<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
SCHEDULE 14D-1
Tender Offer Statement
Pursuant to Section 14(d)(1)
of the Securities Exchange Act of 1934
AND
SCHEDULE 13D
Pursuant to Section 13(d)
of the Securities Exchange Act of 1934
----------------
DIGEX, INCORPORATED
(Subject Company)
----------------
INTERMEDIA COMMUNICATIONS INC.
DAYLIGHT ACQUISITION CORP.
(Bidders)
----------------
Common Stock, Par Value $.01 Per Share
(Title of Class of Securities)
----------------
253754105
(CUSIP Number of Class of Securities)
----------------
Robert M. Manning
Senior Vice President, Chief Financial Officer
Intermedia Communications Inc.
3625 Queen Palm Drive
Tampa, Florida 33619
(813) 829-0011
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
----------------
Copy to:
Ralph J. Sutcliffe, Esq.
Kronish, Lieb, Weiner & Hellman LLP
1114 Avenue of Americas
New York, New York 10036-7798
(212) 479-6170
Exhibit Index is located on Page 8
THIS FILING SHALL BE DEEMED TO CONSTITUTE AN ORIGINAL FILING ON
SCHEDULE 13D ON BEHALF OF INTERMEDIA COMMUNICATIONS INC. PURSUANT TO SECTION
13(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934
CALCULATION OF FILING FEE
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<TABLE>
<CAPTION>
TRANSACTION VALUATION AMOUNT OF FILING FEE
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<S> <C>
$151,765,393.00* $30,353.08**
</TABLE>
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* For purposes of calculating fee only. Transaction valuation assumes the
purchase of 11,674,261 shares of Common Stock of the Subject Company at
$13.00 in cash per share.
** The amount of the filing fee, calculated in accordance with Regulation
240.0-11 of the Securities Exchange Act of 1934, equals 1/50 of one percent
of the value of the shares to be purchased.
// Check Box if any part of the fee is offset as provided by Rule O-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the provisions filing by registration statement number, or the
Form or Schedule and the date of its filing.
Filing Party: Intermedia
Amount Previously Paid: Communications Inc.
Form or Registration No.: Daylight Acquisition Corp.
Date Filed: June 11, 1997
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<PAGE>
SCHEDULE 14D-1
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CUSIP No. 253754105
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<TABLE>
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<S> <C>
NAME OF REPORTING PERSONS:
1 S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
Daylight Acquisition Corp.
Not Assigned
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
2 (See Instructions) (b) [_]
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SEC USE ONLY
3
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SOURCES OF FUNDS (See Instructions)
4 AF
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CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
5 PURSUANT TO ITEMS 2(e) or 2(f) [_]
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CITIZENSHIP OR PLACE OF ORGANIZATION
6 Delaware
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
7. REPORTING PERSON
5,877,582 shares of Common Stock, $.01 par value
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
8. CERTAIN SHARES (See Instructions) [_]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
9 50.3%
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TYPE OF REPORTING PERSON (See Instructions)
10 CO
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</TABLE>
2
<PAGE>
SCHEDULE 14D-1
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CUSIP No. 253754105
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<TABLE>
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<S> <C>
NAME OF REPORTING PERSONS:
1 S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
Intermedia Communications Inc.
59-291-3586
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
2 (See Instructions) (b) [_]
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SEC USE ONLY
3
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SOURCES OF FUNDS (See Instructions)
4 WC
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CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
5 PURSUANT TO ITEMS 2(e) or 2(f) [_]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
5,877,582 shares of Common Stock, $.01 par value
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
8 CERTAIN SHARES (See Instructions) [_]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
9 50.3%
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TYPE OF REPORTING PERSON (See Instructions)
10 HC, CO
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</TABLE>
3
<PAGE>
INTRODUCTION
This Tender Offer Statement on Schedule 14D-1 and Schedule 13D relates to a
tender offer by Daylight Acquisition Corp., a Delaware corporation
("Purchaser") and a wholly owned subsidiary of Intermedia Communications Inc.,
a Delaware corporation ("Parent"), to purchase all outstanding shares of
Common Stock, par value $.01 per share (the "Shares"), of DIGEX, Corporation,
a Delaware corporation (the "Company"), at $13.00 per Share, net to the seller
in cash, upon the terms and subject to the conditions set forth in the Offer
to Purchase dated June 11, 1997 (the "Offer to Purchase"), and the related
Letter of Transmittal (which, together with any amendments or supplements
thereto, collectively constitute the "Offer"), copies of which are filed as
Exhibits (a)(1) and (a)(2) hereto, respectively and are incorporated herein by
reference.
ITEM 1. SECURITY AND SUBJECT COMPANY
(a) The subject company to which this Statement on Schedule 14D-1 relates is
DIGEX, Corporation, a Delaware corporation which has its principal executive
offices at One DIGEX Plaza, Beltsville, Maryland 20705.
(b) This statement relates to a tender offer by Purchaser, a wholly owned
subsidiary of Parent, to purchase all outstanding shares of Common Stock, par
value $.01 per share, of the Company at $13.00 per share, net to the seller in
cash. As of June 4, 1997, there were 11,674,261 Shares outstanding (15,339,741
Shares on a fully diluted basis including all Shares issuable upon the
exercise of certain outstanding options and warrants). The information set
forth in "Introduction" and "Section 1. Terms of the Offer; Expiration" of the
Offer to Purchase is incorporated herein by reference.
(c) The information regarding the principal market for, and price of, the
Shares set forth in "Section 6. Price Range of the Shares; Dividends" of the
Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND
(a)-(d), (g) The persons filing this statement are Purchaser and Parent.
Purchaser, a Delaware corporation, was incorporated on May 30, 1997 for the
purpose of entering into the Merger Agreement and consummating the
transactions contemplated thereby. It has conducted no business other than
related to its formation and the transactions contemplated by the Merger
Agreement. All the outstanding capital stock of Purchaser is owned by Parent.
Parent is a publicly held Delaware corporation. Parent, directly and through
its subsidiaries, is a rapidly growing integrated communications services
provider, offering a full suite of local, long distance and enhanced data
telecommunications services to business and government end user customers,
long distance carriers, Internet service providers, resellers and wireless
communications companies. The principal office of Purchaser and Parent is
located at 3625 Queen Palm Drive, Tampa, Florida 33619. The information set
forth in "Section 9. Certain Information Concerning Purchaser and Parent" of
the Offer to Purchase is incorporated herein by reference. The names, business
addresses, present principal occupations or employment, material occupations,
positions, offices or employments during the last five years and citizenship
of the directors and executive officers of Purchaser and Parent are set forth
in "Annex I-Directors and Executive Officers of Purchaser and Parent" of the
Offer to Purchase, which Annex is incorporated herein by reference.
(e)-(f) During the last five years, neither Purchaser nor Parent nor, to the
best knowledge of Purchaser or Parent, any persons listed in "Annex I-
Directors and Executive Officers of Purchaser and Parent" of the Offer to
Purchase, (i) has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) has been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and
as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, Federal or State securities laws or finding any violation of such laws.
4
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ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY
(a) Except as set forth in the "Introduction," "Section 8. Certain
Information Concerning the Company," "Section 9. Certain Information
Concerning Purchaser and Parent" and "Section 11. Background of the
Transaction" of the Offer to Purchase, which are incorporated herein by
reference, neither Purchaser nor Parent nor, to the best knowledge of
Purchaser or Parent, any of the persons listed on "Annex I-Directors and
Executive Officers of Purchaser and Parent" to the Offer to Purchase, has
engaged in any transaction since January 1, 1994 with the Company, any
corporation affiliated with the Company, or any of the Company's executive
officers, directors or affiliates that would be required to be disclosed under
this Item 3(a).
(b) Except as set forth in the "Introduction," "Section 8. Certain
Information Concerning the Company," "Section 9. Certain Information
Concerning Purchaser and Parent," "Section 11. Background of the Transaction"
and "Section 12. Purpose of the Offer; The Merger Agreement and the Stock
Purchase Agreement" of the Offer to Purchase, which are incorporated herein by
reference, there have been no contacts, negotiations or transactions since
January 1, 1994 between Purchaser or Parent or their subsidiaries or, to the
best knowledge of the Purchaser and Parent, any of the persons listed in
"Annex I-Directors and Executive Officers of Purchaser and Parent" to the
Offer to Purchase, which is incorporated herein by reference, on the one hand,
and the Company or any of the Company's executive officers, directors or
affiliates, on the other hand, concerning: a merger, consolidation or
acquisition; a tender offer or other acquisition of securities; an election of
directors; or a sale or other transfer of a material amount of assets.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a) The total amount of funds required by Purchaser to purchase all
outstanding Shares and to pay related fees and expenses in connection with the
Offer, the Merger and the Stock Purchase Agreement, is estimated to be
approximately $154.2 million. Purchaser expects to obtain the necessary funds
directly from Parent from Parent's existing cash reserves. The information set
forth in "Section 10. Source and Amount of Funds" of the Offer to Purchase is
incorporated herein by reference.
(b)-(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDERS
(a)-(e) The purpose of the Offer is to enable Purchaser to acquire, in one
or more transactions, control of the Company. The information concerning the
purpose of the Offer set forth in the "Introduction," "Section 8. Certain
Information Concerning the Company" and "Section 12. Purpose of the Offer; The
Merger Agreement and the Stock Purchase Agreement" of the Offer to Purchase is
incorporated herein by reference.
(f)-(g) The information set forth in "Section 7. Certain Effects of the
Transaction" of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
(a)-(b) Parent has entered into a stock purchase agreement with certain
stockholders who own an aggregate of approximately 50.3% of the outstanding
Shares (approximately 38.3% of the Shares on a fully diluted basis), pursuant
to which, among other things, such stockholders have agreed to validly tender
(and not to withdraw) all such shares pursuant to the Offer and granted Parent
an option to purchase all such shares at a price of $13.00 per share
exercisable individually from each stockholder, in whole or in part, at any
time or from time to time, on or after June 4, 1997 and prior to the
Termination Date (as defined in Section 12 of the Offer to Purchase). The
information set forth in "Section 9. Certain Information Concerning Purchaser
and Parent" and "Section 12. Purpose of the Offer; The Merger Agreement and
the Stock Purchase Agreement" of the Offer to Purchase is incorporated herein
by reference. Except as set forth in said Sections 9 and 12 of the Offer to
Purchase, none of the Purchaser or Parent or, to the best knowledge of
Purchaser or Parent any of the persons listed in "Annex I-Directors and
Executive Officers of Purchaser and Parent" to the Offer to Purchase or any
associate or majority-owned subsidiary of Purchaser or Parent or any of the
persons so listed, owns beneficially or has any right to acquire, directly or
indirectly, any Shares; and neither Purchaser nor Parent nor, to the best
knowledge of Purchaser or Parent, any of the persons or entities referred to
above nor any director, executive officer or subsidiary of any of the
foregoing, has effected any transaction in the Shares during the past sixty
days.
5
<PAGE>
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES
The description of all contracts, arrangements, understandings or
relationships between Purchaser or Parent or, to the best knowledge of
Purchaser or Parent, any of the persons listed in "Annex I- Directors and
Executive Officers of Purchaser and Parent" to the Offer to Purchase and any
person with respect to any securities of the Company set forth in "Section 1.
Terms of the Offer; Expiration," "Section 9. Certain Information Concerning
Purchaser and Parent," "Section 10. Source and Amount of Funds," "Section 11.
Background of the Transaction" and "Section 12. Purpose of the Offer; The
Merger Agreement and the Stock Purchase Agreement" of the Offer to Purchase is
incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The information with respect to persons employed, retained or to be
compensated by Purchaser or by any person on its behalf to make solicitations
or recommendations in connection with the Offer and the terms of such
employment, retention and compensation set forth in the "Introduction" and in
"Section 16. Fees and Expenses" of the Offer to Purchase is incorporated
herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS
Reference is hereby made to the financial information set forth in "Section
9. Certain Information Concerning Purchaser and Parent" of the Offer to
Purchase which is incorporated herein by reference. The financial statements
of Parent contained in the Offer to Purchase do not constitute an admission
that such information is material to a decision by a security holder of the
Company to sell, tender or hold the securities being sought in the Offer.
ITEM 10. ADDITIONAL INFORMATION
(a) The information with respect to present or proposed material contracts,
arrangements, understandings or relationships between Purchaser or Parent, any
of their subsidiaries, or, to the best knowledge of Purchaser or Parent, any
of the persons listed on "Annex I-Directors and Executive Officers of
Purchaser and Parent" to the Offer to Purchase, set forth in "Section 8.
Certain Information Concerning the Company," "Section 9. Certain Information
Concerning Purchaser and Parent," "Section 11. Background of the Transaction"
and "Section 12. Purpose of the Offer; The Merger Agreement and the Stock
Purchase Agreement" of the Offer to Purchase are incorporated herein by
reference.
(b)-(c) The information relating to regulatory requirements and regulatory
approvals that may be required and the applicability of antitrust laws set
forth in "Section 15. Certain Legal Matters" of the Offer to Purchase is
incorporated herein by reference.
(d) The information relating to the applicability of the margin requirements
of Section 7 of the Exchange Act set forth in "Section 7. Certain Effects of
the Transaction" of the Offer to Purchase is incorporated herein by reference.
(e) Not Applicable.
(f) Additional information with respect to the Offer contained in Exhibits
(a)(1) and (a)(2) hereto is incorporated by reference herein in its entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS
See Exhibit Index.
6
<PAGE>
SIGNATURES
After due inquiry and to the best of its knowledge and belief, each of the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
INTERMEDIA COMMUNICATIONS INC.
/s/ Robert M. Manning
By___________________________________
Name: Robert M. Manning
Title:Senior Vice President, Chief
Financial
Officer & Secretary
DAYLIGHT ACQUISITION CORP.
/s/ Robert M. Manning
By___________________________________
Name: Robert M. Manning
Title:President, Secretary
and Treasurer
Dated: June 11, 1997
7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
<C> <S> <C>
(a)(1) Offer to Purchase dated June 11, 1997...................
(a)(2) Form of Letter of Transmittal...........................
(a)(3) Form of Notice of Guaranteed Delivery...................
(a)(4) Form of Letter from Bear, Stearns & Co. Inc. to Brokers,
Dealers, Commercial Banks, Trust Companies and Other
Nominees................................................
(a)(5) Form of Letter to Clients from Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees....
(a)(6) Summary Advertisement published June 11, 1997...........
(a)(7) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9...........................
(a)(8) Text of Press Release issued on June 5, 1997............
(a)(9) Text of Press Release issued on June 11, 1997...........
(c)(1) Agreement and Plan of Merger dated as of June 4, 1997
among DIGEX, Incorporated, Intermedia Communications
Inc. and Daylight Acquisition Corp. ....................
(c)(2) Stock Purchase Agreement dated as of June 4, 1997 among
Intermedia Communications Inc. and certain specified
Stockholders............................................
(c)(3) Confidentiality Agreement, dated as of March 27, 1997,
between Parent and the Company..........................
(c)(4) Letter from Parent to the Company dated June 4, 1997....
(d) Not applicable..........................................
(e) Not applicable..........................................
(f) Not applicable..........................................
</TABLE>
<PAGE>
EXHIBIT 99(A)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
DIGEX, INCORPORATED
BY
DAYLIGHT ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
INTERMEDIA COMMUNICATIONS INC.
AT
$13.00 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, JULY 9, 1997, UNLESS THE OFFER IS EXTENDED.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT THE
OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY
AND ITS STOCKHOLDERS, HAS APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, AND RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
INTERMEDIA COMMUNICATIONS INC. HAS ENTERED INTO A STOCK PURCHASE AGREEMENT
WITH CERTAIN STOCKHOLDERS WHO OWN AN AGGREGATE OF APPROXIMATELY 50.3% OF THE
OUTSTANDING SHARES OF THE COMPANY'S COMMON STOCK (AND APPROXIMATELY 38.3% OF
THE COMPANY'S COMMON STOCK ON A FULLY DILUTED BASIS), PURSUANT TO WHICH, AMONG
OTHER THINGS, SUCH STOCKHOLDERS HAVE AGREED TO VALIDLY TENDER (AND NOT TO
WITHDRAW) ALL SUCH SHARES PURSUANT TO THE OFFER AND GRANTED INTERMEDIA
COMMUNICATIONS INC. AN OPTION TO PURCHASE ALL SUCH SHARES AT A PRICE OF $13.00
PER SHARE EXERCISABLE INDIVIDUALLY FROM EACH STOCKHOLDER, IN WHOLE OR IN PART,
AT ANY TIME OR FROM TIME TO TIME, ON OR AFTER JUNE 4, 1997 AND PRIOR TO THE
TERMINATION DATE.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN AT THE EXPIRATION OF THE OFFER A MAJORITY OF THE
THEN OUTSTANDING SHARES OF THE COMPANY'S COMMON STOCK ON A FULLY DILUTED BASIS
(INCLUDING, WITHOUT LIMITATION, ALL SHARES ISSUABLE UPON THE CONVERSION OF ANY
CONVERTIBLE SECURITIES OR UPON THE EXERCISE OF ANY OPTIONS, WARRANTS OR
RIGHTS). THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS CONTAINED IN
THIS OFFER TO PURCHASE. SEE SECTIONS 1 AND 14.
---------------
IMPORTANT
Any stockholder desiring to tender all or a portion of such stockholder's
Shares should either (i) complete and sign the Letter of Transmittal or a
facsimile thereof in accordance with the instructions in the Letter of
Transmittal, mail or deliver it and any other required documents to the
Depositary and either deliver the Certificates for such Shares to the
Depositary along with the Letter of Transmittal or deliver such Shares
pursuant to the procedures for book-entry transfer set forth in Section 3 or
(ii) request such stockholder's broker, dealer, commercial bank, trust company
or other nominee to effect the transaction for such stockholder. Any
stockholder whose Shares are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee if such stockholder
desires to tender such Shares.
Any stockholder who desires to tender Shares and whose Certificates
representing such Shares are not immediately available, or who cannot comply
with the procedure for book-entry transfer on a timely basis, may tender such
Shares by following the procedures for guaranteed delivery set forth in
Section 3.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone
numbers set forth on the back cover of this Offer to Purchase. Additional
copies of this Offer to Purchase, the Letter of Transmittal, the Notice of
Guaranteed Delivery and other tender offer documents may be obtained at
Purchaser's expense from the Information Agent or from brokers, dealers,
commercial banks or trust companies.
---------------
The Dealer Manager for the Offer is:
BEAR, STEARNS & CO. INC.
June 11, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
INTRODUCTION.............................................................. 1
THE OFFER................................................................. 3
1. Terms of the Offer; Expiration........................................ 3
2. Acceptance for Payment and Payment for Shares......................... 5
3. Procedure for Tendering Shares........................................ 6
4. Withdrawal Rights..................................................... 9
5. Certain Federal Income Tax Consequences............................... 10
6. Price Range of the Shares; Dividends.................................. 11
7. Certain Effects of the Transaction.................................... 11
8. Certain Information Concerning the Company............................ 12
9. Certain Information Concerning Purchaser and Parent................... 14
10. Source and Amount of Funds............................................ 16
11. Background of the Transaction......................................... 16
12. Purpose of the Offer; The Merger Agreement and the Stock Purchase
Agreement............................................................ 19
13. Dividends and Distributions........................................... 28
14. Conditions of the Offer............................................... 28
15. Certain Legal Matters................................................. 31
16. Fees and Expenses..................................................... 32
17. Miscellaneous......................................................... 33
</TABLE>
Annex I--Directors And Executive Officers of Purchaser and Parent
<PAGE>
To the Holders of Common Stock of
DIGEX, Incorporated:
INTRODUCTION
Daylight Acquisition Corp., a Delaware corporation ("Purchaser") and a
wholly owned subsidiary of Intermedia Communications Inc., a Delaware
corporation ("Parent"), hereby offers to purchase all of the outstanding
shares of the common stock, par value $.01 per share (the "Shares"), of DIGEX,
Incorporated, a Delaware corporation (the "Company"), at a purchase price of
$13.00 per Share (the "Offer Price") net to the seller in cash, upon the terms
and subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which, together with any supplements or
amendments thereto, collectively constitute the "Offer"). See Section 9 for
additional information concerning Parent and Purchaser.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 to the Letter of
Transmittal, stock transfer taxes on the purchase of Shares pursuant to the
Offer. However, any tendering stockholder or other payee who fails to complete
and sign the Substitute Form W-9 that is included in the Letter of Transmittal
may be subject to a required backup U.S. federal income tax withholding of 31%
of the gross proceeds payable to such holder or other payee pursuant to the
Offer. See Section 5. Purchaser will pay all charges and expenses of Bear,
Stearns & Co. Inc. ("Bear Stearns"), as the dealer manager (in such capacity,
the "Dealer Manager"), Continental Stock Transfer & Trust Company, as the
depositary (the "Depositary"), and Georgeson & Company Inc., as the
information agent (the "Information Agent"), incurred in connection with the
Offer. See Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT THE
OFFER AND THE MERGER (AS DEFINED BELOW) ARE FAIR TO, AND IN THE BEST INTERESTS
OF, THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED AND ADOPTED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, AND RECOMMENDS THAT
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
FRIEDMAN, BILLINGS, RAMSEY & CO. INC. ("FRIEDMAN"), THE COMPANY'S
INDEPENDENT FINANCIAL ADVISOR, HAS ADVISED THE COMPANY'S BOARD OF DIRECTORS
THAT, IN ITS OPINION, THE CONSIDERATION TO BE PAID IN THE OFFER AND THE MERGER
TO THE COMPANY'S STOCKHOLDERS IS FAIR, FROM A FINANCIAL POINT OF VIEW, TO SUCH
STOCKHOLDERS. A COPY OF THE OPINION OF FRIEDMAN IS CONTAINED IN THE COMPANY'S
SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE "SCHEDULE 14D-9")
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") IN
CONNECTION WITH THE OFFER, A COPY OF WHICH (WITHOUT CERTAIN EXHIBITS) IS BEING
FURNISHED TO STOCKHOLDERS CONCURRENTLY HEREWITH.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN AT THE EXPIRATION OF THE OFFER A MAJORITY OF THE
THEN OUTSTANDING SHARES ON A FULLY DILUTED BASIS (INCLUDING, WITHOUT
LIMITATION, ALL SHARES ISSUABLE UPON THE CONVERSION OF ANY CONVERTIBLE
SECURITIES OR UPON THE EXERCISE OF ANY OPTIONS, WARRANTS OR RIGHTS) (THE
"MINIMUM CONDITION"). THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS
CONTAINED IN THIS OFFER TO PURCHASE. SEE SECTIONS 1 AND 14.
PARENT HAS ENTERED INTO A STOCK PURCHASE AGREEMENT WITH CERTAIN STOCKHOLDERS
WHO OWN AN AGGREGATE OF APPROXIMATELY 50.3% OF THE OUTSTANDING SHARES
(APPROXIMATELY 38.3% OF THE SHARES ON A FULLY DILUTED BASIS), PURSUANT TO
WHICH, AMONG OTHER THINGS, SUCH STOCKHOLDERS HAVE AGREED TO VALIDLY TENDER
(AND NOT TO WITHDRAW) ALL SUCH SHARES PURSUANT TO THE OFFER AND GRANTED PARENT
AN OPTION TO PURCHASE ALL SUCH SHARES AT A PRICE OF $13.00 PER SHARE
EXERCISABLE INDIVIDUALLY FROM EACH STOCKHOLDER, IN WHOLE OR IN PART, AT ANY
TIME OR FROM TIME TO TIME, ON OR AFTER JUNE 4, 1997 AND PRIOR TO THE
TERMINATION DATE (AS DEFINED IN SECTION 12 HEREOF).
1
<PAGE>
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of June 4, 1997 (the "Merger Agreement"), among Purchaser, Parent and the
Company. The purpose of the Offer is to acquire control of, and the entire
equity interest in, the Company as the first step in Purchaser's proposed
acquisition of all the Shares. The Merger Agreement provides, among other
things, for the making of the Offer by Purchaser and further provides that,
following the Offer and subject to the satisfaction or waiver of certain
conditions and in accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), Purchaser will be merged with and into the Company (the
"Merger"), with the Company surviving the Merger as a wholly owned subsidiary
of Parent (the "Surviving Corporation"). Upon consummation of the Merger (the
"Effective Time"), each Share issued and outstanding immediately prior to the
Effective Time (other than Shares owned by Parent or Purchaser or any of their
subsidiaries or held in the treasury of the Company (which shares shall be
cancelled) or by stockholders who have properly exercised their appraisal
rights under Delaware law) will be converted into the right to receive an
amount in cash equal to the price per Share paid in the Offer, without
interest (the "Merger Consideration"). For a description of the Merger
Agreement, see Section 12. Certain federal income tax consequences of the sale
of Shares pursuant to the Offer and the conversion of Shares for cash pursuant
to the Merger (whether as Merger Consideration or pursuant to the proper
exercise of appraisal rights) are described in Section 5.
Concurrently with the execution of the Merger Agreement, and as a condition
to Parent and Purchaser entering into the Merger Agreement, Parent entered
into a Stock Purchase Agreement, dated as of June 4, 1997 (the "Stock Purchase
Agreement"), with Grotech Partners IV, L.P., Grotech Partners III, L.P.,
Grotech III Companion Fund, L.P., Grotech III Pennsylvania Fund, L.P., Venrock
Associates, Venrock Associates II, L.P., Southern Venture Fund II, L.P., Blue
Chip Capital Fund Limited Partnership, DIGEX Investors, Ltd., Douglas E.
Humphrey and Michael T. Doughney (together, the "Investors", each an
"Investor"), the owners of an aggregate of 5,877,582 Shares (representing
approximately 50.3% of the outstanding Shares and approximately 38.3% of the
Shares on a fully diluted basis) (collectively, the "Investor Shares").
Pursuant to the Stock Purchase Agreement, each of the Investors has (i)
irrevocably agreed to validly tender and sell (and not to withdraw) such
Investor's Investor Shares pursuant to and in accordance with the Offer and
(ii) granted Parent an option (each an "Investor Option" and collectively, the
"Investor Options") to purchase such Investor's Investor Shares at a price of
$13.00 per Investor Share. The Investor Options are exercisable individually
from each Investor, in whole or in part, at any time or from time to time, on
or after June 4, 1997 and prior to the Termination Date (as defined in Section
12--the Stock Purchase Agreement). Parent may exercise any Investor Option by
sending a written notice to such Investor specifying the number of Investor
Shares Parent intends to purchase. For a description of the Stock Purchase
Agreement, see Section 12.
The Company has represented pursuant to the Merger Agreement that as of June
4, 1997, 11,674,261 Shares were issued and outstanding (all of which are
validly issued, fully paid and nonassessable) and that, as of that date, not
more than 15,339,741 Shares were outstanding on a fully diluted basis
(including 2,900,480 Shares for issuance upon the exercise of outstanding
stock options granted to employees or directors of the Company, 415,000 Shares
for issuance upon exercise of currently outstanding warrants and 350,000
Shares for issuance to employees pursuant to the Company's Amended and
Restated 1997 Employee Stock Purchase Plan). Parent, Purchaser and their
affiliates do not currently beneficially own any Shares or rights to acquire
Shares other than the rights to acquire the Investor Shares pursuant to the
Stock Purchase Agreement. The Minimum Condition will be satisfied if 7,669,871
Shares (inclusive of the Investor Shares) are duly tendered and not withdrawn
pursuant to the Offer, including 1,792,289 Shares held by Stockholders other
than the Investors.
The consummation of the Merger is subject to the satisfaction or waiver of a
number of conditions, including, if required, the approval of the Merger by
the requisite vote of the stockholders of the Company. Under the DGCL, the
stockholder vote necessary to approve the Merger will be the affirmative vote
of a majority of the outstanding Shares, including any Shares held by Parent
and Purchaser as a result of the purchase of Shares pursuant to the Offer and
the Stock Purchase Agreement. UPON CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED BY THE STOCK PURCHASE AGREEMENT, PARENT AND PURCHASER, BY VIRTUE
OF THE ACQUISITION OF APPROXIMATELY 50.3% OF THE OUTSTANDING SHARES, WILL OWN
A NUMBER OF SHARES SUFFICIENT, EVEN IF NO OTHER SHARES ARE TENDERED IN THE
OFFER, TO CAUSE THE MERGER TO OCCUR WITHOUT THE AFFIRMATIVE VOTE OF ANY OTHER
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HOLDER OF SHARES, IF NO OTHER SHARES ARE ISSUED BY THE COMPANY. See Sections
12 and 14. In addition, if Purchaser acquires at least 90% of the outstanding
Shares pursuant to the Offer, the Stock Purchase Agreement or otherwise,
Purchaser will be able to effect the Merger pursuant to the "short-form"
merger provisions of Section 253 of the DGCL, without prior notice to, or any
action by, any other stockholder. In such event, Purchaser intends to effect
the Merger promptly following the purchase of Shares pursuant to the Offer and
the Stock Purchase Agreement. If, however, Purchaser does not acquire at least
90% of the outstanding Shares pursuant to the Offer, the Stock Purchase
Agreement or otherwise, and a vote of the Company's stockholders is required
under the DGCL, a significantly longer period of time will be required to
effect the Merger. In connection with the Merger, holders of Shares who have
not sold their Shares pursuant to the Offer (or otherwise) may have certain
rights under the DGCL to demand appraisal of, and payment in cash of the fair
value (as judicially determined) of, their Shares. See Section 12.
The Offer is not being made for the Company's outstanding warrants (the
"Warrants") issued by the Company to WinStar Communications, Inc., on June 10,
1996 and to Electonic Press Services, Inc. on January 3, 1997. Holders of
Warrants who wish to participate in the Offer must exercise such Warrants and
tender the Shares issued upon such exercise prior to expiration of the Offer.
The Company has advised Purchaser that the Company has been advised by each
of its directors and executive officers that they intend either to tender all
Shares beneficially owned by them to Purchaser pursuant to the Offer or to
vote such Shares in favor of approval and adoption of the Merger Agreement.
THIS OFFER TO PURCHASE, THE LETTER OF TRANSMITTAL AND THE SCHEDULE 14D-9
CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BY STOCKHOLDERS
BEFORE THEY MAKE ANY DECISION WHETHER TO TENDER THEIR SHARES PURSUANT TO THE
OFFER.
THE OFFER
1. TERMS OF THE OFFER; EXPIRATION
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will, and Parent has agreed in the Merger Agreement
to cause Purchaser to, accept for payment, and pay for, all Shares validly
tendered and not properly withdrawn as provided in Section 4 prior to the
Expiration Date. As used herein, the term "Expiration Date" shall mean 12:00
midnight, New York City time, on Wednesday, July 9, 1997, unless and until
Purchaser shall have extended the period of time during which the Offer is
open, in which event the term "Expiration Date" shall mean the latest time and
date at which the Offer, as so extended by Purchaser, shall expire.
Pursuant to the Merger Agreement, Parent and Purchaser may, without the
consent of the Company, extend the Offer, if at any scheduled Expiration Date
of the Offer any of the conditions of the Offer shall not be satisfied or
waived, until such time as such conditions are satisfied or waived; provided,
however, in the event Purchaser desires to extend the Offer beyond July 31,
1997, in the event the proposed length of the extension is, in the aggregate,
more than three days, the Company shall have the right to consent to such
longer extension. As used in this Offer to Purchase, "business day" means any
day other than a Saturday, Sunday or a U.S. federal holiday, and consists of
the time period from 12:01 a.m. through 12:00 Midnight, New York City time.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE EXPIRATION OR
TERMINATION OF ALL WAITING PERIODS IMPOSED BY THE HART-SCOTT-RODINO ANTITRUST
IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"), AND THE MINIMUM
CONDITION BEING SATISFIED. THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER
CONDITIONS. SEE SECTIONS 1 AND 14.
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Purchaser reserves the right (but will not be obligated), in accordance with
applicable rules and regulations of the Commission, to waive or reduce the
Minimum Condition or to waive any other condition to the Offer. However,
Purchaser does not presently intend to waive the Minimum Condition. If the
Minimum Condition or any of the other conditions set forth in Section 14 has
not been satisfied by the scheduled expiration date of the Offer, Purchaser
may elect (i) to extend the Offer and, subject to applicable withdrawal
rights, retain all tendered Shares until the expiration of the Offer, as
extended, subject to the terms of the Offer and the Merger Agreement, (ii)
subject to complying with applicable rules and regulations of the Commission,
to waive the unsatisfied conditions and accept for payment all Shares so
tendered and not extend the Offer, (iii) subject to the terms of the Merger
Agreement, to terminate the Offer and not accept for payment any Shares and
return all tendered Shares to tendering stockholders, or (iv) subject to the
terms of the Merger Agreement, to amend the Offer.
Subject to the limitations set forth in the Merger Agreement as described
above, Purchaser reserves the right (but will not be obligated), at any time
or from time to time in its sole discretion, to extend the period during which
the Offer is open by giving oral or written notice of such extension to the
Depositary and by making a public announcement of such extension. There can be
no assurance that Purchaser will exercise its right to extend the Offer.
