL BE BROUGHT EXCLUSIVELY IN THE COURTS OF THE STATE OF DELAWARE OR OF THE UNITED STATES OF AMERICA RESIDING IN THE STATE OF DELAWARE AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HERETO HEREBY ACCEPT FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HEREBY WAIVES, AND AGREES NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR PROCEEDING FOR THE INTERPRETATION OR ENFORCEMENT OF THIS AGREEMENT THAT IT IS NOT SUBJECT THERETO OR THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN SAID COURTS OR THAT THIS AGREEMENT MAY NOT BE ENFORCED IN OR BY SAID COURTS OR THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR (PROVIDED THAT PROCESS SHALL BE SERVED IN ANY MANNER REFERRED TO IN THE FOLLOWING SENTENCE) THAT SERVICE OF PROCESS UPON SUCH PARTY IS INEFFECTIVE. EACH PARTY AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION, SUIT OR PROCEEDING AGAINST IT WITH RESPECT TO THIS AGREEMENT MAY BE MADE UPON IT IN ANY MANNER PERMITTED BY THE LAWS OF THE STATE OF DELAWARE OR THE FEDERAL LAWS OF THE UNITED STATES. SERVICE OF PROCESS IN ANY MANNER -5- REFERRED TO IN THE PRECEDING SENTENCE SHALL BE DEEMED, IN EVERY RESPECT, EFFECTIVE SERVICE OF PROCESS UPON SUCH PARTY. (SIGNATURE PAGE FOLLOWS] -6- 4.11 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY OR AGAINST IT ON ANY MATTERS WHATSOEVER, IN CONTRACT OR IN TORT, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT. IN WITNESS WHEREOF, and intending to be legally bound thereby, the parties hereto have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the date and year first above written. INTERMEDIA COMMUNICATIONS INC. By: ----------------------------- Name: Title: SHARED TECHNOLOGIES FAIRCHILD INC. By: ----------------------------- Name: Title: Exhibit A --------- Promissory Note $21,918,000.00 New York, New York _________ __, 1997 FOR VALUE RECEIVED, the undersigned, SHARED TECHNOLOGIES FAIRCHILD INC., a Delaware corporation (the "Company"), hereby promises to pay to the order of INTERMEDIA COMMUNICATIONS INC., a Delaware corporation (the "Lender"), the principal sum of TWENTY ONE MILLION NINE HUNDRED EIGHTEEN THOUSAND DOLLARS AND NO CENTS ($21,918,000.00), together with interest thereon from the date hereof until the date such amounts are paid in accordance with the terms hereof at the rate set forth below. Payments of the principal amount hereof shall be made at the same time and on the same terms as payments of the liquidation preference were required to made under the terms of the Series J Special Preferred Stock, par value $.01 per share (the "Special Preferred Stock") issued by the Company. Interest on this Note shall accrue and be payable on the same terms as dividends were payable under the terms of the Special Preferred Stock. In no event shall the interest rate applicable at any time to this Note exceed the maximum rate permitted by law. The principal of and the interest on this Note shall be payable in lawful money of the United States of America at the offices of the Lender, at 3625 Queen Palm Drive, Tampa, Florida, 33619, or at such other location as the Lender may designate by written notice to the Company. Any payment which is required to be made on a day which is a legal holiday for banking institutions generally, at the place where payment is to be made, shall be made on the next succeeding day which is not a legal holiday without additional interest and with the same force and effect as if made on the date specified herein for such payment. To induce the Lender to make the loan evidenced by this Note, the Company represents and warrants to the Lender that (i) the Company is duly incorporated and validly existing in good standing under the laws of the jurisdiction of its incorporation, with full power and authority to make, deliver and -8- perform this Note; (ii) the execution, delivery and performance by the Company of this Note have been duly authorized by all necessary corporate action and does not and will not violate or conflict with its charter or by-laws or any law, rule, regulation or order binding on the Company or any agreement or instrument to which the Company is a party or which may be binding on the Company; (iii) this Note has been fully executed by an authorized officer of the Company and constitutes a legal, valid, binding and enforceable obligation of the Company; and (iv) no authorization, consent, approval, license, exemption of or filing or registration with, any court or government or governmental agency is or will be necessary to the valid execution, delivery or performance by the Company of this Note. The Company agrees to pay all costs and expenses including reasonable attorneys' fees, incurred by Lender in investigating and enforcing any of Lender's rights and remedies hereunder, whether or not suit is instituted. The Company hereby waives presentment, notice of dishonor, protest and notice of protest, and any or all other notices or demands (other than demand for payment) in connection with the delivery, acceptance, performance, default, endorsement or guarantee of this Note. The liability of the Company hereunder shall be unconditional and shall not be in any manner affected by any indulgence whatsoever granted or consented to by Lender, including, but not limited to any extension of time, renewal, waiver or other modification. Any failure of Lender to exercise any right hereunder shall not be construed as a waiver of the right to exercise the same or any other right at any time and from time to time thereafter. The Lender may accept late payments, or partial payments, even though marked "payment in full" or containing words of similar import or other conditions, without waiving any of its rights. No amendment, modification or waiver of any provision of this Note or consent to any departure by the Company therefrom shall be effective, irrespective of any course of dealing, unless the same shall be in writing and signed by the Lender, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. This Note cannot be changed or terminated orally or by estoppel or waiver or by any alleged oral modification regardless of any claimed partial performance referable thereto. Any notice from the Lender to the Company shall be deemed given when delivered to the Company by hand or when deposited in the United States mail and addressed to the Company -9- at the last address of the Company appearing on the Lender's records. This Note is non-negotiable and may not be pledged, sold, transferred or assigned by the Lender. This Note shall be governed by and construed in accordance with the laws of the State of Delaware applicable to instruments made and to be performed wholly within that state. If any provision of this Note is held to be illegal or unenforceable for any reason whatsoever, such illegality or unenforceability shall not affect the validity of any other provision hereof. EACH OF THE LENDER AND THE COMPANY AGREES THAT ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS NOTE MAY BE INITIATED AND PROSECUTED IN THE STATE OR FEDERAL COURTS, AS THE CASE MAY BE, LOCATED IN THE STATE OF DELAWARE. EACH OF THE LENDER AND THE COMPANY CONSENTS TO AND SUBMITS TO THE EXERCISE OF JURISDICTION OVER ITS PERSON BY ANY SUCH COURT HAVING JURISDICTION OVER THE SUBJECT MATTER, WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE LENDER AT ITS ADDRESS SET FORTH ABOVE, AND TO THE COMPANY AT ITS ADDRESS SET FORTH BELOW OR TO ANY