-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VBQ4Z7BOdPdgYlLS36lSNM2FFt4sgN/WRpLPyJZsC+XrE4Xl2i5WtcX4a8ub0CPz o/GxIaiq5U5J2DfPdlTXig== 0000893750-03-000415.txt : 20030725 0000893750-03-000415.hdr.sgml : 20030725 20030724175847 ACCESSION NUMBER: 0000893750-03-000415 CONFORMED SUBMISSION TYPE: SC TO-C PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20030725 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: WORLDCOM INC CENTRAL INDEX KEY: 0000723527 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 581521612 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-C BUSINESS ADDRESS: STREET 1: 500 CLINTON CENTER DRIVE CITY: CLINTON STATE: MS ZIP: 39056 BUSINESS PHONE: 6014605600 FORMER COMPANY: FORMER CONFORMED NAME: MCI WORLDCOM INC DATE OF NAME CHANGE: 19980914 FORMER COMPANY: FORMER CONFORMED NAME: WORLDCOM INC /GA/ DATE OF NAME CHANGE: 19970127 FORMER COMPANY: FORMER CONFORMED NAME: LDDS COMMUNICATIONS INC /GA/ DATE OF NAME CHANGE: 19930916 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: DIGEX INC/DE CENTRAL INDEX KEY: 0001085098 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 593582217 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-C SEC ACT: 1934 Act SEC FILE NUMBER: 005-57127 FILM NUMBER: 03801741 BUSINESS ADDRESS: STREET 1: DIGEX, INC STREET 2: 14400 SWEITZER LANE CITY: LAUREL STATE: MD ZIP: 20707 BUSINESS PHONE: 2402642000 MAIL ADDRESS: STREET 1: 12050 BALTIMORE AVE CITY: BELTSVILLE STATE: MD ZIP: 20705 SC TO-C 1 sch.txt SCHEDULE TO-C SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- SCHEDULE TO (RULE 14D-100) TENDER OFFER STATEMENT UNDER SECTION 14(D)(1) OR 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 DIGEX, INCORPORATED ----------------------------------------------------------------------- (Name of Subject Company (Issuer)) WORLDCOM, INC. INTERMEDIA COMMUNICATIONS INC. BUSINESS INTERNET, INC. INTERMEDIA INVESTMENT, INC. --------------------------------------------------------------------------- (Names of Filing Persons (Offeror and Other Persons)) Class A Common Stock, par value $.01 per share --------------------------------------------------------------------------- (Title of Class of Securities) 253756 100 --------------------------------------------------------------------------- (CUSIP Number of Class of Securities) Paul M. Eskildsen Secretary WorldCom, Inc. 22001 Loudoun County Parkway Ashburn, VA 20147 (703) 886-5600 ---------------------------------------------------------------------------- (Name, Address and Telephone Numbers of Person Authorized to Receive Notices and Communications on Behalf of Filing Persons) Copies to: Frederick S. Green, Esq./Steven D. Rubin, Esq. Weil, Gotshal & Manges, LLP 767 Fifth Avenue New York, NY 10153 (212) 310-8000 CALCULATION OF FILING FEE ----------------------------------------- ---------------------------------- Transaction Valuation* Amount of Filing Fee* not applicable not applicable ----------------------------------------- ---------------------------------- * As the filing contains only preliminary communications made before the commencement of the tender offer, no filing fee is required. [ ] Check the box if any part of the fee is offset as provided by Rule 0-11(a) (2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: Not applicable Filing Party: Not applicable Form or Registration No.: Not applicable Date Filed: Not applicable [X] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. Check the appropriate boxes below to designate any transactions to which the statement relates: [X] third-party tender offer subject to Rule 14d-1. [ ] issuer tender offer subject to Rule 13e-4. [X] going-private transaction subject to Rule 13e-3. [X] amendment to Schedule 13D under Rule 13d-2. Check the following box if the filing is a final amendment reporting the results of the tender offer: [ ] ---------------------------------------------- This Tender Offer Statement on Schedule TO is filed by WorldCom, Inc. ("WorldCom"). Pursuant to General Instruction D to Schedule TO, this Schedule TO relates to pre-commencement communications by WorldCom, Intermedia Communications Inc. ("Intermedia"), Business Internet, Inc. ("Business Internet") and Intermedia Investment, Inc. ("Intermedia Investment"). WorldCom has not yet commenced the offer that is referred to in this communication. Upon commencement of such offer, WorldCom, Intermedia, Business Internet and Intermedia Investment will file with the Securities and Exchange Commission a Schedule TO and related exhibits, including an Offer to Purchase, the Letter of Transmittal and other related documents. Stockholders are strongly encouraged to read the Schedule TO and related exhibits, including the Offer to Purchase, the Letter of Transmittal and other related documents, when these become available because they will contain important information about the offer. The Schedule TO and related exhibits will be available without charge at the Securities and Exchange Commission website at http://www.sec.gov and will be delivered without charge to all stockholders of Digex, Incorporated. ============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO 13d-2(a) Digex, Incorporated - ------------------------------------------------------------------------------ (Name of Issuer) Class A Common Stock, par value $0.01 per share Class B Common Stock, par value $0.01 per share - ------------------------------------------------------------------------------ (Title of Class of Securities) Class A Common Stock: 253756 10 0 Class B Common Stock: 369385 20 8 - ----------------------------------------------------------------------------- (CUSIP Number) Paul M. Eskildsen Secretary WorldCom, Inc. 22001 Loudoun County Parkway Ashburn, VA 20147 (703) 886-5600 - ----------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) July 23, 2003 - ----------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box: (Continued on following pages) (Page 1 of 18 Pages) ============================================================================== - ----------------------------------- -------------------- Class A Common Stock: 253756 10 0 Schedule 13D Page 2 of 18 Pages Class B Common Stock: 369385 20 8 - ----------------------------------- -------------------- - ----- 1. NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY) WorldCom, Inc. 58-1521612 - ------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) / / - ------------------------------------------------------------------------------- 3. SEC USE ONLY - ------------------------------------------------------------------------------- 4. SOURCES OF FUNDS Class A Common Stock: WC, OO Class B Common Stock: OO - ------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT /X/ TO ITEMS 2(d) OR 2(e) - ------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Georgia - ----------- ------------------------------------------------------------------- NUMBER OF SHARES 7. SOLE VOTING POWER Class A Common Stock: 39,350,000(1) Class B Common Stock: 39,350,000(2) ------------------------------------------------------- BENEFICIALLY OWNED BY 8. SHARED VOTING POWER None ------------------------------------------------------- EACH REPORTING 9. SOLE DISPOSITIVE POWER Class A Common Stock: 39,350,000(1) Class B Common Stock: 39,350,000(2) ------------------------------------------------------- PERSON WITH 10. SHARED DISPOSITIVE POWER Class A Common Stock: 730,995(3) - ------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON Class A Common Stock: 40,080,995(4) Class B Common Stock: 39,350,000(2) - ------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS BEFORE FILLING OUT) / / - ------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) Class A Common Stock: 61.1%(4) Class B Common Stock: 100.0%(2) - ------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON CO - ------------------------------------------------------------------------------- (1) Represents shares of Class A Common Stock if Class B shares are converted. (2) Represents shares of Class B Common Stock held of record by Intermedia Investment, Inc., a wholly owned subsidiary of Business Internet, Inc., which is a wholly owned subsidiary of Intermedia Communications Inc., which is a directly owned subsidiary