Subject to the applicable rules and regulations of the Commission, Purchaser
also expressly reserves the right, in its sole discretion at any time and from
time to time, (i) subject to the limitations set forth in the Merger
Agreement, to delay payment for any Shares regardless of whether such Shares
were theretofore accepted for payment, or to terminate the Offer and not to
accept for payment or pay for any Shares not theretofore accepted for payment
or paid for, if the Minimum Condition or any other condition to the Offer is
not satisfied, by giving oral or written notice of such delay or termination
to the Depositary, and (ii) subject to the limitations set forth in the Merger
Agreement, to amend the Offer in any respect. However, in the Merger
Agreement, Purchaser has agreed that it will not, without the consent of the
Company, (i) decrease the price per Share payable in the Offer 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 of the Offer
other than those set forth in Section 14, or (iv) modify the conditions of the
Offer (provided that Parent or Purchaser in its sole discretion may waive any
such conditions). Purchaser's right to delay payment for any Shares or not to
pay for any Shares theretofore accepted for payment is subject to the
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
relating to Purchaser's obligation to pay for or return tendered Shares
promptly after the termination or withdrawal of the Offer. 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 to the conditions of the
Offer. See Section 14.
Any extension of the period during which the Offer is open, delay in
acceptance for payment or payment, or termination or amendment of the Offer
will be followed, as promptly as practicable, by public announcement thereof,
such announcement in the case of an extension to be issued not later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date in accordance with the public announcement
requirements of Rule 14d-4(c) under the Exchange Act. Without limiting the
obligation of Purchaser under such rule or the manner in which Purchaser may
choose to make any public announcement, Purchaser currently intends to make
announcements only by issuing a press release to the Dow Jones News Service
and making any appropriate filing with the Commission.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or if it waives a material condition of the
Offer (including a waiver of the Minimum Condition), Purchaser will
disseminate additional tender offer materials and extend the Offer if and to
the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange
Act. The minimum period during which a tender offer must remain open following
a material change in the terms of the Offer or information concerning the
Offer, other than a change in the price or in the number of Shares sought,
will depend on the facts and circumstances then existing, including the
relative materiality of the change. With respect to a change in the price or
number of Shares sought, a minimum of ten business days is generally required
to permit adequate disclosure to stockholders.
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The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to
stockholders. This Offer to Purchase, the related Letter of Transmittal and
certain other relevant materials will be mailed to record holders of Shares
and will be furnished to brokers, dealers, commercial banks, trust companies
and similar persons whose names, or the names of whose nominees, appear on the
Company's stockholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing, for subsequent transmittal
to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will, and Parent has agreed to cause Purchaser to,
accept for payment, and pay for, all Shares validly tendered and not properly
withdrawn prior to the Expiration Date, promptly after the later to occur of
(i) the Expiration Date and (ii) subject to compliance with Rule 14e-1(c)
under the Exchange Act, the date of satisfaction or waiver of all of the
conditions of the Offer set forth in Section 14 (including expiration or
termination of the waiting period under the HSR Act). Subject to compliance
with Rule 14e-1(c) under the Exchange Act and the terms and conditions of the
Merger Agreement, Purchaser expressly reserves the right, in its discretion,
to delay acceptance for payment of or payment for Shares in order to comply,
in whole or in part, with any applicable law or government regulation or any
condition contained herein. See Sections 14 and 15.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) certificates
evidencing such Shares (or a timely Book-Entry Confirmation (as defined in
Section 3) with respect to such Shares), (ii) the Letter of Transmittal (or a
manually signed facsimile thereof), properly completed and duly executed with
all required signature guarantees or an Agent's Message, as defined below, in
connection with a book-entry transfer, and (iii) all other documents required
by the Letter of Transmittal. See Section 3. The term "Agent's Message" means
a message transmitted by the Book-Entry Transfer Facility (as defined in
Section 3) to, and received by, the Depositary and forming a part of a Book-
Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares which are the subject of such Book-
Entry Confirmation that such participant has received and agrees to be bound
by the terms of the Letter of Transmittal and that Purchaser may enforce such
agreement against such participant.
On June 10, 1997, Parent filed with the Federal Trade Commission (the "FTC")
and the Antitrust Division of the Department of Justice (the "Antitrust
Division") its Premerger Notification and Report Forms under the HSR Act with
respect to both the Offer and the Stock Purchase Agreement. The Company
anticipates that it will make its filings under the HSR Act with the Antitrust
Division and the FTC on June 11, 1997. Accordingly, it is anticipated that the
waiting period under the HSR Act with respect to the Offer and the Stock
Purchase Agreement will expire at 11:59 p.m., New York City time, on June 25,
1997. Prior to the expiration or termination of such waiting period, the FTC
or the Antitrust Division may extend such waiting period by requesting
additional information from Parent and/or the Company with respect to the
Offer or the Stock Purchase Agreement. If such a request is made, the waiting
period will expire at 11:59 p.m., New York City time, on the tenth calendar
day after substantial compliance by Parent with such a request. Thereafter,
the waiting period may only be extended by court order. The waiting period
under the HSR Act may be terminated by the FTC and the Antitrust Division
prior to the expiration thereof. Parent and the Company have requested early
termination of the waiting period, although there can be no assurance that
this request will be granted. See Section 15 for additional information
regarding the HSR Act.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as,
if and when Purchaser gives oral or written notice to the Depositary of
Purchaser's acceptance of such Shares for payment. In all cases, payment for
Shares purchased pursuant to the Offer will be made by deposit of the purchase
price therefor with the Depositary, which will act as agent for tendering
stockholders for the purpose of receiving payment from Purchaser and
transmitting
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payment to tendering stockholders whose Shares have theretofore been accepted
for payment. If, for any reason, acceptance for payment of any Shares tendered
pursuant to the Offer is delayed, or Purchaser is unable to accept for payment
Shares tendered pursuant to the Offer, then, without prejudice to Purchaser's
rights under Section 14, the Depositary may, nevertheless, on behalf of
Purchaser, retain tendered Shares, and such Shares may not be withdrawn except
to the extent that the tendering stockholders are entitled to withdrawal
rights as described in Section 4 and as otherwise required by Rule 14e-1(c)
under the Exchange Act. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE OFFER
PRICE BE PAID BY PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY
DELAY IN MAKING SUCH PAYMENT.
If any tendered Shares are not purchased for any reason or if certificates
are submitted for more Shares than are tendered, certificates for such Shares
not purchased or tendered will be returned pursuant to the instructions of the
tendering stockholder without expense to the tendering stockholder (or, in the
case of Shares delivered by book-entry transfer into the Depositary's account
at the Book-Entry Transfer Facility pursuant to the procedures set forth in
Section 3, such Shares will be credited to an account maintained at the Book-
Entry Transfer Facility) as promptly as practicable following the expiration,
termination or withdrawal of the Offer.
If, prior to the Expiration Date, Purchaser (in its sole discretion)
increases the consideration to be paid per Share pursuant to the Offer,
Purchaser will pay such increased consideration for all such Shares purchased
pursuant to the Offer, whether or not such Shares were tendered prior to such
increase in consideration.
Purchaser reserves the right to transfer or assign, in whole or in part, to
Parent or one or more of Parent's subsidiaries the right to purchase Shares
tendered pursuant to the Offer; provided, however, that no such transfer or
assignment will release Purchaser from its obligations under the Offer or
prejudice the rights of tendering stockholders to receive payment for Shares
validly tendered and accepted for payment pursuant to the Offer.
3. PROCEDURE FOR TENDERING SHARES
Valid Tenders. For Shares to be validly tendered pursuant to the Offer, a
Letter of Transmittal (or a manually signed facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or an
Agent's Message in connection with a book-entry delivery of Shares and any
other required documents, must be received by the Depositary at its address
set forth on the back cover of this Offer to Purchase prior to the Expiration
Date, and (i) certificates representing Shares must be received by the
Depositary at such address on or prior to the Expiration Date, (ii) such
Shares must be delivered pursuant to the procedures for book-entry transfer
set forth below and a Book-Entry Confirmation must be received by the
Depositary, in each case prior to the Expiration Date, or (iii) the tendering
stockholder must comply with the guaranteed delivery procedures set forth
below. No alternative, conditional or contingent tenders will be accepted.
Book-Entry Transfer. The Depositary will make a request to establish an
account with respect to the Shares at The Depository Trust Company (the "Book-
Entry Transfer Facility") for purposes of the Offer within two business days
after the date of this Offer to Purchase. Any financial institution that is a
participant in the Book-Entry Transfer Facility's system may make book-entry
delivery of Shares by causing the Book-Entry Transfer Facility to transfer
such Shares into the Depositary's account at the Book-Entry Transfer Facility
in accordance with the Book-Entry Transfer Facility's procedure for such
transfer. However, although delivery of Shares may be effected through book-
entry transfer into the Depositary's account at the Book-Entry Transfer
Facility, the Letter of Transmittal (or a manually signed facsimile thereof),
properly completed and duly executed, with any required signature guarantees
(or an Agent's Message in connection with a book-entry transfer) and any other
required documents, must, in any case, be transmitted to, and received by, the
Depositary at its address set forth on the back cover of this Offer to
Purchase on or prior to the Expiration Date, or the tendering stockholder must
comply with the guaranteed delivery procedures described below. The
confirmation of a book-entry transfer of Shares into the Depositary's account
at the Book-Entry Transfer Facility as described
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above is referred to herein as a "Book-Entry Confirmation." DELIVERY OF
DOCUMENTS (INCLUDING AN EXECUTED LETTER OF TRANSMITTAL) TO THE BOOK-ENTRY
TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a member in good standing of the Securities Transfer
Association's Medallion Program, or by any other bank, broker, dealer, credit
union, savings association or other entity that is an "eligible guarantor
institution," as such term is defined in Rule 17Ad-15 under the Exchange Act
(each of the foregoing constituting an "Eligible Institution"), unless the
Shares tendered thereby are tendered (i) by a registered holder (which term,
for purposes of this Section, includes any participant in the Book-Entry
Transfer Facility's system whose name appears on a security position listing
as the owner of the Shares) of Shares who has not completed either the box
labeled "Special Delivery Instructions" or the box labeled "Special Payment
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. See Instruction 1 of the Letter of Transmittal. If the
certificates representing Shares are registered in the name of a person or
persons other than the signer of the Letter of Transmittal, or if payment is
to be made or certificates for Shares not accepted for payment or not tendered
are to be issued to a person other than the registered holder, then the
certificates representing Shares must be endorsed or accompanied by
appropriate stock powers, in each case signed exactly as the name or names of
the registered holder or holders appear on the certificates, with the
signatures on the certificates or stock powers guaranteed as described above
and as provided in the Letter of Transmittal. See Instructions 1 and 5 of the
Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates are not immediately available or
the procedures for book-entry transfer cannot be completed on a timely basis
or time will not permit all required documents to reach the Depositary prior
to the Expiration Date, such Shares may nevertheless be tendered if all of the
following guaranteed delivery procedures are complied with:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser herewith, is
received by the Depositary, as provided below, prior to the Expiration
Date; and
(iii) the certificates for all tendered Shares in proper form for
transfer, or a Book-Entry Confirmation with respect to all tendered Shares,
in either case together with a properly completed and duly executed Letter
of Transmittal (or a manually signed facsimile thereof), with any requested
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message), and any other documents required by the Letter of Transmittal,
are received by the Depositary within three trading days after the date of
execution of such Notice of Guaranteed Delivery. A "trading day" is any day
on which the New York Stock Exchange, Inc. is open for business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, facsimile transmission or mail to the Depositary and must include an
endorsement by an Eligible Institution in the form set forth in such Notice of
Guaranteed Delivery.
THE METHOD OF DELIVERY OF CERTIFICATES FOR SHARES, THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER
AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer in all cases will be made only after timely
receipt by the Depositary of (i) certificates for (or a Book-Entry
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Confirmation with respect to) such Shares, (ii) a Letter of Transmittal (or a
manually signed facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or an Agent's Message, and (iii) all other
documents required by the Letter of Transmittal.
Backup Withholding. In order to avoid "backup withholding" of federal income
tax on payments of cash pursuant to the Offer, a stockholder surrendering
Shares in the Offer must, unless an exemption applies, provide the Depositary
with such stockholder's correct taxpayer identification number ("TIN") on a
Substitute Form W-9 and certify under penalties of perjury that such TIN is
correct and that such stockholder is not subject to backup withholding. If a
stockholder does not provide such stockholder's correct TIN or fails to
provide the certifications described above, the Internal Revenue Service (the
"IRS") may impose a penalty on such stockholder and payment of cash to such
stockholder pursuant to the Offer may be subject to backup withholding of 31%.
All stockholders surrendering Shares pursuant to the Offer should complete and
sign the main signature form and the Substitute Form W-9 included as part of
the Letter of Transmittal to provide the information and certification
necessary to avoid backup withholding (unless an applicable exemption exists
and is proved in a manner satisfactory to the Purchaser and the Depositary).
Certain stockholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding.
Noncorporate foreign stockholders should complete and sign the main signature
form and a Form W-8 (Certificate of Foreign Status), a copy of which may be
obtained from the Depositary, in order to avoid backup withholding. See
Instruction 10 to the Letter of Transmittal.
Determination of Validity. All questions as to the form of documents and the
validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares pursuant to any of the procedures described above will
be determined by Purchaser in its sole discretion, which determination shall
be final and binding on all parties. Purchaser reserves the absolute right to
reject any or all tenders of Shares that are determined by it not to be in
proper form or the acceptance of or payment for which, in the opinion of
Purchaser, may be unlawful. Purchaser also reserves the absolute right to
waive any defect or irregularity in any tender of Shares. Subject to the terms
of the Merger Agreement, Purchaser also reserves the absolute right to waive
or to amend any of the conditions of the Offer. See Sections 1 and 14.
Purchaser's interpretation of the terms and conditions of the Offer (including
the Letter of Transmittal and the instructions thereto) will be final and
binding on all parties. No tender of Shares will be deemed to have been
validly made until all defects and irregularities have been cured or waived.
None of Purchaser, Parent, the Dealer Manager, the Depositary, the Information
Agent or any other person will be under any duty to give notification of any
defects or irregularities in tenders or incur any liability for failure to
give any such notification.
Appointment as Proxy. By executing a Letter of Transmittal, a tendering
stockholder irrevocably appoints designees of Purchaser as such stockholder's
attorneys-in-fact and proxies, each with full power of substitution, in the
manner set forth in the Letter of Transmittal, to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder
and accepted for payment by Purchaser (and with respect to any and all other
Shares or other securities issued or issuable in respect of such Shares on or
after the date hereof). All such powers of attorney and proxies shall be
considered coupled with an interest in the tendered Shares. Such powers of
attorney and proxies shall be irrevocable and shall be effective when, and
only to the extent that, Purchaser accepts such Shares for payment. Upon such
acceptance for payment, all prior powers of attorney and proxies given by such
stockholder with respect to such Shares (and any other Shares or other
securities so issued in respect of such purchased Shares) will be revoked,
without further action, and no subsequent powers of attorney and proxies may
be given (and, if given, will not be deemed effective) by such stockholder.
The designees of Purchaser will be empowered to exercise all voting and other
rights of such stockholder with respect to such Shares (and any other Shares
or securities so issued in respect of such accepted Shares) as they in their
sole discretion may deem proper, including, without limitation, in respect of
any annual or special meeting of the Company's stockholders, or any
adjournment or postponement thereof, or in connection with any action by
written consent in lieu of any such meeting or otherwise (including any such
meeting or action by written consent to approve the Merger). Purchaser
reserves the absolute right to require that, in order for Shares to be validly
tendered, immediately upon Purchaser's acceptance for payment of such Shares,
Purchaser must be able to
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exercise full voting and other rights with respect to such Shares (and any
other Shares or securities so issued in respect of such accepted Shares),
including voting at any meeting of stockholders then scheduled or giving or
withdrawing written consents as to which the record date has passed.
Binding Agreement. The tender of Shares pursuant to any one of the
procedures described above will constitute the tendering stockholder's
acceptance of the terms and conditions of the Offer, as well as the tendering
stockholder's representation and warranty that such stockholder has full power
and authority to tender, sell, assign and transfer such stockholder's Shares
tendered in the Offer. The valid tender of Shares tendered pursuant to the
Offer will constitute a binding agreement between the tendering stockholder
and Purchaser upon the terms and subject to the conditions of the Offer.
4. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 4, tenders of Shares pursuant
to the Offer are irrevocable. Shares tendered pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment by Purchaser as provided herein, may also be withdrawn at
any time after August 9, 1997. If Purchaser extends the Offer, is delayed in
its purchase of or payment for Shares or is unable to purchase or pay for
Shares for any reason, then, without prejudice to the rights of Purchaser
hereunder, tendered Shares may be retained by the Depositary on behalf of
Purchaser and may not be withdrawn except to the extent that tendering
stockholders are entitled to withdrawal rights as set forth in this Section 4
subject to the provisions of Rule 14e-1(c) under the Exchange Act, which
requires Purchaser to pay the consideration offered or return Shares deposited
by or on behalf of stockholders promptly after the termination or withdrawal
of the Offer.
For a withdrawal of tendered Shares to be effective, a written, telegraphic
or facsimile transmission notice of withdrawal must be timely received by the
Depositary at its address set forth on the back cover of this Offer to
Purchase. Any such notice of withdrawal must specify the name of the person
who tendered the Shares to be withdrawn, the number of Shares to be withdrawn
and the name of the registered holder, if different from that of the person
who tendered such Shares. If certificates evidencing Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then prior to
the physical release of such certificates, the tendering stockholder must also
submit to the Depositary the serial numbers shown on such certificates, and
the signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution (except in the case of Shares tendered for the account of an
Eligible Institution). If Shares have been tendered pursuant to the procedure
for book-entry transfer set forth in Section 3, any notice of withdrawal with
respect to such Shares must also specify the name and number of the account at
the Book-Entry Transfer Facility to be credited with the withdrawn Shares.
ALL QUESTIONS AS TO THE FORM AND VALIDITY (INCLUDING TIME OF RECEIPT) OF
NOTICES OF WITHDRAWAL WILL BE DETERMINED BY PURCHASER, IN ITS SOLE DISCRETION,
WHOSE DETERMINATION SHALL BE FINAL AND BINDING ON ALL PARTIES. NO WITHDRAWAL
OF SHARES SHALL BE DEEMED TO HAVE BEEN PROPERLY MADE UNTIL ALL DEFECTS AND
IRREGULARITIES HAVE BEEN CURED OR WAIVED. NONE OF PURCHASER, PARENT, THE
DEALER MANAGER, THE DEPOSITARY, THE INFORMATION AGENT OR ANY OTHER PERSON WILL
BE UNDER ANY DUTY TO GIVE NOTIFICATION OF ANY DEFECTS OR IRREGULARITIES IN ANY
NOTICE OF WITHDRAWAL OR INCUR ANY LIABILITY FOR FAILING TO GIVE SUCH
NOTIFICATION.
Any Shares properly withdrawn will be deemed not to have been validly
tendered for purposes of the Offer, but may be retendered at any subsequent
time prior to the Expiration Date by following any of the procedures described
in Section 3.
9
<PAGE>
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal federal income tax consequences
of the Offer and the Merger to holders whose Shares are purchased pursuant to
the Offer or whose Shares are converted into the right to receive cash in the
Merger (whether upon receipt of the Merger Consideration or pursuant to the
proper exercise of appraisal rights). The discussion applies only to holders
of Shares in whose hands Shares are capital assets, and may not apply to
Shares received pursuant to the exercise of employee stock options or
otherwise as compensation, or to holders of Shares who are not citizens or
residents of the United States of America.
THE TAX DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL INFORMATIONAL
PURPOSES ONLY AND IS BASED UPON PRESENT LAW. BECAUSE INDIVIDUAL CIRCUMSTANCES
MAY DIFFER, EACH HOLDER OF SHARES SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR
TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH
STOCKHOLDER AND THE PARTICULAR TAX EFFECTS OF THE OFFER AND THE MERGER,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS.
The receipt of the Offer Price and the receipt of cash pursuant to the
Merger (whether as Merger Consideration or pursuant to the proper exercise of
appraisal rights) will be a taxable transaction for federal income tax
purposes (and also may be a taxable transaction under applicable state, local
and other income tax laws). In general, for federal income tax purposes, a
holder of Shares will recognize gain or loss equal to the difference between
such holder's adjusted tax basis in the Shares sold pursuant to the Offer or
converted to cash in the Merger and the amount of cash received therefor. Gain
or loss must be determined separately for each block of Shares (i.e., Shares
acquired at the same cost in a single transaction) sold pursuant to the Offer
or converted to cash in the Merger. Such gain or loss will be capital gain or
loss and will be long-term gain or loss if, on the date of sale (or, if
applicable, the date of the Merger), the Shares were held for more than one
year.
Payments in connection with the Offer or the Merger may be subject to backup
withholding at a 31% rate. Backup withholding generally applies if the
stockholder (i) fails to furnish such stockholder's social security number or
TIN, (ii) furnishes an incorrect TIN, (iii) fails properly to report interest
or dividends or (iv) under certain circumstances, fails to provide a certified
statement, signed under penalties of perjury, that the TIN provided is such
stockholder's correct number and that such stockholder is not subject to
backup withholding. Backup withholding is not an additional tax but merely an
advance payment, which may be refunded to the extent it results in an
overpayment of tax. Certain persons, including corporations and financial
institutions generally, are exempt from backup withholding. Certain penalties
apply for failure to furnish correct information and for failure to include
the reportable payments in income. Each stockholder should consult with such
stockholder's own tax advisor as to such stockholder's qualification for
exemption from withholding and the procedure for obtaining such exemption.
10
<PAGE>
6. PRICE RANGE OF THE SHARES; DIVIDENDS
According to the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996 (the "Company 10-K"), the Shares commenced trading on The
National Association of Securities Dealers, Inc. ("NASD") Automated Quotation
System ("NASDAQ") National Market System under the symbol DIGX on October 17,
1996. According to the Company 10-K, the Company's Quarterly Report on Form
10-QSB for the quarter ended March 31, 1997 (the "Company 10-Q") and
information supplied to Purchaser by the Company, since that date the Company
has not paid any cash dividends on the Shares. The following table sets forth,
for the periods indicated, the high and low sales prices per Share on the
NASDAQ National Market System, as reported in published financial sources.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Fiscal Year Ended December 31, 1996:
Fourth Quarter (commencing October 17, 1996)............... $12.750 $10.000
Fiscal Year Ended December 31, 1997:
First Quarter.............................................. $12.750 $ 7.000
Second Quarter (ending June 10, 1997)...................... $12.875 $ 6.813
</TABLE>
On June 4, 1997, the last full trading day prior to announcement of the
execution of the Merger Agreement and the Stock Purchase Agreement and of
Purchaser's intention to commence the Offer, the closing price per Share on
the NASDAQ National Market System was $10.875. On June 10, 1997, the last full
trading day before the commencement of the Offer, the closing price per Share
on the NASDAQ National Market System was $12.828. STOCKHOLDERS ARE ENCOURAGED
TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
7. CERTAIN EFFECTS OF THE TRANSACTION
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and the number of holders of
Shares, which could adversely affect the liquidity and market value of the
remaining Shares held by the public. Based on information provided by the
Company, as of June 4, 1997, there were 11,674,261 Shares outstanding and 72
stockholders of record of the Shares (not taking into account ownership
through nominees and depositaries).
The extent of the public market for the Shares and, according to the
published guidelines of the Nasdaq Stock Market, Inc., the continued trading
of the Shares on the NASDAQ National Market System after the purchase of
Shares pursuant to the Offer will depend upon the number of holders of Shares
remaining at such time, the interest in maintaining a market in such Shares on
the part of securities firms, the possible termination of registration of such
Shares under the Exchange Act, as described below, and other factors. If, as a
result of the purchase of Shares pursuant to the Offer or otherwise, trading
of the Shares on the NASDAQ National Market System is discontinued, the
liquidity of and market for the Shares could be adversely affected. Purchaser
cannot predict whether or to what extent the reduction in the number of Shares
that might otherwise trade publicly would result in the suspension of trading
of the Shares on the NASDAQ National Market System or would have an adverse or
beneficial effect on the market price for or marketability of the Shares or
whether it would cause future prices to be greater or less than the Offer
Price.
Depending upon the number of Shares purchased pursuant to the Offer, sales
prices and price quotations for the Shares may no longer be reported by the
NASD through the NASDAQ National Market System or by any other quotation
service. According to the NASD's published guidelines, the NASD would consider
suspending authorization of the Shares for quotation on the NASDAQ National
Market System if the number of publicly held Shares should fall below 100,000.
For purposes of the preceding sentence, "publicly held" shares do not include
holdings of officers, directors or their immediate families and other
concentrated holdings of 10% or more.
If the NASD were to suspend authorization of the Shares for quotation on the
NASDAQ National Market System, it is possible that the Shares would continue
to trade in the over-the-counter market and that price quotations for the
Shares would be reported through other sources. The extent of the public
market for the Shares
11
<PAGE>
and availability of such quotations, however, would, depend upon the number of
Shares remaining at such time, the interest in maintaining a market in the
Shares on the part of securities firms, the possible termination of
registration under the Exchange Act, as described below, and other factors.
The Shares are currently "margin securities," as such term is defined under
the rules of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of
allowing brokers to extend credit on the collateral of the Shares. Depending
upon factors similar to those described above regarding listing and market
quotations, following consummation of the Offer it is possible that the Shares
might no longer constitute "margin securities" for purposes of the margin
regulations of the Federal Reserve Board, in which event such Shares could no
longer be used as collateral for loans made by brokers.
The Shares are currently registered under the Exchange Act. Registration of
the Shares under the Exchange Act may be terminated upon application of the
Company to the Commission if the Shares are not listed on a national
securities exchange (including the NASDAQ National Market System) and there
are fewer than 300 record holders of the Shares. Termination of registration
of the Shares under the Exchange Act would substantially reduce the
information required to be furnished by the Company to its stockholders and to
the Commission and would make certain provisions of the Exchange Act, such as
the short-swing profit recovery provisions of Section 16(b) of the Exchange
Act, the requirement of furnishing a proxy statement in connection with
stockholders' meetings pursuant to Section 14(a) of the Exchange Act, and the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions, no longer applicable to the Company. In addition,
"affiliates" of the Company and persons holding "restricted securities" of the
Company may be deprived of the ability to dispose of such securities pursuant
to Rule 144 promulgated under the Securities Act of 1933, as amended (the
"Securities Act"). It is the present intention of Purchaser to seek to cause
the Company to make an application for the termination of the registration of
the Shares under the Exchange Act as soon as possible after the purchase of
all validly tendered Shares in the Offer if the requirements for termination
of registration are met. If registration of the Shares under the Exchange Act
were terminated, the Shares would no longer be "margin securities" or be
eligible for the NASDAQ National Market System reporting. If registration of
the Shares is not terminated prior to the Merger, the registration of the
Shares under the Exchange Act will be terminated following consummation of the
Merger. See Section 12.
8. CERTAIN INFORMATION CONCERNING THE COMPANY
Except as otherwise stated in this Offer to Purchase, the information
concerning the Company contained herein has been taken from or based upon
publicly available documents and records on file with the Commission and other
public sources including, but not limited to, the Company 10-K and the Company
10-Q. Although neither Parent nor Purchaser has any knowledge that any
statements contained herein based on such documents and records are untrue,
neither Parent nor Purchaser takes any responsibility for the accuracy or
completeness of the information concerning the Company, furnished by the
Company or contained in such documents and records, or for any failure by the
Company to disclose events that may have occurred and may affect the
significance or accuracy of any such information.
The Company is a Delaware corporation with its principal executive offices
and facilities located at One Digex Plaza, Beltsville, Maryland 20705. The
Company is an independent national Internet carrier that focuses exclusively
on businesses, government agencies and other institutional customers. The
Company offers a comprehensive range of Internet solutions, including a
complete product line of dedicated Internet connectivity solutions to its
business customers, Web site management, consulting and security, and private
network solutions. The Company offers its Internet solutions through three
separate and highly focused business units. The Business Internet Connectivity
Group offers dedicated high-bandwidth Internet connectivity and security
solutions for commercial Internet and Intranet communication applications. The
Web Site Management Group provides fault tolerant Web site management and
electronic commerce integration services to companies seeking to outsource the
management of "mission-critical" World Wide Web presences. The Private Network
Solutions Group seeks to create customized private label solutions for
businesses seeking to provide Internet services without incurring the cost of
building and managing their own facilities.
12
<PAGE>
Set forth below are selected historical financial data and other historical
operating data of the Company as of and for the periods indicated that have
been taken or derived from the audited financial statements contained in the
Company 10-K and the unaudited financial statements contained in the Company
10-Q filed with the Commission. More comprehensive financial information and
other information is included in the Company 10-K, the Company 10-Q and other
documents filed by the Company with the Commission, and the following summary
financial information is qualified in its entirety by reference to such
reports and other documents including the financial statements and related
notes contained therein. The reports may be examined and copies may be
obtained at the offices of the Commission in the manner set forth below.
DIGEX, INCORPORATED
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1994 1995 1996
---------- ---------- -----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Revenue.......................... $1,577,609 $5,075,316 $15,573,393
Loss from Operations................. (54,361) (3,822,170) (22,236,128)
Net Loss............................. (81,524) (3,976,913) (23,304,860)
Net Loss Per Common Share
Attributable to Common Stockholder.. $ (0.01) $ (0.63) $ (3.68)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ ----------
(AUDITED) (UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Working Capital................................... $20,052,000 $7,940,000
Total Assets...................................... 56,773,000 55,458,000
Total Liabilities................................. 23,068,000 30,797,000
Stockholders' Equity.............................. 33,705,000 24,661,000
</TABLE>
Certain Company Projections. During the course of discussions between Parent
and the Company that led to the execution of the Merger Agreement (see Section
11), the Company provided Parent with certain information relating to the
Company that Purchaser believes is not publicly available. This information
included projections of the operating performance of the Company for the years
ending December 31, 1997, 1998 and 1999, based on financial projections
developed by the Company. The projections do not reflect consummation of the
Offer or the Merger.
The projections include the following information regarding the Company's
anticipated results of operations (in millions) for the years ending December
31, 1997, 1998 and 1999:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
---------------------
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Revenues............................................... $ 58.6 $122.3 $189.3
Gross Profit........................................... 32.6 65.4 108.0
Operating Income....................................... (23.5) * *
Net Income............................................. (25.3) * *
</TABLE>
* Information not provided.
13
<PAGE>
These projections are based on a variety of estimates and assumptions, which
involve judgments with respect to future economic and competitive conditions,
inflation rates and technology trends.
The Company does not as a matter of course make public any projections as to
future performance or earnings, and the projections set forth above are
included in this Offer to Purchase only because the information was made
available to Parent by the Company. Parent understands that the projections
were not prepared with a view to public disclosure or compliance with the
published guidelines of the Commission or the guidelines established by the
American Institute of Certified Public Accountants regarding projections or
forecasts. Projected information of this type is based on estimates and
assumptions that are inherently subject to significant economic and
competitive uncertainties and contingencies, all of which are difficult to
predict and many of which are beyond the control of the Company and Parent.
Accordingly, actual results may vary materially from such projections and none
of the Company, or Parent or their respective financial advisors assumes any
responsibility for the accuracy or validity of any of the projections. The
inclusion of the foregoing projections should not be regarded as an indication
that the Company, Parent or any other person who received such information
considers it an accurate prediction of future events, and Parent has not
relied on them as such.
Available Information. The Company is subject to the informational filing
requirements of the Exchange Act. In accordance therewith, the Company files
periodic reports, proxy statements and other information with the Commission
under the Exchange Act relating to its business, financial condition and other
matters. The Company is required to disclose in such proxy statements certain
information, as of particular dates, concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities and any material interest of such persons
in transactions with the Company. Such reports, proxy statements and other
information may be inspected at the Commission's office at 450 Fifth Street,
N.W., Washington, D.C. 20549, and also should be available for inspection and
copying at the regional offices of the Commission located at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511; and 7 World Trade Center, 13th Floor, New York, New York 10048. Copies
of such reports, proxy statements and other information may be obtained by
mail upon payment of the Commission's prescribed fees, from the Commission's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.
9. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT
Purchaser, a Delaware corporation, was incorporated on May 30, 1997 for the
purpose of entering into the Merger Agreement and consummating the
transactions contemplated thereby. It has conducted no business other than
related to its formation and the transactions contemplated by the Merger
Agreement. All the outstanding capital stock of Purchaser is owned by Parent.
Until immediately prior to the time that Purchaser will purchase Shares
pursuant to the Offer, it is not anticipated that Purchaser will have any
significant assets or liabilities or engage in activities other than those
incident to its formation and capitalization and the transactions contemplated
by the Offer. Since Purchaser is newly formed and has minimal assets and
capitalization, no meaningful financial information is available.