OTHER ADDRESS AS MAY APPEAR IN THE LENDER'S RECORDS AS THE ADDRESS OF THE COMPANY. IN ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS NOTE, EACH OF THE LENDER AND THE COMPANY WAIVES (I) TRIAL BY JURY, (II) ANY OBJECTION BASED ON FORUM NON CONVENIENS OR VENUE AND (III) ANY CLAIM FOR CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES. The Lender is authorized to fill in any blank spaces and to otherwise complete this Note and correct any patent errors herein. -10- IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by its proper corporate officers thereunto duly authorized. SHARED TECHNOLOGIES FAIRCHILD INC. By: ------------------------------ Name: Title: 100 Great Meadow Road, Suite 104 Wethersfield, CT 06109 EX-4 5 STOCK OPTION AGREEMENT EXHIBIT 4 EXECUTION COPY STOCK OPTION AGREEMENT STOCK OPTION AGREEMENT, dated as of November 20, 1997 (this "Agreement"), among INTERMEDIA COMMUNICATIONS INC., a Delaware corporation ("PURCHASER"), and the individuals and entities whose names and addresses are set forth at the foot of this Agreement (collectively, the "STOCKHOLDERS", and each, individually, a "STOCKHOLDER"), it being understood that the Stockholders are executing this Agreement in their capacity as stockholders of the Company (as defined below) and not in their capacity as directors or officers of the Company. WHEREAS, Purchaser and its wholly owned subsidiary, Moonlight Acquisition Corp. (the "SUBSIDIARY"), propose to enter into an Agreement and Plan of Merger, dated as of the date hereof (the "MERGER AGREEMENT"), with Shared Technologies Fairchild, Inc., a Delaware corporation (the "COMPANY"), which Merger Agreement provides, among other things, for the acquisition of the Company by Subsidiary through a merger pursuant to which Subsidiary will merge with and into the Company (the "MERGER") and all outstanding shares of Common Stock of the Company, par value $.01 per share ("COMPANY COMMON STOCK") other than shares held by Purchaser and Subsidiary will be converted into the right to receive $15.00 per share (the "PER SHARE AMOUNT") and each outstanding share of Preferred Stock of the Company, par value, $.01 per share ("COMPANY PREFERRED STOCK") which is convertible into Common Stock and is not owned by Purchaser will be converted into the right to receive the Per Share Amount multiplied by the number of shares of Company Common Stock into which such share of Company Preferred Stock is convertible which would have been received had such share of Preferred Stock been converted immediately prior to the Merger (the "PREFERRED STOCK PER SHARE AMOUNT"), in each case, net to the holder thereof in cash; and WHEREAS, as of the date hereof, the Stockholders own (both beneficially and of record) the number of shares of Company Common Stock, options to purchase Company Common Stock ("Options") and Company Preferred Stock set forth opposite their respective names at the foot of this Agreement; and WHEREAS, as a condition to the willingness of Purchaser and the Subsidiary to enter into the Merger Agreement, Purchaser and the Subsidiary have required that the Stockholders agree, and in order to induce Purchaser and the Subsidiary -2- to enter into the Merger Agreement, the Stockholders have agreed, to enter into this Agreement governing the voting and disposition of the shares of Company Common Stock, Company Common Stock issuable upon exercise of Options and Company Preferred Stock now owned and which may hereafter be acquired by any of the Stockholders (the "SHARES"). NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereto hereby agree as follows: I. GRANT OF OPTION. Each Stockholder hereby grants to Purchaser an exclusive and irrevocable option (each an "OPTION", and together the "OPTIONS") to purchase from such Stockholder any and all Shares held by such Stockholder (the "OPTION SHARES") at a price equal to the Per Share Amount, net to the Seller in cash, for each Share which is a share of Company Common Stock and a price equal to the Preferred Stock Per Share Amount, net to the Seller in cash, for each Share which is a share of Company Preferred Stock. Purchaser may assign to any subsidiary or affiliate of Purchaser (including Subsidiary) the right to exercise the Options. Each Option may be exercised individually from each Stockholder, in whole or in part, at any time or from time to time, on or after the date hereof and prior to the Termination Date (as defined below). No Stockholder shall, prior to the termination of the Option, take, or refrain from taking, any action which would have the effect of preventing or disabling such Stockholder from delivering the Option Shares or otherwise performing its obligations under this Agreement. In the event Purchaser wishes to exercise any Option, in whole or in part, the following procedures shall be followed: (a) Purchaser shall send a written notice to such Stockholder specifying the number and kind of Option Shares Purchaser will purchase and the place and date on or before the later of (x) ten business days from the date such notice is mailed, (y) two days after the date of expiration or termination of any applicable waiting period under Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR ACT") and (z) two days after the receipt of any necessary approvals from the Federal Communications Commission (the "FCC") or any applicable State regulatory authority for the closing of such purchase. If -3- such closing is to occur sooner than ten business days from the date such notice is mailed, notice shall also be given at the time such written notice is given by telephone or telecopy. To the extent such notice provides for the purchase of Option Shares issuable upon exercise of Options, the Stockholder hereby agrees to exercise the option relating to such Option Shares sufficiently prior to such closing to permit certificates for such Option Shares to be delivered at such closing. (b) At the closing of such purchase, (i) Purchaser (or any affiliate or subsidiary of Purchaser) shall pay to such Stockholder the aggregate price for the Option Shares so purchased by certified or cashier's check or wire transfer of immediately available funds and (ii) such Stockholder shall deliver to Purchaser (or, at the option of Purchaser, an affiliate or subsidiary of Purchaser) a certificate or certificates, duly endorsed in blank or accompanied by stock powers duly executed in blank, representing the number of Option Shares purchased. (c) To the extent any Stockholder has sold any Option Shares to Purchaser pursuant to that certain purchase agreement dated the date hereof or pursuant to the Lender offer to be made pursuant to the Merger Agreement prior to the exercise of the Option, such Option Shares shall cease to be Option Shares subject to this Agreement. II. VOTING OF SHARES. Each Stockholder, until the Termination Date, shall cause the Shares owned by such Stockholder 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 Purchaser in order to carry out the purposes of the Merger Agreement. For the purposes of this Agreement, "TERMINATION DATE" shall mean the earlier of (i) two days after the termination of the Merger Agreement in accordance with its terms, (ii) the Effective Time (as defined in the Merger Agreement), and (iii) the termination of this Agreement by the mutual written agreement of the parties hereto or pursuant to the terms of Section 9 of this