of WorldCom. (3) Represents shares of Class A Common Stock issuable upon conversion of 50,000 shares of Series A Convertible Preferred Stock owned directly by HPQ Holdings, LLC, a wholly owned subsidiary of Hewlett-Packard Company, which shares WorldCom has agreed to purchase pursuant to the terms of a Stock Purchase Agreement dated July 23, 2003, by and among WorldCom, Hewlett-Packard and HPQ Holdings. So long as the Stock Purchase Agreement is in effect, HPQ is prohibited from selling or otherwise transferring the Series A Convertible Preferred Stock. WorldCom's acquisition of the Series A Convertible Preferred Stock is conditioned on, among other things, approval of the U.S. Bankruptcy Court for the Southern District of New York. (See Items 4, 5 and 6 of this Schedule 13D). (4) Includes shares of Class A Common Stock if Class B shares are converted and shares of Class A Common Stock issuable upon conversion of 50,000 shares of Series A Convertible Preferred Stock owned by HPQ Holdings, LLC. See notes (2) and (3) above. - ----------------------------------- -------------------- Class A Common Stock: 253756 10 0 Schedule 13D Page 3 of 18 Pages Class B Common Stock: 369385 20 8 - ----------------------------------- -------------------- - ------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY) Intermedia Communications Inc. 59-2913586 - ------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) /X/ - ------------------------------------------------------------------------------- 3. SEC USE ONLY - ------------------------------------------------------------------------------- 4. SOURCES OF FUNDS Class A Common Stock: OO Class B Common Stock: OO - ------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) /X/ - ------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------------------------- NUMBER OF SHARES 7. SOLE VOTING POWER Class A Common Stock: 39,350,000(1) Class B Common Stock: 39,350,000(2) ------------------------------------------------------- BENEFICIALLY OWNED BY 8. SHARED VOTING POWER None ------------------------------------------------------- EACH REPORTING 9. SOLE DISPOSITIVE POWER Class A Common Stock: 39,350,000(1) Class B Common Stock: 39,350,000(2) ------------------------------------------------------- PERSON WITH 10. SHARED DISPOSITIVE POWER None - ------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON Class A Common Stock: 39,350,000(1) Class B Common Stock: 39,350,000(2) - ------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES / / CERTAIN SHARES (SEE INSTRUCTIONS BEFORE FILLING OUT) - ------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) Class A Common Stock: 60.7%(1) Class B Common Stock: 100.0%(2) - ------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON CO - ------------------------------------------------------------------------------- (1) Represents shares of Class A Common Stock if Class B shares are converted. (2) Represents shares of Class B Common Stock held of record by Intermedia Investment, Inc., a wholly owned subsidiary of Business Internet, Inc., which is a wholly owned subsidiary of Intermedia Communications Inc. - ----------------------------------- -------------------- Class A Common Stock: 253756 10 0 Schedule 13D Page 4 of 18 Pages Class B Common Stock: 369385 20 8 - ----------------------------------- -------------------- - ------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY) Business Internet, Inc. 52-1986462 - ------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) / / - ------------------------------------------------------------------------------- 3. SEC USE ONLY - ------------------------------------------------------------------------------- 4. SOURCES OF FUNDS Class A Common Stock: OO Class B Common Stock: OO - ------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED /X/ PURSUANT TO ITEMS 2(d) OR 2(e) - ------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------------------------- NUMBER OF SHARES 7. SOLE VOTING POWER Class A Common Stock: 39,350,000(1) Class B Common Stock: 39,350,000(2) ------------------------------------------------------- BENEFICIALLY OWNED BY 8. SHARED VOTING POWER None ------------------------------------------------------- EACH REPORTING 9. SOLE DISPOSITIVE POWER Class A Common Stock: 39,350,000(1) Class B Common Stock: 39,350,000(2) ------------------------------------------------------- PERSON WITH 10. SHARED DISPOSITIVE POWER None - ------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON Class A Common Stock: 39,350,000(1) Class B Common Stock: 39,350,000(2) - ------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES / / CERTAIN SHARES (SEE INSTRUCTIONS BEFORE FILLING OUT) - ------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) Class A Common Stock: 60.7%(1) Class B Common Stock: 100.0%(2) - ------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON CO - ------------------------------------------------------------------------------- (1) Represents shares of Class A Common Stock if Class B shares are converted. (2) Represents shares of Class B Common Stock held of record by Intermedia Investment, Inc., which is a wholly owned subsidiary of Business Internet, Inc. - ----------------------------------- -------------------- Class A Common Stock: 253756 10 0 Schedule 13D Page 5 of 18 Pages Class B Common Stock: 369385 20 8 - ----------------------------------- -------------------- - ----------- ------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY) Intermedia Investment, Inc. 59-3677137 - ------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) / / - ------------------------------------------------------------------------------- 3. SEC USE ONLY - ------------------------------------------------------------------------------- 4. SOURCES OF FUNDS Class A Common Stock: OO Class B Common Stock: OO - ------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) /X/ - ------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------------------------- NUMBER OF SHARES 7. SOLE VOTING POWER Class A Common Stock: 39,350,000(1) Class B Common Stock: 39,350,000 ------------------------------------------------------- BENEFICIALLY OWNED BY 8. SHARED VOTING POWER None ------------------------------------------------------- EACH REPORTING 9. SOLE DISPOSITIVE POWER Class A Common Stock: 39,350,000(1) Class B Common Stock: 39,350,000 ------------------------------------------------------- PERSON WITH 10. SHARED DISPOSITIVE POWER None - ------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON Class A Common Stock: 39,350,000(1) Class B Common Stock: 39,350,000 - ------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS BEFORE FILLING OUT) / / - ------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) Class A Common Stock: 60.7%(1) Class B Common Stock: 100.0% - ------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON CO - ------------------------------------------------------------------------------- (1) Represents shares of Class A Common Stock if Class B shares are converted. - ----------------------------------- -------------------- Class A Common Stock: 253756 10 0 Schedule 13D Page 6 of 18 Pages Class B Common Stock: 369385 20 8 - ----------------------------------- -------------------- Item. 1. Security and Issuer This Schedule 13D ("Schedule 13D") relates to the Class A common stock, par value $0.01 per share ("Class A Stock"), and the Class B common stock, par value $0.01 per share ("Class B Stock"), of Digex, Incorporated ("Digex"), a Delaware corporation. Digex's principal executive offices are located on 14400 Sweitzer Lane, Laurel, MD 20707. Item. 2. Identity and Background WorldCom, Inc. ("WorldCom") is a Georgia corporation. The principal business of WorldCom is telecommunications. WorldCom's directly owned subsidiary, Intermedia Communications Inc. ("Intermedia"), a Delaware corporation, holds its interest in Digex through its wholly owned subsidiary, Business Internet, Inc. ("Business Internet"), a Delaware corporation, whose wholly owned subsidiary, Intermedia Investment, Inc. ("Intermedia Investment"), a Delaware corporation, is the record holder of the Digex shares. The principal business and principal office of WorldCom is located at 22001 Loudoun