Parent is a publicly held Delaware corporation. Parent, directly and through
its subsidiaries, is a rapidly growing integrated communications services
provider, offering a full suite of local, long distance and enhanced data
telecommunications services to business and government end user customers,
long distance carriers, Internet service providers, resellers and wireless
communications companies. The common stock of Parent is listed for trading on
the NASDAQ National Market System under the symbol ICIX. For the year ended
December 31, 1996, Parent had revenues of $103.4 million.
The principal executive offices of Parent and Purchaser are located at 3625
Queen Palm Drive, Tampa, Florida 33619.
14
<PAGE>
See Annex I to this Offer to Purchase for certain biographical and other
information concerning the executive officers and directors of Purchaser and
Parent.
Except as described in this Offer to Purchase, (i) none of Purchaser or
Parent or, to the best knowledge of Purchaser or Parent, any of the persons
listed in Annex I or any associate or majority owned subsidiary of any such
persons, beneficially owns or has a right to acquire any equity security of
the Company and (ii) none of Purchaser or Parent, or to the best knowledge of
Purchaser or Parent, any of the other persons referred to above, or any of the
respective directors, executive officers or subsidiaries of any of the
foregoing, has effected any transaction in any equity security of the Company
during the past 60 days.
Except as described in this Offer to Purchase, (i) none of Purchaser or
Parent or, to the best knowledge of Purchaser or Parent, any of the persons
listed in Annex I, has any contract, arrangement, understanding or
relationship (whether or not legally enforceable) with any other person with
respect to any securities of the Company, including, but not limited to, any
contract, arrangement, understanding or relationship concerning the transfer
or the voting of any such securities, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss, or
the giving or withholding of proxies and (ii) there have been no contacts,
negotiations or transactions between Purchaser, Parent or any of their
respective subsidiaries or, to the best knowledge of Purchaser or Parent, any
of the persons listed in Annex I on the one hand, and the Company or any of
its directors, officers or affiliates on the other hand, concerning a merger,
consolidation or acquisition, a tender offer or other acquisition of
securities, election of directors or a sale or transfer of a material amount
of assets, that are required to be disclosed pursuant to the rules and
regulations of the Commission.
Set forth below are selected historical financial data and other historical
operating data of Parent as of and for the periods indicated that have been
taken or derived from the audited financial statements contained in Parent's
Annual Report on Form 10-K for the year ended December 31, 1996 ("Parent 10-
K") and the unaudited financial statements contained in Parent's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997 ("Parent 10-Q"). More
comprehensive financial information and other information is included in the
Parent 10-K, the Parent 10-Q and other documents filed by Parent with the
Commission, and the following summary financial information is qualified in
its entirety by reference to such reports and other documents including the
financial statements and related notes contained therein. The reports may be
examined and copies may be obtained at the offices of the Commission in the
manner set forth in Section 8.
INTERMEDIA COMMUNICATIONS INC.
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1994 1995 1996
----------- ------------- ------------
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues........................ $14,272,396 $ 38,630,574 $103,396,887
Loss Before Income Tax Benefit
and
Extraordinary Item............. (3,067,379) (19,253,549) (57,198,711)
Net Loss........................ (3,067,379) (20,748,642) (57,198,711)
Net Loss Per Share.............. $ (0.34) $ (2.07) $ (4.08)
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------- ------------
(AUDITED) (UNAUDITED)
<S> <C> <C> <C>
CONDENSED CONSOLIDATED BALANCE SHEET DATA:
Cash and Cash Equivalents................... $ 189,546,000 $435,859,000
Working Capital............................. 206,030,000 448,890,000
Total Assets................................ 512,940,000 787,388,000
Total Liabilities........................... 398,710,000 411,272,000
Series A Redeemable Exchangeable Preferred
Stock and Accrued Dividends................ -- 292,250,000
Total Stockholders' Equity.................. 114,230,000 83,866,000
</TABLE>
15
<PAGE>
Loss per share is based on the weighted average shares outstanding. Common
Stock equivalents are not considered in Parent's calculation of loss per share
as all are antidilutive and would have no impact on the results.
10. SOURCE AND AMOUNT OF FUNDS
The total amount of funds required by Purchaser to purchase all outstanding
Shares (including the Investor Shares) and to pay related fees and expenses in
connection with the Offer, the Merger and the Stock Purchase Agreement is
estimated to be approximately $154.2 million. Purchaser expects to obtain the
necessary funds directly from Parent from Parent's existing cash reserves.
11. BACKGROUND OF THE TRANSACTION
In July 1996, the Company began using Parent's collocation services through
purchases from a third party vendor. In August 1996, the Company began using
Parent's dedicated access services, also through purchases from a third party
vendor. Parent was unaware the Company was the ultimate customer of these
services. Parent charged the third party vendor customary rates, but has no
knowledge of the arrangements between the Company and such third party vendor.
Parent and the Company held discussions in late 1996 relating to the
possibility of the Company becoming a direct customer of Parent. The Company,
as a provider of Internet services, requires certain telecommunications
services underlying the services the Company provides to its customers. Since
the Company's telecommunication needs were in Parent's service territory,
Parent was in a position to offer the Company telecommunications services at
competitive rates.
Representatives of Parent and the Company discussed the kinds of services
Parent could provide to the Company. During the course of these discussions
and based on the Company's stated requirements, Parent established a sales
team which focused on offering frame relay services, equipment collocation
services and dedicated access services to the Company. In late 1996, the
Company began purchasing collocation services and dedicated access services
directly from the Company. For the 1996 calendar year, Parent invoiced the
Company an aggregate of $16,572 for such services. The Company continues to
use such services, with invoices for May 1997 being $2,238 and aggregate
invoices for 1997 through May 31, 1997 totalling $47,628. All rates charged by
Parent to the Company were, and continue to be, at the prevailing market rates
that Parent would charge to a similar customer with similar term and volume
requirements.
For the past several years, Parent's business strategy has been to offer its
customers an integrated package of telecommunications services, including
providing data services to its customers. Throughout 1996 and the first half
of 1997, Parent monitored various Internet service providers with a view
toward either internally developing the capacity to provide Internet services
to its customers or acquiring a company which had already established such a
business. Parent had determined that it was strategically important to offer
these services to its customers in order to complement the services already
offered by Parent.
While Parent was able to internally develop the capability of providing
Internet services, Parent concluded that, because of the growth of the
Internet market, the best and most rapid way for Parent to successfully enter
the Internet services market would be for Parent to acquire a company already
offering such services. Parent reached this conclusion as a result of numerous
meetings and discussions among various members of Parent's senior management.
Once Parent reached the decision to acquire an established Internet service
provider, Parent solicited input from several investment banking
professionals, including Bear Stearns and UBS Securities, Inc. Both of these
firms profiled various companies, including the Company, as suitable for
Parent to investigate.
The first contact between Parent and the Company regarding a possible
business combination was arranged by Benji Diesbach, a consultant to the Bass
Group who was familiar with management of both companies. Mr. Diesbach
suggested that David C. Ruberg, Chairman, President and Chief Executive
Officer of Parent, meet with Christopher R. McCleary, Chairman, President and
Chief Executive Officer of the Company, in order to discuss potential business
opportunities for the two companies. Mr. Diesbach is not entitled to a fee in
this transaction.
Mr. Ruberg met with Mr. McCleary at Parent's corporate headquarters in mid-
February 1997. At this meeting, Mr. Ruberg indicated that Parent would like to
commence discussions about a possible business
16
<PAGE>
combination. Mr. McCleary indicated to Mr. Ruberg that the Company had
received indications of interest in the past which the Company believed were
inadequate. Mr. McCleary did indicate, however, that if Parent was prepared to
pay a fair price for the Company, he would be interested in furthering such
discussions.
Mr. Ruberg and Mr. McCleary continued such discussions at a meeting at the
Company's corporate headquarters in early March 1997. At this meeting, Mr.
Ruberg toured the Company's facilities. Mr. Ruberg and Mr. McCleary agreed
that Robert M. Manning, Senior Vice President and Chief Financial Officer of
Parent, would call Mr. McCleary by telephone to begin the process of
investigating a business combination.
Mr. Manning contacted Mr. McCleary by telephone during the week of March 24,
1997. Mr. Manning and Mr. McCleary agreed that Parent and the Company should
exchange confidentiality agreements, which were completed and executed by
Parent and the Company on March 27, 1997. Shortly after the execution of such
confidentiality agreements, Parent and the Company began a substantial
exchange of information and documents, which continued throughout the months
of April and May.
Shortly after the exchange of documents commenced, Mr. Manning and Mr.
McCleary agreed that detailed due diligence visits would be required. On April
1, 1997, representatives of Parent, including financial advisors, visited with
the Company's senior management and representatives of the Company's financial
advisor at the Company's corporate headquarters to review the business plans
of the Company and the Company's historical financial results, as well as all
aspects of the Company's business.
Mr. Manning and Mr. McCleary again met at the offices of Mr. McCleary on
April 16, 1997 to discuss a possible business combination. Broad terms of a
potential transaction were discussed. Mr. Manning and Mr. McCleary also
discussed the form of consideration, whether in cash or in securities, the
various stockholder constituencies of the Company would prefer. Mr. Manning
and Mr. McCleary decided to establish a price range per Share before
determining the structure of a business combination. In addition, Mr. Manning
indicated that because it was Parent's intent to retain existing senior
management to manage the Company as a separate business division of Parent,
Parent would not be interested in pursuing discussions unless Mr. McCleary and
other members of the Company's senior management would be fully supportive of
any business combination.
Several additional telephone conversations were held during the month of
April among the various members of senior management of both companies to
evaluate the business of the Company and to allow Parent to form a preliminary
valuation of the price per Share that Parent would be willing to pay.
Mr. Manning and Mr. McCleary then agreed that the Company should evaluate
Parent as a potential acquiror, especially with the view towards determining
the value of Parent common stock in the event that capital stock of Parent was
to be used as consideration in a transaction. Meetings were held at the
corporate headquarters of Parent on April 28, 1997, where certain members of
senior management of Parent and the Company, together with their financial
advisors, exchanged information, discussed the business of a combined company
and discussed synergies and cost savings that could be achieved by combining
both companies. During these meetings, senior executives of Parent presented
information about the nature of Parent's business, business philosophy,
strategies and long term plans. In addition, such executives explained their
views of the advantages of a business combination with the Company and
discussed how the combined businesses might be operated. Senior executives of
the Company then presented similar information to Parent. The meetings
concluded with a conversation among Mr. Ruberg, Mr. Manning, Mr. McCleary and
William F. Earthman III, a director of the Company, that a business
combination could be in the best interest of both companies and their
stockholders, provided that an appropriate price per Share was paid. Mr.
Manning and Mr. McCleary then continued the discussion, focusing on the
possible principal concerns of the Company's stockholders in considering a
sale of the Company. Mr. Manning indicated to Mr. McCleary that the price
range for a possible business combination was between $8.50 per Share and
$10.50 per Share, but that, with more information and with a better
understanding of the future potential of the business of the Company, a higher
price could be possible.
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On April 30, 1997, Mr. McCleary delivered a letter to Mr. Ruberg indicating
Mr. McCleary's belief that Parent and the Company should continue to pursue a
possible business combination and that a price per Share of $13.00, payable
all in stock of Parent, would be acceptable to the Company's venture
investors, founders and employees. Mr. McCleary also indicated his belief that
such a price would reflect a preemptive transaction valuation obviating the
need for protracted negotiation on the subject of breakup in the event of a
competing offer.
Mr. Ruberg then telephoned Mr. McCleary and they agreed that the price range
under discussion for a business combination was between $10.50 per Share and
$13.00 per Share.
During the week of May 1, 1997, Mr. Manning contacted Mr. McCleary to
arrange a series of follow up due diligence sessions. Mr. Manning and Mr.
McCleary agreed that two days of comprehensive meetings would be held among
the members of senior management of both companies and would include key
functional groups of both Parent and the Company such as finance, accounting,
MIS, network operations, engineering, strategic planning, sales and marketing.
These meetings occurred on May 8 and 9, 1997, with certain meetings being held
at the offices of Latham & Watkins, counsel to the Company, in Washington,
D.C. and others being held at the corporate headquarters of the Company.
On May 22, 1997, Parent convened a regularly scheduled meeting of its Board
of Directors. During such meeting, the possible acquisition of the Company was
discussed. Mr. Ruberg and Mr. Manning presented to the Board of Directors of
Parent the rationale for the transaction as well as the status of the
negotiations. The Board of Directors of Parent also discussed the form of the
consideration to be paid, discussing the benefits of a cash transaction and a
stock transaction. The Board of Directors of Parent unanimously agreed that a
business combination with the Company would benefit Parent and was in line
with the business strategy of Parent. Therefore, management was instructed to
proceed with negotiations and attempt to conclude a transaction at a fair
price.
Over the course of the next several days, Mr. Manning contacted Mr. McCleary
to discuss the nature of Parent's valuation efforts and of Parent's
conclusions. Mr. Manning and Mr. McCleary agreed that senior executives from
Parent and the Company would meet promptly in New York to continue
negotiations. On May 30, 1997, representatives of Parent and the Company, and
their legal and financial advisors, met at the offices of Kronish, Lieb,
Weiner & Hellman LLP, counsel to Parent and Purchaser, to continue to
negotiate the structure and terms of a possible transaction.
During the course of such negotiations, Parent stated that it was prepared
to pay a price of $13.00 per Share, but that the consideration would be paid
in a combination of cash and preferred securities of Parent. Parent stated
that it was not willing to use its common stock as part of the consideration.
Parent also stated that the holders of a majority of the outstanding Shares
would be required to agree to grant an option to Parent to acquire all of
their Shares as part of any transaction. The parties were unable to resolve
several important business issues relating to the structure and terms of the
transaction, including the form of consideration.
On May 30 and 31 and June 1, 1997, Mr. McCleary discussed the transaction
with various members of the Board of Directors of the Company. Mr. McCleary
also discussed the proposed transaction and the possible combinations of cash
and preferred securities or common stock of Parent with the Company's
financial advisors. The directors indicated that Mr. McCleary should attempt
to negotiate an all cash consideration transaction at a price of $13.00 per
Share.
On June 1, 1997, the Board of Directors of Parent convened a meeting at
which the acquisition of the Company was discussed. The Board of Directors of
Parent authorized management of Parent to continue to attempt to negotiate an
agreement, using a price of $13.00 per Share and all cash as the
consideration, subject to final approval of any such transaction and related
agreements by the Board of Directors of Parent.
On June 2, 1997, Mr. McCleary and Mr. Manning, in a telephone conversation,
discussed a possible transaction involving a price per Share of $13.00,
payable all in cash, subject to negotiation of satisfactory
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definitive acquisition agreements and certain other terms and conditions.
Representatives of Parent and the Company, including legal and financial
advisors, then continued to negotiate the terms and conditions of the Merger
Agreement. These negotiations continued on June 3 and were concluded on June
4, 1997.
During the morning of June 4, 1997, the Board of Directors of Parent met and
approved and adopted the Merger Agreement and the Stock Purchase Agreement
with a price per Share of $13.00, payable all in cash. The Board of Directors
of the Company met during the afternoon of June 4, 1997 and, after the market
closed on June 4, 1997, approved and adopted the Merger Agreement and approved
the Stock Purchase Agreement. The same day, the Investors approved and
subsequently executed the Stock Purchase Agreement.
12. PURPOSE OF THE OFFER; THE MERGER AGREEMENT AND THE STOCK PURCHASE
AGREEMENT
General
The purposes of the Offer and the Stock Purchase Agreement are to enable
Parent to acquire, in one or more transactions, control of the Company. The
purpose of the Merger is for Parent to acquire all Shares not purchased
pursuant to the Offer and the Stock Purchase Agreement. The acquisition of the
entire equity interest in the Company is structured as a cash tender offer
followed by the Merger in order to provide a prompt and orderly transfer of
ownership of the Company from the public stockholders to Parent.
Upon consummation of the Merger, the Company will become a wholly owned
subsidiary of Parent. The Offer is being made in accordance with the Merger
Agreement.
Under the DGCL, the approval of the Board of Directors of the Company and
the affirmative vote of the holders of a majority of the outstanding Shares is
required to approve and adopt the Merger Agreement. The Board of Directors of
the Company has approved and adopted the Merger Agreement and the transactions
contemplated thereby and, unless the Merger is consummated pursuant to the
short-form merger provisions under the DGCL described below, the only
remaining required corporate action of the Company is the approval and
adoption of the Merger Agreement by the affirmative vote of the holders of a
majority of the outstanding Shares. UPON CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED BY THE STOCK PURCHASE AGREEMENT, PARENT AND PURCHASER, BY VIRTUE
OF THE ACQUISITION OF APPROXIMATELY 50.3% OF THE OUTSTANDING SHARES, WILL OWN
A NUMBER OF SHARES SUFFICIENT, EVEN IF NO OTHER SHARES ARE TENDERED INTO THE
OFFER, TO CAUSE THE MERGER TO OCCUR WITHOUT THE AFFIRMATIVE VOTE OF ANY OTHER
HOLDER OF SHARES, IF NO OTHER SHARES ARE ISSUED BY THE COMPANY.
In the Merger Agreement, the Company has agreed to convene a meeting of its
stockholders as soon as practicable after the consummation of the Offer for
the purpose of the approval and adoption of the Merger Agreement and the
transactions contemplated thereby, if such action is required by the DGCL, and
to include in the proxy statement with respect to such meeting the
recommendation of its Board of Directors that stockholders of the Company vote
in favor of the approval and adoption of the Merger Agreement. Purchaser and
Parent have each agreed that all Shares acquired pursuant to the Offer, the
Stock Purchase Agreement or otherwise by Purchaser or Parent or any of their
affiliates will be voted in favor of the Merger.
Under the "short-form" merger provisions of the DGCL, if Purchaser acquires,
pursuant to the Offer, the Stock Purchase Agreement or otherwise, at least 90%
of the outstanding Shares, Purchaser will be able to approve the Merger
without a vote of the Company's stockholders promptly following the transfer
of record ownership into the name of Purchaser of the Shares so acquired. The
Company's certificate of incorporation provides that the stockholders of the
Company may act only at a meeting of the stockholders and not by written
consent. Therefore, if Purchaser does not acquire at least 90% of the
outstanding Shares pursuant to the Offer, the Stock Purchase Agreement or
otherwise and a vote of the Company's stockholders is required under the DGCL,
a significantly longer period of time would be required to effect the Merger
by reason of the need for the preparation and distribution of a proxy
statement in advance of a meeting of stockholders.
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The Merger Agreement
The following is a summary of the material terms of the Merger 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 incorporated herein by reference and a copy of which has been filed with
the Commission as an exhibit to the Schedule 14D-1. The Schedule 14D-1
(including the Merger Agreement and other exhibits) may be examined, and
copies thereof may be obtained, as set forth in Section 17.
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 the price per Share payable in the Offer 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 Section 14 or (iv) modify 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 Section 14. 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 have not been satisfied;
provided, however, in the event Purchaser desires to extend the Offer beyond
July 31, 1997, and the proposed length of the extension is, in the aggregate,
more than three days, the Company will have the right to consent to such
longer extension. Parent has agreed to cause Purchaser to, and Purchaser has
agreed to use its reasonable best efforts to, consummate the Offer as soon as
legally permissible, subject to satisfaction of the conditions to the Offer
and its right to extend for 20 additional days as provided above.
Board Representation. The Merger Agreement provides that promptly upon the
purchase by Purchaser of Shares pursuant to the Offer or the Stock Purchase
Agreement, and from time to time thereafter, Purchaser shall be entitled to
designate up to such number of directors, rounded up to the next whole number,
on the Board of Directors of the Company as will give Purchaser representation
on the Board of Directors of the Company equal to the product of the number of
directors on the Board of Directors of the Company (giving effect to the
directors elected pursuant to this sentence) multiplied by the percentage that
the aggregate number of Shares beneficially owned by Purchaser or any
affiliate of Purchaser following such purchase bears to the total number of
Shares then outstanding, and the Company shall, at such time, promptly take
all actions necessary to cause Purchaser's designees to be elected or
designated as directors of the Company, including increasing the size of the
Board of Directors of the Company or securing the resignations of incumbent
directors or both. Notwithstanding the foregoing, until the earlier of (i) the
time Purchaser acquires a majority of the then outstanding Shares on a fully
diluted basis and (ii) the Effective Time, the Company will use its reasonable
best efforts to ensure that all the members of the Board of Directors of the
Company and each committee thereof as of June 4, 1997 who are not employees of
the Company will remain members of the Board of Directors and of such
committees. The Company will also use its reasonable best efforts to cause
persons designated by Purchaser to constitute the same percentage as persons
designated by Purchaser shall constitute of the entire Board of Directors of
the Company to be on each committee of the Board of Directors of the Company.
The Company's obligations to appoint designees to its Board of Directors shall
be subject to Section 14(f) of the Exchange Act. At the request of Purchaser
and subject to applicable law, the Company has agreed to take all action
necessary to effect any such election or appointment of Purchaser's designees,
including mailing to its stockholders the information required by Section
14(f) of the Exchange Act and Rule 14f-l promulgated thereunder. Purchaser and
Parent are obligated to supply to the Company all information with respect to
themselves and their officers, directors and affiliates required by such
Section and Rule.
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 the State of Delaware. The Certificate of
Incorporation of the Company shall be the Certificate of Incorporation of the
Surviving Corporation, provided that such Certificate of Incorporation shall
be amended in its entirety to read as Purchaser's Certificate of Incorporation
(except the name of the Surviving Corporation shall be "DIGEX,
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Incorporated"). The By-Laws of the Purchaser in effect immediately prior to
the Effective Time will be the By-Laws of the Surviving Corporation. 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. Upon consummation of the
Merger, 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 will cause the Merger to be consummated by filing with the Secretary
of State of the State of Delaware a 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 will be canceled, and other than Shares held by
stockholders who have properly exercised their rights of appraisal), by virtue
of the Merger and without any action on the part of the holder thereof, shall
be converted into, exchanged for and represent the right to receive in cash an
amount per Share equal to the price per Share paid in the Offer, without
interest.
Company Stock Options and Warrants. At the Effective Time, all options and
warrants then outstanding under the Company's 1995 Incentive Stock Option Plan
and the 1996 Equity Participation Plan (collectively, the "Company Stock
Option Plans") will be assumed by Parent in such manner that Parent is a
corporation "assuming a stock option in a transaction to which Section 424(a)
applies" within the meaning of Section 424 of the Internal Revenue Code of
1986, as amended (the "Code"). The options and warrants assumed by Parent as
provided above will be exercisable upon the same terms and conditions as under
the Company Stock Option Plans and the option agreements and warrants issued
thereunder, except that each such option or warrant (i) will be exercisable
for that number of shares of Parent's common stock equal to the product of (A)
the number of shares of the Company's common stock subject to such option or
warrant immediately prior to the Effective Time multiplied by (B) a fraction,
the numerator of which will be $13.00 and the denominator of which will be $27
1/8 (with any fractional share of Parent's common stock being disregarded) and
(ii) the exercise price per share of Parent's common stock will equal the
exercise price per share of the Company's common stock theretofore in effect
multiplied by a fraction, the numerator of which will be $27 1/8 and the
denominator of which will be $13.00. From and after the Effective Time, no
additional options or warrants will be granted under the Company Stock Option
Plans. In connection with the assumption of the options outstanding under the
Company Stock Option Plans, Parent will use its best efforts to effect such
assumption in such a manner as to not affect the incentive stock option status
of those options which are intended to be incentive stock options at the
Effective Time. The Company has agreed not to accelerate, or take any action
which would cause the acceleration of, the vesting of any of the options
outstanding under the Company Stock Option Plans by reason of the Offer or the
Merger. On June 4, 1997, Parent consented to the grant by the Company of
options to purchase up to 200,000 Shares at an exercise price of $3.00 per
Share to certain senior officers of the Company.
Stockholder Meeting. The Merger Agreement provides that, if required by
applicable law in order to consummate the Merger, the Company will, as soon as
practicable following consummation of the Offer, duly call, give notice of,
convene and hold a meeting of its stockholders for the purpose of considering
and taking action on the Merger Agreement and the transactions contemplated
thereby. The Merger Agreement also provides that the Company will (i) include
in the proxy statement related to such stockholders meeting the unanimous
recommendation of the Board of Directors of the Company that the stockholders
of the Company approve and adopt the Merger Agreement and the transactions
contemplated thereby and (ii) use its reasonable best efforts to secure such
approval and adoption. Parent and Purchaser have each agreed under the Merger
Agreement that, at such stockholder meeting, all of the Shares then owned by
Parent or Purchaser or any of their affiliates will be voted in favor of the
Merger.
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If Purchaser or Parent acquires at least 90% of the outstanding Shares, the
Merger may be effected without a meeting of the stockholders in accordance
with the "short-form" merger provisions of Section 253 of the DGCL.
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, employee benefits,
labor relations, litigation, taxes, compliance with applicable laws,
intellectual property, real property, insurance, material contracts, related
party transactions, liens and other matters.
Purchaser and Parent have also made certain representations and warranties
with respect to corporate existence and good standing, corporate
authorization, Commission filings relating to the Offer and the Merger,
consents and approvals, no violations of other agreements, solvency and other
matters.
Conduct of Business and Other Covenants Pending the Merger. The Company has
agreed that, except with the prior written consent of Parent and Purchaser,
during the period from the date of the Merger Agreement to the Effective Time,
the Company will carry on its business in, and only in, the ordinary and usual
course in the same manner as previously conducted and, to the extent
consistent with such business, the Company will use all reasonable efforts to
preserve intact its current business organization, to keep available the
services of its current officers and employees and to preserve the goodwill
of, and maintain satisfactory relationships with, customers, suppliers and
others having business dealings with the Company. The Company has agreed to
promptly advise Parent and Purchaser in writing of the occurrence of any event
which will or may result in the failure to satisfy the conditions to the Offer
or the Merger.
In addition, except with the prior written consent of Parent and Purchaser,
prior to the time specified in the first sentence in the preceding paragraph,
the Company has agreed that it will: (i) not amend its Certificate of
Incorporation or By-Laws; (ii) maintain all of its material structures,
equipment and other tangible personal property in good repair, order and
condition, except for depletion, depreciation, ordinary wear and tear and
damage by unavoidable casualty; (iii) keep in full force and effect insurance
comparable in amount and scope of coverage to insurance currently carried by
it; (iv) perform in all material respects all of its obligations under
agreements, contracts and instruments relating to or affecting its properties,
assets and business; (v) maintain its books of account and records in the
usual, regular and ordinary manner; (vi) comply in all material respects with
all statutes, laws, ordinances, rules and regulations applicable to it and to
the conduct of its business; (vii) not enter into, assume or amend in any
material respect any material agreement, contract or commitment of the
Company, except, in certain cases, in the ordinary course of business
consistent with past practice; (viii) not enter into any additional contracts
or agreements for network capacity or local transport services which are not
terminable by the Company, without penalty or other adverse consequence, on
not more than 60 days notice; (ix) not enter into any additional customer
contracts or agreements containing rates which are materially different from
the rates charged by the Company to current customers of similar
creditworthiness, ordering similar amounts of services and over a similar
term; (x) not merge or consolidate with, or agree to merge or consolidate
with, or purchase substantially all the assets of, or otherwise acquire any
business of any corporation, partnership, association or other business
organization or division thereof; (xi) not purchase for cash and cancel any
options outstanding under the Company Stock Option Plans or otherwise amend
such Company Stock Option Plans; (xii) promptly advise Parent and Purchaser in
writing of any materially adverse change in the consolidated financial
condition, operations or business of the Company; (xiii) not declare or pay
dividends (cash or otherwise) or make any distribution on, or directly or
indirectly redeem, purchase or otherwise acquire, any shares of its
outstanding capital stock; (xiv) not effect any stock split or other
reclassification; (xv) not authorize the creation or issuance of or issue,
sell or dispose of, or create any obligation to issue, sell or dispose of, any
shares of its capital stock or any securities or obligations convertible into
or exchangeable for, any shares of its capital stock (other than pursuant to
stock options or warrants heretofore outstanding); (xvi) not issue any press
releases without first consulting with Parent regarding any such press
release; (xvii) not create, incur, assume, guarantee or otherwise become
directly or indirectly liable with respect to any indebtedness for borrowed
money other than in the
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ordinary course of business consistent with past practice under agreements
existing on the date of the Merger Agreement and identified in writing to
Parent and Purchaser; and (xviii) not enter into any agreement or
understanding to do or engage in any of the foregoing.
No Solicitation. The Company has agreed that it will not, directly or
indirectly, through any officer, director, agent or otherwise (a) solicit,
initiate or encourage the submission of any proposal or offer from any person
relating to any acquisition or purchase of all or (other than in the ordinary
course of business) any portion of the assets of, or any equity interest in,
the Company or any business combination (other than private network agreements
entered into by the Company in the ordinary course of business) with the
Company (a "Company takeover proposal") or (b) except to the extent required
by fiduciary obligations under applicable law as advised in writing by
independent counsel, participate in any negotiations regarding, or furnish to
any other person any information with respect to, or otherwise cooperate in
any way with, or assist or participate in, facilitate or encourage, any effort
or attempt by any other person to do or seek any of the foregoing. The Company
must notify Parent promptly of any Company takeover proposal or any inquiry or
contact with any person with respect thereto, that is made and must, in any
such notice to Parent, indicate in reasonable detail the identity of the
person making such Company takeover proposal or related inquiry or contact and
the terms and conditions of such Company takeover proposal or related inquiry
or contact. In addition, the Company may not release any third party from, or
waive any provision of, any confidentiality or standstill agreement to which
the Company is a party.
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 (i) the Company will be required to pay a termination
payment and reimburse certain expenses of Parent and Purchaser to Parent under
certain circumstances described in "Termination Payment" below and (ii) Parent
and the Company have agreed to share evenly any filing fees required by the
HSR Act.
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:
(i) unless the Merger is consummated pursuant to the "short-form" merger
provisions of Section 253 of the DGCL, 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; (ii) all permits, approvals
and consents of any governmental or regulatory authority or any other third
party necessary or appropriate for consummation of the Merger shall have been
obtained, other than consents the failure to obtain which would not reasonably
be expected to have, individually or in the aggregate, a material adverse
effect on the Company or a material adverse effect on the consummation of the
transactions contemplated by the Merger Agreement; (iii) Purchaser or a
permitted assignee shall have purchased all Shares validly tendered and not
withdrawn pursuant to the Offer; provided, however, that this condition will
not be applicable to the obligations of Parent and Purchaser if, in breach of
the Merger Agreement or the terms of the Offer, Purchaser fails to purchase
any Shares validly tendered and not withdrawn pursuant to the Offer; (iv) no
preliminary or permanent injunction or other order of a court or governmental
or regulatory authority shall have been issued and be in effect, and no United
States federal or state statute, rule or regulation shall have been enacted or
promulgated after the date hereof and be in effect, that (A) prohibits the
consummation of the Merger or (B) imposes material limitations on the ability
of Parent to exercise full rights of ownership of the Company's assets or
business; (v) there shall not be any action or proceeding commenced by or
before any governmental or regulatory authority in the United States, or
threatened by any governmental or regulatory authority in the United States,
that challenges the consummation of the Merger or seeks to impose material
limitations on the ability of Parent to exercise full rights of ownership of
the Company's assets or business, other than any such action or proceeding
commenced by a stockholder or stockholders of Parent or the Company, either
derivatively on behalf of Parent or the Company, respectively, or on behalf of
such stockholder or stockholders, alleging that the directors or officers of
Parent or the Company, respectively, have breached their fiduciary duties to
stockholders under Delaware law or Parent or the Company has failed to make
disclosures required to be made under applicable state or federal securities
laws, in each case in connection with the transactions contemplated by the
Merger Agreement, or making any similar claim; and
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(vi) any waiting period applicable to the consummation of the Merger under the
HSR Act shall have expired or been terminated.
For a description of conditions of the Offer, see Section 14.
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: (i) by consent of the Boards of Directors of the Company, Parent and
Purchaser, except that in the case of termination after the consummation of
the Offer, the termination must be consented to by a majority of the
independent directors of the Company; (ii) 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 in the Merger Agreement on
the part of the Company shall not have been true and correct in any material
respect at and as of the date made; (iii) 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 in the Merger Agreement 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; (iv) 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 October 31, 1997, 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 this provision
is not 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; (v) by Parent if due solely to
an occurrence or circumstance that would result in a failure to satisfy any
condition to the Offer, Purchaser shall have (A) failed to commence the Offer
within 60 days following the date of the Merger Agreement, (B) terminated the
Offer without having accepted any Shares for payment thereunder or (C) failed
to pay for Shares pursuant to the Offer within 90 days following the
commencement of the Offer, unless such failure to pay for Shares shall have
been caused by or resulted from the failure of Parent or Purchaser to perform
in any material respect any material covenant or agreement of either of them
contained in the Merger Agreement or the material breach by Parent or
Purchaser of any material representation or warranty of either of them
contained in the Merger Agreement; (vi) by the Company, upon approval of the
Board of Directors of the Company, if due to an occurrence or circumstance
that would result in a failure to satisfy any of the conditions to the Offer,
Purchaser shall have (A) failed to commence the Offer within 60 days following
the date of the Merger Agreement, (B) terminated the Offer without having
accepted any Shares for payment thereunder or (C) failed to pay for Shares
pursuant to the Offer within 90 days following the commencement of the Offer,
unless such failure to pay for Shares shall have been caused by or resulted
from the failure of the Company to perform in any material respect any
material covenant or agreement of it contained in the Merger Agreement or the
material breach by the Company of any material representation or warranty of
it contained in the Merger Agreement; (vii) 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; (viii) by Parent or Purchaser if the Company breaches
the provisions of the Merger Agreement relating to solicitation of other
offers (as described above); or (ix) by Parent or Purchaser if, at any time,
the Company shall have withdrawn or modified in any manner adverse to Parent
or Purchaser its approval or recommendation of the Offer, the Merger Agreement
or the Merger.