Agreement. -4- III. IRREVOCABLE PROXY. Each Stockholder hereby irrevocably appoints Purchaser, until the Termination Date, as its attorney and proxy pursuant to the provisions of Section 212 of the General Corporation Law of the State of Delaware, 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 Shares (and all other securities issued to the Stockholder in respect of the Shares) which each Stockholder 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 Purchaser. Each Stockholder hereby revokes all other proxies and powers of attorney with respect to the Shares (and all other securities issued to the Stockholder in respect of the Shares) which it may have heretofore appointed or granted, and no subsequent proxy or power of attorney shall be given or written consent executed (and if given or executed, shall not be effective) by the Stockholder with respect thereto. IV. NO DISPOSITION OR ENCUMBRANCE OF SHARES. Each Stockholder hereby covenants and agrees that, until the expiration of the Options as provided in Section 1 of this Agreement, except as contemplated by this Agreement, the Stockholder 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 Stockholder's voting rights, charge or other encumbrance of any nature whatsoever with respect to the Shares, except for the security interest arising from that certain Pledge Agreement dated as of March 13, 1996 between RHI Holdings, Inc. and Gadsby & Hannah (the "Pledge Agent") and except for the security interest arising from that certain Amended and Restated Pledge Agreement dated as of July 18, 1997 between RHI Holdings, Inc. and Citicorp USA, Inc. (the "Citicorp Pledge Agreement"). V. NO SOLICITATION OF TRANSACTIONS. Each Stockholder shall not, directly or indirectly, through any agent or -5- 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 Purchaser and any affiliate of Purchaser, a "PERSON") relating to (a) any acquisition or purchase of all or any of the 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 Stockholder immediately shall cease and cause to be terminated all existing discussions or negotiations of the Stockholder and its agents or other representatives with any Person conducted heretofore with respect to any of the foregoing. Each Stockholder shall notify Purchaser 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 Purchaser, 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. The provisions of this Section 3 shall not apply to or restrict any action that may be taken by the Stockholder in its capacity as an officer or director of the Company. VI. LEGEND ON CERTIFICATES. The certificate(s) evidencing the Shares and the agreements evidencing the Options shall be endorsed with a restrictive legend substantially as follows: The shares [options] evidenced by this certificate [agreement] are subject to a stock option agreement dated as of November 20, 1997 between the registered holder hereof and Intermedia Communications Inc., a copy of which is on file at the principal office of the Company. The holder of this certificate [agreement], by his acceptance hereof, agrees to be -6- bound by all the terms of such agreement, as the same is in effect from time to time. VII. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each Stockholder hereby severally represents and warrants with respect to itself and its ownership of the Shares to Purchaser and the Subsidiary as follows: 65535.VII1. AUTHORITY RELATIVE TO THIS AGREEMENT. The Stockholder has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Stockholder and the consummation by the Stockholder of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of the Stockholder. This Agreement has been duly and validly executed and delivered by the Stockholder and, assuming the due authorization, execution and delivery by Purchaser, constitutes a legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, except that such enforceability may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally. 65535.VII2. NO CONFLICT. The execution and delivery of this Agreement by the Stockholder does not, and the performance of this Agreement by the Stockholder will not, (i) require any consent, approval, authorization or permit of, or filing with or notification to (other than pursuant to the HSR Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the Other Regulatory Approvals), any governmental or regulatory authority, domestic or foreign, (ii) conflict with or violate the Certificate of Incorporation or By-laws (or comparable organizational documents) of the Stockholder, (iii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Stockholder or by which any property or asset of the Stockholder is bound, or (iv) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance of any nature whatsoever on any -7- property or asset of the Stockholder pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Stockholder is a party or by which the Stockholder or any property or asset of the Stockholder is bound except that a consent pursuant to that certain Shareholders' Agreement dated March 13, 1996 by and among Shared Technologies Inc., RHI Holdings Inc. and Anthony D. Autorino (the "Shareholders Agreement") may be required and have been obtained. 65535.VII3. TITLE TO THE SHARES. The Shares and Options owned by the Stockholder (as set forth on the signature pages hereto) are all the Shares and Options of the Company owned, either of record or beneficially, by the Stockholder. The Stockholder owns all such Shares free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on the Stockholder's voting rights, charges and other encumbrances of any nature whatsoever (except for the liens granted to the Pledge Agent and pursuant to the Citicorp Pledge Agreement), and, except as provided in this Agreement, other than the Shareholders Agreement, the Pledge Agreement and the Citicorp Pledge Agreement, the Stockholder has not appointed or granted any proxy, which appointment or grant is still effective, with respect to the Shares. RHI hereby agrees to obtain a release from their limitation on voting rights in the Citicorp Pledge Agreement within 10 days after the date of this Agreement. 65535.VII4. BROKERS. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Stockholder. VIII. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby represents and warrants to the Stockholders as follows: 65535.VIII1. Purchaser has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by -8- Purchaser and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of Purchaser. This Agreement has been duly and validly executed and delivered by Purchaser and, assuming the due authorization, execution and delivery by the Stockholders, constitutes a legal, valid and binding obligation of Purchaser, enforceable against the Purchaser in accordance with its terms, except that such enforceability may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally. 65535.VIII2. NO CONFLICT. The execution and delivery of this Agreement by Purchaser does not, and the performance of this Agreement by Purchaser will not, (i) require any consent, approval, authorization or permit of, or filing with or notification to (other than pursuant to the HSR Act, the Exchange Act and the Other Regulatory Approvals), any governmental or regulatory authority, domestic or foreign, (ii) conflict with or violate the Certificate of Incorporation or By-laws of Purchaser, (iii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to Purchaser or by which any property or asset of Purchaser is bound, or (iv) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance of any nature whatsoever on any property or asset of Purchaser pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Purchaser is a party or by which Purchaser or any property or asset of Purchaser is bound. 