County Parkway, Ashburn, Virginia 20147. The principal business of Intermedia, Business Internet and Intermedia Investment is telecommunications. The principal business and principal office of Intermedia is located at One Intermedia Way, Tampa, Florida 33647. The principal business and principal office of Business Internet and Intermedia Investment are located at 22001 Loudoun County Parkway, Ashburn, Virginia 20147. Certain information pertaining to executive officers and directors of WorldCom, Intermedia, Business Internet and Intermedia Investment are set forth in Annexes A, B, C and D hereto and incorporated herein by reference. On June 25, 2002, WorldCom announced that as a result of an internal audit of WorldCom's capital expenditure accounting, it was determined that certain transfers from line cost expenses to capital accounts in the amount of $3.9 billion during 2001 and the first quarter of 2002 were not made in accordance with generally accepted accounting principles. WorldCom promptly notified its recently engaged external auditors, KPMG LLP ("KPMG"), and has engaged KPMG to undertake a comprehensive audit of WorldCom's financial statements for 2000, 2001 and 2002. On August 8, 2002, WorldCom announced that its ongoing internal review of its financial statements discovered an additional $3.8 billion in improperly reported pre-tax earnings for 1999, 2000, 2001, and the first quarter of 2002. On November 5, 2002, WorldCom announced that it expected a further restatement of earnings in addition to amounts previously announced and that the overall amount of the restatements could total in excess of $9 billion. A Special Committee of WorldCom's Board of Directors conducted an independent investigation of these matters with the law firm of Wilmer, Cutler & Pickering as special counsel and PricewaterhouseCoopers LLP as their financial advisors. WorldCom's accounting practices also are under investigation by the U.S. Attorney's Office for the Southern District of New York (the "District Court") and the Examiner appointed by the U.S. Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"), Richard Thornburgh, former Attorney General of the United States. On June 9, 2003, the Examiner released the second Interim Report regarding, among other things, corporate governance matters and past accounting practices. On November 4, 2002, the Examiner released the first Interim Report regarding the Examiner's preliminary observations. By order dated June 26, 2002, the Securities and Exchange Commission ("SEC") required WorldCom to file a sworn statement pursuant to Section 21(a)(1) of the Securities Exchange Act of 1934 (the "Exchange Act") describing in detail the facts and circumstances underlying the events leading to - ----------------------------------- -------------------- Class A Common Stock: 253756 10 0 Schedule 13D Page 7 of 18 Pages Class B Common Stock: 369385 20 8 - ----------------------------------- -------------------- WorldCom's June 25th announcement. WorldCom filed the sworn statement on July 1, 2002 and filed an amended statement on July 8, 2002. The SEC filed a civil action against WorldCom on June 26, 2002 seeking injunctive relief and damages under various legal theories. On November 26, 2002, WorldCom consented to the entry of a permanent injunction that partially resolved the claims brought in this suit. The injunction enjoins WorldCom, its employees and its agents from violating the antifraud, reporting, and books and records and internal controls provisions of the federal securities laws. The injunction directs WorldCom's Corporate Monitor, Richard Breeden, to review the adequacy and effectiveness of WorldCom's corporate governance systems, policies, plans, and practices, requires WorldCom to retain a consultant to review its material internal accounting control structure and policies, obligates WorldCom to provide reasonable training to its senior operational officers and financial reporting personnel to minimize the possibility of future violations, and permits the SEC to seek a civil penalty. On May 19, 2003, WorldCom announced a proposed settlement with the SEC regarding a civil penalty. Pursuant to the initial proposed settlement, WorldCom would satisfy an SEC civil penalty of $1.51 billion by payment of $500 million upon the effective date of WorldCom's emergence from Chapter 11 protection. On June 11, 2003, WorldCom consented to the entry of two orders dealing with internal controls and corporate governance issues that modified certain of the ongoing obligations imposed in the permanent injunction entered on November 26, 2002. On July 2, 2003, WorldCom filed documents in the District Court modifying the proposed settlement. Pursuant to the revised proposed settlement, WorldCom will satisfy the SEC civil penalty by paying $500 million upon the effective date of WorldCom's emergence from Chapter 11 protection and by transfer of common stock in the reorganized company having a value of $250 million. On July 3, 2003, WorldCom filed proposed settlement documents that reflect a technical change that increases the civil penalty from $1.51 billion to $2.25 billion without changing the amount to be paid by WorldCom as described in the preceding sentence. On July 7, 2003, the District Court issued an order approving the proposed settlement. The proposed settlement must also be approved by the Bankruptcy Court. The proposed settlement provides that the funds paid and common stock transferred by WorldCom in satisfaction of the SEC's penalty claim will be distributed pursuant to the Fair Funds provisions of the Sarbanes-Oxley Act of 2002. The SEC has proposed a plan for distribution of the funds, which is subject to court approval. WorldCom has terminated or accepted the resignations of various financial and accounting personnel, including its then chief financial officer and its corporate controller, and is continuing the process of investigating and restating its financial results for the years 2000-2002. Earlier years also are impacted. The former corporate controller and three accounting directors have entered into plea agreements with the U.S. Attorney's Office, and on August 28, 2002, a grand jury returned an indictment charging the former chief financial officer with various securities-related crimes; trial of that case is currently scheduled for February 2004. On April 16, 2003, a superseding indictment was filed to include additional charges against the former chief financial officer. The U.S. Attorney's Office has advised WorldCom that its investigation of certain former officers and employees is ongoing. Except as described above, during the past five years, neither WorldCom, Intermedia, Business Internet or Intermedia Investment nor, to the best knowledge of each of them, respectively, any of the members of their respective Board of Directors or executive officers has had any criminal convictions, and none 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 future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. - ----------------------------------- -------------------- Class A Common Stock: 253756 10 0 Schedule 13D Page 8 of 18 Pages Class B Common Stock: 369385 20 8 - ----------------------------------- -------------------- Item. 3. Source and Amount of Funds or Other Consideration In July 1997, Intermedia acquired 98.8% of the outstanding shares of common stock of DIGEX, Incorporated ("DIGEX") through a cash tender offer by a wholly owned subsidiary of Intermedia, after which the wholly owned subsidiary merged into DIGEX. The aggregate consideration for the acquisition was approximately $155 million, and Intermedia used its existing cash reserves for the acquisition. Digex was incorporated in April 1999, and DIGEX contributed certain assets to Digex in contemplation of an initial public offering by Digex, which occurred in August 1999. After the initial public offering, Intermedia contributed the Class B Stock of Digex it held to its wholly owned subsidiary Intermedia Financial Company. In February 2000, Intermedia sold 10,650,000 shares of the Class B Stock it held in a public offering. The Class B Stock sold automatically converted into Class A Stock at the closing of the offering. On August 