Effect of Termination. In the event of the termination of the Merger
Agreement as provided above, the provisions of the Merger Agreement (other
than the provisions relating to confidentiality, expenses, and the termination
payment) will become void and have no effect, with no liability on the part of
any party thereto or its stockholders or directors or officers in respect
thereof, except with respect to the termination payment, provided that nothing
contained in the Merger Agreement will be deemed to relieve any party of any
liability it may have to any other party with respect to a willful breach of
its obligations under the Merger Agreement.
Termination Payment. The Company agreed to pay to Parent the sum of
$3,794,135 plus all reasonably documented out-of-pocket expenses (including,
but not limited to, the reasonable fees and expenses of counsel
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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) ("Parent Expenses")
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 the provisions described
in clauses (ii), (vii), (viii) and (ix) of the paragraph above entitled
"Termination"; (ii) Parent or Purchaser shall have exercised its right to
terminate the Merger Agreement pursuant to clause (v) of the paragraph above
entitled "Termination", but only because of the failure of one or more of the
conditions specified in clauses 3, 5, 6, 7 or 10 of Section 14 of this Offer
to Purchase; (iii) the Company shall have exercised its right to terminate the
Merger Agreement pursuant to clause (vii) of the paragraph above entitled
"Termination"; or (iv) any person or group, other than Parent or an affiliate
thereof, shall have acquired at least 50% of the outstanding Shares. The
Company is not obligated to make such termination payment if at the time such
payment becomes due Parent or Purchaser is in material breach of its
obligations under the Merger Agreement.
Compliance with Conditions Precedent, etc. Parent, Purchaser and the Company
each agreed to use commercially reasonable efforts to cause the conditions
precedent to the Offer and the Merger to be fulfilled and, subject to the
terms and conditions in the Merger Agreement, to take, or cause to be taken,
all action, and to do or cause to be done all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by the Merger Agreement and the
Merger, including without limitation, to lift any injunction or remove any
other impediment to the consummation of such transactions or the Merger.
Access and Information. The Company agreed to give to Parent and Purchaser
and their representatives reasonable access during normal business hours to
the personnel, properties, books, records, contracts and commitments of the
Company and to furnish all such information and documents relating to the
properties and business of the Company as Parent and Purchaser may reasonably
request.
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
or any listing agreement with a national securities exchange or the NASDAQ
National Market System to which Parent or the Company is a party.
Indebtedness of the Company. The Company agreed that prior to the
consummation of the Offer by Purchaser (and as a condition thereto), the
Company will, if Parent makes available a Parent Loan (as described below),
repay all indebtedness of the Company other than vendor indebtedness, it being
expressly understood that if Parent does not make available to the Company a
Parent Loan, then the repayment of such indebtedness will not be a condition
to the consummation of the Offer. To the extent requested by the Company,
Parent will make a loan to the Company in principal amount sufficient to pay
in full (including principal, accrued interest, fees, penalties and other
charges) all indebtedness required to be repaid by Company pursuant to the
preceding sentence (the "Parent Loan"). The Parent Loan will (i) have a
maturity of 180 days, (ii) bear interest at a rate to be negotiated in good
faith by the parties taking into account the interest rate that could be
obtained by the Company on any bank or other financial institution financing
and (iii) have such other terms as shall be mutually agreed to by the Company
and Parent, acting in good faith and in a commercially reasonably manner.
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 Company pursuant to the Merger
Agreement will survive the Merger.
Parties in Interest. Nothing in the Merger Agreement is intended to confer
upon any person, other than the parties thereto, any rights or remedies.
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Timing. Although Parent, Purchaser and the Company have agreed to use all
reasonable efforts to consummate and make effective as promptly as practicable
the transactions contemplated by the Merger Agreement, there can be no
assurance that the Merger will be consummated or as to the timing of the
Merger because the Merger is subject to certain conditions as described above.
Purchaser and its affiliates reserve the right to acquire, to the extent
permitted by applicable law and except as prohibited by the Merger Agreement,
following the consummation or termination of the Offer, additional Shares
through open market purchases, privately negotiated transactions, or
otherwise, upon such terms and at such prices as they shall determine, which
may be more or less than the price to be paid pursuant to the Offer and the
Merger.
Delaware Law. The Board of Directors of the Company has approved and adopted
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 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, Section 203 of the DGCL does not apply to the Offer, the Stock Purchase
Agreement or the Merger because the Company's Board of Directors properly
approved, among other things, the Offer, the Stock Purchase Agreement and 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 may 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
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 incorporated herein by reference and a copy of which has
been filed with the Commission
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as an exhibit to the Schedule 14D-1. The Stock Purchase Agreement may be
examined, and copies thereof may be obtained, as set forth in Section 17.
Tender of Shares. Each of the Investors has irrevocably agreed to validly
tender and sell (and not withdraw), pursuant to and in accordance with the
terms of the Offer, all of such Investor's Investor Shares (provided, that the
consideration in the Offer must be in cash and in an amount equal to $13.00
per Share). The Investors own an aggregate of 5,877,582 Shares, constituting
approximately 50.3% of the currently outstanding Shares (approximately 38.3%
of the outstanding Shares on a fully diluted basis). UPON CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED BY THE STOCK PURCHASE AGREEMENT, PARENT AND
PURCHASER, BY VIRTUE OF THE ACQUISITION OF APPROXIMATELY 50.3% OF THE
OUTSTANDING SHARES, WILL OWN A NUMBER OF SHARES SUFFICIENT, EVEN IF NO OTHER
SHARES ARE TENDERED INTO THE OFFER, TO CAUSE THE MERGER TO OCCUR WITHOUT THE
AFFIRMATIVE VOTE OF ANY OTHER HOLDER OF SHARES, IF NO OTHER SHARES ARE ISSUED
BY THE COMPANY.
Voting of Shares. At any meeting of the stockholders of the Company, or in
any consent in lieu of such a meeting from the date of the Stock Purchase
Agreement, until the first to occur of (i) the Effective Time, (ii) the
termination of the Stock Purchase Agreement by Parent or (iii) the termination
of the Merger Agreement in accordance with its terms (the "Termination Date"),
each of the Investors has agreed to vote (or cause to be voted) all of its
Investor Shares 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.
Investor Option. To induce Parent and Purchaser to enter into the Merger
Agreement, each of the Investors has granted Parent an Investor Option to
purchase its Investor Shares at $13.00 per Investor 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 and from
time to time, on or after June 4, 1997 and prior to the Termination Date.
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
Investor Shares (and all other securities issued to such Investor in respect
of the Investor 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 revoked all other
proxies and powers of attorney with respect to the Investor Shares (and all
other securities issued to such Investor in respect of the Investor 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 agreed that, until the expiration of
the Investor Options, except as contemplated by the Stock Purchase Agreement,
such Investor will not, and will 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 such Investor's voting rights, charge or
other encumbrance of any nature whatsoever with respect to the Investor
Shares.
No Solicitation. Each Investor agreed not to, 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 Exchange
Act), 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 Investor Shares or (B) any acquisition
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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 also agreed to notify Parent promptly if any
such proposal or offer, or any inquiry or contact with any Person with respect
thereto.
Plans for the Company
It is expected that, initially following the Offer and the Merger, the
business and operations of the Company will, except as set forth in this Offer
to Purchase, be continued by the Company substantially as they are currently
being conducted, and that the Company's current management, under the
direction of the Board of Directors of Parent, will continue to manage the
Company. Following consummation of the Merger, however, Parent intends to
conduct a review of the Company and its assets, its corporate structure,
operations, properties, management and personnel and consider what, if any,
changes would be desirable in light of the circumstances which then exist
although, except as disclosed in this Offer to Purchase, Purchaser has no
current plans with respect to any of such matters. Such changes could include
the acquisition or disposition of assets or other changes in the Company's
capitalization, dividend policy, corporate structure, business, Certificate of
Incorporation, By-laws, Board of Directors or management.
Except as noted in this Offer to Purchase, neither Parent nor Purchaser has
any present plans or proposals that would result in an extraordinary corporate
transaction, such as a merger, reorganization, liquidation, or sale or
transfer of a material amount of assets, involving the Company, or any
material changes in the Company's capitalization, dividend policy, corporate
structure, business or composition of its management.
13. DIVIDENDS AND DISTRIBUTIONS
Pursuant to the terms of the Merger Agreement, the Company is prohibited
from declaring or paying any dividends (cash or otherwise) or making any
distribution on, or directly or indirectly redeeming, purchasing or otherwise
acquiring, any shares of its outstanding capital stock or effecting any stock
split or other reclassification.
14. 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) the Minimum Condition
shall not have been satisfied, (ii) any applicable waiting period under the
HSR Act shall not have expired or been terminated prior to the expiration of
the Offer, or (iii) 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:
1. there shall have been instituted or be pending any action or
proceeding before any court or governmental, administrative or
regulatory authority or agency, domestic or foreign, (i) that would
reasonably be expected to make illegal, materially delay or otherwise
directly or indirectly restrain or prohibit the making of the Offer,
the acceptance for payment of, or payment for, any Shares by Parent,
Purchaser or any other affiliate of Parent, the purchase of Shares
pursuant to the Stock Purchase Agreement, or the consummation of any
other transaction contemplated by the Merger Agreement, or that would
reasonably be expected to result in material damages in connection
with any transaction contemplated by the Merger Agreement, (ii) that
would reasonably be expected to prohibit or limit materially the
ownership or operation by the Company, Parent or any of their
subsidiaries of all or any material portion of the business or assets
of the Company, or to compel the Company, Parent or any of their
subsidiaries to dispose of or hold separate all or any material
portion of the business or assets of the Company, Parent or any of
their subsidiaries, as a result of the transactions contemplated
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by the Merger Agreement, (iii) that would reasonably be expected to
impose or confirm limitations on the ability of Parent, Purchaser or
any other affiliate of Parent to exercise effectively full rights of
ownership of any Shares, including, without limitation, the right to
vote any Shares acquired by Purchaser pursuant to the Offer, the Stock
Purchase Agreement or otherwise on all matters properly presented to
the Company's stockholders, including, without limitation, the approval
and adoption of the Merger Agreement and the transactions contemplated
thereby, (iv) that would reasonably be expected to require divestiture
by Parent, Purchaser or any other affiliate of Parent of any Shares, or
(v) which otherwise is a Material Adverse Change (as defined below);
2. there shall have been any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction
enacted, entered, enforced, promulgated, amended, issued or deemed
applicable to (i) Parent, the Company or any subsidiary or affiliate
of Parent or the Company or (ii) any transaction contemplated by the
Merger Agreement, by any legislative body, court, government or
governmental, administrative or regulatory authority or agency,
domestic or foreign, other than the routine application of the waiting
period provisions of the HSR Act to the Offer, the Stock Purchase
Agreement or the Merger, which is reasonably likely to result,
directly or indirectly, in any of the consequences referred to in
clauses (i) through (v) of paragraph (1) above;
3. there shall have occurred any change, condition, event or development
that is a Material Adverse Change. "Material Adverse Change" means
any change or effect that, individually or in the aggregate with all
other changes or effects, is or is reasonably likely to be materially
adverse to the business, operations, properties, condition (financial
or otherwise), assets, liabilities or prospects of the Company,
except for changes or effects that result primarily from the Offer,
the contemplated Merger or the contemplated control of the Company by
Parent, including any action or inaction by any employee (other than
a senior executive officer or director) of the Company or any other
third party primarily due to the Offer, the contemplated Merger or
the contemplated control of the Company by Parent;
4. there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the Nasdaq Stock
Market for more than one trading day, (ii) any decline, measured from
June 4, 1997, in the Standard & Poor's 500 Index by an amount in
excess of 25%, (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (iv)
any direct material limitation (whether or not mandatory) by any
government or governmental, administrative or regulatory authority or
agency, domestic or foreign, on the extension of credit by banks or
other lending institutions, (v) a commencement of a war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States or (vi) in the case of any of
the foregoing existing on the date of the Merger Agreement, a
material acceleration or worsening thereof;
5. (i) it shall have been publicly disclosed or Purchaser shall have
otherwise learned that beneficial ownership (determined for the
purposes of this paragraph as set forth in Rule 13d-3 promulgated
under the Exchange Act) of 30% or more of the then outstanding Shares
has been acquired by any person other than Parent or any of its
affiliates or other than those persons executing the Stock Purchase
Agreement or (ii) (A) the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified in a manner
adverse to Parent or Purchaser the approval or recommendation of the
Offer, the Merger or the Merger Agreement, or approved or recommended
any takeover proposal or any other acquisition of Shares other than
the Offer and the Merger, (B) any corporation, partnership, person or
other entity or group shall have entered into a definitive agreement
or an agreement in principle with the Company with respect to a
tender offer or exchange offer for any Shares or a merger,
consolidation or other business combination with or involving the
Company or (C) the Board of Directors of the Company or any committee
thereof shall have resolved to do any of the foregoing;
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6. any representation or warranty of the Company in the Merger Agreement
which is qualified as to materiality shall not be true and correct or
any such representation or warranty that is not so qualified shall
not be true and correct in any material respect, in each case as if
such representation or warranty was made as of such time on or after
the date of the Merger Agreement (other than representations or
warranties made as of a specific date, which shall only be made as of
such date); provided, that for purposes of this condition, the term
"Material Adverse Change" is substituted for the term "Material
Adverse Effect" in all representations and warranties containing such
term which are deemed to be made after the date of the Merger
Agreement by virtue of this paragraph, and the Company shall not have
delivered to Parent a certificate of the Company to such effect
signed by a duly authorized officer thereof and dated as of the date
on which Parent first accepts Shares for payment;
7. the Company shall have failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under
the Merger Agreement and, in the case of failures to perform any
agreement or covenant of the Company pursuant to Sections 5.1 (b),
(c), (d) and (f) of the Merger Agreement, such failure to perform
would reasonably be expected to have a Material Adverse Change;
8. the Merger Agreement shall have been terminated in accordance with
its terms;
9. 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;
10. any holder of options to purchase shares of the Company's common stock
(other than Clyde Heintzelman) whose options vest on a change of
control shall have failed to waive the vesting of such options upon a
change of control of the Company;
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, Parent and
their respective subsidiaries and affiliates, 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 subject to the terms and conditions of
the Merger Agreement. 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. Any determination by Purchaser
concerning the events described in this Section 14 will be final and binding
on all parties.
In addition, the Company agreed that prior to the consummation of the Offer
by Purchaser (and as a condition thereto), the Company will, if Parent makes
available a Parent Loan, repay all indebtedness of the Company other than
vendor indebtedness, it being expressly understood that if Parent does not
make available to the Company a Parent Loan, then the repayment of such
indebtedness will not be a condition to the consummation of the Offer. To the
extent requested by the Company, Parent will make a Parent Loan to the Company
in principal amount sufficient to pay in full (including principal, accrued
interest, fees, penalties and other charges) all indebtedness required to be
repaid by the Company pursuant to the preceding sentence. The Parent Loan will
(i) have a maturity of 180 days, (ii) bear interest at a rate to be negotiated
in good faith by the parties taking into account the interest rate that could
be obtained by the Company on any bank or other financial institution
financing and (iii) have such other terms as shall be mutually agreed to by
the Company and Parent, acting in good faith and a commercially reasonably
manner.
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15. CERTAIN LEGAL MATTERS
Except as described in this Section 15, Purchaser is not aware of any
license or regulatory permit that appears to be material to the business of
the Company and its subsidiaries, taken as a whole, that might be adversely
affected by Purchaser's acquisition of Shares as contemplated herein or of any
approval or other action by any governmental authority that would be required
for the acquisition or ownership of Shares by Purchaser as contemplated
herein. Should any such approval or other action be required, Purchaser
currently contemplates that such approval or other action will be sought,
except as described below under "State Takeover Laws." While, except as
otherwise expressly described in this Section 15, Purchaser does not presently
intend to delay the acceptance for payment of or payment for Shares tendered
pursuant to the Offer pending the outcome of any such matter, there can be no
assurance that any such approval or other action, if needed, would be obtained
or would be obtained without substantial conditions or that failure to obtain
any such approval or other action might not result in consequences adverse to
the Company's business or that certain parts of the Company's business might
not have to be disposed of if such approvals were not obtained or such other
actions were not taken or in order to obtain any such approval or other
action. If certain types of adverse action are taken with respect to the
matters discussed below, Purchaser could decline to accept for payment or pay
for any Shares tendered. See Section 14 for certain conditions of the Offer.
State Takeover Laws. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable
to attempts to acquire securities of corporations that are incorporated or
have assets, stockholders, executive offices or places of business in such
states. In 1982, in Edgar v. MITE Corp., the Supreme Court of the United
States held that the Illinois Business Takeover Act, which involved state
securities laws that made the takeover of certain corporations more difficult,
imposed a substantial burden on interstate commerce and therefore was
unconstitutional, and the reasoning in such decision is likely to apply to
certain other takeover contexts. In CTS Corp. v. Dynamics Corp. of America,
however, the Supreme Court of the United States held that a state may, as a
matter of corporate law and, in particular, those laws concerning corporate
governance, constitutionally disqualify a potential acquirer from voting on
the affairs of a target corporation without prior approval of the remaining
stockholders, provided that such laws were applicable only under certain
conditions in particular where the corporation has a substantial number of
stockholders in the state and is incorporated there.
Section 203 of the DGCL limits the ability of a Delaware corporation to
engage in business combinations with "interested stockholders" (defined as any
beneficial owner of 15% or more of the outstanding voting stock of the
corporation) unless, among other things, the corporation's board of directors
has given its prior approval to either the business combination or the
transaction which resulted in the stockholder becoming an "interested
stockholder." The Company has represented in the Merger Agreement that it
properly approved, among other things, the Offer, the Stock Purchase Agreement
and the Merger for purposes of Section 203 of the DGCL and that as a result
the limitations on business combinations set forth in Section 203 of the DGCL
will not be applicable to the Offer, the Stock Purchase Agreement or the
Merger.
Based on information supplied by the Company, Purchaser does not believe
that any other state takeover statutes apply to the Offer or the Merger. Other
than as set forth in the preceding paragraph, Purchaser has not attempted to
comply with any state takeover statute or regulation. Purchaser reserves the
right to challenge the applicability or validity of any state law purportedly
applicable to the Offer, the Stock Purchase Agreement or the Merger and
nothing in this Offer to Purchase or any action taken in connection with the
Offer, the Stock Purchase Agreement or the Merger is intended as a waiver of
such right. If it is asserted that any state takeover statute is applicable to
the Offer, the Stock Purchase Agreement or the Merger and an appropriate court
does not determine that it is inapplicable or invalid as applied to the Offer,
the Stock Purchase Agreement or the Merger, Purchaser might be required to
file certain information with, or to receive approvals from, the relevant
state authorities, and Purchaser might be unable to accept for payment or pay
for Shares tendered pursuant to the Offer, or be delayed in consummating the
Offer or the Merger. In such case, Purchaser may not be obligated to accept
for payment or pay for any Shares tendered pursuant to the Offer. See Section
14.
31
<PAGE>
Antitrust. Under the provisions of the HSR Act applicable to the Offer and
the Stock Purchase Agreement, the purchase of Shares under the Offer or under
the Stock Purchase Agreement may be consummated following the expiration of a
15 calendar-day waiting period following the filing by Parent as the "ultimate
parent entity" of Purchaser of a Notification and Report Form with respect to
the Offer and the Stock Purchase Agreement with the Antitrust Division and the
FTC, unless Parent receives a request for additional information or
documentary material from the Antitrust Division or the FTC or unless early
termination of the waiting period is granted. Parent made its filings under
the HSR Act with the Antitrust Division and the FTC on June 10, 1997. The
Company anticipates it will make its filings under the HSR Act with the
Antitrust Division and the FTC on June 11, 1997. Unless a request for
additional information is received by Parent, the waiting period under the HSR
Act with respect to the Offer and the Stock Purchase Agreement will expire at
11:59 P.M., New York City time, on June 25, 1997. If, within the initial 15-
day waiting period, either the Antitrust Division or the FTC requests
additional information or documentary material from Parent, the waiting period
will be extended and would expire at 11:59 P.M., New York City time, on the
tenth calendar day after the date of substantial compliance by Parent with
such request. Only one extension of the waiting period pursuant to a request
for additional information is authorized by the HSR Act. Thereafter, such
waiting period may be extended only by court order or with the consent of
Parent. If the acquisition of Shares is delayed pursuant to a request by the
FTC or the Antitrust Division for additional information or documentary
material pursuant to the HSR Act, the Offer may, at the discretion of
Purchaser (subject to the terms of the Merger Agreement), be extended and, in
any event, the purchase of or any payment for Shares will be deferred until
ten days following the date the request is complied with by Parent, unless the
waiting period is sooner terminated by the FTC and the Antitrust Division.
Unless the Offer is extended, any extension of the waiting period will not
give rise to any additional withdrawal rights. See Section 4. Although the
Company is required to file certain information and documentary material with
the FTC and the Antitrust Division in connection with the Offer, neither the
Company's failure to make such filings nor a request from the FTC or the
Antitrust Division for additional information or documentary material made to
the Company will extend the waiting period.
In practice, complying with a request for additional information or
documentary material can take a significant amount of time. In addition, if
the Antitrust Division or the FTC raises substantive issues in connection with
a proposed transaction, the parties frequently engage in negotiations with the
relevant governmental agency concerning possible means of addressing those
issues and may agree to delay consummation of the transaction while such
negotiations continue.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as Purchaser's proposed acquisition of
the Company. At any time before or after Purchaser's purchase of Shares
pursuant to the Offer, the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the purchase of Shares pursuant
to the Offer or the consummation of the Merger or seeking the divestiture of
Shares acquired by Purchaser or the divestiture of substantial assets of
Purchaser or its subsidiaries, or the Company or its subsidiaries. Private
parties or state officials may also bring legal action under the antitrust
laws under certain circumstances. There can be no assurance that a challenge
to the Offer on antitrust grounds will not be made or, if such a challenge is
made, of the result thereof. If any such action by the FTC, the Antitrust
Division or any other person should be threatened or commenced, Purchaser may
extend, terminate or amend the Offer. See Section 14 for certain conditions of
the Offer. Purchaser believes that consummation of the Offer would not violate
any antitrust laws. However, there can be no assurance that a challenge to the
Offer on antitrust grounds will not be made or, if a challenge is made, what
the result will be.
16. FEES AND EXPENSES
Bear Stearns is acting as Dealer Manager in connection with the Offer and is
acting as financial advisor to Parent with respect to the proposed acquisition
of the Company. In consideration of its services, Parent has agreed to pay
Bear Stearns (a) $50,000, which became payable upon execution of the
engagement letter between Bear Stearns and Parent, dated January 18, 1996, (b)
quarterly payments of $50,000 during the term of the
32
<PAGE>
engagement letter, (c) $475,000, which became payable upon execution of the
Merger Agreement and (d) $1,450,000 upon consummation of the Offer. Parent has
also agreed to reimburse Bear Stearns for all of its reasonable out-of-pocket
expenses, including the fees and disbursements of counsel. In addition, Parent
has agreed to indemnify Bear Stearns and certain related persons against
certain liabilities and expenses in connection with its services, including
certain liabilities under the federal securities laws.
In the ordinary course of its business, Bear Stearns engages in securities
trading, market-making and brokerage activities and may, at any time, hold
long or short positions and may trade or otherwise effect transactions in
securities of the Company. As of June 9, 1997, Bear Stearns did not hold a
long or a short position in the Shares for its own account.
Purchaser has retained Georgeson & Company Inc. to act as the Information
Agent and Continental Stock Transfer & Trust Company to act as the Depositary
in connection with the Offer. The Information Agent may contact holders of
Shares by mail, telephone, telex, telegraph and personal interview and may
request brokers, dealers and other nominees to forward the Offer materials to
beneficial owners of the Shares. The Information Agent and the Depositary each
will receive reasonable and customary compensation for their services, will be
reimbursed for certain reasonable out-of-pocket expenses and will be
indemnified against certain liabilities and expenses in connection therewith,
including certain liabilities under the federal securities laws.
Except as set forth above, Purchaser will not pay any fees or commissions to
any broker or dealer or other person for soliciting tenders of Shares pursuant
to the Offer. Brokers, dealers, commercial banks and trust companies will be
reimbursed by Purchaser for customary mailing and handling expenses incurred
by them in forwarding the offering materials to their customers.
17. MISCELLANEOUS
Purchaser is not aware of any jurisdiction where the making of the Offer is
prohibited by any administrative or judicial action pursuant to any valid
state statute. If Purchaser becomes aware of any valid state statute
prohibiting the making of the Offer or the acceptance of Shares pursuant
thereto, Purchaser will make a good faith effort to comply with any such state
statute. If, after such good faith effort, Purchaser cannot comply with any
such state statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made
on behalf of Purchaser or by one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
Parent and Purchaser have filed with the Commission a Tender Offer Statement
on Schedule 14D-1 (including exhibits) pursuant to Rule 14d-3 under the
Exchange Act containing certain additional information with respect to the
Offer and may file amendments thereto. The Company has filed with the
Commission the Schedule 14D-9 (including exhibits) containing the Company's
recommendation with respect to the Offer and other information required to be
disseminated to stockholders of the Company pursuant to Rule 14d-9. Such
Statements and any amendments thereto, including exhibits, may be examined and
copies may be obtained from the Commission in the manner set forth in Section
8 (except that they will not be available at the regional offices of the
Commission).
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER NOT CONTAINED IN THIS OFFER TO PURCHASE
OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Daylight Acquisition Corp.
June 11, 1997
33
<PAGE>
ANNEX I
DIRECTORS AND EXECUTIVE OFFICERS OF
PURCHASER AND PARENT
A. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT
The following information sets forth the name, age citizenship, business
address, present principal occupation or employment, and the material
occupation, positions, offices or employment for the past five years of each
director and executive officer of Parent. Unless otherwise indicated below,
the address of each director and executive officer is c/o Intermedia
Communications Inc., 3625 Queen Palm Drive, Tampa, Florida 33619 and each
director and executive officer is a citizen of the United States of America.
David C. Ruberg, age 51, has been a director, President, and Chief Executive
Officer of Parent since May 1993 and Chairman of the Board since March 1994.
He was an independent consultant to the computer and telecommunications
industries from September 1991 to May 1993. Mr. Ruberg was a Vice President
and General Manager of Data General Corporation form 1989 until September
1991.
John C. Baker, age 47, has been a director of Parent since February 1988.
Mr. Baker has been the principal of Baker Capital Corp., a private equity
investment firm, since October 1995. He was a Senior Vice President of
Patricof & Co. Ventures, Inc., a multi-national venture capital firm from 1988
until September 1995. Mr. Baker is currently a director of Xpedite Systems,
Inc., FORE Systems, Inc. and Resource Bancshares Mortgage Group, Inc., all of
which are publicly traded corporations.
George F. Knapp, age 65, has been a director of Parent since February 1988.
He has been a principal of Communications Investment Group, an investment
banking firm, since June 1990. From January 1988 until June 1990, Mr. Knapp
was an associate at MBW Management, Inc., a venture capital firm. Prior to
that time, he held various executive positions at ITT Corporation and its
subsidiaries, most recently as Corporate Vice President of ITT Corporation.
Mr. Knapp is currently a member of the Manhattan College Board of Trustees and
Chairman of its Finance Committee.
Philip A. Campbell, age 60, has been a director of Parent since September
1996. Mr. Campbell retired from Bell Atlantic Inc. as director, Vice Chairman
and Chief Financial Officer in 1991. Previously, he was President of New
Jersey Bell, Indiana Bell, and Bell Atlantic Network Services. Mr. Campbell is
currently a director of Xpedite Systems, Inc., a publicly traded corporation.
Robert A. Rouse, age 48, has served as Executive Vice President,
Engineering, Operations and Systems of Parent since October 1996. Prior to
joining Parent, Mr. Rouse was Senior Vice President of Concert, a joint
venture company of British Telecommunications and MCI Communications Company
where he managed the engineering and operations of the Concert Global Networks
from 1991 to 1996. Mr. Rouse held various executive management positions at
MCI from 1986 to 1991, with responsibilities including product and network
design, network and systems development, network planning, operations,
provisioning, and customer services. From 1969 to 1986, he managed several
subsidiaries of Rochester Telephone, now a part of Frontier Corporation.
James F. Geiger, age 38, has served as Senior Vice President, Sales of
Parent since August 1995. Mr. Geiger served as the Vice President of Alternate
Channel Sales from March 1995 through August 1995 and as the President of each
of FiberNet USA, Inc. and FiberNet Telecommunications Cincinnati, Inc.
(collectively, "FiberNet") since their inception. Mr. Geiger was one of the
founding principals of FiberNet, initially serving as Vice President of Sales
& Marketing and subsequently serving as President. From April 1989 to April
1990, Mr. Geiger served as Director of Marketing for Associated
Communications, a cellular telephone company.
34
<PAGE>
Robert M. Manning, age 37, has served as Senior Vice President, Chief
Financial Officer of Parent since September 1996. Mr. Manning joined Parent
from DMX Inc., a Los Angeles-based cable programmer, where he was Executive
Vice President, Senior Financial Executive and a director of DMX-Europe from
October 1991 to September 1996. Prior to his tenure at DMX, Mr. Manning spent
ten years in the investment banking field in corporate finance and mergers and
acquisitions, most recently with Oppenheimer and Co., Inc. as Vice President,
Corporate Finance, managing their Entertainment/Leisure Time Group from
October 1988 to October 1991.
Robert A. Ruh, age 52, has served as Senior Vice President, Human Resources
of Parent since March 1, 1996. From January 1991 through February 1996, Dr.
Ruh was an independent consultant, specializing in executive and organization
development. From 1975 to 1990, Dr. Ruh held executive positions in human
resources with Baxter Healthcare Corporation and American Hospital Supply
Corporation. From 1973 to 1975, Dr. Ruh served as a consulting psychologist
for Medina and Thompson, specializing in executive assessment, selection, and
development. From 1970 to 1972, Dr. Ruh was on the corporate organization
development staff at Corning Glass Works. Dr. Ruh served as Assistant
Professor of psychology at Michigan State University from 1970 to 1972.
Barbara L. Samson, age 34, a co-founder of Parent, has served as a Vice
President since June 1987, and as a Senior Vice President since October 1992.
She served as President of Parent's predecessor from September 1986 to June
1987. Ms. Samson recently served two terms as Chairman of the Association of
Local Telecommunications Services (ALTS), a national competitive access
provider trade association.(/1/)
Michael A. Viren, age 55, has served as Senior Vice President, Strategic
Planning, Regulatory, and Industry Relations of Parent since October 1996.
Prior to his present position, he was Senior Vice President, Engineering and
Information Systems from January 1996 to October 1996 and served as Vice
President, Product Development from December 1992 through January 1996. Dr.
Viren joined Parent in February 1991 as Director of Product Development. Dr.
Viren worked for GTE Corporation from August 1986 to February 1991 as a
specialist in wide and local area networking ("WAN" and "LAN," respectively).
Prior to that he operated his own consulting firm concentrating in WAN and LAN
design; was Senior Vice President of Criterion, Inc., an Economic Consulting
Firm in Dallas, Texas; and served as the Director of the Utility Division of
the Missouri Public Service Commission. Dr. Viren taught economics for 10
years, most recently as an Associate Professor of Economics at the University
of Missouri-Columbia and prior to that at the University of Kansas.
Patricia A. Kurlin, age 42, has served as Vice President, General Counsel of
Parent since June 1996. From September 1995 until June 1996, Ms. Kurlin served
as Corporate Counsel and served as Director of Governmental and Legal Affairs
for Parent from September 1993 to September 1995. Prior to joining Parent, Ms.
Kurlin served as Senior Telecommunications Attorney at the Florida Public
Service Commission from May 1990 to September 1993.
Jeanne M. Walters, age 34, has served as Controller and Chief Accounting
Officer of Parent since May 1993. From November 1992 until May 1993 she served
as Assistant Controller. From June 1988 to November 1992, Ms. Walters was an
auditor at Ernst & Young LLP, a certified public accounting firm in Tampa,
Florida. She is licensed in the State of Florida as a certified public
accountant.
B. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER
The following table sets forth the name, citizenship, age, business address,
present principal occupation or employment, and the material occupation,
positions, offices or employment for the past five years of each director and
executive officer of Purchaser. Unless otherwise indicated below, the address
of each director and executive officer is c/o Intermedia Communications Inc.,
3625 Queen Palm Drive, Tampa, Florida 33619 and each director and executive
officer is a citizen of the United States of America.
- --------
(/1/) Commencing April 1, 1997, Ms. Samson has been on a sabbatical leave in
order to chair the Florida NetDay 2000 program.
35
<PAGE>
Robert M. Manning, age 37, has been the sole director, President, Secretary
and Treasurer of Purchaser since May 30, 1997. Mr. Manning has served as
Senior Vice President, Chief Financial Officer and Secretary of Parent since
September 1996. Mr. Manning joined Parent from DMX Inc., a Los Angeles-based
cable programmer, where he was Executive Vice President, Senior Financial
Executive and a director of DMX-Europe from October 1991 to September 1996.
Prior to his tenure at DMX, Mr. Manning spent ten years in the investment
banking field in corporate finance and mergers and acquisitions, most recently
with Oppenheimer and Co., Inc. as Vice President, Corporate Finance managing
their Entertainment/Leisure Time Group from October 1988 to October 1991.
G. Lawrence Sledge, age 30, has been Vice President and Assistant Secretary
of Purchaser since May 30, 1997. Mr. Sledge has served as Senior Director,
Corporate Planning & Development of Parent since March 1997. Prior to his
present position, Mr. Sledge held managerial positions in Parent's corporate
finance, strategic planning and treasury departments. Mr. Sledge joined Parent
in November 1991.
36
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, Certificates for Shares and any other
required documents should be sent or delivered by each stockholder of the
Company or such stockholder's broker, dealer, commercial bank, trust company
or other nominee to the Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
By Mail: By Facsimile Transmission By Hand or Overnight
(For Eligible Institutions Only): Courier:
2 Broadway
2 Broadway New York, NY 10004
New York, NY (212) 509-5150 Attn: Reorganization
10004 Dept.
Attn: Confirm Receipt of
Reorganization Notice of Guaranteed Delivery:
Dept.
(212) 509-4000 ext. 535
---------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS TO A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
Questions and requests for assistance may be directed to the Information
Agent and the Dealer Manager at the telephone numbers and locations listed
below. Additional copies of this Offer to Purchase, the Letter of Transmittal,
the Notice of Guaranteed Delivery and other tender offer documents may be
obtained at Purchaser's expense from the Information Agent or from your
broker, dealer, commercial bank or trust company or other nominee.
The Information Agent for the Offer is:
GEORGESON
& COMPANY INC.
--------------
Wall Street Plaza
New York, NY 10005
Banks and Brokers Call Collect: (212) 440-9800
CALL TOLL-FREE: (800) 223-2064
The Dealer Manager for the Offer is:
BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, NY 10167
CALL TOLL FREE: (888) 466-7234
<PAGE>
EXHIBIT 99(A)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
DIGEX, INCORPORATED
PURSUANT TO THE OFFER TO PURCHASE
DATED JUNE 11, 1997
BY
DAYLIGHT ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
INTERMEDIA COMMUNICATIONS INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON WEDNESDAY, JULY 9, 1997, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
By Mail: By Facsimile By Hand or Overnight
Transmission (For Courier:
Eligible Institutions
Only):
2 Broadway
New York, NY 10004 2 Broadway
Attn: Reorganization New York, NY 10004
Dept.
(212) 509-5150 Attn: Reorganization
Confirm Receipt of Dept.
Notice of Guaranteed Delivery:
(212) 509-4000 ext. 535
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN THE
NUMBER LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS
LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED BELOW AND
COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by holders (the
"Stockholders") of Shares (as defined below) of DIGEX, Incorporated if
certificates evidencing Shares ("Certificates") are to be forwarded herewith
or if delivery of Shares is to be made by book-entry transfer to an account
maintained by Continental Stock Transfer & Trust Company (the "Depositary")
with The Depository Trust Company ( the "Book-Entry Transfer Facility")
pursuant to the procedures set forth in Section 3 of the Offer to Purchase (as
defined below).
Stockholders whose Certificates are not immediately available or who cannot
deliver either their Certificates for, or a Book-Entry Confirmation (as
defined in Section 3 of the Offer to Purchase) with respect to, their Shares
and all other required documents to the Depositary prior to the Expiration
Date (as defined in Section 1 of the Offer to Purchase) must tender their
Shares according to the guaranteed delivery procedure set forth in Section 3
of the Offer to Purchase. See Instruction 2 hereof. Delivery of documents to
the Book-Entry Transfer Facility does not constitute delivery to the
Depositary.
1
<PAGE>
DESCRIPTION OF SHARES TENDERED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND
ADDRESS(ES) OF
REGISTERED
HOLDER(S)
(PLEASE FILL
IN IF BLANK,
EXACTLY AS
NAME(S)
APPEAR(S) ON
THE SHARES TENDERED(2)
CERTIFICATE(S) (ATTACH ADDITIONAL LIST IF NECESSARY)
- -----------------------------------------------------------------------
NUMBER OF
SHARES NUMBER
CERTIFICATE REPRESENTED BY OF SHARES
NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2)
-----------------------
-----------------------
-----------------------
-----------------------
-----------------------
-----------------------
-----------------------
<S> <C> <C> <C>
TOTAL SHARES
TENDERED
</TABLE>
- --------------------------------------------------------------------------------
(1) Need not be completed by holders of Shares delivering Shares by Book-
Entry Transfer.
(2) Unless otherwise indicated, it will be assumed that all Shares
represented by Certificates delivered to the Depositary are being
tendered. See Instruction 4.
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER
FACILITY, AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY
TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER).
Name of Tendering Institution: _____________________________________________
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
[_]CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING.
PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s): ___________________________________________
Window Ticket Number (if any): _____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Institution which Guaranteed Delivery: _____________________________
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
2
<PAGE>
NOTE: SIGNATURE(S) MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
The undersigned hereby tenders to Daylight Acquisition Corp., a Delaware
corporation ("Purchaser") and a wholly owned subsidiary of Intermedia
Communications Inc., a Delaware corporation ("Parent"), the above-described
shares of common stock, $.01 par value (the "Shares"), of DIGEX, Incorporated,
a Delaware corporation (the "Company"), for $13.00 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated June 11, 1997 (the "Offer to Purchase"), receipt of
which is hereby acknowledged, and in this Letter of Transmittal (which,
together with any supplements of amendments thereto, collectively constitute
the "Offer"). The undersigned understands that Purchaser reserves the right to
transfer or assign, in whole or from time to time in part, to Parent or one or
more of Parent's subsidiaries, the right to purchase Shares tendered pursuant
to the Offer; provided, however, that no such transfer or assignment will
release Purchaser from its obligations under the Offer or prejudice the rights
of tendering stockholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of, or payment for,
Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms or conditions of any such extension or amendment), the undersigned
hereby sells, assigns and transfers to, or upon the order of, Purchaser all
right, title and interest in and to all of the Shares that are being tendered
hereby and any and all other Shares or other securities issued or issuable in
respect of such Shares on or after June 4, 1997 (a "Distribution"), and
irrevocably constitutes and appoints the Depositary the true and lawful agent
and attorney-in-fact of the undersigned with respect to such Shares (and any
Distributions), with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (i) deliver
Certificates evidencing such Shares (and any Distributions), or transfer
ownership of such Shares (and any Distributions) on the account books
maintained by the Book-Entry Transfer Facility together, in any such case,
with all accompanying evidences of transfer and authenticity to, or upon the
order of, Purchaser, upon receipt by the Depositary as the undersigned's
agent, of the purchase price with respect to such Shares, (ii) present such
Shares (and any Distributions) for transfer on the books of the Company and
(iii) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares (and any Distributions), all in accordance with the
terms and subject to the conditions of the Offer.
The undersigned hereby irrevocably appoints the designees of Purchaser as
the attorney-in-fact and proxy of the undersigned, each with full power of
substitution, to the full extent of the undersigned's rights with respect to
all Shares tendered hereby and accepted for payment and paid for by Purchaser
(and any Distributions), including, without limitation, the right to vote such
Shares (and any Distributions) in such manner as each such attorney and proxy
or his substitute shall, in his or her sole discretion, deem proper. All such
powers of attorney and proxies, being deemed to be irrevocable, shall be
considered coupled with an interest in the Shares tendered herewith. Such
appointment will be effective when, and only to the extent that, Purchaser
accepts such Shares for payment. Upon such acceptance for payment, all prior
powers of attorney and proxies given by the undersigned with respect to such
Shares (and any Distributions) will be revoked, without further action, and no
subsequent powers of attorneys and proxies may be given with respect thereto
(and, if given, will be deemed ineffective). The designees of Purchaser will,
with respect to the Shares (and any Distributions) for which such appointment
is effective, be empowered to exercise all voting and other rights of the
undersigned with respect to such Shares (and any Distributions) as they in
their sole discretion may deem proper including, without limitation, in
respect of any annual or special meeting of the Stockholders, or any
adjournment or postponement thereof, or in connection with any action by
written consent in lieu of such meeting or otherwise (including any such
meeting or action by written consent to approve the Merger (as defined in the
Offer to Purchase)). Purchaser reserves the absolute right to require that, in
order for Shares to be deemed validly tendered, immediately upon the
acceptance for payment of such Shares, Purchaser or its designees are able to
exercise full voting rights with respect to such Shares (and any
Distributions).
3
<PAGE>
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and any Distributions) and that, when the same are accepted for
payment and paid for by Purchaser, Purchaser will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances, and that the Shares tendered hereby (and any Distributions)
will not be subject to any adverse claim. The undersigned, upon request, will
execute and deliver any additional documents deemed by the Depositary or
Purchaser to be necessary or desirable to complete the sale, assignment and
transfer of Shares tendered hereby (and any Distributions). In addition, the
undersigned shall promptly remit and transfer to the Depositary for the
account of Purchaser any and all Distributions issued to the undersigned on or
after June 4, 1997, in respect of the Shares tendered hereby, accompanied by
appropriate documentation of transfer; and pending such remittance and
transfer or appropriate assurance thereof, Purchaser shall be entitled to all
rights and privileges as owner of any such Distributions and may withhold the
entire purchase price or deduct from the purchase price the amount or value
thereof, as determined by Purchaser in its sole discretion.
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and in
the instructions hereto will constitute a binding agreement between the
undersigned and Purchaser with respect to such Shares upon the terms and
subject to the conditions of the Offer.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, Purchaser may not be required to accept for payment any
of the Shares tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any Certificates
evidencing Shares not tendered or not accepted for payment in the name(s) of
the registered holder(s) appearing under "Description of Shares Tendered."
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price and/or return any Certificates
evidencing Shares not tendered or not accepted for payment (and accompanying
documents, as appropriate) to the address(es) of the registered holder(s)
appearing under "Description of Shares Tendered." In the event that both the
"Special Payment Instructions" and the "Special Delivery Instructions" are
completed, please issue the check for the purchase price and/or return any
such Certificates evidencing Shares not tendered or not accepted for payment
(and accompanying documents, as appropriate) in the name(s) of, and deliver
such check and/or return such certificates (and accompanying documents, as
appropriate) to, the person(s) so indicated. Unless otherwise indicated herein
under "Special Payment Instructions," in the case of a book-entry delivery of
Shares, please credit the account maintained at the Book-Entry Transfer
Facility indicated above with respect to any Shares not accepted for payment.
The undersigned recognizes that Purchaser has no obligation pursuant to the
"Special Payment Instructions" to transfer any Shares from the name of the
registered holder thereof if Purchaser does not accept for payment any of the
Shares tendered hereby.
4
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7) (SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if Certif- To be completed ONLY if Certif-
icates for Shares not tendered icates for Shares not tendered
or not accepted for payment or not accepted for payment
and/or the check for the pur- and/or the check for the pur-
chase price of Shares accepted chase price of Shares accepted
for payment are to be issued in for payment are to be sent to
the name of someone other than someone other than the under-
the undersigned, or if Shares signed, or to the undersigned at
delivered by book-entry transfer an address other than that
that are not accepted for pay- above.
ment are to be returned by
credit to an account maintained
at the Book-Entry Transfer Fa-
cility other than the account
indicated above.
Mail: (check appropriate
box(es))
[_] Check to:
[_] Certificate(s) to:
Name_____________________________
Issue: [_] Check [_] Certificate(s) (PLEASE TYPE OR PRINT)
to: Address _________________________
_________________________________
Name ____________________________ (INCLUDE ZIP CODE)
(PLEASE TYPE OR PRINT) _________________________________
Address _________________________ (TAX IDENTIFICATION OR SOCIAL
_________________________________ SECURITY NUMBER)
(INCLUDE ZIP CODE) (SEE SUBSTITUTE FORM W-9)
_________________________________
(TAX IDENTIFICATION OR SOCIAL
SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9)
[_]Credit unpurchased Shares
delivered by book-entry
transfer to The Depository
Trust Company.
_________________________________
(ACCOUNT NUMBER)
5
<PAGE>
STOCKHOLDER: SIGN HERE AND COMPLETE SUBSTITUTE
FORM W-9 ON REVERSE
_____________________________________________________________
_____________________________________________________________
(SIGNATURE(S) OF STOCKHOLDER(S))
Dated: _______________________________________________ , 1997
(Must be signed by registered holder(s) as name(s) appear(s)
on the Certificate(s) or on a security position listing or
by person(s) authorized to become registered holder(s) by
Certificates and documents transmitted herewith. If
signature is by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity,
please provide the following information. See Instruction
5.)
Name(s)______________________________________________________
_____________________________________________________________
(PLEASE TYPE OR PRINT)
Capacity (Full Title)________________________________________
(SEE INSTRUCTION 5)
Address______________________________________________________
_____________________________________________________________
(INCLUDE ZIP CODE)
Area Codes and Telephone Numbers: ___________________________
(HOME)
---------------------------------
(BUSINESS)
Tax Identification or
Social Security No. _________________________________________
Also Complete Substitute Form W-9 on Reverse
GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5)
Authorized Signature_________________________________________
Name_________________________________________________________
_____________________________________________________________
(PLEASE TYPE OR PRINT)
Name of Firm_________________________________________________
Address______________________________________________________
_____________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number ______________________________
Dated: _______________________________________________ , 1997
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, signatures
on this Letter of Transmittal must be guaranteed by a member in good standing
of the Securities Transfer Association's Medallion Program, or by any other
bank, broker, dealer, credit union, savings association or other entity that
is an "eligible guarantor institution," as such term is defined in Rule 17Ad-
15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(each of the foregoing constituting an "Eligible Institution,") unless the
Shares tendered hereby are tendered (i) by the registered holder (which term,
for purposes of this document, shall include any participant in the Book-Entry
Transfer Facility whose name appears on a security position listing as the
owner of Shares) of such Shares who has completed neither the box entitled
"Special Payment Instructions" nor the box entitled "Special Delivery
Instructions" hereby or (ii) for the account of an Eligible Institution. See
Instruction 5. If the Certificates are registered in the name of a person
other than the signer of this Letter of Transmittal, or if payment is to be
made or delivered to, or Certificates evidencing unpurchased Shares are to be
issued or returned to, a person other than the registered owner, then the
tendered Certificates must be endorsed or accompanied by duly executed stock
powers, in either case signed exactly as the name or names of the registered
owner or owners appear on the Certificates, with the signatures on the
Certificates or stock powers guaranteed by an Eligible Institution as provided
herein. See Instruction 5.
2. REQUIREMENT OF TENDER. This Letter of Transmittal is to be completed by
Stockholders if Certificates evidencing Shares are to be forwarded herewith or
if delivery of Shares is to be made pursuant to the procedures for book-entry
transfer set forth in Section 3 of the Offer to Purchase. For a Stockholder to
validly tender Shares pursuant to the Offer, a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile thereof), with
any required signature guarantees or an Agent's Message (as defined in the
Offer to Purchase) in connection with a book-entry delivery of Shares and any
other required documents, must be received by the Depositary at its address
set forth herein prior to the Expiration Date (as defined in Section 1 of the
Offer to Purchase) and (i) Certificates for tendered Shares must be received
by the Depositary at one of such addresses prior to the Expiration Date, (ii)
Shares must be delivered pursuant to the procedures for book-entry transfer
set forth in Section 3 of the Offer to Purchase and the Book-Entry
Confirmation must be received by the Depositary on or prior to the Expiration
Date or (iii) the tendering Stockholder must comply with the guaranteed
delivery procedures set forth below and in Section 3 of the Offer to Purchase.
Stockholders whose Certificates are not immediately available or who cannot
deliver their Certificates and all other required documents to the Depositary
or complete the procedures for book-entry transfer prior to the Expiration
Date may tender their Shares by properly completing and duly executing a
Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures
set forth in Section 3 of the Offer to Purchase. Pursuant to such procedure:
(i) such tender must be made by or through an Eligible Institution, (ii) a
properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by Purchaser, must be received by the
Depositary prior to the Expiration Date, and (iii) the Certificates
representing all tendered Shares in proper form for transfer, or a Book-Entry
Confirmation with respect to all tendered Shares, in either case together with
a properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof), with any required signature guarantees (or, in the
case of a book-entry transfer, an Agent's Message), and any other documents
required by this Letter of Transmittal, must be received by the Depositary
within three New York Stock Exchange, Inc. trading days after the date of such
Notice of Guaranteed Delivery. If Certificates are forwarded separately to the
Depositary, a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof) must accompany each such delivery.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ANY
OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE TENDERING
STOCKHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED
BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
7
<PAGE>
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering Stockholders, by execution
of this Letter of Transmittal (or a facsimile thereof), waive any right to
receive any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
information required under "Description of Shares Tendered" should be listed
on a separate signed schedule attached hereto.
4. PARTIAL TENDERS. If fewer than all of the Shares represented by any
Certificates delivered to the Depositary herewith are to be tendered hereby,
fill in the number of Shares which are to be tendered in the box entitled
"Number of Shares Tendered." In such case, if Purchaser accepts the tendered
Shares for payment, a new Certificate for the remainder of the Shares that
were evidenced by your old Certificate(s) will be sent, without expense, to
the person(s) signing this Letter of Transmittal, unless otherwise provided in
the box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on this Letter of Transmittal, as soon as practicable
after the Expiration Date. All Shares represented by Certificate(s) delivered
to the Depositary will be deemed to have been tendered unless otherwise
indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, INSTRUMENTS OF TRANSFER AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
holder(s) of the Shares tendered hereby, the signature(s) must correspond
exactly with the name(s) as written on the face of the Certificate(s) without
alteration, enlargement or any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
Certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
Certificates.
If this Letter of Transmittal or any Certificates or instruments of transfer
are signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, such person should so indicate when signing, and
proper evidence satisfactory to Purchaser of such person's authority to so act
must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of Certificates or
separate instruments of transfer are required unless payment is to be made, or
Certificates not tendered or not purchased are to be issued or returned, to a
person other than the registered holder(s). Signatures on such Certificates or
instruments of transfer must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares evidenced by the Certificate(s) listed and
transmitted hereby, the Certificate(s) must be endorsed or accompanied by
appropriate instruments of transfer, in either case signed exactly as the
name(s) of the registered holder(s) appear on the Certificate(s). Signatures
on such Certificate(s) or instruments of transfer must be guaranteed by an
Eligible Institution.
6. TRANSFER TAXES. Except as set forth in this Instruction 6, Purchaser will
pay or cause to be paid any transfer taxes with respect to the transfer and
sale of Shares to it or its order pursuant to the Offer. If, however, payment
of the purchase price is to be made to, or (in the circumstances permitted
hereby) if Certificates for Shares not tendered or not purchased are to be
registered in the name of, any person other than the registered holder(s), or
if tendered Certificates are registered in the name of any person other than
the person(s) signing this Letter of Transmittal, the amount of any transfer
taxes (whether imposed on the registered holder(s) or such person) payable on
account of the transfer to such person will be deducted from the purchase
price unless satisfactory evidence of the payment of such taxes or exemption
therefrom is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Certificate(s) listed in this Letter
of Transmittal.
8
<PAGE>
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check and/or Certificates
for unpurchased Shares are to be issued in the name of a person other than the
signer of this Letter of Transmittal or if a check is to be sent and/or such
Certificates are to be returned to someone other than the signer of this
Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed. If any
tendered Shares are not purchased for any reason and such Shares are delivered
by Book-Entry Transfer Facility, such Shares will be credited to an account
maintained at the appropriate Book-Entry Transfer Facility.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance may be directed to the Information Agent or the Dealer Manager at
their respective addresses and telephone numbers listed below. Additional
copies of this Letter of Transmittal, the Offer to Purchase, the Notice of
Guaranteed Delivery and other related materials may be obtained at Purchaser's
expense from the Information Agent or from brokers, dealers, commercial banks
or trust companies.
9. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by
Purchaser, in whole or in part, at any time or from time to time, in
Purchaser's sole discretion subject to the conditions described in the Offer
to Purchase.
10. BACKUP WITHHOLDING TAX. Each tendering Stockholder is required to
provide the Depositary with a correct Taxpayer Identification Number ("TIN")
on Substitute Form W-9, which is provided under "Important Tax Information"
below, and to certify that the stockholder is not subject to backup
withholding. Failure to provide the information on the Substitute Form W-9 may
subject the tendering Stockholder to 31% federal income tax backup withholding
on the payment of the purchase price for the Shares. The tendering Stockholder
should indicate in the box in Part III of the Substitute Form W-9 if the
tendering Stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the Stockholder has
indicated in the box in Part III that a TIN has been applied for and the
Depositary is not provided with a TIN by the time of payment, the Depositary
will withhold 31% of all payments of the purchase price, if any, made
thereafter pursuant to the Offer until a TIN is provided to the Depositary.
11. LOST OR DESTROYED CERTIFICATES. If any Certificate(s) representing
Shares has been lost or destroyed, the holders should promptly notify the
Company's transfer agent, American Stock Transfer Company. The holders will
then be instructed as to the procedure to be followed in order to replace the
Certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed Certificates
have been followed. Lost or destroyed Certificates must be replaced prior to
the Expiration Date to validly tender such Shares pursuant to the Offer.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE THEREOF
(TOGETHER WITH CERTIFICATES OR A BOOK-ENTRY CONFIRMATION FOR SHARES AND ANY
OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY, OR A NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, PRIOR TO THE
EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under federal income tax law, a Stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary (as payor) with
such Stockholder's correct TIN on Substitute Form W-9 below. If such
Stockholder is an individual, the TIN is his or her social security number. If
such Stockholder is a resident alien and does not have and is not eligible to
get a social security number, the TIN is his or her IRS individual taxpayer
identification number ("ITIN"). If the tendering Stockholder has not been
issued a TIN and has applied for a number or intends to apply for a number in
the near future, such Stockholder should so indicate on the Substitute Form W-
9. See Instruction 10. If the Depositary is not provided with the correct TIN,
the Stockholder may be subject to a $50 penalty imposed by the Internal
Revenue Service. In addition, payments that are made to such Stockholders with
respect to Shares purchased pursuant to the Offer may be subject to backup
federal income tax withholding.
9
<PAGE>
Certain Stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such Stockholder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Forms for such
statements can be obtained from the Depositary. See the enclosed Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the Stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will
be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained from the Internal Revenue
Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup federal income tax withholding with respect to payment of
the purchase price for Shares purchased pursuant to the Offer, a Stockholder
must provide the Depositary with his correct TIN by completing the Substitute
Form W-9 below, certifying that the TIN provided on Substitute Form W-9 is
correct (or that such Stockholder is awaiting a TIN) and that (i) such
Stockholder has not been notified by the Internal Revenue Service that he is
subject to backup withholding as a result of failure to report all interest or
dividends or (ii) the Internal Revenue Service has notified the Stockholder
that he is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The Stockholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are registered in more than one name or are not
in the name of the actual owner, consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional guidance on which number to report.
10
<PAGE>
PAYOR'S NAME: CONTINENTAL STOCK TRANSFER & TRUST COMPANY
- -------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR TIN -------------------
SUBSTITUTE IN THE BOX AT RIGHT AND CERTIFY Social Security
FORM W-9 BY SIGNING AND DATING BELOW. Number
DEPARTMENT OF -------------------
THE TREASURY Employer
INTERNAL Identification Number
REVENUE SERVICE ----------------------------------------------------------
PART 2--CERTIFICATION--Under penalties of perjury, I
certify that: (1) the number shown on this form is my
correct Taxpayer Identification Number (or I am waiting
for a number to be issued to me) and (2) I am not
subject to backup withholding because (i) I am exempt
from backup withholding, (ii) I have not been notified
by the Internal Revenue Service ("IRS") that I am
subject to backup withholding as a result of a failure
to report all interest or dividends, or (iii) the IRS
has notified me that I am no longer subject to backup
withholding.
PAYER'S REQUEST FORTAXPAYER IDENTIFICATIONNUMBER ("TIN")
PART
III
Certification Instructions--You must cross AwaitingTIN
out item (2) in Part 2 above if you have been [_]
notified by the IRS that you are subject to
backup withholding because of underreporting
interest or dividends on your tax return.
However, if after being notified by the IRS
that you were subject to backup withholding
you received another notification from the
IRS stating that you are no longer subject to
backup withholding, do not cross out item
(2).
----------------------------------------------------------
Signature: ____________________ Date: _, 1997
Name (Please Print): __________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER
AND SOLICITATION. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(2) I intend to mail or deliver an application in the near future. I
understand that if I have not provided a taxpayer identification number, 31%
of all reportable payments made to me will be withheld until I provide a
number.
Signature ________________________________ ___________________, 1997
Date
Name (Please Print): _____________________
The Information Agent for the Offer is:
GEORGESON
& COMPANY INC.
--------------
Wall Street Plaza
New York, NY 10005
Bankers and Brokers call collect: (212) 440-9800
CALL TOLL FREE: (800) 223-2064
The Dealer Manager for the Offer is:
BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, NY 10167
CALL TOLL-FREE (888) 466-7234
June 11, 1997
<PAGE>
EXHIBIT 99(A)(3)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
DIGEX, INCORPORATED
This Notice of Guaranteed Delivery or one substantially equivalent hereto
must be used to accept the Offer (as defined below) if certificates
representing the common stock, par value $.01 per share (the "Shares"), of
DIGEX, Incorporated, a Delaware corporation, are not immediately available or
the procedures for book-entry transfer cannot be completed on a timely basis
or time will not permit all required documents to reach Continental Stock
Transfer & Trust Company (the "Depositary") prior to the Expiration Date (as
defined in the Offer to Purchase). This Notice of Guaranteed Delivery may be
delivered by hand or transmitted by facsimile transmission or mail to the
Depositary. See Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
By Mail: By Facsimile By Hand or Overnight
Transmission Courier:
2 Broadway (For Eligible
New York, NY 10004 Institutions Only): 2 Broadway
New York, NY 10004
Attn: Reorganization
Attn: Reorganization (212) 509-5150 Dept.
Dept.
Confirm Receipt of
Notice of Guaranteed Delivery:
(212) 509-4000 ext. 535
----------------
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION
TO A NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee signatures.
If a signature on a Letter of Transmittal is required to be guaranteed by an
"Eligible Institution" under the instructions thereto, such signature
guarantee must appear in the applicable space provided in the signature box on
the Letter of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible
Institution.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
<PAGE>
LADIES AND GENTLEMEN:
The undersigned hereby tenders to Daylight Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Intermedia Communications Inc.,
upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated June 11, 1997 (the "Offer to Purchase"), and in the related
Letter of Transmittal (which, together with any supplements or amendments
thereto, collectively constitute the "Offer"), receipt of each of which is
hereby acknowledged, the number of shares indicated below pursuant to the
guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase.
Number of Shares: __________________ Name(s) of Record Holder(s): ______
Certificate Nos. (if available): ___ -----------------------------------
(PLEASE TYPE OR PRINT)
------------------------------------
Address(es): ______________________
Check box if Shares will be
tendered by book-entry transfer: -----------------------------------
(INCLUDE ZIP CODE)
[_] The Depository Trust Company
Area Code and Tel. No.: ___________
Account Number: ____________________
Signature(s): _____________________
Dated: _____________________________
Dated: ____________________________
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
The undersigned, an Eligible Institution (as such term is defined in Section
3 of the Offer to Purchase), hereby guarantees to deliver to the Depositary the
certificates representing the Shares tendered hereby, in proper form for
transfer, or a Book-Entry Confirmation (as defined in Section 3 of the Offer to
Purchase) with respect to such Shares, in either case together with a properly
completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof), with any required signature guarantees, or, in the case of
a book-entry transfer, an Agent's Message (as defined in Section 2 of the Offer
to Purchase) and any other documents required by the Letter of Transmittal, all
within three trading days (as defined in Section 3 of the Offer to Purchase)
after the date hereof.
Name of Firm: ______________________ --------------------------------------
(AUTHORIZED SIGNATURE)
Address: ___________________________
Name: ________________________________
- ------------------------------------ (PLEASE TYPE OR PRINT)
(INCLUDE ZIP CODE)
Title: _______________________________
Area Code and Tel. No.: ____________
Dated: _______________________________
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES FOR SHARES SHOULD BE SENT ONLY TOGETHER WITH OUR
LETTER OF TRANSMITTAL.
2
<PAGE>
EXHIBIT 99(A)(4)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
DIGEX, INCORPORATED
BY
DAYLIGHT ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
INTERMEDIA COMMUNICATIONS INC.
AT
$13.00 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON WEDNESDAY, JULY 9, 1997, UNLESS THE OFFER IS EXTENDED.
June 11, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Daylight Acquisition Corp., a Delaware corporation
("Purchaser") and a wholly owned subsidiary of Intermedia Communications Inc.,
a Delaware corporation ("Parent"), to act as Dealer Manager in connection with
Purchaser's offer to purchase for cash all of the outstanding shares of common
stock, $.01 par value per share (the "Shares"), of DIGEX, Incorporated, a
Delaware corporation (the "Company"), at $13.00 per Share, 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 June 11, 1997 (the "Offer
to Purchase"), and in the related Letter of Transmittal (which, together with
any supplements or amendments thereto, collectively constitute the "Offer")
enclosed herewith. Please furnish copies of the enclosed materials to those of
your clients for whom you hold Shares in your name or in the name of your
nominee.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase.
2. The Letter of Transmittal to tender Shares for your use and for the
information of your clients. Facsimile copies of the Letter of
Transmittal may be used to tender Shares.
3. A letter to stockholders of the Company from Christopher R. McCleary,
Chairman of the Board, President and Chief Executive Officer of the
Company, together with a Solicitation/Recommendation Statement on
Schedule 14D-9 filed with the Securities and Exchange Commission by
the Company and mailed to the stockholders of the Company.
4. The Notice of Guaranteed Delivery for Shares to be used to accept the
Offer if neither of the two procedures for tendering Shares set forth
in Section 3 of the Offer to Purchase can be completed on a timely
basis.
5. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of
your nominee, with space provided for obtaining such clients'
instructions with regard to the Offer.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
7. A return envelope addressed to Continental Stock Transfer & Trust
Company of New York, the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, JULY 9, 1997, UNLESS THE OFFER IS EXTENDED.
<PAGE>
In order to take advantage of the Offer, (i) a Letter of Transmittal (or a
manually signed facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or an Agent's Message (as defined in
Section 2 of the Offer to Purchase) and any other required documents should be
sent to the Depositary and (ii) certificates representing the tendered Shares
or a timely Book-Entry Confirmation should be delivered to the Depositary in
accordance with the instructions set forth in the Letter of Transmittal and
the Offer to Purchase.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) certificates
evidencing such Shares (or a timely Book-Entry Confirmation (as defined in
Section 3 of the Offer to Purchase) with respect to such Shares), (ii) the
Letter of Transmittal (or a manually signed facsimile thereof) properly
completed and duly executed, with all required signature guarantees or an
Agent's Message, and (iii) all other documents required by the Letter of
Transmittal.
If holders of the Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents or complete the
procedures for book-entry transfer prior to the Expiration Date, a tender may
be effected by following the guaranteed delivery procedures specified in
Section 3 of the Offer to Purchase.
Purchaser will not pay any fees or commission to any broker, dealer or other
person (other than the Dealer Manager, the Depositary and the Information
Agent, as described in the Offer to Purchase) for soliciting tenders of Shares
pursuant to the Offer. Purchaser upon request, will, however, reimburse you
for customary mailing and handling expenses incurred by you in forwarding any
of the enclosed materials to your clients. Purchaser will pay or will cause to
be paid any transfer taxes payable on the transfer of Shares to it, except as
otherwise provided in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
Georgeson & Company Inc., the Information Agent for the Offer, at Wall Street
Plaza, New York, NY 10005, (212) 440-9800, Toll Free (800) 223-2064 or Bear,
Stearns & Co. Inc., the Dealer Manager, 245 Park Avenue, New York, NY 10167,
(888) 466-7234.