65535.VIII3. BROKERS. Other than Bear, Stearns & Co., Inc., no broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of Purchaser. IX. TERMINATION OF AGREEMENT. Purchaser reserves the right in its sole discretion at any time hereafter to terminate this Agreement, the Options and all irrevocable proxies granted to it hereunder. -9- X. MISCELLANEOUS. 65535.X1. EXPENSES. Except as otherwise provided herein or in the Merger Agreement, all costs and expenses incurred in connection with the transactions contemplated by this Agreement shall be paid by the party incurring such expenses. 65535.X2. FURTHER ASSURANCES. Purchaser and the Stockholders will execute and deliver all such further documents and instruments and take all such further action as may be necessary in order to consummate the transactions contemplated hereby. 65535.X3. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage would occur in the event any of the provisions of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof (without establishing the likelihood of irreparable injury or posting bond or other security) in addition to any other remedy to which they may be entitled at law or in equity. 65535.X4. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between Purchaser and the Stockholders with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, between Purchaser and the Stockholders with respect to the subject matter hereof. 65535.X5. ASSIGNMENT. This Agreement shall not be assigned by operation of law or otherwise, except that Purchaser may assign all or any of its rights and obligations hereunder to any affiliate of Purchaser, provided that no such assignment shall relieve Purchaser of its obligations hereunder if such assignee does not perform such obligations. 65535.X6. OBLIGATIONS OF SUCCESSORS; PARTIES IN INTEREST. This Agreement shall be binding upon, inure solely to the benefit of, and be enforceable by, the successors and permitted assigns of the parties hereto. Nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement. -10- 65535.X7. AMENDMENT; WAIVER. This Agreement may not be amended or changed except by an instrument in writing signed by the parties hereto. Any party hereto may (i) extend the time for the performance of any obligation or other act of the other party hereto, (ii) waive any inaccuracy in the representations and warranties contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any agreement or condition contained herein. Any such extension or waiver shall be valid if set forth in an instrument in writing signed by the party or parties to be bound thereby. 65535.X8. SEVERABILITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 65535.X9. NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, telecopy, telegram or telex or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 7(i)): if to Purchaser: Intermedia Communications Inc. 3625 Queen Palm Drive Tampa, Florida 33619 Attention: Chief Financial Officer Telecopy: (813) 829-2470 with a copy to: Kronish, Lieb, Weiner & Hellman LLP 1114 Avenue of the Americas New York, New York 10036 Attention: Ralph J. Sutcliffe, Esq. Telecopy: (212) 997-3527 if to any Stockholder: -11- at the respective addresses of such Stockholder set forth at the foot of this Agreement. 65535.X10. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware applicable to contracts executed in and to be performed in that State. 65535.X11. HEADINGS. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. 65535.X12. COUNTERPARTS. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. 65535.X13. The obligations of the Stockholders hereunder are several and no Stockholder shall be liable for any breach by any other Stockholder if his or its obligations hereunder. 65535.X14. WAIVER OF JURY TRIAL. EACH PARTY HERETO WAIVES ANY RIGHT IT MIGHT HAVE TO A JURY TRIAL OF ANY DISPUTE ARISING IN CONNECTION WITH THIS AGREEMENT. XI. CONSENTS. Each of the Stockholders, the Company and RHI Holdings, Inc. hereby consents to the execution and delivery of this Agreement by all parties hereto and the grants of voting rights and Options pursuant hereto and agrees that all Option Shares purchased by Purchasers pursuant hereto shall be acquired free and clear of any obligation under the Shareholders Agreement. IN WITNESS WHEREOF, Purchaser has caused this Agreement to be executed by its officers thereunto duly authorized and the Stockholders and the Company have duly executed or caused this Agreement to be executed by its officers thereunto duly authorized as of the date first written above. PURCHASER: -12- INTERMEDIA COMMUNICATIONS INC. By: ___________________________ Name: Robert M. Manning Title: Senior Vice President and Chief Financial Officer SHAREHOLDERS: NUMBER OF SHARES OWNED: RHI HOLDINGS, INC. 6,225,000 COMPANY COMMON STOCK 250,000 COMPANY PREFERRED STOCK By: ___________________________ Name: Title: Address: c/o The Fairchild Corporation 300 West Service PO Box 10803 Chantilly, Virginia Attention: Donald Miller, Esq. Telecopy: (703) 478-5775 [Signature Pages Continue on Next Page] -13- Anthony D. Autorino 870,416 COMPANY COMMON STOCK OPTIONS TO PURCHASE 296,667 SHARES OF COMPANY COMMON STOCK ____________________________________ Address: c/o Shared Technologies Fairchild, Inc. 100 Great Meadow Road Wethersfield, Connecticut 06109 Attention: Kenneth Doros Telecopy: (860) 258-2455 Jeffrey J. Steiner UP TO 47,500 COMPANY COMMON STOCK OPTIONS TO PURCHASE 116,667 SHARES OF COMPANY COMMON STOCK ____________________________________ Address: c/o The Fairchild Corporation 300 West Service PO Box 10803 Chantilly, Virginia Attention: Donald Miller, Esq. Telecopy: (703) 478-5775 SHARED TECHNOLOGIES FAIRCHILD INC. By:_________________________________ EX-5 6 SETTLEMENT AGREEMENT EXHIBIT 5 This Settlement Agreement (the "Agreement"), dated as of November 20, 1997, by and among Intermedia Communications, Inc. ("ICI"), Moonlight Acquisition Corp. ("Moonlight"), Tel-Save Holdings, Inc. ("Tel-Save"), Shared Technologies Fairchild Inc., ("STF") and TSHCo, Inc. ("TSH") (collectively, the "Parties"). R E C I T A L S WHEREAS, on July 16, 1997, Tel-Save, TSH and STF entered into an Agreement and Plan of Merger (the "Tel-Save Merger Agreement") and certain other agreements and arrangements; WHEREAS, on November 17, 1997, ICI and Moonlight commenced a litigation against Tel-Save, STF and certain other parties, styled INTERMEDIA COMMUNICATIONS, INC. AND MOONLIGHT ACQUISITION CORP. V. SHARED TECHNOLOGIES FAIRCHILD, INC., ET AL., C.A. No. 16038, Del. Ch. 1997 (the "Litigation") and offered to acquire STF (the "ICI Proposal"); and WHEREAS, the Parties desire to terminate the Litigation and settle all disputes among them arising from, or relating in any way to, the Tel-Save Merger Agreement (and all agreements and arrangements contemplated therein or relating thereto) and the ICI Proposal, and to enter into certain other arrangements among them, including, but not limited to, an Agreement and Plan of Merger, dated the date hereof, by and among STF, ICI and Moonlight (the "ICI Merger Agreement"); NOW, THEREFORE, for good and valuable consideration, including the mutual promises, releases, representations, covenants and obligations contained herein or contemplated hereby, the sufficiency of which is hereby acknowledged, the Parties hereby agree as follows: 1. SETTLEMENT OF DISPUTE. 