23, 2000, Intermedia Financial Company was merged into Intermedia Investment, which became the holder of shares of Digex. Shares of Intermedia Investment are held by Business Internet, which is a wholly owned subsidiary of Intermedia. In July 2001, WorldCom acquired all the capital stock of Intermedia, other than Intermedia's 13 1/2% series B preferred stock, thereby acquiring an indirect controlling interest in Digex. WorldCom owns approximately 90% of the voting securities of Intermedia. On July 23, 2003, WorldCom agreed to purchase 50,000 outstanding shares of Series A Convertible Preferred Stock, par value $.01 per share (the "Series A Preferred Stock"), of Digex pursuant to a Stock Purchase Agreement (the "Stock Purchase Agreement") among WorldCom, Hewlett-Packard Company ("Hewlett-Packard") and Hewlett-Packard's wholly owned subsidiary, HPQ Holdings, LLC, a copy of which is filed as Exhibit 2 hereto and incorporated herein by reference, for an aggregate purchase price of $11 million. The Stock Purchase Agreement, including the payment of the purchase price, is subject to approval of the Bankruptcy Court. WorldCom will use cash on hand to make the purchase. Item. 4. Purpose of Transaction On the date hereof, WorldCom has filed a motion with the Bankruptcy Court seeking the Bankruptcy Court's authorization and approval for WorldCom to acquire beneficial ownership of all of the outstanding stock of Digex through the purchase of all of Digex's outstanding shares of Series A Preferred Stock pursuant to the Stock Purchase Agreement and the purchase of all of Digex's outstanding shares of Class A Stock, other than such shares owned by WorldCom, Intermedia, Business Internet or Intermedia Investment, pursuant to a tender offer and subsequent merger. A copy of the motion is filed as Exhibit 3 hereto and incorporated herein by reference. Also on the date hereof, WorldCom presented a letter to the Chairman of the Special Committee of the Board of Directors of Digex, comprised of directors independent of WorldCom, Intermedia, Business Internet and Intermedia Investment, that advised Digex of WorldCom's proposal for acquiring the outstanding shares of Class A Stock pursuant to the tender offer and the merger and requesting the Special Committee evaluate the proposal for purposes of making a recommendation with respect to the proposal. A copy of the letter to the Chairman of the Special Committee is attached hereto as Exhibit 4 and incorporated herein by reference. - ----------------------------------- -------------------- Class A Common Stock: 253756 10 0 Schedule 13D Page 9 of 18 Pages Class B Common Stock: 369385 20 8 - ----------------------------------- -------------------- WorldCom issued a press release today noting the filing of the motion with the Bankruptcy Court and the communication with the Special Committee. The press release is attached as Exhibit 5 hereto and is incorporated herein by reference. Subject to the Bankruptcy Court's authorization, WorldCom intends to commence a tender offer to acquire at a price of $0.70 per share all of the outstanding shares of Class A Stock not owned by WorldCom, Intermedia, Business Internet or Intermedia Investment. Consummation of the tender offer will be subject to customary conditions for a tender offer, as well as the condition that WorldCom receive valid tenders (that have not been withdrawn prior to expiration of the tender offer) of a sufficient number of shares of Class A Stock such that, after purchase of shares pursuant to the tender offer, WorldCom, Intermedia, Business Internet and Intermedia Investment would own at least 90% of the outstanding shares of Class A Stock on an as-converted basis (the "Minimum Condition"). "On an as-converted basis" means the percentage of shares of Class A Stock that WorldCom, Intermedia, Business Internet and Intermedia Investment would own following conversion into shares of Class A Stock of the shares of Class B Stock they own and the shares of Series A Preferred Stock they propose to purchase under the Stock Purchase Agreement. Upon acquisition of sufficient shares of Class A Stock as part of the tender offer to meet the Minimum Condition, WorldCom intends to cause Digex to be merged with Intermedia Investment (the "Merger") in a short-form merger pursuant to the provisions of Section 253 of the Delaware General Corporation Law ("DGCL"). As part of the Merger, WorldCom will cause to be paid to the remaining holders (other than WorldCom, Intermedia, Business Internet or Intermedia Investment) of shares of Class A Stock for such shares (i) the same consideration for their shares as paid to the holders of Class A Stock who tendered their shares in the tender offer or (ii) for those holders that exercise appraisal rights in respect of such shares in accordance with Section 262 of the DGCL, the fair value of their shares (which may be an amount less than, more than or equal to the consideration paid for shares in the tender offer). Upon consummation of the Merger, all of the outstanding shares of capital stock of Digex (or Intermedia Investment, if Digex shall not be the surviving company in the Merger) will be owned indirectly by WorldCom. Upon consummation of the tender offer, WorldCom may cause Digex to apply to terminate the registration of the Class A Stock under the Exchange Act to the extent it is eligible for such termination. In the event that there are less than 300 record holders of the Class A Stock following consummation of the tender offer, the registration of the shares of Class A Stock may be terminated upon application by Digex to the SEC. Furthermore, termination of the registration of the shares of Class A Stock under the Exchange Act would cause the shares of Class A Stock to cease to be quoted on the Over the Counter Bulletin Board ("OTC BB"). Upon consummation of the Merger, Digex will not be subject to the reporting requirements of the Exchange Act, and shares of Class A Stock will cease to be quoted on the OTC BB. Except as set forth above, none of WorldCom, Intermedia, Business Internet and Intermedia Investment has any present plans or intentions that would result in or relate to any of the transactions described in subparagraphs (a) through (j) of Item 4 of Schedule 13D. WorldCom's plans and proposals as set forth in this Item 4 remain subject to substantial authorizations and approvals and are not intended to be legally binding in any way. If a tender offer were to be made, it would be made in accordance with all applicable securities laws and would involve the filing of appropriate materials with the SEC and the mailing of appropriate materials to the public stockholders of Digex. - ----------------------------------- -------------------- Class A Common Stock: 253756 10 0 Schedule 13D Page 10 of 18 Pages Class B Common Stock: 369385 20 8 - ----------------------------------- -------------------- Any communications regarding the potential tender offer will be filed with the SEC on Schedule TO as "pre-commencement communications" to a tender offer. When it becomes available, stockholders should read the tender offer statement on Schedule TO (including a "going private" statement on Schedule 13E-3) to be filed by WorldCom, as it will contain important information about the tender offer. When it becomes available, stockholders can obtain such tender offer statement on Schedule TO free of charge from the SEC's website at HTTP://WWW.SEC.GOV or from WorldCom by directing a request to WorldCom, Inc., 22001 Loudoun County Parkway, Ashburn, VA 20147. Item. 5. Interest in Securities of the Issuer WorldCom presently beneficially owns 39,350,000 shares of Class B Stock, representing 100.0% of the presently outstanding shares of Class B Stock, based upon 39,350,000 outstanding shares of Class B Stock as of April 30, 2003, as represented by Digex in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2003. Each share of Class B Stock is fully convertible into Class A Stock, on a one-for-one basis, at any time at the option of the holder and shall automatically convert into Class A Stock upon the transfer of the Class B Stock to any person or entity not affiliated with Intermedia. Additionally, subject to receipt of the necessary