Requests for copies of the enclosed materials may be directed to the
Information Agent at the above address and telephone number.
Very truly yours,
Bear, Stearns & Co. Inc.
as Dealer Manager
245 Park Avenue
New York, New York 10167
Call Toll Free: (888) 466-7234
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE
YOU OR ANY OTHER PERSON THE AGENT OF PURCHASER, PARENT, THE COMPANY, THE
DEPOSITARY, THE INFORMATION AGENT, THE DEALER MANAGER OR ANY AFFILIATE OF
ANY OF THEM OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION
OR MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN
CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE
STATEMENTS CONTAINED THEREIN.
2
<PAGE>
EXHIBIT 99(A)(5)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
DIGEX, INCORPORATED
BY
DAYLIGHT ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
INTERMEDIA COMMUNICATIONS INC.
AT
$13.00 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, JULY 9, 1997, UNLESS THE OFFER IS EXTENDED.
June 11, 1997
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated June 11,
1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which,
together with any supplements or amendments thereto, collectively constitute
the "Offer"), relating to the offer by Daylight Acquisition Corp., a Delaware
corporation ("Purchaser") and a wholly owned subsidiary of Intermedia
Communications Inc., a Delaware corporation ("Parent"), to purchase all the
outstanding shares of common stock, $.01 par value per share (the "Shares"),
of DIGEX, Incorporated, a Delaware corporation (the "Company"), at a purchase
price of $13.00 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer. Holders of Shares whose
certificates for such Shares (the "Certificates") are not immediately
available or who cannot deliver their Certificates and all other required
documents to the depositary, Continental Stock Transfer & Trust Company (the
"Depositary"), or complete the procedures for book-entry transfer prior to the
Expiration Date (as defined in the Offer to Purchase), must tender their
Shares according to the guaranteed delivery procedures set forth in Section 3
of the Offer to Purchase.
WE ARE (OR OUR NOMINEE IS) THE HOLDER OF RECORD OF SHARES HELD BY US FOR
YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
SHARES HELD BY US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish to have us
tender on your behalf any or all Shares held by us for your account pursuant
to the terms and conditions set forth in the Offer.
Please note the following:
1. The tender price is $13.00 per Share, net to the seller in cash.
2. The Offer is being made for all the outstanding Shares. The Offer is
being made pursuant to an Agreement and Plan of Merger, dated as of June
4, 1997 (the "Merger Agreement") among Purchaser, Parent and the
Company.
3. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn at the expiration of the Offer a majority of
the Shares on a fully diluted basis (including, without limitation, all
Shares issuable upon the conversion of any convertible securities or
upon the exercise of any options, warrants or rights). The Offer is also
subject to certain other conditions contained in the Offer to Purchase.
See Sections 1 and 14 of the Offer to Purchase.
4. THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT
THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE
COMPANY AND ITS STOCKHOLDERS, HAS APPROVED AND ADOPTED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, AND RECOMMENDS THAT
THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER.
5. The Offer and withdrawal rights will expire at 12:00 midnight, New York
City time, on Wednesday, July 9, 1997, unless the Offer is extended.
6. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes with respect to the transfer and sale of
Shares pursuant to the Offer. However, any tendering stockholder or
other payee who fails to complete and sign the Substitute Form W-9 that
is included in the Letter of Transmittal may be subject to a required
backup federal income tax withholding of 31% of the gross proceeds
payable to such holder or other payee pursuant to the Offer. See
Sections 3 and 5 of the Offer to Purchase.
7. In all cases, payment for Shares purchased pursuant to the Offer will
be made only after timely receipt by the Depositary of (i) Certificates
evidencing such Shares (or a timely Book-Entry Confirmation (as defined
in Section 3 of the Offer to Purchase) with respect to such Shares),
(ii) the Letter of Transmittal (or a manually signed facsimile thereof),
properly completed and duly executed with all required signature
guarantees or an Agent's Message (as defined in Section 2 of the Offer
to Purchase), and (iii) all other documents required by the Letter of
Transmittal.
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing, detaching and
returning to us the instruction form set forth below. If you authorize the
tender of your Shares, all such Shares will be tendered unless otherwise
specified below. An envelope to return your instructions to us is enclosed.
YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO
SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal. Purchaser is not aware of any jurisdiction where the making of
the Offer is prohibited by administrative or judicial action or pursuant to
any valid state statute. If Purchaser becomes aware of any valid state statute
prohibiting the making of the Offer or the acceptance of Shares pursuant
thereto, Purchaser will make a good faith effort to comply with any such state
statute. If, after such good faith effort, Purchaser cannot comply with any
such state statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made
on behalf of Purchaser by Bear, Stearns & Co. Inc. or one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
DIGEX, INCORPORATED
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated June 11, 1997, and the related Letter of Transmittal, in
connection with the offer by Daylight Acquisition Corp., a Delaware
corporation ("Purchaser") and a wholly owned subsidiary of Intermedia
Communications Inc., a Delaware corporation, to purchase all outstanding
shares of common stock, par value $.01 per Share (the "Shares"), of DIGEX,
Incorporated, a Delaware corporation.
This will instruct you to tender to Purchaser the number of Shares indicated
below (or if no number is indicated below, all Shares) which are held by you
for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer to Purchase.
Dated: , 1997
NUMBER OF SHARES TO BE TENDERED:*
SHARES
-------------------------------------
Signature(s)
-------------------------------------
-------------------------------------
Print Name(s)
-------------------------------------
-------------------------------------
Print Address(es)
-------------------------------------
Area Code(s) and Telephone Number(s)
-------------------------------------
Taxpayer Identification or Social Security Number(s)
- --------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
2
<PAGE>
EXHIBIT 99.(A)(6)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is being made solely by the Offer to Purchase dated
June 11, 1997 and the related Letter of Transmittal and is being made to all
holders of Shares. Purchaser is not aware of any state where the making of the
Offer is prohibited by administrative or judicial action pursuant to any valid
state statute. If Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of Shares pursuant thereto, Purchaser
will make a good faith effort to comply with such statute. If, after such good
faith effort, Purchaser cannot comply with such state statute, the Offer will
not be made to (nor will tenders be accepted from or on behalf of) holders of
Shares in such state. In any jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed made on behalf of Purchaser by Bear, Stearns & Co. Inc.
("Bear Stearns"), the Dealer Manager, or one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
DIGEX, INCORPORATED
AT
$13.00 NET PER SHARE
BY
DAYLIGHT ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
INTERMEDIA COMMUNICATIONS INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, JULY 9, 1997, UNLESS THE OFFER IS EXTENDED.
Daylight Acquisition Corp., a Delaware corporation ("Purchaser") and a
wholly owned subsidiary of Intermedia Communications Inc., a Delaware
corporation ("Parent"), is offering to purchase all outstanding shares of
Common Stock, par value $.01 per share (the "Shares"), of DIGEX, Incorporated,
a Delaware corporation (the "Company"), at a price of $13.00 per Share net to
the seller in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated June 11, 1997 (the "Offer to Purchase") and in the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"). Following the Offer,
Purchaser intends to effect the Merger (as defined below).
The Board of Directors of the Company unanimously has determined that the
Offer and the Merger are fair to, and in the best interests of, the Company and
its stockholders, has approved and adopted the Merger Agreement (as defined
below) and the transactions contemplated thereby, and recommends that the
Company's stockholders accept the Offer and tender their Shares pursuant to the
Offer.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN AT THE EXPIRATION OF THE OFFER A MAJORITY OF THE
THEN OUTSTANDING SHARES ON A FULLY DILUTED BASIS (INCLUDING, WITHOUT
LIMITATION, ALL SHARES ISSUABLE UPON THE CONVERSION OF ANY CONVERTIBLE
SECURITIES OR UPON THE EXERCISE OF ANY OPTIONS, WARRANTS OR RIGHTS). SEE
SECTION 14 OF THE OFFER TO PURCHASE FOR THE OTHER CONDITIONS OF THE OFFER.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of June 4, 1997 (the "Merger Agreement"), among Parent, Purchaser and the
Company. The Merger Agreement provides that as soon as practicable after the
purchase of Shares pursuant to the Offer and the satisfaction or waiver of
certain conditions contained in the Merger Agreement, and in accordance with
the relevant provisions of the General Corporation Law of the State of Delaware
(the "DGCL"), Purchaser will be merged with and into the Company (the
"Merger"). The Company will continue as the surviving corporation (the
"Surviving Corporation") and as a wholly owned subsidiary of Parent following
consummation of the Merger. At the effective time of the Merger, each
outstanding Share (other than Shares owned by Parent or Purchaser or any of
their subsidiaries or held in the treasury of the Company or by stockholders,
if any, who are entitled to and who properly exercise appraisal rights under
Delaware law) will be converted into, exchanged for and represent the right to
receive $13.00 in cash or any greater amount per Share paid pursuant to the
Offer, without interest.
Concurrently with the execution of the Merger Agreement, and as a condition
to Parent and Purchaser entering into the Merger Agreement, Parent entered into
a Stock Purchase Agreement, dated as of June 4, 1997 (the "Stock Purchase
Agreement"), with certain stockholders who own an aggregate of approximately
50.3% of the outstanding Shares (approximately 38.3% of the Shares on a fully
diluted basis). Under the Stock Purchase Agreement, such stockholders have
agreed to validly tender (and not withdraw) all of their Shares pursuant to the
Offer and have granted Parent an option to purchase all of their Shares at a
price of $13.00 per Share.
For purposes of the Offer, Purchaser shall be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as,
if and when Purchaser gives oral or written notice to Continental Stock
Transfer & Trust Company (the "Depositary") of Purchaser's acceptance of such
Shares for payment. In all cases, payment for Shares purchased pursuant to the
Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payment from Purchaser and transmitting payment to tendering
stockholders whose Shares have theretofore been accepted for payment. Payment
for Shares accepted for payment pursuant to the Offer in all cases will be made
only after timely receipt by the Depositary of (i) certificates for (or a
book-entry transfer with respect to) such Shares, (ii) a Letter of Transmittal
(or a manually signed facsimile thereof), properly completed and duly executed,
with any required signature guarantees, or an Agent's Message (as defined in
the Offer to Purchase), and (iii) all other documents required by the Letter of
Transmittal. Under no circumstances will interest be paid by Purchaser on the
purchase price of the Shares, regardless of any extension of the Offer or any
delay in making such payment.
The term "Expiration Date" means 12:00 Midnight, New York City time, on
Wednesday, July 9, 1997, unless and until Purchaser shall have extended the
period of time during which the Offer is open, in which event the term
"Expiration Date" shall extended by Purchaser, shall expire. Subject to the
limitations set forth in the Merger Agreement, Purchaser reserves the right (but
will not be obligated), at any time or from time to time in its sole discretion,
to extend the period of time during which the Offer is open by giving oral or
written notice of such extension to the Depositary and by making a public
announcement of such extension. There can be no assurance that Purchaser will
exercise its right to extend the Offer. Any such extension will be followed by a
public announcement thereof no later than 9:00 A.M., New York City time, on the
next business day after the previously scheduled Expiration Date. If Purchaser
extends the Offer, then without prejudice to the rights of Purchaser, tendered
Shares may be retained by the Depositary on behalf of Purchaser and may not be
withdrawn except to the extent that tendering stockholders are entitled to
withdrawal rights, as set forth below.
Except as otherwise provided below, tenders of Shares made pursuant to the
Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn
at any time prior to the Expiration Date and, unless theretofore accepted for
payment by Purchaser pursuant to the Offer, may also be withdrawn at any time
after August 9, 1997. For a withdrawal to be effective, a written, telegraphic
or facsimile transmission notice of withdrawal must be timely received by the
Depositary at its address as set forth on the back cover of the Offer to
Purchase. Any such notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name of the registered holder, if different from the name of the person who
tendered such Shares. If certificates evidencing Shares to be withdrawn have
been delivered or otherwise identified to the Depositary, then prior to the
physical release of such certificates, the tendering stockholder must also
submit the serial numbers shown on such certificates, and the signature(s) on
the notice of withdrawal must be guaranteed by an Eligible Institution (as
defined in the Offer to Purchase), except in the case of Shares tendered for
the account of an Eligible Institution. If Shares have been tendered pursuant
to the procedure for book-entry transfer as set forth in Section 3 of the Offer
to Purchase, any notice of withdrawal with respect to such Shares must specify
the name and number of the account at the applicable Book-Entry Transfer
Facility (as defined in the Offer to Purchase) to be credited with the
withdrawn Shares. Any Shares properly withdrawn will be deemed not to have been
validly tendered for purposes of the Offer, but may be retendered at any
subsequent time prior to the Expiration Date by following any of the procedures
described in Section 3 of the Offer to Purchase. All questions as to the form
and validity (including time of receipt) of notices of withdrawal will be
determined by Purchaser, in its sole discretion, whose determination shall be
final and binding on all parties.
The Offer to Purchase and the relevant materials will be mailed to record
holders of Shares and furnished to brokers, dealers, banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
stockholders lists or, if applicable, who are listed as participants in a
clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) under the
Securities Exchange Act of 1934, as amended, is contained in the Offer to
Purchase and is incorporated herein by reference.
THE OFFER TO PURCHASE AND LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION
WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to the Information
Agent and the Dealer Manager at the telephone numbers and locations listed
below. Copies of the Offer to Purchase, the Letter of Transmittal, the Notice of
Guaranteed Delivery and other tender offer documents may be obtained at
Purchaser's expense from the Information Agent or from your broker, dealer,
commercial bank or trust company or other nominee. No fees or commissions will
be payable by Parent or Purchaser to brokers, dealers or other persons other
than the Information Agent and the Dealer Manager for soliciting tenders of
Shares pursuant to the Offer.
The Information Agent for the Offer is:
[LOGO OF GEORGESON & COMPANY INC. APPEARS HERE]
Wall Street Plaza
New York, New York 10005
Banks and Brokers call collect (212) 440-9800
CALL TOLL FREE: (800) 223-2064
The Dealer Manager for the Offer is:
BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, New York 10167
CALL TOLL FREE: (888) 466-7234
June 11, 1997
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF --
- --------------------------------------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals (joint account) The actual owner
of the account
or, if combined
funds, any one
of the
individuals(1)
3. Husband and wife (joint account) The actual owner
of the account
or, if joint
funds, either
person(1)
4. Custodian account of a minor (Uniform Gift to Minors Act) The minor(2)
5. Adult and minor (joint account) The adult or, if
the minor is the
only
contributor, the
minor(1)
The ward, minor,
6. Account in the name of guardian or committee for a or incompetent
designated ward, minor, or incompetent person person(3)
7. a The usual revocable savings trust account (grantor is The grantor-
also trustee) trustee(1)
b So-called trust account that is not a legal or valid The actual
trust under State law owner(1)
8. Sole proprietorship account The owner(4)
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF --
- ------------------------------------------------------------------------------
<S> <C>
9. A valid trust, estate, or pension trust The legal entity
(Do not furnish
the identifying
number of the
personal
representative
or trustee
unless the legal
entity itself is
not designated
in the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or educational organization The organization
account
12. Partnership account held in the name of the business The partnership
13. Association, club, or other tax-exempt organization The organization
14. A broker or registered nominee The broker or
nominee
15. Account with the Department of Agriculture in the name The public
of a public entity (such as a State or local government, entity
school district, or prison) that receives agricultural
program payments
</TABLE>
- -------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your num-
ber, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of
the Social Security Administration or the Internal Revenue Service and apply
for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a)
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.-- Section 6109 requires most recipients of dividend, in-
terest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are re-
quired to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Cer-
tain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are sub-
ject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or pat-
ronage dividends in gross income, such failure will be treated as being due to
negligence and will be subject to a penalty of 5% on any portion of an under-
payment attributable to that failure unless there is clear and convincing evi-
dence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or im-
prisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
<PAGE>
EXHIBIT 99.(a)8
[LETTERHEAD OF INTERMEDIA COMMUNICATIONS]
NEWS RELEASE
CONTACT: Robert M. Manning
Chief Financial Officer
(813) 829-2403
or
Chris Brown
Sr. Vice President, Investor Relations
(813) 829-2408
INTERMEDIA COMMUNICATIONS TO ACQUIRE DIGEX INCORPORATED
----------------------------------------
COMBINATION EXTENDS INTERMEDIA'S LEADERSHIP POSITION IN FAST-GROWING
BUSINESS DATA COMMUNICATIONS MARKET
TAMPA, FLORIDA (June 5, 1997) -- Intermedia Communications (ICIX: Nasdaq/NM)
and DIGEX Incorporated (DIGEX) (DIGX: Nasdaq/NM) today announced that they have
executed a definitive agreement for the acquisition of DIGEX by Intermedia for
$13 per share or approximately $150 million. The acquisition will be
consummated through a tender offer for all outstanding DIGEX shares, which will
begin next week and will be followed by a cash merger. Management and other
DIGEX option holders will receive Intermedia stock options for their DIGEX stock
options, in lieu of receiving cash. The acquisition was unanimously approved by
the Board of Directors of both companies, and shareholders owning a majority of
the outstanding shares of DIGEX have agreed to sell their shares to Intermedia
for $13 per share.
Intermedia will hold a conference call at 9:00 AM EDT to discuss this
transaction. To participate in this conference, call (800) 236-9153. A 24-hour
replay will be available by calling (800) 633-8284, ID 2832850.
DIGEX is among the limited number of national First Tier Internet service
providers which positions the company to be a strong participant in the fastest
growing sector of the Internet market--business connectivity. It is also a
market leader in Web hosting and management and operates the world's largest
Microsoft NT Web site management facility. DIGEX has over 2,000 customers and a
staff of 450 people, including approximately 150 in sales and marketing.
Monthly annualized revenue was approximately $40 million for March 1997. The
combined company would have had annualized monthly revenue of $241 million for
the same month, with 37% of that total from enhanced data services. The
combined company will have over 18,000 business and government customers, and
over 1,500 employees.
EXCELLENT STRATEGIC FIT
"A fundamental element of Intermedia's mission and a key to its success in
acquiring business telecom market share is the continued expansion of our strong
leadership position in enhanced data
-MORE-
<PAGE>
ICIX Announces Definitive Agreement
To Acquire DIGEX Incorporated
Page 2
June 5, 1997
services," commented David C. Ruberg, Intermedia's Chairman, President, and
Chief Executive Officer. "This acquisition meets all of our criteria for
strategic acquisitions. Intermedia is acquiring an established quality customer
base, accelerating its time to market with new services, expanding and
increasing network density, and adding high quality employees. With this
acquisition, Intermedia becomes a provider with one of the broadest portfolios
of high value-added data services integrated with traditional local and long
distance voice services. The combined company will have a strong base of
Internet connectivity services. These will enable Intermedia to expand delivery
of a wide range of hosted business applications including multimedia
applications, supporting the needs of electronics commerce."
SIGNIFICANT FINANCIAL SYNERGIES
"Significant financial and operational synergies will be realized upon
integrating the two companies," added Robert M. Manning, Intermedia's Chief
Financial Officer. "We expect to realize minimum cost savings of approximately
$4 million in the second half of 1997, $12 million in 1998, $14 million 1999,
and increasing savings in subsequent years."
Approximately 75% of DIGEX's backbone network overlaps existing or planned
Intermedia network routes. Additional savings should result from substantially
greater purchasing power for leased backbone circuits, from CLEC interconnection
agreements, and from Intermedia's owned local network facilities. Lastly, the
most significant benefit should come from combining the sales efforts and cross-
selling services to the 18,000 business customers of the combined company.
These opportunities were not included in Intermedia's estimate of synergies.
Manning reported that Intermedia expects the transaction to close in the
third quarter of 1997. The resulting third quarter EBITDA for the combined
company is expected to be within the current range of analysts' expectations for
Intermedia. "With the synergies we expect, and the continued rapid growth in
DIGEX's business, this acquisition should accelerate our progression toward
positive free cash flow and adds meaningfully to EBITDA beginning in 1998," he
added.
"After elimination of the duplicate network facility costs, Intermedia will
have acquired a rapidly growing revenue stream with attractive margins that
provide significant incremental return on its already invested capital
infrastructure," Manning concluded.
DIGEX's current network deployment and customer base are concentrated in the
large city markets in the eastern U.S., with service also provided in major west
coast markets. Over 80% of the cities served are covered today by both
Intermedia and DIGEX, increasing the density of Intermedia's already robust
network in the eastern U.S.
MCCLEARY TO CONTINUE LEADING THE DIGEX ORGANIZATION
Chris McCleary, DIGEX's current Chairman, President, and Chief Executive
Officer, and his management team will continue to manage the DIGEX operation.
"Chris has done an excellent job
-MORE-
<PAGE>
ICIX Announces Definitive Agreement
To Acquire DIGEX Incorporated
Page 3
June 5, 1997
of building a team and a business," commented Ruberg. "We will maintain the
focus he has developed by supporting all of his team's efforts with Intermedia's
resources throughout our service territory.
"DIGEX's consultative selling approach matches Intermedia's; and the DIGEX
customer base and target markets reinforce Intermedia's, allowing us access to
more cross-selling opportunities in these markets," added Ruberg. "The skills
needed to effectively sell DIGEX's current services provide an excellent
foundation for the DIGEX staff to sell Intermedia's full suite of integrated
voice and data telecom services."
Headquartered in suburban Washington, DC, DIGEX is a leading independent
national Internet carrier focusing exclusively on business customers. DIGEX
offers a comprehensive range of Internet solutions, including high-speed
dedicated business Internet connectivity, corporate Web site management services
and private network capacity. The DIGEX Gold Ring/SM/ national fault-tolerant
fiber optic Internet network, engineered utilizing Cisco Systems (NASDAQ: CSCO)
Internet Operating System technology, provides highly reliable service for
mission-critical Internet applications. Company news, product, and service
information are available at www.digex.net.
Intermedia Communications is one of the nation's fastest growing
telecommunications companies. Intermedia provides integrated telecommunications
solutions to business and government customers. These solutions include voice,
data, and video; local and long distance services; and advanced access services
in cities throughout the eastern U.S. Its enhanced data offerings, including
frame relay, ATM, and Internet services offers seamless end-to-end service
virtually anywhere in the world.
Intermedia is headquartered in Tampa, Florida, and is traded on the Nasdaq
National Market under the symbol ICIX. Intermedia can be found on the World
Wide Web at http://www.icix.net.
Bear, Stearns & Co., Inc. acted as exclusive financial advisor to Intermedia
Communications for this transaction. Friedman, Billings, Ramsey & Co., Inc. was
the financial advisor for DIGEX Incorporated.
Statements contained in this news release regarding expected revenues and
other planned events are forward-looking statements, subject to uncertainties
and risks, including, but not limited to, the demand for Intermedia's products
and services, and the ability of the Company to successfully implement its
expanded and accelerated capital deployment plan, each of which may be impacted,
among other things, by economic, competitive or regulatory conditions. These
and other applicable risks are summarized under the caption "Risk Factors" in
the Company's Form 10-K Annual Report for its fiscal year ended December 31,
1996.
###
<PAGE>
[LETTERHEAD OF GEORGESON & COMPANY INC.]
NEWS RELEASE
Wall Street Plaza
New York, NY 10005
212-440-9800
FAX 212-440-9009
________________________________________________________________________________
From: INTERMEDIA COMMUNICATIONS INC. For Release: IMMEDIATELY
3625 QUEEN PALM DRIVE
TAMPA, FLORIDA 33619 Contact: Chris Brown
Sr. Vice President
Investor Relations
(813) 829-2408
Tampa, Florida (June 11, 1997) -- Intermedia Communications Inc. ("Intermedia")
announced that Daylight Acquisition Corp. (the "Purchaser"), a wholly-owned
subsidiary of Intermedia, today commenced its cash tender offer for all the
outstanding shares of common stock of DIGEX Incorporated, pursuant to the
previously announced merger agreement with DIGEX. Under the tender offer,
stockholders who tender their shares will be entitled to receive $13 in cash per
share. The offer and withdrawal rights will expire at 12:00 midnight, New York
City Time, on Wednesday, July 9, 1997, unless extended. Following completion of
the tender offer, the Purchaser will be merged into DIGEX and any remaining
stockholders will receive $13 per share in cash.
The offer is conditioned upon, among other things, there being validly tendered
and not withdrawn at the expiration of the offer a majority of the then
outstanding shares of DIGEX common stock on a fully diluted basis.
Bear, Stearns & Co. Inc. is the Dealer-Manager for the Offer. Georgeson &
Company Inc. is the Information Agent for the Offer.
Headquartered in suburban Washington, D.C., DIGEX is a leading independent
national Internet carrier focusing exclusively on business customers. DIGEX
offers a comprehensive range of Internet solutions, including high-speed
dedicated business Internet connectivity, corporate Web site management services
and private network capacity. The DIGEX Gold Ring(SM) national fault-tolerant
fiber optic Internet network, engineered utilizing Cisco Systems (NASDAQ: CSCO)
Internet Operating System technology, provides highly reliable service for
mission-critical Internet applications. Company news, product, and service
information are available at www.digex.net.
Intermedia Communications is one of the nations fastest growing
telecommunications companies. Intermedia provides integrated telecommunications
solutions to business and
<PAGE>
government customers. These solutions include voice, data, and video; local and
long distance services; and advanced access services in cities throughout the
eastern U.S. Its enhanced data offerings, including frame relay, ATM, and
Internet services offer seamless end-to-end service virtually anywhere in the
world. Intermedia Communications is headquartered in Tampa, Florida and is
traded on the NASDAQ Market under the symbol ICIX. Intermedia Communications can
be found on the worldwide web at http://www.icix.net.
2
<PAGE>
EXHIBIT 99.(c)1
EXECUTION COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
----------------------------
Among
INTERMEDIA COMMUNICATIONS INC.,
DAYLIGHT ACQUISITION CORP.
and
DIGEX, INCORPORATED
Dated June 4, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
I. THE OFFER
1.1. The Offer.................................................... 2
1.2. Company Action............................................... 3
II. THE MERGER
2.1. Merger; Surviving Corporation................................ 4
2.2. Certificate of Incorporation................................. 5
2.3. By-Laws...................................................... 5
2.4. Directors and Officers....................................... 5
2.5. Effective Time............................................... 5
2.6. Conversion of Shares......................................... 6
2.7. Purchaser Common Stock....................................... 7
2.8. Surrender of Shares.......................................... 7
2.9. Company Stock Options and Warrants........................... 9
III. REPRESENTATIONS AND WARRANTIES OF COMPANY
3.1. Organization and Authorization, etc.......................... 9
3.2. Subsidiaries................................................. 10
3.3. Non-Contravention............................................ 10
3.4. Approvals.................................................... 10
3.5. Capital Stock................................................ 11
3.6. Financial Statements......................................... 11
3.7. Periodic SEC Filings......................................... 12
3.8. Changes...................................................... 12
3.9. Taxes........................................................ 14
3.10. Material Contracts........................................... 15
3.11. Properties................................................... 15
3.12. Litigation................................................... 16
3.13. Permits...................................................... 16
3.14. Employee Plans............................................... 16
3.15. Patents, Trademarks, etc..................................... 18
3.16. Insurance.................................................... 18
3.17. No Brokers................................................... 19
3.18. Disclosure................................................... 19
3.19. Offer Documents; Schedule 14D-9; Proxy Statement;
Other Information............................................ 19
IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
4.1. Organization and Authorization, etc.......................... 20
4.2. Non-Contravention............................................ 20
4.3. Approvals.................................................... 21
4.4. No Brokers................................................... 21
4.5. Offer Documents; Proxy Statement; Other Information.......... 21
4.6. Solvency..................................................... 22
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
V. COVENANTS OF COMPANY
5.1. Conduct of Business.......................................... 22
5.2. Access and Information....................................... 24
5.3. No Solicitation.............................................. 24
VI. ADDITIONAL AGREEMENTS
6.1. Stockholders' Meeting........................................ 25
6.2. Proxy Statement.............................................. 26
6.3. Compliance with Conditions Precedent, etc.................... 26
6.4. Certain Notifications........................................ 26
6.5. Adoption by Purchaser........................................ 26
6.6. Expenses..................................................... 27
6.7. Public Announcements......................................... 27
6.8. Company Board Representation; Section 14(f).................. 27
6.9. .......................................................... 28
VII. CONDITIONS
7.1. Conditions to the Merger..................................... 28
VIII. TERMINATION, AMENDMENT AND WAIVER
8.1. Termination.................................................. 29
8.2. Effect of Termination........................................ 31
8.3. Termination Payment.......................................... 31
8.4. Amendment.................................................... 32
8.5. Waiver....................................................... 32
IX. GENERAL PROVISIONS
9.1. Definitions.................................................. 32
9.2. Non-Survival of Representations, Warranties and
Agreements................................................... 35
9.3. Notices...................................................... 35
9.4. Severability................................................. 36
9.5. Miscellaneous................................................ 36
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER (the "Agreement") being made and entered
---------
into as of this 4th day of June, 1997 by and among INTERMEDIA COMMUNICATIONS
INC., a Delaware corporation ("Parent"), DAYLIGHT ACQUISITION CORP., a Delaware
------
corporation which is wholly owned by Parent ("Purchaser"), and DIGEX,
---------
INCORPORATED, 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 all the issued
-----
and outstanding shares of Common Stock, par value $.01 per share, of Company
("Company Common Stock") (shares of Company Common Stock being hereinafter
- ----------------------
collectively referred to as "Shares") for $13.00 per Share (such amount being
------
hereinafter referred to as the "Per Share 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") following the consummation
---
of the Offer and upon the terms and subject to the conditions set forth herein;
and
WHEREAS, as a condition to the willingness of Parent and Purchaser to
consummate this Agreement, the holders of 5,877,582 Shares have entered into a
Stock Purchase Agreement, dated as of the date hereof (the "Stock Purchase
--------------
Agreement"), pursuant to which (i) such holders have granted an option to Parent
- ---------
to purchase all of the Shares held by such holders at $13.00 per Share and (ii)
each of such holders has agreed to tender all of its Shares pursuant to the
Offer, all upon the terms and subject to the conditions set forth in the Stock
Purchase Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE>
ARTICLE I.
THE OFFER
---------
SECTION 1.1. The Offer. (a) Provided that this Agreement shall
---------
not have been terminated in accordance with Section 8.1 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
condition (the "Minimum Condition") that at least a majority of the then
-----------------
outstanding Shares on a fully diluted basis (including, without limitation, all
Shares issuable upon the conversion of any convertible securities or upon the
exercise of any options, warrants or rights) shall have been validly tendered
and not withdrawn prior to the expiration of the Offer and also shall be subject
to the satisfaction of the other conditions set forth in Annex A hereto.
Purchaser expressly reserves the right to waive any such condition, to increase
the price per Share payable 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 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 (including, without limitation, the Minimum Condition), 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; provided, however, in
-------- -------
the event Purchaser desires to extend the Offer beyond July 31, 1997, in the
event the proposed length of the extension is, in the aggregate, more than three
days Company shall have the right to consent to such longer extension. Parent
agrees to cause Purchaser to, and Purchaser agrees to use its reasonable best
efforts to, consummate the Offer as soon as legally permissible, subject to its
right to extend for 20 additional days as provided above.
2
<PAGE>
(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.
SECTION 1.2. 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 June 4, 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) Friedman, Billings, Ramsey & Co. Inc. has delivered 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 either to tender all Shares beneficially
owned by them to Purchaser pursuant to the Offer or to vote such Shares in
3
<PAGE>
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 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
8.1, shall deliver to Company all copies of such information then in their or
their agents' possession.
II. THE MERGER
----------
2.1. Merger; Surviving Corporation. In accordance with the
-----------------------------
provisions of this Agreement and the GCL, at the Effective Time (as such term
and other capitalized terms used herein without definition are defined in
Section 9.1), 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
- -----------
4
<PAGE>
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.
2.2. 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 in its entirety so that it will read as Purchaser's Certificate
of Incorporation, except that the name of the Surviving Corporation shall be
"DIGEX, INCORPORATED". 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.
2.3. By-Laws. The By-Laws of Purchaser in effect immediately prior
-------
to the Effective Time shall be the By-Laws of the Surviving Corporation until
altered, amended or repealed as provided therein and in the Certificate of
Incorporation of the Surviving Corporation.
2.4. 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 By-
Laws of the Surviving Corporation.
2.5. 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 6.1 and the satisfaction or, if permissible, waiver of
the conditions set forth in Article VII. The date and time when the Merger
shall become effective are referred to herein as the "Effective Time." Prior to
--------------
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
5
<PAGE>
confirming the satisfaction or waiver, as the case may be, of the conditions set
forth in Article VII.
2.6. Conversion of Shares. (a) Each Share issued and outstanding
--------------------
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 the Per Share Amount in cash (the "Merger 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.