1.1 Promptly after the execution and delivery hereof, each of the Parties hereto shall cause their respective attorneys to execute a stipulation of dismissal, in the form annexed hereto as Exhibit A, dismissing the Litigation with prejudice. Immediately upon execution of said stipulation of dismissal, ICI and Moonlight shall cause their attorneys to file said stipulation of dismissal with the Court of Chancery of the State of Delaware, in and for New Castle County. Each party to the Litigation shall take all steps necessary to effectuate the dismissal with prejudice of the Litigation, and shall pay its own expenses, including attorneys' fees, incident to the Litigation and to the preparation and performance of this Agreement. 1.2 (a) Subject to the provisions of paragraph 1.2(c) hereof, each of the Parties, for itself and its respective officers, directors, affiliates, parent and subsidiary corporations, partners, agents, attorneys, successors, assigns, and anyone claiming any right through it or under it, mutually, irrevocably and unconditionally releases and forever discharges each of the other Parties and their present and former officers, directors, affiliates, parent and subsidiary corporations, partners, agents, representatives, employees, controlling persons, and their respective successors and assigns (collectively, the "Releasees"), from any and all claims, actions, causes of action, suits, debts, dues, rights, offsets, demands, sums of money, accounts, damages, judgments, reckonings, bonds, bonuses, charges, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, extents, executions, and complaints whatsoever, in law, equity or otherwise, under federal law, state law or otherwise, whether known or unknown, which such Party and/or its officers, directors, affiliates, parent and subsidiary corporations, partners, agents, attorneys, successors, assigns, and anyone claiming any right through it or under it, ever had, now has, or hereafter may have, for, upon, or by any matter, cause or thing whatsoever, from the beginning of the world to the day of this Agreement, based on, relating or with respect to, or arising out of: (i) the facts, underlying claims, or affirmative defenses that were asserted, or could have been asserted, in the Litigation; (ii) the filing or prosecution of the Litigation, or any process or proceedings therein; (iii) the Tel-Save Merger Agreement, the STF Voting Agreements (as defined below), the Option (as defined below), the ICI Proposal or the LD Agreement, as originally executed and delivered (as defined below), or the negotiation or execution of any thereof; (iv) the negotiation or execution of this Agreement, the ICI Merger Agreement, the Amended LD Agreement (as defined below), the Option Agreement, of even date herewith, among ICI and certain stockholders of STF (the "Option Agreement"), the Stock Purchase Agreement to be entered, between ICI and RHI (the "Stock Purchase Agreement"), the Loan Agreement to be entered between ICI and STF (the "Loan Agreement"), or any other agreement contemplated by such agreements to be executed on or after the date hereof; or (v) any acts, facts, transactions, occurrences, conduct, statements or representations on the part of the -2- Parties or their respective present or former officers, directors, affiliates, parent and subsidiary corporations, partners, agents, representatives, employees or controlling persons with regard to, or directly or indirectly related to, the merger or sale of, or failure to merge or sell, or any offer or proposal to merge or sell, or failure to include any particular term in any agreement to merge or sell, STF, or any statement or omission in the Joint Proxy Statement of Tel-Save and STF of October 30, 1997. (b) Subject to the provisions of paragraph 1.2(c) hereof, each of the Parties, for itself and its respective officers, directors, affiliates, parent and subsidiary corporations, partners, agents, attorneys, successors, assigns, and anyone claiming any right through it or under it, covenants not to sue or bring any claim or action, of any nature whatsoever, against the Releasees, or any one or more of them, in any forum, based on, relating to or arising out of: (i) the facts, underlying claims, or affirmative defenses that were asserted, or could have been asserted, in the Litigation; (ii) the filing or prosecution of the Litigation, or any proceedings therein; (iii) the Tel-Save Merger Agreement, the STF Voting Agreements (as defined below), the Option (as defined below), the ICI Proposal or the LD Agreement, as originally executed and delivered (as defined below); (iv) the negotiation or execution of this Agreement, the ICI Merger Agreement, the Amended LD Agreement (as defined below), the Option Agreement, the Stock Purchase Agreement, the Loan Agreement, or any other agreement contemplated by such agreements to be executed on or after the date hereof; or (v) any acts, facts, transactions, occurrences, conduct, statements or representations on the part of the Parties or their respective present or former officers, directors, affiliates, parent and subsidiary corporations, partners, agents, representatives, employees or controlling persons with regard to, or directly or indirectly related to, the merger or sale of, or failure to merge or sell, or any offer or proposal to merge or sell, or failure to include any particular term in any agreement to merge or sell, STF, or any statement or omission in the Joint Proxy Statement of Tel-Save and STF of October 30, 1997. -3- (c) Nothing in paragraphs 1.2(a) or 1.2(b) hereof shall alter, modify, release or apply to: (i) the rights, obligations, covenants, representations or warranties of the Parties under or in this Agreement; (ii) the rights, obligations, covenants, representations or warranties of STF, ICI and Moonlight under or in the ICI Merger Agreement, the Option Agreement, the Stock Purchase Agreement, the Loan Agreement, or any other agreement contemplated by such agreements to be executed on or after the date hereof; (iii) the rights, obligations, consents, representations or warranties of STF and Tel-Save, Inc. under or in the Amended LD Agreement (as defined below); or (iv) the rights, obligations, covenants, representations, or warranties of STF and ICI under or in the Notes (as defined below). (d) Simultaneously with the execution of this Agreement, ICI, Moonlight, STF, RHI Holdings, Inc. ("RHI") and The Fairchild Corporation ("TFC") are executing and delivering a release in favor of Daniel Borislow ("Borislow"), and Borislow is executing and delivering a release in favor of ICI, Moonlight, STF, RHI, and TFC, in each case in the forms attached as Exhibit B and Exhibit C, respectively. Simultaneously with the execution of this Agreement, ICI, Moonlight, Tel-Save and TSH are executing and delivering a release in favor of RHI and TFC, and RHI and TFC are executing and delivering a release in favor of ICI, Moonlight, Tel-Save and TSH, in each case in the forms attached as Exhibit D and Exhibit E, respectively. 