authorization and approval of the Bankruptcy Court, after completing the acquisition of the Series A Preferred Stock, WorldCom will beneficially own 50,000 shares of Series A Preferred Stock, representing 100.0% of the presently outstanding shares of Series A Preferred Stock. As of the date hereof, each share of Series A Preferred Stock is fully convertible, at the option of the holder, into 14.62 shares of Class A Stock, for an aggregate of 730,995 shares of Class A Stock, based on a liquidation preference of $1,000 and a conversion price of $68.40. WorldCom therefore beneficially owns 40,080,995 shares of Class A Stock, representing approximately 61.1% of the presently outstanding shares of Class A Stock, based upon a total of 25,519,461 outstanding shares of Class A Stock as of April 30, 2003, as represented by Digex in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2003. WorldCom (through Intermedia, Business Internet and Intermedia Investment) has the sole power to vote or direct the vote and the sole power to dispose or to direct the disposition of the 39,350,000 shares of Class B Stock WorldCom presently owns beneficially. Each share of Class B Stock entitles the holder to 10 votes per share, while each share of Class A Stock entitles the holder to one vote per share. Subject to receipt of the necessary authorization and approval of the Bankruptcy Court, after completing the purchase of the Series A Preferred Stock, WorldCom will have the sole power to vote or direct the vote and the sole power to dispose or direct the disposition of the 50,000 shares of the Series A Preferred Stock WorldCom will own beneficially after the purchase. To the best knowledge of WorldCom, Intermedia, Business Internet and Intermedia Investment, respectively, as of the date hereof, no executive officer or director of WorldCom, Intermedia, Business Internet or Intermedia Investment, respectively, listed on Annexes A, B, C and D to this Schedule is a beneficial owner of any Class A Stock or Class B Stock. In addition, none of WorldCom, Intermedia, Business Internet or Intermedia Investment, nor, to the best knowledge of WorldCom, Intermedia, Business Internet and Intermedia Investment, respectively, as of the date hereof, any executive officer or director of WorldCom, Intermedia, Business Internet or Intermedia Investment, respectively, listed on Annexes A, B, C and D to this Schedule has effected any transactions in shares of the Class A Stock or Class B Stock during the past 60 days. - ----------------------------------- -------------------- Class A Common Stock: 253756 10 0 Schedule 13D Page 11 of 18 Pages Class B Common Stock: 369385 20 8 - ----------------------------------- -------------------- Item. 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer On July 31, 2001, Digex entered into a note purchase agreement with WorldCom pursuant to which WorldCom agreed to provide funding, either directly or through its affiliates, in the form of floating rate senior notes for the Digex business plans for 2001 and 2002. Intermedia issued senior notes under this note purchase agreement in an aggregate principal amount of $97.9 million outstanding as of March 1, 2003. The notes bear interest at LIBOR plus a margin of 3% per annum. The maturity date of notes is December 31, 2006. A copy of the note purchase agreement is attached as Exhibit 6 hereto and incorporated herein by reference. On January 14, 2002, Digex entered into another note purchase agreement with Intermedia under which Intermedia purchased a senior note in the amount of $25.0 million. The note matures on December 31, 2003 and bears interest at LIBOR plus a margin of 3% per annum. A copy of the note purchase agreement is attached as Exhibit 7 hereto and incorporated herein by reference. On July 23, 2003, WorldCom entered into the Stock Purchase Agreement with Hewlett-Packard and its wholly owned subsidiary, HPQ Holdings, LLC, pursuant to which WorldCom agreed to purchase the Series A Preferred Stock for $11.0 million. The Stock Purchase Agreement, including the payment of the purchase price, is subject to Bankruptcy Court authorization and approval. Additionally, consummation of the purchase of the Series A Preferred Stock is conditioned upon WorldCom's acquisition of sufficient shares of Class A Stock such that it can cause the Merger, as described in Item 4 above. A copy of the Stock Purchase Agreement is filed as Exhibit 2 hereto. Item. 7. Materials to be Filed as Exhibits Attached hereto or incorporated herein are the following exhibits: 1. Joint Filing Agreement, dated July 24, 2003. 2. Stock Purchase Agreement, dated as of July 23, 2003, by and between Hewlett-Packard Company, HPQ Holdings, LLC and WorldCom, Inc. 3. Motion of the Debtors Pursuant to Section 363 of the Bankruptcy Code Authorizing Acquisition of Digex, Incorporated. 4. Letter dated July 24, 2003, from WorldCom, Inc. to the Special Committee of the Board of Directors of Digex, Incorporated. 5. Press release issued by WorldCom, Inc. on July 24, 2003. 6. Note Purchase Agreement dated July 31, 2001 between Digex, Incorporated and WorldCom, Inc. (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Digex, Incorporated for the quarter ended September 30, 2001 (File No. 000-26873) filed on November 14, 2001). 7. Note Purchase Agreement dated July 31, 2001 between Digex, Incorporated and Intermedia Communications Inc. (incorporated by reference to Exhibit 10.37 to the Annual Report on Form 10-K of Digex, Incorporated for the year ended December 31, 2001 (File No. 000-26873) filed on April 1, 2002). - ----------------------------------- -------------------- Class A Common Stock: 253756 10 0 Schedule 13D Page 12 of 18 Pages Class B Common Stock: 369385 20 8 - ----------------------------------- -------------------- SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: July 24, 2003 WORLDCOM, INC. By: /s/ Paul M. Eskildsen ---------------------------------------------- Name: Paul M. Eskildsen Title: Secretary INTERMEDIA COMMUNICATIONS INC. By: /s/ Paul M. Eskildsen ---------------------------------------------- Name: Paul M. Eskildsen Title: Secretary BUSINESS INTERNET, INC. By: /s/ Paul M. Eskildsen ---------------------------------------------- Name: Paul M. Eskildsen Title: Secretary INTERMEDIA INVESTMENT, INC. By: /s/ Paul M. Eskildsen ---------------------------------------------- Name: Paul M. Eskildsen Title: Secretary - ----------------------------------- -------------------- Class A Common Stock: 253756 10 0 Schedule 13D Page 13 of 18 Pages Class B Common Stock: 369385 20 8 - ----------------------------------- -------------------- Exhibit 1 JOINT FILING AGREEMENT In accordance with Rule 13d-1(k)(1) under the Securities Exchange Act of 1934, as amended, the undersigned hereby agree to the joint filing of the attached statement on Schedule 13D and of all amendments to such statement and that such statement and all amendments to such statement are made on behalf of each of them. IN WITNESS WHEREOF, the undersigned hereby execute this Agreement on July 24, 2003. WORLDCOM, INC. By: /s/ Paul M. Eskildsen -------------------------------- Name: Paul M. Eskildsen Title: Secretary INTERMEDIA COMMUNICATIONS INC. By: /s/ Paul M. Eskildsen -------------------------------- Name: Paul M. Eskildsen Title: Secretary BUSINESS INTERNET, INC. By: /s/ Paul M. Eskildsen ------------------------------- Name: Paul M. Eskildsen Title: Secretary INTERMEDIA INVESTMENT, INC. By: /s/ Paul M. Eskildsen ------------------------------- Name: Paul M. Eskildsen Title: Secretary - ----------------------------------- -------------------- Class A Common Stock: 253756 10 0 Schedule 13D Page 14 of 18 Pages Class B Common Stock: 369385 20 8 - ----------------------------------- -------------------- Annex A INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF WORLDCOM, INC. Directors and Executive Officers of WorldCom, Inc. ("WorldCom"). Set forth below are the name, current business address, citizenship and the present principal occupation or employment of each director and executive officer of WorldCom. The principal address of WorldCom is 22001 Loudoun County Parkway, Ashburn, Virginia 20147, U.S.A. Each such person is a citizen of the United States.