(b) Each Share 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 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) Notwithstanding anything in this Section 2.6 to the contrary,
shares of Company Common Stock which are issued and outstanding immediately
prior to the Effective Time and which are held by stockholders of Company who
have not voted such shares in favor of the Merger and who shall have properly
exercised their 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
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
6
<PAGE>
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.
2.7. 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.
2.8. 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 pursuant to Section 2.6 hereof. Such funds shall be
invested by the Exchange Agent as directed by the Surviving Corporation,
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 Company
Common Stock to be cancelled 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 of Company Common Stock (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
7
<PAGE>
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 of Company Common
Stock 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 a share of Company Common Stock for any Merger
Consideration delivered in respect of such 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 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 of Company Common Stock 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
8
<PAGE>
cancelled and exchanged for the Merger Consideration as provided in this Article
I.
2.9. Company Stock Options and Warrants. At the Effective Time, all
----------------------------------
options and warrants then outstanding under the 1995 Incentive Stock Option Plan
and the 1996 Equity Participation Plan (collectively, the "Company Stock Option
--------------------
Plans") shall be assumed by Parent in such manner that Parent is a corporation
- -----
"assuming a stock option in a transaction to which section 424(a) applies"
within the meaning of Section 424 of the Internal Revenue Code of 1986, as
amended (the "Code"). The options and warrants assumed by Parent as provided
----
above and the warrants issued to WinStar Communications, Inc. and Electronic
Press Services, Inc. shall be exercisable upon the same terms and conditions as
under the Company Stock Option Plans and the option agreements and warrants
issued thereunder and such warrants, except that each such option or warrant (A)
shall be exercisable for that number of shares of Parent Common Stock equal to
the product of (i) the number of shares of Company Common Stock subject to such
option or warrant immediately prior to the Effective Time multiplied by (ii) a
fraction, the numerator of which shall be the Per Share Amount and the
denominator of which shall be $27 1/8 (with any fractional share of Parent
Common Stock being disregarded) and (B) the exercise price per share of Parent
Common Stock shall equal the exercise price per share of Company Common Stock
theretofore in effect multiplied by a fraction, the numerator of which shall be
$27 1/8 and the denominator of which shall be the Per Share Amount. From and
after the Effective Time, no additional options or warrants shall be granted
under Company Stock Option Plans. In connection with the assumption of the
options outstanding under Company Stock Option Plans, Parent shall use its best
efforts to effect such assumption in such a manner as to not affect the
incentive stock option status of those options which are intended to be
incentive stock options at the Effective Time. From the date hereof, Company
shall not accelerate, or take any action which would cause the acceleration of,
the vesting of any of the options outstanding under the Company Stock Option
Plans by reason of the Offer or the Merger and any agreement providing for such
acceleration shall be rescinded.
III. REPRESENTATIONS AND WARRANTIES OF COMPANY
-----------------------------------------
Company represents and warrants to Parent and Purchaser as follows
(except as set forth in the Disclosure Letter delivered by Company to Parent and
Purchaser on the date hereof):
3.1. Organization and Authorization, etc. Company is a corporation
-----------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware, has the
9
<PAGE>
corporate power and authority to own, lease and operate all of its properties
and assets and to carry on its business, and is duly qualified to do business as
a foreign corporation and is in good standing in each jurisdiction in which the
nature of its business or the ownership of its properties or both makes such
qualification necessary, except where failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect. Company has
delivered to Parent and Purchaser complete and correct copies of its Certificate
of Incorporation and By-Laws, as amended and in effect on the date of this
Agreement. Company has the corporate power to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by its Board of Directors and, except for the
approval of its stockholders, no other corporate proceedings on the part of
Company are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Company and, assuming this Agreement constitutes the legal, valid
and binding Agreement of the other parties hereto, this Agreement constitutes
the legal, valid and binding agreement of Company, enforceable against Company
in accordance with its terms. The restrictions on business combinations
contained in Section 203 of the GCL have been satisfied with respect to the
transactions contemplated hereby.
3.2. Subsidiaries. Company has no Subsidiaries.
------------
3.3. Non-Contravention. The execution and delivery of this Agreement
-----------------
and, subject to the approval of this Agreement by Company's stockholders and
compliance with the applicable regulatory requirements set forth in Section 3.4,
the consummation of the transactions contemplated hereby will not (a) violate
-
any provision of the Amended and Restated Certificate of Incorporation or
Amended and Restated By-Laws of Company, (b) violate any material provision of
-
or result in the breach or the acceleration of or entitle any party to
accelerate (whether after the giving of notice or lapse of time or both) any
material obligation under, any material mortgage, lien, lease, agreement,
license, instrument, order, arbitration award, judgment or decree to which
Company is a party or by which it is bound, (c) result in the creation or
-
imposition of any material lien, charge, pledge, security interest or other
encumbrance upon any material property of Company or (d) violate or conflict
-
with any law, ordinance or rule to which Company, or the property of Company, is
subject.
3.4. Approvals. No consent, approval, order or authorization of, or
---------
registration, declaration or filing with, any Governmental Authority is required
in connection with the
10
<PAGE>
execution and delivery of this Agreement by Company or the consummation by
Company of the transactions contemplated hereby, except for (a) the filing of a
-
Notification and Report Form by Company under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (b) the filing of the
------- -
Schedule 14D-9 with the SEC and the filing of the Proxy Statement with the SEC,
(c) filings and approvals required by the securities or blue sky laws of the
-
various states, (d) the filings and approvals with the FCC and state public
-
utility commissions or other Governmental Authorities identified on Schedule 3.4
hereto and (e) the filing of a Certificate of Merger with the Secretary of State
-
of the State of Delaware.
Company has delivered to Parent correct and complete copies of all
licenses and the applications related thereto of Company together with any
pending applications filed by Company for other licenses, certificates, permits
and similar authorizations.
3.5. Capital Stock. The authorized capital stock of Company consists
-------------
of 47,000,000 shares of Common Stock, par value $.01 per share, of which
11,674,261 shares are issued and outstanding, and of 3,000,000 shares of
Preferred Stock, par value $1.00 per share, none of which are issued and
outstanding. All outstanding shares of Company Common Stock are duly authorized,
validly issued, fully paid and nonassessable. As of the date hereof, Company
had reserved (a) 2,900,480 shares of Company Common Stock for issuance upon the
-
exercise of outstanding stock options granted to employees or directors of
Company, (b) 415,000 shares of Company Common Stock for issuance upon exercise
-
of currently outstanding warrants and (c) 350,000 shares of Company Common Stock
-
for issuance to employees pursuant to the Amended and Restated 1997 Employee
Stock Purchase Plan. Except as set forth herein or in the reports and other
filings referred to in Section 3.7 and except for the warrants issued to WinStar
Communications, Inc. on June 10, 1996 and to Electronic Press Services, Inc. on
January 3, 1997, there are not outstanding any offers, subscriptions, options,
warrants, rights or other agreements or commitments obligating Company to issue
or sell, or cause to be issued or sold, any shares of the capital stock of
Company or any securities or obligations convertible into or exchangeable for or
giving any Person any right to acquire any shares of such capital stock, or
obligating Company to enter into any such agreement or commitment.
3.6. Financial Statements. (a) The balance sheet as of December 31,
--------------------
1996 of Company, and the related statements of income, stockholders' equity and
changes in financial position for each of the three years then ended, examined
and reported upon by Ernst & Young, LLP, certified public accountants, complete
copies of which have previously been delivered to
11
<PAGE>
Parent, have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis, and fairly present the financial
position of Company at such date and the results of its operations and changes
in its financial position for such periods. Except as disclosed or provided for
in such financial statements (including the notes thereto), as of December 31,
1996, Company had no liabilities or obligations material to the business or
condition (financial or otherwise) of Company, whether accrued, absolute,
contingent or otherwise, and whether due or to become due and which were
required to be disclosed or provided for in such financial statements in
accordance with generally accepted accounting principles.
(b) The unaudited financial statements of Company as of March 31,
1997 and for the three months then ended, complete copies of which have
previously been delivered to Parent (the "Company Interim Financials"), fairly
--------------------------
present the financial position of Company at such date and the results of its
operations for such period and, except as otherwise disclosed therein, have been
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with the audited financial statements referred to in the
preceding paragraph, and reflect all adjustments (subject to normal and
recurring year end adjustments that are not expected to be material in amount)
which are necessary to a fair presentation of the results of the interim period
therein described.
3.7. Periodic SEC Filings. Company has heretofore delivered to
--------------------
Parent its (a) Annual Report on Form 10-KSB for the year ended December 31, 1996
-
as filed with the SEC; (b) a Quarterly Report on Form 10-QSB for the period
-
ended March 31, 1997; (c) proxy statements relating to Company's meetings of
-
stockholders (whether annual or special) during calendar year 1997; and (d) all
-
other reports or registration statements filed by Company with the SEC since
October 16, 1996. As of their respective dates, such reports and statements
were prepared in accordance with the requirements of the Securities Act of 1933,
as amended, and the Exchange Act, as the case may be, and the rules and
regulations thereunder and did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
3.8. Changes. Except as has been otherwise disclosed by Company to
-------
Parent and Purchaser in writing prior to the date hereof, or as has been
disclosed in the Company Interim Financials or in the filings with the SEC set
forth in Section 3.7, since December 31, 1996 through the date of this Agreement
there have not been any changes in the condition (financial or otherwise),
assets, liabilities, properties, business, operations
12
<PAGE>
or prospects of Company having, individually or in the aggregate, a Material
Adverse Effect and, except as aforesaid, Company has not:
(a) issued or sold any stock, notes, bonds or other securities other
than pursuant to the exercise or conversion of outstanding securities, or
any option to purchase the same other than in the ordinary course of
business consistent with past practice, or entered into any agreement with
respect thereto, except to or with Parent or Purchaser;
(b) declared, set aside or made any dividend or other distribution on
capital stock or redeemed, purchased or acquired any shares thereof or
entered into any agreement in respect of the foregoing;
(c) amended its Certificate of Incorporation or By-Laws;
(d) other than in the ordinary course of business, (i) purchased,
-
sold, assigned or transferred any material tangible assets or any material
patent, trademark, trade name, copyright, license, franchise, design or
other intangible assets or property, (ii) mortgaged, pledged or granted or
--
suffered to exist any lien or other encumbrance or charge on any material
assets or properties, tangible or intangible, except for liens for taxes
not yet delinquent and such other liens, encumbrances or charges which do
not, individually or in the aggregate, have a Material Adverse Effect, or
(iii) to the best knowledge of Company, waived any rights of material value
----
or cancelled any material debts or claims;
(e) incurred any material obligation or liability (absolute or
contingent), except current liabilities and obligations incurred in the
ordinary course of business consistent with past practice, or paid any
material liability or obligation (absolute or contingent) other than
current liabilities and obligations incurred in the ordinary course of
business consistent with past practice;
(f) increased the compensation payable to any officer or director of
Company, or become obligated to increase any such compensation, other than
in the ordinary course of business consistent with past practice;
(g) entered into any employment agreement (except that agreements
with employees that are solely confidentiality agreements shall not be
considered employment agreements) or adopted, or amended in any material
respect, any collective
13
<PAGE>
bargaining agreement or Company Plan, other than in the ordinary course of
business consistent with past practice;
(h) incurred any damage, destruction or similar loss, whether or not
covered by insurance, materially affecting the businesses or properties of
Company;
(i) entered into any transaction of a material nature other than in
the ordinary course of business consistent with past practice; or
(j) changed its accounting methods, principles or practices.
3.9. Taxes. (a) Company has prepared and timely filed or will
-----
timely file with the appropriate Governmental Authorities 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;
(b) all material Taxes of Company 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;
(c) to the best knowledge of Company, no deficiency has been asserted
or assessed against Company, and no examination of Company is pending or
threatened for any material amount of Tax by any taxing authority;
(d) 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;
(e) no material Tax liens have been filed with respect to any Taxes;
(f) Company 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 for any period ending after the
Effective Date;
(g) Company has made timely payments of the Taxes required to be
deducted and withheld from the wages paid to their employees;
(h) to the best knowledge of Company, there are no foreign losses as
defined in Section 904(f)(2) of the Code; and
14
<PAGE>
(i) to the best knowledge of Company, there are no transfer pricing
agreements made with any taxation authority involving Company.
3.10. Material Contracts. Company has heretofore furnished to Parent
------------------
and Purchaser a complete and correct list as of the date hereof of all
agreements, contracts and commitments of the following types, written or oral,
to which Company is a party or by which any of its properties is bound as of the
date hereof: (a) mortgages, indentures, security agreements and other
-
agreements and instruments relating to the borrowing of money by or extension of
credit to Company; (b) employment and consulting agreements; (c) Company Plans;
- -
(d) collective bargaining agreements; (e) material sales agency, manufacturer's
- -
representatives or distributorship agreements; (f) agreements, orders or
-
commitments for the purchase by Company of raw materials, supplies or finished
products exceeding $100,000; (g) agreements, orders or commitments for the sale
-
by Company of its products exceeding $250,000; (h) licenses of patent, trademark
-
and other intellectual property rights; (i) agreements or commitments for
-
capital expenditures in excess of $100,000 for any single project (it being
warranted that the commitment for all undisclosed contracts for such agreements
or commitments does not exceed $500,000 in the aggregate for all projects); (j)
-
brokerage or finder's agreements; (k) surety bonds for any single project,
-
foreign exchange contracts and letters of credit, in each case in excess of
$250,000; and (l) agreements, contracts and commitments of a type other than
-
those described in the foregoing clauses (a) through (k) which in any case
involve payments or receipts of more than $100,000. Other than for documents
that are included in Company's SEC filings, Company has delivered or made
available to Parent and Purchaser complete and correct copies of all written
agreements, contracts and commitments, together with all amendments thereto, and
accurate descriptions of all oral agreements, set forth on such list. Such
agreements, contracts and commitments are in full force and effect and, to the
best knowledge of Company, all parties thereto have performed all obligations
required to be performed by them to date and are not in default in any material
respect thereunder. No claim of default by any party has been made or is now
pending under any such agreement, contract or commitment, and, to the best
knowledge of Company, no event has occurred and is continuing that with notice
or the passing of time or both would constitute a material default thereunder or
would excuse performance by any party thereto.
3.11. Properties. Company owns and has good and marketable title in
----------
fee to all its assets and properties, tangible or intangible reflected in the
Company Interim Financials as owned by it, and valid leasehold interests in all
properties reflected in the Company Interim Financials as leased
15
<PAGE>
or licensed by it, in each case free and clear of any mortgage, lien, pledge,
charge, claim, conditional sales or other agreement, right, easement or
encumbrance except (i) to the extent stated or reserved against in the Company
-
Interim Financials, (ii) for changes occurring in the ordinary course of
--
business consistent with past practice after the date thereof, which do not
have, individually or in the aggregate, a Material Adverse Effect, and (iii) for
---
liens for taxes not yet delinquent and such other exceptions which do not
materially detract from the value or interfere with the use of the property
affected thereby. Company has delivered or made available to Parent and
Purchaser complete and correct copies of all leases of real property and
material personal property to which it is a party. All such leases are valid,
subsisting and effective in accordance with their terms and, to the knowledge of
Company, there does not exist thereunder any material default or event or
condition which, after notice or lapse of time or both, would constitute a
material default thereunder. To the knowledge of Company, all physical
properties owned or used by Company and all equipment necessary for the
operation of its businesses are in good operating condition.
3.12. Litigation. Except as disclosed in the reports and other
----------
filings referred to in Section 3.7 and except as has been otherwise disclosed by
Company to Parent and Purchaser prior to the date hereof, there are no material
actions, suits or proceedings or investigations pending or, to the knowledge of
Company, threatened against or affecting Company or any property or assets of
Company before or by any Governmental Authority. Company is not in default in
respect of any judgment, order, writ, injunction or decree of any Governmental
Authority.
3.13. Permits. Company has all material permits, licenses, orders
-------
and approvals of all Governmental Authorities required for it to conduct its
business as presently conducted. All such material permits, licenses, orders and
approvals are in full force and effect and, to the knowledge of Company, no
suspension or cancellation of any of them is threatened. Subject to obtaining
the consents referred to in Section 3.4, none of such permits, licenses, orders
or approvals will be adversely affected by the consummation of the transactions
contemplated by this Agreement. Company has complied in all material respects
with all laws and with the rules and regulations of all Governmental Authorities
having authority over it, including, without limitation, agencies concerned with
occupational safety, environmental protection and employment practices, and
Company has not received notice of violation of any such rules or regulations,
corrected or not, within the last three years.
3.14. Employee Plans. (a) Schedule 3.14 contains a true and complete
--------------
list of all bonus, deferred compensation,
16
<PAGE>
pension, profit-sharing, retirement, insurance, stock purchase, stock option,
welfare, severance, hospitalization, insurance or other employee benefit plan
(as defined in Section 3(3) of ERISA), whether formal or informal, presently
maintained by Company or maintained by it since 1992, or under which Company
has, or has had since 1992, any obligation to contribute (collectively, the
"Company Plans").
- --------------
(b) For each of the Company Plans, Company has delivered or made
available to Parent true and complete copies of (i) the plan document, (ii) any
related trust agreements, insurance contracts and other funding agreements,
(iii) the summary plan descriptions, (iv) the most recent Internal Revenue
Service determination letter, if any, (v) the most recently filed annual report
(Form 5500 Series) and accompanying schedules filed with the Department of Labor
or Internal Revenue Service, and (vi) the most recent financial statements, if
any.
(c) Except where the failure of any of the following representations
would not result in a Material Adverse Effect:
(i) Each such Company Plan which is intended to be a "qualified plan"
under Section 401(a) of the Code, has received, within the last three
years, a favorable determination letter from the IRS. With respect to any
Company Plan which has received a currently applicable determination
letter, nothing has occurred since the date of such determination letter
that would adversely affect the qualification of the Company Plan under
Section 401(a) of the Code.
(ii) Company has performed and complied with all of its obligations
under or with respect to the Company Plans, and the Company Plans have
operated in accordance with their respective terms. All Company Plans have
operated in accordance with the applicable requirements of ERISA and the
Code and other applicable laws, rules and regulations, and all reports
required by any governmental agency with respect to a Company Plan have
been timely filed.
(iii) Neither any of the Company Plans nor any employee benefit plan
(as defined in Section 3(3) of ERISA) maintained or contributed to by an
ERISA Affiliate (the Company Plans and the employee benefit plans of ERISA
Affiliates are collectively referred to as the "Company Group Plans") is
-------------------
covered by Title IV of ERISA.
(iv) No prohibited transaction (as defined in Section 406 of ERISA or
Section 4975 of the Code) has
17
<PAGE>
occurred with respect to any of the Company Group Plans.
(v) Each Company Plan which constitutes a welfare benefit plan within
the meaning of Section 3(1) of ERISA has complied and continues to comply
with the health care continuation coverage requirements of section 4980B of
the Code and Part 6 of Subtitle B of Title I of ERISA. Other than the
coverage referred to in the immediately preceding sentence, there are no
benefits to be provided to current retirees under any of the Company Plans
which constitutes a welfare benefit plan.
(vi) No action, suit or proceeding, hearing, or investigation with
respect to the administration or investment of the assets of any Company
Group Plan is pending or threatened. None of the senior executive officers
of Company has any knowledge of any basis for any such action, suit,
proceeding, hearing or investigation.
(vii) No amount paid or payable (or which may become payable)
pursuant to any Company Plan to or for the benefit of any officer, director
or employee of Company was or will constitute any excess parachute payment
(within the meaning of Section 280G of the Code) as a consequence, direct
or indirect, in whole or in part, of the consummation of the transaction
contemplated under the Agreement.
(viii) Company does not have any commitment, whether formal or
informal and whether legally binding or not, to create or amend any Company
Plan.
3.15. Patents, Trademarks, etc. Company owns, or possess adequate
------------------------
rights to use, all material patents, trade names, trademarks, copyrights,
inventions, processes, designs, formulae, trade secrets, knowhow and other
intellectual property rights necessary for the conduct of its business, with, to
the knowledge of Company, no conflict with or infringement of the asserted
rights of others. Company has no knowledge of any infringement by any third
party upon any patent, trade name, trademark or copyright owned by Company, and
Company has not taken or omitted to take any action which would have the effect
of waiving any of its rights thereunder, in each case except where such
infringement or waiver would not have a Material Adverse Effect.
3.16. Insurance. Company has heretofore furnished to Parent and
---------
Purchaser a complete and correct list as of the date
18
<PAGE>
hereof of all material insurance policies maintained by Company, and has made
available to Parent and Purchaser complete and correct copies of all such
policies, together with all riders and amendments thereto. All such policies
are in full force and effect and all premiums due thereon have been paid to the
date hereof. Company has complied in all material respects with the provisions
of all such policies.
3.17. No Brokers. All negotiations relating to this Agreement and
----------
the transactions contemplated hereby have been carried on without the
intervention of any person (other than Friedman, Billings, Ramsey & Co., Inc.)
acting on behalf of Company in such manner as to give rise to any valid claim
against Company or Parent or any of Parent's Subsidiaries for any broker's or
finder's fee or similar compensation.
3.18. Disclosure. The certificates, statements, and other
----------
information furnished to Parent or Purchaser in writing by or on behalf of
Company in connection with the transactions contemplated herein, taken as a
whole, do not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except for facts or
conditions affecting the Internet access industry or the website hosting
industry generally, Company knows of no fact or condition which materially
adversely affects, or in the future may (so far as Company can now reasonably
foresee) materially adversely affect the condition (financial or otherwise),
properties, assets, liabilities, business, operations or prospects of Company
which has not been set forth herein or disclosed in writing to Parent and
Purchaser with reference to this Agreement.
3.19. Offer Documents; Schedule 14D-9; Proxy Statement; Other
-------------------------------------------------------
Information. Neither the Schedule 14D-9 nor any information supplied by Company
- -----------
for inclusion in the Offer Documents shall, at the respective times the Schedule
14D-9, the Offer Documents or any amendments or supplements thereto 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. Neither the proxy statement to be sent to the
stockholders of Company in connection with the Stockholders' Meeting (as
hereinafter defined) or the information statement to be sent to such
stockholders, as appropriate (such proxy statement or information statement, as
amended or supplemented, being referred to herein as the "Proxy Statement"),
---------------
shall, at the date the Proxy Statement (or any amendment or supplement thereto)
is first mailed to stockholders of Company, at the time of the Stockholders'
Meeting and at the
19
<PAGE>
Effective Time, be false or misleading with respect to any 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 or necessary to correct any statement
in any earlier communication with respect to the solicitation of proxies for the
Stockholders' Meeting which shall have become false or misleading. The Schedule
14D-9 and the Proxy Statement shall comply in all material respects as to form
with the requirements of the Exchange Act and the rules and regulations
thereunder.
IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
------------------------------------------------------
Parent and Purchaser each represent to Company as follows:
4.1. Organization and Authorization, etc. Each of Parent and
-----------------------------------
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, has the corporate power and authority
to own, lease and operate all of its properties and assets and to carry on its
business, and is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which the nature of its business or the
ownership of its properties or both makes such qualification necessary, except
where failure to be so qualified would not, individually or in the aggregate,
have a Material Adverse Effect. Each of Parent and Purchaser has the corporate
power to enter into this Agreement and to carry out its obligations hereunder.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of each of Parent and Purchaser and no other corporate
proceedings on the part of Parent or Purchaser are necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by each of Parent and Purchaser and,
assuming this Agreement constitutes the legal, valid and binding Agreement of
the other parties hereto, this Agreement constitutes the legal, valid and
binding agreement of each of Parent and Purchaser, enforceable against each in
accordance with its terms.
4.2. Non-Contravention. The execution and delivery of this Agreement
-----------------
and the consummation of the transactions contemplated hereby will not (a)
-
violate any provision of the Certificate of Incorporation or By-Laws of Parent
or any of its Subsidiaries, (b) after giving effect to the to the transactions
-
contemplated by Section 6.9, violate any material provision of or result in the
breach or the acceleration of or entitle any party to accelerate (whether after
the giving of notice or lapse of time or both) any material obligation under,
any material
20
<PAGE>
mortgage, lien, lease, agreement, license, instrument, order, arbitration award,
judgment or decree to which Parent or any of its Subsidiaries is a party or by
which any of them is bound, (c) result in the creation or imposition of any
-
material lien, charge, pledge, security interest or other encumbrance upon any
material property of Parent or any of its Subsidiaries or (d) violate or
-
conflict with any other material restriction or any law, ordinance or rule to
which Parent or any of its Subsidiaries, or the property of Parent or any of its
Subsidiaries, is subject.
4.3. Approvals. No consent, approval, order or authorization of, or
---------
registration, declaration or filing with, any Governmental Authority is required
in connection with the execution and delivery of this Agreement by Parent and
Purchaser or the consummation by Parent and Purchaser of the transactions
contemplated hereby, except for (a) the filing of a Notification and Report Form
-
by Parent under the HSR Act, (b) the filing of the Schedule 14D-1 with the SEC
-
and the filing of the Proxy Statement with the SEC, (c) filings and approvals
-
with the SEC or as required by the securities or blue sky laws of the various
states, (d) any necessary filings with and approvals of the FCC and state public
-
utility commissions or other Governmental Authorities where the operations of
Company are subject to their jurisdiction and (e) the filing of a Certificate of
-
Merger with the Secretary of State of the State of Delaware.
4.4. No Brokers. All negotiations relating to this Agreement and the
----------
transactions contemplated hereby have been carried on without the intervention
of any person acting on behalf of Parent in such manner as to give rise to any
valid claim against Parent or Company or any of Parent's Subsidiaries for any
broker's or finder's fee or similar compensation other than Bear, Stearns & Co.
Inc., whose fees shall be paid by Parent.
4.5. Offer Documents; Proxy Statement; Other Information. 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. The information supplied by Parent for inclusion in the
Proxy Statement will not, on the date the Proxy Statement (or any amendment or
supplement thereto) is first mailed to stockholders of Company, at the time of
the Stockholders' Meeting and at the Effective Time, contain any statement
which, at such time and in light of the circumstances under which it is made, is
false or misleading with respect to any material fact, or omits to state any
material fact
21
<PAGE>
required to be stated therein or necessary in order to make the statements
therein not false or misleading or necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies for the
Stockholders' Meeting which shall have become false or 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.
4.6. Solvency. Parent is not currently insolvent, as such term is
--------
defined in Title 11 of the United States Bankruptcy Code or any state statute
relating to insolvency, and none of the execution and delivery of this Agreement
by Parent, the performance of its obligations hereunder or the consummation by
Parent of the transactions contemplated hereby will render Parent insolvent or
result in Parent being unable to pay its debts as they become due.
V. COVENANTS OF COMPANY
--------------------
5.1. Conduct of Business. From the date hereof to the Effective
-------------------
Time, except with the prior written consent of Parent and Purchaser, Company
will:
(a) carry on its business in, and only in, the ordinary course in
substantially the same manner as heretofore and, to the extent consistent
with such business, use all reasonable efforts to preserve intact its
present business organization, keep available the services of its present
officers and employees, and preserve its relationships with customers,
suppliers and others having business dealings with it;
(b) maintain all of its material structures, equipment and other
tangible personal property in good repair, order and condition, except for
depletion, depreciation, ordinary wear and tear and damage by unavoidable
casualty;
(c) keep in full force and effect insurance comparable in amount and
scope of coverage to insurance now carried by it;
(d) perform in all material respects all of its obligations under
agreements, contracts and instruments relating to or affecting its
properties, assets and business;
22
<PAGE>
(e) maintain its books of account and records in the usual, regular
and ordinary manner;
(f) comply in all material respects with all statutes, laws,
ordinances, rules and regulations applicable to it and to the conduct of
its business;
(g) not amend its Certificate of Incorporation or By-Laws;
(h) not enter into, assume or amend in any material respect any
agreement, contract or commitment of the character referred to in clauses
(a) through (c) of Section 3.10 (except that agreements with employees that
are solely confidentiality agreements shall not be considered employment
agreements) or, except in the ordinary course of business consistent with
past practice, clauses (d) through (l) of such Section;
(i) not enter into any additional contracts or agreements for network
capacity or local transport services which are not terminable by Company,
without penalty or other adverse consequence, on not more than 60 days
notice;
(j) not enter into any additional customer contracts or agreements
containing rates which are materially different from the rates charged by
Company to current customers of similar creditworthiness, ordering similar
amounts of services and over a similar term;
(k) not merge or consolidate with, or agree to merge or consolidate
with, or purchase substantially all the assets of, or otherwise acquire any
business or any corporation, partnership, association or other business
organization or division thereof;
(l) not purchase for cash and cancel any options outstanding under
Company Stock Option Plans or otherwise amend such Plans;
(m) promptly advise Parent and Purchaser in writing of any materially
adverse change in the consolidated financial condition, operations or
business of Company;
(n) not declare or pay dividends (cash or otherwise) or make any
distribution on, or directly or indirectly redeem, purchase or otherwise
acquire, any shares of its outstanding capital stock;
(o) not effect any stock split or other reclassification;
23
<PAGE>
(p) not authorize the creation or issuance of or issue, sell or
dispose of, or create any obligation to issue, sell or dispose of, any
shares of its capital stock or any securities or obligations convertible
into or exchangeable for, any shares of its capital stock (other than
pursuant to stock options or warrants heretofore outstanding);
(q) not issue any press releases without first consulting with Parent
regarding any such press release;
(r) not create, incur, assume, guarantee or otherwise become directly
or indirectly liable with respect to any indebtedness for borrowed money
other than in the ordinary course of business consistent with past practice
under agreements existing on the date hereof and identified in writing to
Parent and Purchaser; and
(s) not enter into any agreement or understanding to do or engage in
any of the foregoing.
Notwithstanding anything to the contrary in this Section 5.1, Company
shall be permitted to make payment in full of the automobile loans relating to
the two Chevrolet trucks owned by Company and to purchase the 1997 BMW 528I
automobile, the Ford Explorer and the two vans, each of which is currently being
leased by Company.
5.2. Access and Information. From the date hereof to the Effective
----------------------
Time, Company shall give to Parent and Purchaser and their representatives
reasonable access during normal business hours to the personnel, properties,
books, records, contracts and commitments of Company and will furnish all such
information and documents relating to the properties and business of Company as
Parent and Purchaser may reasonably request. In the event this Agreement is
terminated and the Merger abandoned, Parent and Purchaser will keep confidential
any information (unless readily ascertainable from public information or sources
or otherwise required by law to be disclosed) obtained from Company in
connection with the Merger, will not utilize such information for any purpose
and will return to Company all documents, work papers and other written material
obtained by Parent and Purchaser from Company.
5.3. No Solicitation. From the date hereof to the Effective Time,
---------------
Company shall not, directly or indirectly, through any officer, director, agent
or otherwise, (a) solicit, initiate or encourage the submission of any proposal
or offer from any person relating to any acquisition or purchase of all or
(other than in the ordinary course of business) any portion of the assets of, or
any equity interest in, Company or any business
24
<PAGE>
combination (other than private network agreements entered into by Company in
the ordinary course of business) with Company (a "Company takeover proposal") or
(b) except to the extent required by fiduciary obligations under applicable law
as advised in writing by independent counsel, participate in any negotiations
regarding, or furnish to any other person any information with respect to, or
otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other person to do or seek any of the
foregoing. Company immediately shall cease and cause to be terminated all
existing discussions or negotiations with any parties conducted heretofore with
respect to any of the foregoing. Company shall notify Parent promptly of any
Company takeover proposal or any inquiry or contact with any person with respect
thereto, that is made and shall, in any such notice to Parent, indicate in
reasonable detail the identity of the person making such Company takeover
proposal or related inquiry or contact and the terms and conditions of such
Company takeover proposal or related inquiry or contact. Company shall not
release any third party from, or waive any provision of, any confidentiality or
standstill agreement to which Company is a party.
VI. ADDITIONAL AGREEMENTS
---------------------
6.1. Stockholders' Meeting. (a) If required by applicable law in
---------------------
order to consummate the Merger, Company, acting through the Board, shall, in
accordance with applicable law and Company's Certificate of Incorporation and
By-laws, (i) duly call, give notice of, convene and hold an annual or special
meeting of its stockholders as soon as practicable following consummation of the
Offer for the purpose of considering and taking action on this Agreement and the
transactions contemplated hereby (the "Stockholders' Meeting") and (ii) (A)
---------------------
include in the Proxy Statement the unanimous recommendation of the Board that
the stockholders of Company approve and adopt this Agreement and the
transactions contemplated hereby and (B) use its reasonable best efforts to
obtain such approval and adoption. At the Stockholders' Meeting, Parent and
Purchaser shall cause all Shares then owned by them and their Subsidiaries to be
voted in favor of the approval and adoption of this Agreement and the
transactions contemplated hereby.
(b) Notwithstanding the foregoing, in the event that Purchaser shall
acquire at least 90 percent of the then outstanding Shares, the parties hereto
agree, at the request of Purchaser, subject to Article VII, to take all
necessary and appropriate action to cause the Merger to become effective, in
accordance with Section 253 of Delaware Law, as soon as reasonably practicable
after such acquisition, without a meeting of the stockholders of Company.