1.3 Neither this Agreement nor any of the terms hereof nor any negotiations, proceedings or agreements in connection herewith shall constitute, or be construed as or be deemed to be evidence of, an admission on the part of any Party of any liability or wrongdoing whatsoever, or of the truth or untruth of any of the claims made by any party in the Litigation, or of the merit or any lack of merit of any of the defenses thereto; nor shall this Agreement, or any of the terms hereof, or any negotiations or proceedings in connection herewith, be offered or received in evidence, or used in any proceeding against any of the Parties, or used in any proceeding for any purpose whatsoever, except with respect to the effectuation and enforcement of this Agreement, the ICI Merger Agreement, the Option Agreement, the Stock Purchase Agreement, the Loan Agreement, the Amended LD Agreement (as defined below), the Notes (as defined below), any other agreement contemplated by such agreement to be executed on or after the date -4- hereof, the discontinuance with prejudice of the Litigation, or the releases referred to in paragraph 1.2(d) hereof. 2. TERMINATION OF THE TEL-SAVE MERGER AGREEMENT AND CERTAIN RELATED AGREEMENTS. (a) (i) Tel-Save, TSH and STF hereby terminate the Tel-Save Merger Agreement, (ii) Tel-Save and STF hereby terminate the Option Agreement, dated as of July 16, 1997 (the "Option"), between Tel-Save and STF, (iii) the agreements, dated as of July 16, 1997 (the "STF Voting Agreements"), by Tel-Save with each of RHI Holdings, Inc., J.J. Cramer & Co., Mentor Partners, L.P. and Anthony D. Autorino, and the voting agreement, dated as of July 16, 1997, between STF and Borislow (the "Borislow Voting Agreement") by their own terms shall be terminated upon termination of the Tel-Save Merger Agreement, and Tel-Save hereby agrees and confirms that it shall have no rights under the STF Voting Agreements, and STF hereby agrees and confirms that it shall have no rights under the Borislow Voting Agreement, and (iv) except for the Long Distance Agreement, dated as of November 13, 1997 (the "LD Agreement"), between Tel-Save, Inc. and STF, as amended as described herein, and except for this Agreement (and the releases and other instruments contemplated herein), each of Tel-Save, TSH and STF hereby terminates all other agreements and arrangements of any kind arising from or relating to the Tel-Save Merger Agreement and the transactions contemplated thereby (the Tel-Save Merger Agreement, the Option, the STF Voting Agreements, the Borislow Voting Agreement and such other agreements, collectively, the "Terminated Agreements")). Except as expressly provided herein, the termination of the Terminated Agreements shall be without liability to any party to any such Terminated Agreement and shall release each party thereto from any and all further obligations thereunder, including, but not limited to, any obligation to pay any termination fees described in the Tel-Save Merger Agreement. (b) In consideration for the termination of the Tel-Save Merger Agreement, the Option and the STF Voting Agreements, STF hereby pays to Tel-Save $26.250 million by certified check drawn on a bank reasonably acceptable to Tel-Save or wire transfer of immediately available funds. 3. ADDITIONAL TRANSACTIONS. (a) ICI hereby transfers to Tel-Save $211 million by certified check drawn on a bank reasonably acceptable to Tel-Save or wire transfer of immediately available funds. (b) Tel-Save hereby sells, assigns and transfers to ICI all of its right, title and interest in and to all of the $163,637,000 face amount of the 12 1/4% Senior Subordinated Discount Notes Due 2006 of STF (the "Notes") held by it on the date hereof. Tel-Save represents and warrants to ICI that: (i) Tel-Save owns the Notes, free and clear of all liens, -5- encumbrances, restrictions and defects of title of any kind ("Liens") imposed or incurred by it and, to Tel-Save's knowledge, Tel-Save owns the Notes free and clear of all Liens whatsoever; (ii) Tel-Save has the right to transfer such Notes to ICI without (x) violating any contract, agreement or arrangement to which it is a party or by which it or its assets may be bound, and (y) the imposition of any Lien on the Notes arising from such transfer; and (iii) Tel-Save paid approximately $167 million to acquire the Notes. From time to time after the date hereof, at the request of ICI, and without any additional consideration therefor, Tel-Save shall execute and deliver to ICI such instruments and documents of conveyance and transfer, and do and cause to be done such acts or things, as ICI may reasonably request in order to more effectively transfer and assign to ICI, or perfect or record, ICI's interest in or title to, the Notes. (c) Simultaneously with the execution of this Agreement, Tel-Save, Inc. and STF are amending the LD Agreement by executing and delivering an amendment in the form attached as Exhibit F (the LD Agreement as so amended, the "Amended LD Agreement"). 4. STANDSTILL. For a period from the date hereof to the earlier of the first anniversary of the date hereof and the date the ICI Merger Agreement shall have been terminated, none of Tel-Save nor any of its affiliates (as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) will (and none will assist or encourage others to), directly or indirectly: (i) acquire or agree, offer, seek or propose to acquire (or request permission to do so), ownership (including, but not limited to, beneficial ownership as defined in Rule 13d-3 under the Exchange Act) of all or substantially all of the assets or businesses of STF, or any securities issued by STF, or any rights or options to acquire such ownership (including from a third party), or (ii) seek or propose to acquire control of the management or policies of STF (or request permission to do so), or (iii) enter into any discussions, negotiations, arrangements or understandings with any third party with respect to any of the foregoing. 5. REPRESENTATIONS AND WARRANTIES. Each of the Parties hereby represents and warrants to each other Party hereto as follows: -6- (a) It has full corporate power and authority to execute and deliver this Agreement and any agreements and documents contemplated hereunder (the "Related Agreements") to which it is a party and to perform its obligations hereunder and thereunder. The execution, delivery and performance by it of this Agreement and the Related Agreements to which it is a party have been duly authorized by all necessary corporate action on its part, and this Agreement and each of the Related Agreements to which it is a party constitutes a valid and binding obligation of it, enforceable against it in accordance with its terms. (b) Neither the execution and delivery of this Agreement and the Related Agreements to which it is a party nor the consummation of the transactions contemplated hereby or thereby constitutes a violation or breach of the certificate of incorporation or by-laws (or other governing instrument) of it or any provision of any contract, license or franchise or other instrument to which it is a party or by which it may be bound. 