Name and Current Business Address Present Principal Occupation or Employment CYNTHIA K. ANDREOTTI Ms. Andreotti serves as President, Business Markets of WorldCom. WorldCom, Inc. 22001 Loudoun County Parkway Ashburn, VA 20147 U.S.A. DENNIS R. BERESFORD Mr. Beresford is a director of WorldCom. Mr. Beresford is a Professor J.M. Tull School of Accounting of Accounting at the J.M. Tull School of Accounting, Terry College of Terry College of Business Business, The University of Georgia. The University of Georgia Athens, GA 30602 U.S.A. ROBERT T. BLAKELY Mr. Blakely serves as Executive Vice President and Chief Financial WorldCom, Inc. Officer of WorldCom. 22001 Loudoun County Parkway Ashburn, VA 20147 U.S.A. SETH D. BLUMENFELD Mr. Blumenfeld serves as President, WorldCom International of WorldCom. 2 International Rye Brook, NY 10573 U.S.A. FRED M. BRIGGS Mr. Briggs serves as President, Operations and Technology of WorldCom. WorldCom, Inc. 22001 Loudoun County Parkway Ashburn, VA 20147 U.S.A. MICHAEL D. CAPELLAS Mr. Capellas serves as President, Chief Executive Officer and Chairman WorldCom, Inc. of the Board of WorldCom. 22001 Loudoun County Parkway Ashburn, VA 20147 U.S.A. - ----------------------------------- -------------------- Class A Common Stock: 253756 10 0 Schedule 13D Page 15 of 18 Pages Class B Common Stock: 369385 20 8 - ----------------------------------- -------------------- DANIEL L. CASACCIA Mr. Casaccia serves as Executive Vice President, Human Resources of WorldCom, Inc. WorldCom. 22001 Loudoun County Parkway Ashburn, VA 20147 U.S.A. JONATHAN CRANE Mr. Crane serves as Executive Vice President, Strategy and Marketing WorldCom, Inc. of WorldCom. 22001 Loudoun County Parkway Ashburn, VA 20147 U.S.A. PAUL M. ESKILDSEN Mr. Eskildsen serves as Acting General Counsel, Vice President and WorldCom, Inc. Secretary of WorldCom. 22001 Loudoun County Parkway Ashburn, VA 20147 U.S.A. VICTORIA D. HARKER Ms. Harker serves as Senior Vice President, Finance of WorldCom. WorldCom, Inc. 22001 Loudoun County Parkway Ashburn, VA 20147 U.S.A. WAYNE E. HUYARD Mr. Huyard serves as President, Mass Markets of WorldCom. WorldCom, Inc. 22001 Loudoun County Parkway Ashburn, VA 20147 U.S.A. NICHOLAS deB. KATZENBACH Mr. Katzenbach is a director of WorldCom. Mr. Katzenbach is a private 33 Greenhouse Drive attorney. Princeton, NJ 08540 U.S.A. C.B. ROGERS, JR. Mr. Rogers is a director of WorldCom. Mr. Rogers formerly Equifax Inc. 3060 served as Equifax, Inc. an executive officer and director of Peachtree Road - Suite 240 Atlanta, GA 30305 U.S.A. GRACE CHEN TRENT Ms. Trent serves as Vice President and Chief of Staff of WorldCom. WorldCom, Inc. 22001 Loudoun County Parkway Ashburn, VA 20147 U.S.A.
- ----------------------------------- -------------------- Class A Common Stock: 253756 10 0 Schedule 13D Page 16 of 18 Pages Class B Common Stock: 369385 20 8 - ----------------------------------- -------------------- Annex B INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF INTERMEDIA COMMUNICATIONS INC. Directors and Executive Officers of Intermedia Communications Inc. ("Intermedia"). Set forth below are the name, current business address, citizenship and the present principal occupation or employment of each director and executive officer of Intermedia. The principal address of Intermedia is One Intermedia Way, Tampa, Florida 33647, U.S.A. Each such person is a citizen of the United States.
Name and Current Business Address Present Principal Occupation or Employment ---------------- ------------------------------------------ MICHAEL D. CAPELLAS Mr. Capellas serves as President, Chief Executive Officer and sole WorldCom, Inc. director of Intermedia. Mr. Capellas is President, Chief Executive 22001 Loudoun County Parkway Officer and Chairman of the Board of WorldCom. Ashburn, VA 20147 U.S.A. PAUL M. ESKILDSEN Mr. Eskildsen serves as Secretary of Intermedia. Mr. Eskildsen is WorldCom, Inc. Acting General Counsel, Vice President and Secretary of WorldCom. 22001 Loudoun County Parkway Ashburn, VA 20147 U.S.A.
- ----------------------------------- -------------------- Class A Common Stock: 253756 10 0 Schedule 13D Page 17 of 18 Pages Class B Common Stock: 369385 20 8 - ----------------------------------- -------------------- Annex C INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF BUSINESS INTERNET, INC. Directors and Executive Officers of Business Internet, Inc. ("Business Internet"). Set forth below are the name, current business address, citizenship and the present principal occupation or employment of each director and executive officer of Business Internet. The principal address of Business Internet is 22001 Loudoun County Parkway, Ashburn, Virginia 20147, U.S.A. Each such person is a citizen of the United States.
Name and Current Business Address Present Principal Occupation or Employment ---------------- ------------------------------------------ MICHAEL D. CAPELLAS Mr. Capellas serves as President, Chief Executive Officer and sole WorldCom, Inc. director of Business Internet. Mr. Capellas is President, Chief 22001 Loudoun County Parkway Executive Officer and Chairman of the Board of WorldCom. Ashburn, VA 20147 U.S.A. PAUL M. ESKILDSEN Mr. Eskildsen serves as Secretary of Business Internet. Mr. Eskildsen WorldCom, Inc. is Acting General Counsel, Vice President and Secretary of WorldCom. 22001 Loudoun County Parkway Ashburn, VA 20147 U.S.A.