25
<PAGE>
6.2. Proxy Statement. If required by applicable law as soon as
---------------
practicable following consummation of the Offer, Company shall 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. 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.
6.3. Compliance with Conditions Precedent, etc. Parent, Purchaser and
-----------------------------------------
Company will each use commercially reasonable efforts to cause the conditions
precedent to the Offer and the Merger set forth in Annex A and in Article VII
hereof to be fulfilled and, subject to the terms and conditions herein provided,
to take, or cause to be taken, all action, and to do or cause to be done all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Merger, including without limitation to lift any injunction or remove
any other impediment to the consummation of such transactions or the Merger. In
case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers
and/or directors of Company, Parent or Purchaser, as the case may be, shall take
all such necessary action.
6.4. Certain Notifications. At all times from the date hereof until
---------------------
the Effective Time, each party shall promptly notify the others in writing of
the occurrence of any event which will or may result in the failure to satisfy
the conditions specified in Annex A or in Article VII.
6.5. Adoption by Purchaser. Parent, as the sole stockholder of
---------------------
Purchaser, by executing this Agreement, consents to the adoption of this
Agreement by Purchaser and agrees that
26
<PAGE>
such consent shall be treated for all purposes as a vote duly adopted at a
meeting of the stockholders of Purchaser held for this purpose.
6.6. Expenses. Whether or not the Merger is consummated, all costs
--------
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expense, except that the parties agree that Parent and Company shall share
evenly any filing fees required by the HSR Act.
6.7. Public Announcements. Parent and Company shall consult with
--------------------
each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or any transaction contemplated herein
and shall not issue any such press release or make any such public statement
prior to such consultation, except as may be required by law or any listing
agreement with a national securities exchange or the Nasdaq National Market to
which Parent or Company is a party.
6.8. Company Board Representation; Section 14(f). (a) Promptly upon
-------------------------------------------
the purchase by Purchaser of Shares pursuant to the Offer or the Stock Purchase
Agreement, and from time to time thereafter, Purchaser shall be entitled to
designate up to such number of directors, rounded up to the next whole number,
on the Board as shall give Purchaser representation on the Board equal to the
product of the total number of directors on the Board (giving effect to the
directors elected pursuant to this sentence) multiplied by the percentage that
the aggregate number of Shares beneficially owned by Purchaser or any affiliate
of Purchaser following such purchase bears to the total number of Shares then
outstanding, and Company shall, at such time, promptly take all actions
necessary to cause Purchaser's designees to be elected as directors of Company,
including increasing the size of the Board or securing the resignations of
incumbent directors or both. At such time, Company shall use its reasonable
best efforts to cause persons designated by Purchaser to constitute the same
percentage as persons designated by Purchaser shall constitute of the Board of
each committee of the Board. Notwithstanding the foregoing, until the earlier
of (i) the time Purchaser acquires a majority of the then outstanding Shares on
a fully diluted basis and (ii) the Effective Time, Company shall use its
reasonable best efforts to ensure that all the members of the Board and each
committee of the Board as of the date hereof who are not employees of the
Company shall remain members of the Board and of such committees.
(b) Company shall promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order
to fulfill its obligations under this Section 6.8 and shall include in the
Schedule 14D-9 such
27
<PAGE>
information with respect to Company and its officers and directors as is
required under Section 14(f) and Rule 14f-1 to fulfill such obligations. Parent
or Purchaser shall supply to Company and be solely responsible for any
information with respect to either of them and their nominees, officers,
directors and affiliates required by such Section 14(f) and Rule 14f-1.
6.9. Indebtedness of Company. Prior to the consummation of the Offer
-----------------------
by Purchaser (and as a condition thereto), Company shall, if Parent shall have
made available a Parent Loan as described below, repay all Indebtedness (as
defined in the Parent Indenture) of Company other than Vendor Indebtedness (as
defined in the Parent Indenture), it being expressly understood that if Parent
shall not have made available to Company a Parent Loan, then the repayment of
such Indebtedness shall not be a condition to the consummation of the Offer. To
the extent requested by Company, Parent shall make a loan to Company in
principal amount sufficient to pay in full (including principal, accrued
interest, fees, penalties and other charges) all Indebtedness required to be
repaid by Company pursuant to this Section 6.9 (the "Parent Loan"). The Parent
-----------
Loan shall (i) have a maturity of 180 days, (ii) bear interest at a rate to be
negotiated in good faith by the parties taking into account the interest rate
that could be obtained by Company on any bank or other financial institution
financing and (iii) have such other terms as shall be mutually agreed to by
Company and Parent, acting in good faith and a commercially reasonably manner.
VII. CONDITIONS
----------
7.1. Conditions to the Merger. The obligations of each party to
------------------------
effect the Merger shall be subject to the satisfaction, 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) all permits, approvals and consents of any Governmental Authority
or any other third party necessary or appropriate for consummation of the
Merger shall have been obtained, other than consents the failure to obtain
which would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect or a material adverse effect on the
consummation of the transactions contemplated hereby;
28
<PAGE>
(c) Purchaser or a permitted assignee shall have purchased all Shares
validly tendered and not withdrawn pursuant to the Offer; provided,
--------
however, that this condition shall not be applicable to the obligations of
-------
Parent and Purchaser if, in breach of this Agreement or the terms of the
Offer, Purchaser fails to purchase any Shares validly tendered and not
withdrawn pursuant to the Offer;
(d) no preliminary or permanent injunction or other order of a court
or Governmental Authority shall have been issued and be in effect, and no
United States federal or state statute, rule or regulation shall have been
enacted or promulgated after the date hereof and be in effect, that (i)
-
prohibits the consummation of the Merger or (ii) imposes material
--
limitations on the ability of Parent to exercise full rights of ownership
of Company's assets or business;
(e) there shall not be any action or proceeding commenced by or
before any Governmental Authority in the United States, or threatened by
any Governmental Authority in the United States, that challenges the
consummation of the Merger or seeks to impose material limitations on the
ability of Parent to exercise full rights of ownership of Company's assets
or business, other than any such action or proceeding commenced by a
stockholder or stockholders of Parent or Company, either derivatively on
behalf of Parent or Company, respectively, or on behalf of such stockholder
or stockholders, alleging that the directors or officers of Parent or
Company, respectively, have breached their fiduciary duties to stockholders
under Delaware law or Parent or Company has failed to make disclosures
required to be made under applicable state or federal securities laws, in
each case in connection with the transactions contemplated by this
Agreement, or making any similar claim; and
(f) any waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
VIII. TERMINATION, AMENDMENT AND WAIVER
---------------------------------
8.1. 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, except that in the case of termination after the consummation of
the Offer, the termination must be consented to by a majority of the
independent directors of Company;
29
<PAGE>
(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 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; or
(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 October 31, 1997, 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 8.1(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 Parent if due solely to an occurrence or circumstance that
would result in a failure to satisfy any condition set forth in Annex A
hereto, Purchaser shall have (i) failed to commence the Offer within 60
days following the date of this Agreement, (ii) terminated the Offer
without having accepted any Shares for payment thereunder or (iii) failed
to pay for Shares pursuant to the Offer within 90 days following the
commencement of the Offer, unless such failure to pay for Shares shall have
been caused by or resulted from the failure of Parent or Purchaser to
perform in any material respect any material covenant or agreement of
either of them contained in this Agreement or the material breach by Parent
or Purchaser of any material representation or warranty of either of them
contained in this Agreement;
(f) by Company, upon approval of the Board, if due to an occurrence
or circumstance that would result in a failure to satisfy any of the
conditions set forth in Annex A hereto, Purchaser shall have (i) failed to
commence the Offer within 60 days following the date of
30
<PAGE>
this Agreement, (ii) terminated the Offer without having accepted any
Shares for payment thereunder or (iii) failed to pay for Shares pursuant to
the Offer within 90 days following the commencement of the Offer, unless
such failure to pay for Shares shall have been caused by or resulted from
the failure of Company to perform in any material respect any material
covenant or agreement of it contained in this Agreement or the material
breach by Company of any material representation or warranty of it
contained in this Agreement;
(g) 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;
(h) by Parent or Purchaser if Company breaches the provisions of
Section 5.3; or
(i) by Parent or Purchaser if, at any time, Company shall have
withdrawn or modified in any manner adverse to Parent or Purchaser its
approval or recommendation of the Offer, this Agreement or the Merger.
8.2. Effect of Termination. In the event of the termination of this
---------------------
Agreement pursuant to the provisions of Section 8.1, the provisions of this
Agreement (other than the second sentence of Sections 5.2 and Sections 6.6, 8.2
and 8.3 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 Section 8.3, 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 willful breach of its obligations under this
Agreement.
8.3. 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 $3,794,135 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
31
<PAGE>
Purchaser incurred in connection with the transactions contemplated by this
Agreement (including the preparation and negotiation of this Agreement)
("Parent Expenses") 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 8.1(b), 8.1(g), 8.1(h) or
8.1(i) hereof.
(ii) Parent or Purchaser shall have exercised its right to
terminate this Agreement pursuant to Section 8.1(e) hereof, but only
because of the failure of one or more of the conditions specified in
paragraphs (c), (e), (f), (g) or (j) of Annex A;
(iii) Company shall have exercised its right to terminate this
Agreement pursuant to Section 8.1(g).
(iv) Any person or group other than Parent or an affiliate
thereof, shall have acquired at least 50% of the outstanding shares of
Company Common Stock.
(b) Company shall not be obligated to make any payment pursuant to
this Section 8.3, if at the time such payment becomes due Parent or
Purchaser is in material breach of its obligations under this Agreement.
8.4. 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 rate at which shares of
Company Common Stock shall be converted into Merger Consideration pursuant to
Section 1.6 without the further approval of the stockholders of Company other
than Parent.
8.5. 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.
IX. GENERAL PROVISIONS
------------------
9.1. Definitions. As used in the Agreement, the following terms
-----------
have the following respective meanings:
Board: as defined in the recitals.
-----
Certificate of Merger: as defined in Section 2.5.
---------------------
32
<PAGE>
Certificates: as defined in Section 2.8(b).
------------
Code: as defined in Section 2.9.
----
Company: as defined in the first paragraph of this Agreement.
-------
Company Common Stock: as defined in the recitals.
--------------------
Company Group Plans: as defined in Section 3.14.
-------------------
Company Interim Financials: as defined in Section 3.6(b).
--------------------------
Company Plans: as defined in Section 3.14.
-------------
Company Stock Option Plans: as defined in Section 2.9.
--------------------------
Dissenting Shares: as defined in Section 2.6(d).
-----------------
Effective Time: as defined in Section 2.5.
--------------
ERISA: the Employee Retirement Income Security Act of 1974, as
-----
amended.
ERISA Affiliate: means an organization that is a member of a
---------------
controlled group of organizations within the meaning of Sections 414(b), (c),
(m) or (o) of the Code which includes a particular entity.
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.
FCC: the Federal Communications Commission.
---
GCL: as defined in the recitals.
---
Governmental Authority: means any United States federal, state or
----------------------
local or any foreign government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal or judicial or arbitral
body.
HSR Act: as defined in Section 3.4.
-------
Material Adverse Effect: any change or effect that, individually or in
-----------------------
the aggregate with all other changes or effects, is or is reasonably likely to
be materially adverse to the business, operations, properties, condition
(financial or
33
<PAGE>
otherwise), assets, liabilities or prospects of Company, when used with respect
to Company, or of Parent and its Subsidiaries, taken as a whole, when used with
respect to Parent.
Merger: as defined in the recitals.
------
Merger Consideration: as defined in Section 2.6(a).
--------------------
Minimum Condition: as defined in Section 1.1(a).
-----------------
Offer: as defined in the recitals.
-----
Offer Documents: as defined in Section 1.1(b).
---------------
Offer to Purchase: as defined in Section 1.1(b).
-----------------
Parent: as defined in the first paragraph of this Agreement.
------
Parent Common Stock: the Common Stock of Parent, par value $.01 per
-------------------
share.
Parent Indenture: The Indenture, dated as of June 2, 1995 and amended
----------------
and restated as of April 26, 1996, between Parent and SunTrust Bank, Central
Florida, National Association (as trustee), relating to the 13 1/2% Senior Notes
Due 2005 of Parent.
Per Share 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.
Proxy Statement: as defined in Section 3.20.
---------------
Purchaser: as defined in the first paragraph of this Agreement.
---------
SEC: as defined in Section 1.1(b).
---
Shares: as defined in the recitals.
------
Schedule 14D-1: as defined in Section 1.1(b).
--------------
Schedule 14D-9: as defined in Section 1.2(b).
--------------
Stockholders' Meeting: as defined in Section 6.1.
---------------------
Stock Purchase Agreement: as defined in the recitals.
------------------------
34
<PAGE>
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.
---------------------
Tax or Taxes: means all federal, state, local and foreign taxes,
--- -----
duties, levies, governmental charges and assessments of any nature, including
employment taxes 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.
9.2. 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.
9.3. 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 Parent or Purchaser, a copy to:
Intermedia Communications Inc.
3625 Queen Palm Drive
Tampa, Florida 33619
Attention: Chief Financial Officer
Telecopy: (813) 829-2470
and
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:
Digex, Incorporated
One Digex Plaza
Beltsville, Maryland 20705
Attention: Chief Executive Officer
Telecopy: (301) 847-5017
35
<PAGE>
and
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004
Attention: James F. Rogers, Esq.
Telecopy: (202) 637-2201
9.4. 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.
9.5. Miscellaneous. This Agreement (including the exhibits,
-------------
documents and instruments referred to herein or therein) (a) constitute the
-
entire agreement and supersede 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) are 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.
9.6. 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
36
<PAGE>
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.
9.7. 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]
37
<PAGE>
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: /s/ Robert M. Manning
---------------------------------
Name: Robert M. Manning
Title: Senior Vice President and
Chief Financial Officer
DAYLIGHT ACQUISITION CORP.
By: /s/ Robert M. Manning
--------------------------------
Name: Robert M. Manning
Title: President
DIGEX, INCORPORATED
By: /s/ Christopher R. McCleary
---------------------------------
Name: Christopher R. McCleary
Title: President and Chief
Executive Officer
<PAGE>
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) the Minimum Condition shall
not have been satisfied, (ii) any applicable waiting period under the HSR Act
shall not have expired or been terminated prior to the expiration of the Offer,
or (iii) 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) there shall have been instituted or be pending any action or
proceeding before any court or governmental, administrative or regulatory
authority or agency, domestic or foreign, (i) that would reasonably be
expected to make illegal, materially delay or otherwise directly or
indirectly restrain or prohibit the making of the Offer, the acceptance for
payment of, or payment for, any Shares by Parent, Purchaser or any other
affiliate of Parent, the purchase of Shares pursuant to the Stock Purchase
Agreement, or the consummation of any other transaction contemplated by the
Agreement, or that would reasonably be expected to result in material
damages in connection with any transaction contemplated by the Agreement;
(ii) that would reasonably be expected to prohibit or limit materially the
ownership or operation by Company, Parent or any of their subsidiaries of
all or any material portion of the business or assets of Company, or to
compel Company, Parent or any of their subsidiaries to dispose of or hold
separate all or any material portion of the business or assets of Company,
Parent or any of their subsidiaries, as a result of the transactions
contemplated by the Agreement; (iii) that would reasonably be expected to
impose or confirm limitations on the ability of Parent, Purchaser or any
other affiliate of Parent to exercise effectively full rights of ownership
of any Shares, including, without limitation, the right to vote any Shares
acquired by Purchaser pursuant to the Offer, the Stock Purchase Agreement
or otherwise on all matters properly presented to Company's stockholders,
including, without limitation, the approval and adoption of this Agreement
and the transactions contemplated hereby; (iv) that would reasonably be
expected to require divestiture by
<PAGE>
Parent, Purchaser or any other affiliate of Parent of any Shares; or (v)
which otherwise is a Material Adverse Change (as defined below);
(b) there shall have been any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction
enacted, entered, enforced, promulgated, amended, issued or deemed
applicable to (i) Parent, Company or any subsidiary or affiliate of Parent
or Company or (ii) any transaction contemplated by the Agreement, by any
legislative body, court, government or governmental, administrative or
regulatory authority or agency, domestic or foreign, other than the routine
application of the waiting period provisions of the HSR Act to the Offer,
the Stock Purchase Agreement or the Merger, which is reasonably likely to
result, directly or indirectly, in any of the consequences referred to in
clauses (i) through (v) of paragraph (a) above;
(c) there shall have occurred any change, condition, event or
development that is a Material Adverse Change. For purposes of this Annex
A, "Material Adverse Change" means any change or effect that, individually
or in the aggregate with all other changes or effects, is or is reasonably
likely to be materially adverse to the business, operations, properties,
condition (financial or otherwise), assets, liabilities or prospects of
Company, except for changes or effects that result primarily from the
Offer, the contemplated Merger or the contemplated control of Company by
Parent, including any action or inaction by any employee (other than a
senior executive officer or director) of Company or any other third party
primarily due to the Offer, the contemplated Merger or the contemplated
control of Company by Parent;
(d) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the Nasdaq Stock Market
for more than one trading day, (ii) any decline, measured from the date
hereof, in the Standard & Poor's 500 Index by an amount in excess of 25%,
(iii) a declaration of a banking moratorium or any suspension of payments
in respect of banks in the United States, (iv) any direct material
limitation (whether or not mandatory) by any government or governmental,
administrative or regulatory authority or agency, domestic or foreign, on
the extension of credit by banks or other lending institutions, (v) a
commencement of a war or armed hostilities or other national or
international calamity directly or
2
<PAGE>
indirectly involving the United States or (vi) in the case of any of the
foregoing existing on the date hereof, a material acceleration or worsening
thereof;
(e) (i) it shall have been publicly disclosed or Purchaser shall have
otherwise learned that beneficial ownership (determined for the purposes of
this paragraph as set forth in Rule 13d-3 promulgated under the Exchange
Act) of 30% or more of the then outstanding Shares has been acquired by any
person other than Parent or any of its affiliates or other than those
persons executing the Stock Purchase Agreement or (ii) (A) the Board or any
committee thereof shall have withdrawn or modified in a manner adverse to
Parent or Purchaser the approval or recommendation of the Offer, the Merger
or the Merger Agreement, or approved or recommended any takeover proposal
or any other acquisition of Shares other than the Offer and the Merger, (B)
any corporation, partnership, person or other entity or group shall have
entered into a definitive agreement or an agreement in principle with
Company with respect to a tender offer or exchange offer for any Shares or
a merger, consolidation or other business combination with or involving
Company or (C) the Board or any committee thereof shall have resolved to do
any of the foregoing;
(f) any representation or warranty of Company in the Merger Agreement
which is qualified as to materiality shall not be true and correct or any
such representation or warranty that is not so qualified shall not be true
and correct in any material respect, in each case as if such representation
or warranty was made as of such time on or after the date of this Agreement
(other than representations or warranties made as of a specific date, which
shall only be made as of such date); provided, that for purposes of this
--------
paragraph (f), the term "Material Adverse Change" shall be substituted for
the term "Material Adverse Effect" in all representations and warranties
containing such term which are deemed to be made after the date of this
Agreement by virtue of this paragraph (f), and Company shall not have
delivered to Parent a certificate of Company to such effect signed by a
duly authorized officer thereof and dated as of the date on which Parent
shall first accept Shares for payment;
(g) Company shall have failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or
covenant of Company to be performed or complied with by it under
3
<PAGE>
the Merger Agreement and, in the case of failures to perform any agreement
or covenant of Company pursuant to Sections 5.1 (b), (c), (d) and (f) of
the Merger Agreement, such failure to perform would reasonably be expected
to have a Material Adverse Change;
(h) the Merger Agreement shall have been terminated in accordance
with its terms;
(i) Purchaser and Company shall have agreed that Purchaser shall
terminate the Offer or postpone the acceptance for payment of or payment
for Shares thereunder;
(j) any holder of options to purchase shares of Company Common Stock
(other than Clyde Heintzelman) whose options vest on a change of control
shall have failed to waive the vesting of such options upon a change of
control of Company;
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.
4
<PAGE>
EXHIBIT 99.(c)2
EXECUTION COPY
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of June 4, 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 and officers of the Company.
WHEREAS, Purchaser and its wholly owned subsidiary, Daylight Acquisition
Corp. (the "Subsidiary"), propose to enter into an Agreement and Plan of Merger,
----------
dated as of the date hereof (the "Merger Agreement"), with DIGEX, Incorporated,
----------------
a Delaware corporation (the "Company"), which Merger Agreement provides, among
-------
other things, for the acquisition of the Company by Subsidiary through (i) a
tender offer (the "Offer") for any and all shares of Common Stock of the
-----
Company, par value $.01 per share ("Company Common Stock") for $13.00 per share
--------------------
(the "Per Share Amount") and (ii) the second step merger pursuant to which
----------------
Subsidiary will merge with and into the Company (the "Merger") and all
------
outstanding shares of Company Common Stock other than shares held by Purchaser
and Subsidiary will be converted into the right to receive not less than the Per
Share Amount 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 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
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 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:
<PAGE>
1. Tender of Shares Pursuant to the Offer. Each Stockholder hereby
--------------------------------------
irrevocably agrees to tender and sell (and not withdraw), pursuant to and in
accordance with the terms of the Offer as amended from time to time, all of
such Stockholder's Shares (provided, that the consideration offered in any
--------
such amendment is in cash and in an amount equal to the Per Share Amount).
2. 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 per Option
-------------
Share. Purchaser may assign to any subsidiary or affiliate of Purchaser
(including Subsidiary) the right to exercise the Option. 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 purchase any Option Shares
from any Stockholder, the following procedures shall be followed:
(a) Purchaser shall send a written notice to such Stockholder specifying
the number of Option Shares Purchaser will purchase and the place and
date (on or before the later of ten business days from the date such
notice is mailed and 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")) of closing of such
-------
purchase. If such closing is to occur sooner than two 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.
(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
2
<PAGE>
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.
3. Voting of Shares. Each Stockholder shall, until the Termination Date, 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) 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
10 of this Agreement.
4. 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.
3
<PAGE>
5. No Disposition or Encumbrance of Shares. Each Stockholder hereby covenants
-------------------------------------
and agrees that, until the expiration of the Options as provided in Section
2 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.
6. No Solicitation of Transactions. Each Stockholder 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 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
4 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.
4
<PAGE>
7. Legend on Certificates. The certificate(s) evidencing the Shares shall be
----------------------
endorsed with a restrictive legend substantially as follows:
The shares evidenced by this certificate are subject to a stock
purchase agreement dated as of June 4, 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, by his acceptance hereof, agrees to be bound by all the
terms of such agreement, as the same is in effect from time to time.
8. 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:
(a) 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.
(b) 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 and the Securities Exchange Act of 1934, as amended),
any governmental or regulatory authority, domestic or foreign, (ii)
conflict with or violate the Certificate of Incorporation or By-laws
of the Stockholder, (iii) conflict with or violate any law, rule,
regulation, order, judgment
5
<PAGE>
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 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.
(c) Title to the Shares. The Shares owned by the Stockholder (as set
-------------------
forth on the signature pages hereto) are all the equity securities 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, and,
except as provided in this Agreement, the Stockholder has not
appointed or granted any proxy, which appointment or grant is still
effective, with respect to the Shares.
(d) Brokers. Other than Friedman, Billings, Ramsey & 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 the Stockholder.
9. Representations and Warranties of Purchaser. Purchaser hereby represents
-------------------------------------------
and warrants to the Stockholders as follows:
(a) 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 Purchaser and the consummation of the
transactions contemplated hereby have been duly authorized by
6
<PAGE>
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.
(b) 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 and the Securities Exchange Act of 1934, as amended), 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.
(c) 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.
10. 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.
7
<PAGE>
11. Miscellaneous.
-------------
(a) 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.
(b) 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.
(c) 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, in addition to any other remedy to which they may be
entitled at law or in equity.
(d) 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.
(e) 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.
(f) 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.
8
<PAGE>
(g) 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.
(h) 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.
(i) 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 8(i)):
9
<PAGE>
if to Purchaser:
Intermedia Communications Inc.
3625 Queen Palm Drive
Tampa, FL 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:
at the respective addresses of such Stockholder set forth at the foot
of this Agreement
(j) 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.
(k) 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.
(l) Parties in Interest. This Agreement shall be binding upon and inure
-------------------
solely to the benefit of each party hereto, and 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.
(m) 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.
(n) 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.
10
<PAGE>
IN WITNESS WHEREOF, Purchaser has caused this Agreement to be executed by
its officers thereunto duly authorized and the Stockholders have duly executed
this Agreement, as of the date first written above.
PURCHASER:
- ---------
INTERMEDIA COMMUNICATIONS INC.
By: /s/ Robert M. Manning
-------------------------
Name: Robert M. Manning
Title: Senior Vice President and
Chief Financial Officer
<TABLE>
<CAPTION>
SHAREHOLDERS: NUMBER OF SHARES OWNED:
- ------------ -----------------------
<S> <C>
GROTECH PARTNERS IV, L.P. 1,438,361
-------------
By: GROTECH CAPITAL GROUP IV, LLC
General Partner
By: /s/ Frank A. Adams
-------------------------------
Name: Frank A. Adams
Title: President & CEO
Address: 9690 Deereco Road
Timonium, MD 21093
Telecopy: 410-560-1910
GROTECH PARTNERS III, L.P. 229,050
-------------
By: Grotech Capital Group, Inc.
General Partner
By: /s/ Frank A. Adams
-------------------------------
Name: Frank A. Adams
Title: President & CEO
Address: 9690 Deereco Road
Timonium, MD 21093
Telecopy: 410-560-1910
</TABLE>
[Signature Pages Continue on Next Page]
<PAGE>
<TABLE>
<S> <C>
GROTECH III COMPANION FUND, L.P. 24,952
-------------
By: Grotech Capital Group, Inc.
General Partner
By: /s/ Frank A. Adams
-------------------------------
Name: Frank A. Adams
Title: President & CEO
Address: 9690 Deereco Road
Timonium, MD 21093
Telecopy: 410-560-1910
GROTECH III PENNSYLVANIA FUND, L.P. 14,228
-------------
By: Grotech Capital Group, Inc.
General Partner
By: /s/ Frank A. Adams
-------------------------------
Name: Frank A. Adams
Title: President & CEO
Address: 9690 Deereco Road
Timonium, MD 21093
Telecopy: 410-560-1910
VENROCK ASSOCIATES 794,229
-------------
By: /s/ Ray A. Rothrock
-------------------------------
Name: Ray A. Rothrock
Title: General Partner
Address: 30 Rockefeller Plaza, Room 5508
New York, New York 10112
Telecopy: 212-649-5788 (F)
212-649-5786 (P)
</TABLE>
[Signature Pages Continue on Next Page]
<PAGE>
<TABLE>
<S> <C>
VENROCK ASSOCIATES II, L.P. 382,051
-------------
By: /s/ Ray A. Rothrock
-------------------------------
Name: Ray A. Rothrock
Title: General Partner
Address: 30 Rockefeller Plaza, Room 5508
New York, New York 10112
Telecopy: 212-649-5788 (F)
212-649-5786 (P)
SOUTHERN VENTURE FUND II, L.P. 840,198
-------------
By: /s/ William F. Earthman III
-------------------------------
Name: William F. Earthman III
Title: General Partner
Address: 310 25th Avenue N.
Nashville, TN 37205
Telecopy: 615-329-9237
BLUE CHIP CAPITAL FUND LIMITED 429,285
PARTNERSHIP -------------
By: BLUE CHIP VENTURE COMPANY
General Partner
By: /s/ John H. Wyant
-------------------------------
Name: John H. Wyant
Title: President
Address: 2000 PNC Court
Cincinatti, OH 45208
Telecopy: 513-723-2306
DIGEX INVESTORS, LTD. 107,321
-------------
By: /s/ Stephen E. Kaufman
-------------------------------
Name: Stephen E. Kaufman
Title: President
Address: 441 Vine Street, Suite 3900
Cincinatti, OH 45202
Telecopy: 513-381-8808
</TABLE>
[Signature Pages Continue on Next Page]
<PAGE>
DOUGLAS E. HUMPHREY 970,744
-------------
/s/ Douglas E. Humphrey
-------------------------------
Address: 308 Montgomery Street
Laurel, MD 20707
Telecopy: 410-792-2985 (F)
301-598-8723 (P)
MICHAEL T. DOUGHNEY 647,163
-------------
/s/ Michael T. Doughney
-------------------------------
Address: One Digex Plaza
Beltsville, MD 20705
Telecopy: 301-419-5017
<PAGE>
EXHIBIT 99.(c)(3)
March 27, 1997
Christopher R. McCleary
Digex Inc.
6800 Virginia Manor Road
Beltsville, Maryland 20705
Personal and Confidential
- -------------------------
Dear Mr. McCleary:
The undersigned (the "Company") and you ("Digex") are about to engage in
exploratory discussions regarding a possible acquisition by the Company of, or
Investment by the company in Digex or a similar transaction (any of the
foregoing, a "Transaction"). The Company and Digex 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 Digex, including any of its direct or
indirect subsidiaries ("Digex Evaluation Material"). The Company hereby
undertakes with respect to the Digex Evaluation Material, and Digex hereby
undertakes with respect to the Company Evaluation Material, and each of the
Company and Digex otherwise agrees 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
data hereof, such Evaluation Material will be kept strictly
confidential by the Company or Digex, 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 evaluating 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 agree to be bound by this Agreement). The Company and Digex
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
Digex or their respective Representatives) or (ii) was or becomes
available to the
<PAGE>
Company or Digex, as the case may be, on a non-confidential basis
from a person not to the knowledge of the Company or Digex, 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 Digex, as
the case may be, otherwise prohibited from transmitting the
information to the Company or Digex, as the case may be, or (iii) is
independently developed by the Company or Digex, 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, Digex 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 Digex will,
without the prior written consent of the 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 Digex.
5. The Company and Digex each herby 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 or its Representatives, on the one hand,
nor Digex or any of its Representatives, on the other hand, is making
any representation or warranty hereunder, express or implied, as
to the
2
<PAGE>
accuracy or completeness of the Company Evaluation Material or Digex
Evaluation Material, respectively, or any other information provided
pursuant hereto. Neither party, nor any of their respective
affiliates, Representatives, officers, director, 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 Digex 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
king whatsoever with respect to such 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
Digex, 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 Digex, all Evaluation Material, including all
copies, reproductions, summaries extracts therefor or based thereon,
previously provided to the other shall be returned or be certified in
writing to have been destroyed.
10. In consideration of the due diligence effort to be performed by the
Company and the expenses to be incurred by the Company in connection
therewith, Digex hereby agrees that for the period from the date of
this letter through April 30, 1997 and, if a definitive agreement for
a Transaction is executed prior thereto, through the date such
definitive agreement is consummated or abandoned in accordance with
its terms without default by Digex, neither Digex nor any of its
officers, directors or shareholders on behalf of Digex will solicit
any offer for a sale of Digex all or any substantial part of its
business or assets or any equity securities issued by Digex or any
subsidiary of Digex nor engage in any negotiations or permit
exploratory due diligence regarding any such offer, other than with
the Company.
11. The Company and Digex 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.
3
<PAGE>
12. 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 Digex 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 Digex 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 proceeding relating to this Agreement or any Transaction except
in such court. Each of the Company and Digex herby 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.
13. 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.
14. If it is found in a final judgement by a court of competent
jurisdiction (not subject to further appeal) that any term or
provison 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 valid and
enforceable and that comes closest to expressing the intention of
such invalid or unenforceable term or provison.
15. 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
a writing
4
<PAGE>
by a duly authorized Representative of each party.
16. 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 original instrument, but all
such counterparts taken together shall constitute one and the same
Agreement.
5
<PAGE>
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: /s/ Robert M. Manning
------------------------------------
Robert M. Manning, Senior President
Chief Financial Officer
Confirmed and agreed to
this 31 day of March, 1997
----
DIGEX
By: /s/ Brian Dedrald
------------------------------------
6
<PAGE>
EXHIBIT 99.(c)(4)
[LOGO OF INTERMEDIA COMMUNICATIONS]
INTERMEDIA
COMMUNICATIONS
David C. Ruberg
President & CEO
June 4, 1997
Mr. Christopher R. McCleary
President and Chief Executive Officer
DIGEX, Incorporated
6800 Virginia Manor Road
Beltsville, Maryland 20705
Dear Chris:
This will confirm our agreement that Intermedia Communications Inc. will
consent under the provisions of the agreement and plan of merger executed by
our companies tonight to the grant by DIGEX of options to purchase up to two
hundred thousand shares of DIGEX common stock at an exercise price of $3.00 per
share to members of the DIGEX management team in amounts to be determined by
mutual agreement between us prior to the consummation of the contemplated tender
offer. The options to be granted will have a five year vesting schedule.
Sincerely,
/s/ David C. Ruberg
David C. Ruberg
Chairman, President & CEO
DCR/bps
3625 Queen Palm Drive Tampa, Florida 33619 (813) 744-2401