6. NOTICES. All notices, requests, demands, consents and other communications required or permitted under this Agreement (collectively, "Notice") shall be effective only if given in writing and shall be considered to have been duly given when (i) delivered by hand, (ii) sent by telecopier (with receipt confirmed), provided that a copy is mailed (on the same date) by certified or registered mail, return receipt requested, postage prepaid, or (iii) received by the addressee, if sent by Express Mail, Federal Express or other reputable express delivery service (receipt requested), or by first class certified or registered mail, return receipt requested, postage prepaid. Notice shall be sent in each case to the appropriate addresses or telecopier numbers set forth below (or to such other addresses and telecopier numbers as a Party may from time to time designate as to itself by notice similarly given to the other Parties in accordance herewith, which shall not be deemed given until received by the addressee). Notice shall be given: (i) to ICI and Moonlight at: Intermedia Communications Inc. 3625 Queen Palm Drive Tampa, Florida 33619 Attn: Chief Financial Officer Telecopier: (813) 829-2470 copy to: Kronish, Lieb, Weiner & Hellman LLP 1114 Avenue of the Americas New York, New York 10036-7798 Attn: Ralph J. Sutcliffe, Esq. Telecopier: (212) 479-6275 -7- (ii) to STF at: Shared Technologies, Inc. 100 Great Meadow Road, Suite 104 Wethersfield, CT 06109 Attn: Kenneth M. Dorros, Esq. Telecopier: (860) 258-2455 copy to: Cahill Gordon & Reindel 80 Pine Street New York, New York 10005 Attn: James J. Clark, Esq. Telecopier: (212) 269-5420 and The Fairchild Corporation 300 West Service Road P.O. Box 10803 Chantilly, VA 22021 Attn: Donald E. Miller, Esq. Telecopier: (703) 478-5775 (iii) to Tel-Save and TSH at: 6805 Route 202 New Hope, Pennsylvania 18938 Attn: Chief Executive Officer Telecopier: (215) 862-1083 copy to: Arnold & Porter 399 Park Avenue New York, New York 10022 Attn: Jonathan C. Stapleton, Esq. Telecopier: (212) 715-1399 and Aloysius T. Lawn, IV, Esq. General Counsel Tel-Save Holdings, Inc. 6805 Route 202 New Hope, Pennsylvania 18938 Telecopier: (215) 862-1083 7. FURTHER ASSURANCES. Each of the Parties shall, at any time and from time to time after the date hereof, fairly and in good faith, do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, all such further acts, deeds, assignments, transfers, conveyances, powers of attorney, receipts, acknowledgments, acceptances and assurances as may be reasonably required to procure for each of -8- the Parties and their respective successors and assigns, the consideration to be delivered to them as provided for herein or otherwise to carry out the intent and purposes of this Agreement or to consummate any of the transactions contemplated hereby. 8. SEVERABILITY. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 9. MISCELLANEOUS PROVISIONS. 9.1 This Agreement may not be amended, modified, discharged or terminated, nor may the rights of any Party hereunder be waived, except by a written document that is executed by each Party hereto. No waiver of any provision of this Agreement shall be deemed to constitute a waiver of any other provision hereof, nor shall any waiver constitute a continuing waiver. 9.2. This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall be an original, but all of which together shall constitute one and the same instrument. 9.3 The Exhibits referred to herein are a part of this Agreement for all purposes. Terms used in this Agreement shall have the same meanings when used in such Exhibits. 9.4 Captions and headings are employed herein for convenience of reference only and shall not affect the construction or interpretation of any provision hereof. 9.5 This Agreement is made under and shall be governed by and construed in accordance with the substantive laws of the State of New York applicable to contracts made and to be performed entirely within that state. 9.6 This Agreement and the agreements and instruments contemplated herein constitute the entire agreement between Tel-Save and TSH, on the one hand, and the other Parties hereto, on the other hand, with respect to the subject matter hereof. -9- IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day and year first above written. INTERMEDIA COMMUNICATIONS INC. By: _________________________ MOONLIGHT ACQUISITION CORP. By: _________________________ TEL-SAVE HOLDINGS, INC. By: _________________________ SHARED TECHNOLOGIES FAIRCHILD INC. By: _________________________ TSHCO. INC. By: _________________________ -10- EX-6 7 CONFIDENTIAL AGREEMENT Exhibit 6 September 18, 1996 Personal and Confidential - ------------------------- Mr. Anthony Autorino Chief Executive Officer Shared Technologies Inc. 100 Great Meadow Road Wethersfield, CT 06109 Dear Mr. Autorino: The undersigned (the "Company") and you ("ST") are about to engage in exploratory discussions regarding a possible acquisition by the Company of ST or a similar transaction (any of the foregoing, a "Transaction"). The Company and ST have each requested the right to review various non-public information regarding the other (any such information, written or oral, regarding the Company, including any of its direct or indirect subsidiaries, "Company Evaluation Material" and any such information, written or oral, regarding ST, including any of its direct or indirect subsidiaries, "ST Evaluation Material"). The Company hereby undertakes with respect to the ST Evaluation Material, and ST hereby undertakes with respect to the Company Evaluation Material, and each of the Company and ST otherwise agree as follows: 1. The Evaluation Material will be used solely for the purpose of evaluating a possible Transaction, and until two (2) years from the date hereof, such Evaluation Material will be kept strictly confidential by the Company or ST, as the case may be, and their respective affiliates, directors, officers, employees, advisors (including Bear, Stearns & Co. Inc., who has been retained by the Company to act on its behalf), agents or controlling persons (such affiliates and other persons being herein referred to collectively as "Representatives", except that the Evaluation Material or portions thereof may be disclosed to Representatives who need to know such information for the purpose of evalu- -2- ating a possible Transaction (it being understood that prior to such disclosure Representatives will be informed of the confidential nature of the Evaluation Material and shall be agree to be bound by this Agreement). The Company and ST agree to be responsible for any breach of this Agreement by their respective Representatives. 2. The term "Evaluation Material" does not include any information which (i) at the time of disclosure or thereafter is generally known by the public (other than as a result of its disclosure by the Company or ST or their respective Representatives) or (ii) was or becomes available to the Company or ST, as the case may be, on a nonconfidential basis from a person not to the knowledge of the Company or ST, as the case may be, otherwise bound by a confidentiality agreement with the other and who is not, to the knowledge of the Company or ST, as the case may be, otherwise prohibited from transmitting the information to the Company or ST, as the case may be, or (iii) is independently developed by the Company or ST, as the case may be, or their respective Representatives. As used in this Agreement, the term "person" shall be broadly interpreted to include, without limitation, any corporation, company, joint venture, partnership or individual and the term "affiliate" shall have the meaning set forth in Rule 144 issued under the Securities Act of 1933. 