- ----------------------------------- -------------------- Class A Common Stock: 253756 10 0 Schedule 13D Page 18 of 18 Pages Class B Common Stock: 369385 20 8 - ----------------------------------- -------------------- Annex D INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF INTERMEDIA INVESTMENT, INC. Directors and Executive Officers of Intermedia Investment, Inc. ("Intermedia Investment"). Set forth below are the name, current business address, citizenship and the present principal occupation or employment of each director and executive officer of Intermedia Investment. The principal address of Intermedia Investment is 22001 Loudoun County Parkway, Ashburn, Virginia 20147, U.S.A. Each such person is a citizen of the United States.
Name and Current Business Address Present Principal Occupation or Employment ---------------- ------------------------------------------ MICHAEL D. CAPELLAS Mr. Capellas serves as President, Chief Executive Officer and sole WorldCom, Inc. director of Intermedia Investment. Mr. Capellas is President, Chief 22001 Loudoun County Parkway Executive Officer and Chairman of the Board of WorldCom. Ashburn, VA 20147 U.S.A. PAUL M. ESKILDSEN Mr. Eskildsen serves as Secretary of Intermedia Investment. Mr. WorldCom, Inc. Eskildsen is Acting General Counsel, Vice President and Secretary of 22001 Loudoun County Parkway WorldCom. Ashburn, VA 20147 U.S.A.
EX-2 3 exh2.txt STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT dated as of July 23, 2003 among HEWLETT-PACKARD COMPANY, HPQ HOLDINGS, LLC and WORLDCOM, INC. STOCK PURCHASE AGREEMENT This STOCK PURCHASE AGREEMENT ("Agreement"), dated as of July 23, 2003, is made and entered into by and among WorldCom, Inc., a Georgia corporation ("MCI"), Hewlett-Packard Company, a Delaware corporation ("HPQ"), and HPQ Holdings, LLC, a Delaware limited liability company and wholly owned subsidiary of HPQ ("Holdings", and, collectively with HPQ, the "HP Entities"). R E C I T A L S WHEREAS, Holdings owns 50,000 shares (the "Shares") of Series A Convertible Preferred Stock, par value $.01 per share (the "Preferred Stock"), of Digex, Incorporated, a Delaware corporation (the "Company"); and WHEREAS, MCI desires to purchase, and the HP Entities desire to sell to MCI, the Shares upon the terms and subject to the conditions set forth herein; NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS The following terms, as used herein, have the following meanings: "Acquisition" means the acquisition by MCI or, as applicable, one of its Affiliates, of a sufficient number of the outstanding shares of the Class A Common Stock, par value $.01 per share, of the Company, by tender offer (or otherwise), which when added to the shares of Class A Common Stock into which the shares of Class B Common Stock, par value $0.01 per share of the Company currently owned by MCI and its Affiliates, and the shares of Class A Common Stock into which the Preferred Stock is convertible at such time would permit the holder of such shares to cause a "short form" merger of the Company into such holder under Section 253 of the Delaware General Corporation Law. "Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Affiliate" means, with respect to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. "Agreement" has the meaning ascribed thereto in the preamble hereto. "Bankruptcy Code" means Title 11 of the United States Code, entitled "Bankruptcy" (as now and hereafter in effect, or any successor statute, and applicable federal rules of bankruptcy procedure thereunder). "Bankruptcy Court" means the United States Bankruptcy Court for the Southern District of New York or such other court having jurisdiction over the cases, jointly administered as Case No. 02-13533 (AJG), of MCI and its affiliated debtors pending under chapter 11 of the Bankruptcy Code. "Business Day" means any day other than a Saturday, Sunday, or other day on which banking institutions in New York, New York shall be permitted or required by Law or executive order to be closed. "Closing Date" means the date of consummation of the Acquisition. "Closing" means the closing of the transactions contemplated by this Agreement, to take place at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153, at 9:00 a.m. local time on the Closing Date, at which the parties will take the actions and deliver the documents and instruments required to be delivered by them pursuant to the terms of this Agreement. "Commercially reasonable efforts" means, for purposes hereof for any Person, efforts that are reasonable within the context of the events and/or circumstances in respect of which such efforts are required and that do not give rise to, or could not reasonably be expected to give rise to, for such Person a material detriment, whether financial, operational or otherwise. "Control" means, when used with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have correlative meanings. "Company" has the meaning ascribed thereto in the recitals hereto. "Governmental Authority" means any: (a) nation, principality, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government; (c) governmental or quasi governmental authority of any nature (including any governmental division, subdivision, department, agency, bureau, branch, office, commission, council, board, instrumentality, officer, official, representative, organization, unit, body or entity and any court or other tribunal); (d) multinational organization or body; or (e) individual, entity or body exercising, or entitled to exercise, any executive, legislative, judicial, administrative, regulatory, police, military or taxing authority or power of any nature. "Holdings" has the meaning ascribed thereto in the preamble hereto. "HP Entities" has the meaning ascribed thereto in the preamble hereto. "HPQ" has the meaning ascribed thereto in the preamble hereto. 2 "Infrastructure Commitments" has the meaning ascribed thereto in Section 2.3. "Law" means all laws, statutes, ordinances, regulations, orders, writs, rulings, judgments, directives, injunctions and decrees of any executive office, legislature, court, governmental agency, commission, or administrative, regulatory or self-regulatory authority or instrumentality, domestic or foreign. "Lien" means any mortgage, pledge, assessment, security interest, lease, sublease, lien, adverse claim, levy, charge or other encumbrance of any kind, or any conditional sales contract, title retention contract, or other contract to give any of the foregoing. "MCI" has the meaning ascribed thereto in the preamble hereto. "Non-Disclosure Agreement" means that certain Non-Disclosure Agreement, dated as of April 11, 2003, by and between HPQ and MCI. "Organizational Documents" means, as applicable, certificates of incorporation, articles of incorporation, bylaws and other formation or governing documents. "Payee's Account" means an account of Holdings or HPQ designated by HPQ to MCI in writing at least five Business Days prior to the Closing Date. "Person" means any natural person, corporation, general partnership, limited partnership, limited liability company, proprietorship, trust, union, association, court, tribunal, agency, government, department, commission, self-regulatory organization, arbitrator, board, bureau, instrumentality, or other entity, enterprise, authority, or business organization. "Preferred Stock" has the meaning ascribed thereto in the recitals hereto. "Purchase Price" means $11,000,000 plus interest at a rate of 7.5% per year, compounded annually, measured from December 1, 2003. "Shares" has the meaning ascribed thereto in the recitals hereto. All references in this Agreement to an "Article", "Section", "Exhibit" or "Schedule" are to an Article, Section, Exhibit or Schedule of this Agreement, unless the context requires otherwise. Unless the context requires otherwise, the words "this Agreement", "hereof", "hereunder", "herein", "hereby" or words of similar import refer to this Agreement as a whole and not to a particular Article, Section, subsection, clause or other subdivision hereof. Whenever the context requires, the words used herein include the masculine, feminine and neuter gender, and the singular and the plural. The words "include", "includes" and "including" shall mean "include, without limitation,", "includes, without limitation," and "including, without limitation,", respectively. All references herein to "dollars" or "$" refer to currency of the United States of America. 