3. In the event the Company, ST or their respective Representatives are required by applicable law or regulation or by legal process to disclose any Evaluation Material each agrees to (i) immediately notify the other of the existence, terms and circumstances surrounding such a request, and (ii) consult with the other on the advisability of taking legally available steps to resist or narrow such request. 4. Prior to the earlier of two (2) years from the date hereof or the completion of a Transaction, unless otherwise required by law in the opinion of outside counsel, neither the Company nor ST will, without prior written consent of the -3- other, disclose to any person either the fact that discussions or negotiations are taking place concerning a possible Transaction, or any of the terms, conditions or other facts with respect to any such possible Transaction, including the status thereof and the fact that the Evaluation Material has been made available to the Company or ST. 5. The Company and ST each hereby acknowledges that it is aware, and that it will advise its Representatives who receive the Evaluation Material, that the United States securities laws prohibit any person who has material, non-public information concerning the matters which are the subject of this Agreement from purchasing or selling securities of the other (and options, warrants and rights relating thereto) or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person including, without limitation, any of its Representatives, is likely to purchase or sell such securities. 6. Neither the Company nor any of its Representatives, on the one hand, nor ST or any of its Representatives, on the other hand, is making any representation or warranty hereunder, express or implied, as to the accuracy or completeness of the Company Evaluation Material or ST Evaluation Material, respectively, or any other information provided pursuant hereto. Neither party, nor any of their respective affiliates, Representatives, officers, directors, employees, agents or controlling persons (within the meaning of the 1934 Act) shall have any liability hereunder to the other or any other person (including, without limitation, any of its Representatives) resulting from use of the Evaluation Material. 7. The Company and ST agree that unless and until a definitive agreement with respect to any Transaction has been executed and delivered, neither party will be under any legal obligation of any kind whatsoever with respect to such -4- a Transaction by virtue of (i) this Agreement or (ii) any written or oral expression with respect to such a Transaction except, in the case of this Agreement, for the matters specifically agreed to herein. 8. Neither party has granted the other any license, copyright, or similar right with respect to any of the Evaluation Material or any other information provided pursuant hereto. 9. Upon determining not to proceed with a Transaction, the Company or ST, as the case may be, will promptly advise the other of that determination in writing. In that event or at any time requested by either the Company or ST, all Evaluation Material, including all copies, reproductions, summaries, extracts thereof or based thereon, previously provided to the other shall be returned or be certified in writing to have been destroyed. 10. The Company and ST shall be entitled to equitable relief by way of injunction for any breach or threatened breach of any of the provisions of this Agreement by the other. 11. The validity and interpretation of this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York applicable to agreements made and to be fully performed therein (excluding the conflicts of laws rules). The Company and ST irrevocably submit to the jurisdiction of any court of the State of New York or the United States District Court of the Southern District of the State of New York for the purpose of any suit, action or other proceeding arising out of this Agreement, or any of the agreements or transactions contemplated hereby, which is brought by or against it and (i) hereby irrevocably agree that all claims in respect of any such suit, action or proceeding may be heard and determined in any such court, (ii) to the extent that either the Company or ST has acquired, or hereafter may acquire, any immunity from jurisdiction of any such court or from any legal process therein, it hereby waives to the fullest extent permitted by law, such immunity and (iii) agrees not to commence any action, suit or pro- -5- ceeding relating to this Agreement or any Transaction except in such court. Each of the Company and ST hereby waives, and agrees not to assert in any such suit, action or proceeding, in each case, to the fullest extent permitted by applicable law, any claim that (a) it is not personally subject to the jurisdiction of any such court, (b) it is immune from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to it or its property or (c) any such suit, action or proceeding is brought in an inconvenient forum. 12. The benefits of this Agreement shall inure to the respective successors and assigns of the parties and the obligations and liabilities assumed in this Agreement by the parties hereto shall be binding upon their respective successors and assigns. 13. If it is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) that any term or provision hereof is invalid or unenforceable, (i) the remaining terms and provisions hereof shall be unimpaired and shall remain in full force and effect and (ii) the invalid or unenforceable provision or term shall be replaced by a term or provision that is enforceable and that comes closest to expressing the intention of such invalid or unenforceable term or provision. 14. This Agreement embodies the entire agreement and understanding of the parties hereto and supersedes any and all prior agreements, arrangements and understandings relating to the matters provided for herein. No alteration, waiver, amendment, change or supplement hereto shall be binding or effective unless the same is set forth in writing signed by a duly authorized Representative of each party. 15. For the convenience of the parties, any number of counterparts of this Agreement may be executed by the parties hereto. Each such counterpart shall be, and shall be deemed to be, an -6- original instrument, but all such counterparts taken together shall constitute one and the same Agreement. -7- This Agreement is being delivered to you in duplicate. Kindly execute and return one copy of this letter which will constitute our Agreement with respect to the subject matter of this letter. Very truly yours, INTERMEDIA COMMUNICATIONS INC. By: --------------------------------- David C. Ruberg, Chairman and Chief Executive Officer Confirmed and agreed to this ____ day of September, 1996 SHARED TECHNOLOGIES INC. By: ---------------------------- Anthony Autorino, Chief Executive Officer This Agreement is being delivered to you in duplicate. Kindly execute and return one copy of this letter which will constitute our Agreement with respect to the subject matter of this letter. Very truly yours, INTERMEDIA COMMUNICATIONS INC. By: --------------------------------- David C. Ruberg, Chairman and Chief Executive Officer Confirmed and agreed to this ____ day of November, 1996 SHARED TECHNOLOGIES INC. By: ---------------------------- Anthony Autorino, Chief Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----