3 ARTICLE II PURCHASE Section 2.1 Sale and Purchase of the Shares. Subject to the terms and conditions hereof, and in reliance upon the mutual representations, warranties and covenants set forth in this Agreement, Holdings agrees to sell, assign, transfer, convey, and deliver at the Closing to MCI (or, at MCI's direction, to its designated Affiliate), free and clear of any Liens, duly endorsed for transfer or accompanied by duly signed stock powers, and MCI agrees to purchase, acquire and accept delivery from Holdings, the Shares. Section 2.2 Payment of Purchase Price. At Closing, MCI shall pay to Holdings the Purchase Price by wire transfer of immediately available funds to the Payee's Account. Section 2.3 Additional Rights Provided by MCI. MCI also agrees, for a period of at least two years from the Closing Date, to use, and to cause its applicable Affiliates to use, commercially reasonable efforts beginning on the date hereof: 2.3.1 to create pre-defined bundles of managed hosting and managed service offerings that incorporate HPQ computer servers and other HPQ computer memory storage products as part of a standard product offering in instances where computer hardware is being offered; 2.3.2 to develop and support at least one HPQ-sourced infrastructure configuration for the SAP-hosted applications contemplated by MCI to be marketed by MCI in conjunction with a prominent business systems integrator; and 2.3.3 to meet periodically with representatives of HPQ to discuss industry service requirements in connection with managed hosting and managed service offerings and to evaluate, in good faith, appropriate HPQ products and services relevant to such offerings. Notwithstanding the foregoing commitments (collectively, the "Infrastructure Commitments") of this Section 2.3, MCI's obligations thereunder are subject to the following conditions: (i) MCI and its Affiliates retain the right to offer alternatives to HPQ computer servers and other computer memory storage products if requested by any customer or indicated by any customer's infrastructure configuration and (ii) HPQ and its applicable Affiliates shall offer their products and services to MCI and its applicable Affiliates on terms and conditions (including, without limitation, pricing, lease financing and discounts) no less favorable to MCI and its applicable Affiliates than such terms and conditions offered by HPQ and its Affiliates to customers of similar size and purchasing requirements. Section 2.4 HPQ Undertakings. In respect of MCI's obligations regarding the Infrastructure Commitments (and so long as such obligations remain extant), HPQ agrees to use, and to cause its applicable Affiliates to use, commercially reasonable efforts: 2.4.1 to include both MCI and MCI's Affiliates in HPQ's "Service Provider Partnering Program" and any replacement or successor program thereto, in each case subject to MCI maintaining the minimum requirements for inclusion therein; 4 2.4.2 to provide MCI and its Affiliates with support and training as may be necessary for MCI to meet its obligations under the Infrastructure Commitments to HPQ and its Affiliates; and 2.4.3 to accommodate the business models of MCI and its Affiliates wherein MCI and its Affiliates do not purchase or own HPQ equipment, services, software or applications used by their customers. Section 2.5 Confidential Information. None the parties shall be required to disclose confidential information to any other party without an effective confidentiality agreement between the respective parties which is acceptable to the disclosing party. ARTICLE III REPRESENTATIONS AND WARRANTIES Section 3.1 HPQ Representation and Warranties. The HP Entities hereby represent and warrant to MCI as follows: 3.1.1 Title. Holdings has good and marketable title to the Shares, free and clear of any and all Liens. Neither HPQ nor Holdings has entered into or created any outstanding subscriptions, options or rights of any kind issued, granted by or binding upon HPQ or Holdings or any of their respective Affiliates to purchase or otherwise acquire the Shares or any portion thereof. 3.1.2 Authorization. Each of HPQ and Holdings have all necessary corporate power and authority to execute and deliver this Agreement and to perform its respective obligations under this Agreement. The execution and delivery of this Agreement by each of HPQ and Holdings and the performance by HPQ and Holdings of its respective obligations under this Agreement have been duly and validly authorized by all necessary corporate action on the part of each of HPQ and Holdings. This Agreement has been duly and validly executed and delivered by each of HPQ and Holdings and constitutes a legal, valid and binding obligation of each of them, enforceable against each of them in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). 3.1.3 No Conflicts or Violations. Neither the execution and delivery of this Agreement by HPQ or Holdings nor the performance by HPQ or Holdings of its obligations hereunder will conflict with, constitute a default under (with or without notice or lapse of time, or both), violate or require any consent under: (a) any of the terms, conditions or provisions of the Organizational Documents of HPQ or Holdings; 5 (b) any of the terms, conditions or provisions of any document, agreement or other instrument to which HPQ or Holdings is a party or by which it is bound; or (c) any term or provision of any Law applicable to HPQ or Holdings in a manner which would prevent or prohibit the consummation of the transactions contemplated hereby. 3.1.4 Litigation. There are no actions, suits, claims, arbitration proceedings or governmental investigations or inquiries that are pending or, to the knowledge of HPQ or Holdings, threatened, against HPQ or Holdings, or their respective officers, directors, employees or assets that could reasonably be expected to prevent or prohibit the consummation of the transactions contemplated by this Agreement. 3.1.5 Finder's Fee. Neither of the HP Entities has done anything to cause MCI (or any of its Affiliates) to incur any liability to any Person for any brokerage or finder's fee or agent's commission, or the like, in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the HP Entities, and the HP Entities shall be solely responsible for any such fees and expenses attributable to the HP Entities. Section 3.2 MCI Representations and Warranties. MCI hereby represents and warrants to the HP Entities as follows: 3.2.1 Authorization. Subject to the approval specified in Schedule 3.2.2, (i) MCI has all necessary corporate power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement, (ii) the execution and delivery of this Agreement by MCI and the performance by MCI of its obligations under this Agreement have been duly and validly authorized by all necessary corporate action on the part of MCI and (iii) this Agreement has been duly and validly executed and delivered by MCI and constitutes a legal, valid and binding obligation of MCI, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). 3.2.2 No Conflicts or Violations. Neither the execution and delivery of this Agreement by MCI nor the performance by MCI of its obligations hereunder will conflict with, constitute a default under (with or without notice or lapse of time, or both), violate or require any consent under: (a) any of the terms, conditions or provisions of the Organizational Documents of MCI; (b) any of the terms, conditions or provisions of any document, agreement or other instrument to which MCI is a party or by which it is bound; or (c) any term or provision of any Law applicable to MCI in a manner which would prevent or prohibit the consummation of the transactions contemplated hereby. 6 MCI acknowledges that the Shares are stamped with a legend concerning restrictions on transfer thereof in violation of the Act and that the Shares have not been registered under the Act. 3.2.3 Litigation. There are no actions, suits, claims, arbitration proceedings or governmental investigations or inquiries that are pending or, to the knowledge of MCI, threatened, against MCI, or its officers, directors, employees or assets that could reasonably be expected to prevent or prohibit the consummation of the transactions contemplated by this Agreement. 3.2.4 Finder's Fee. MCI has not done anything to cause the HP Entities (or any of their respective Affiliates) to incur any liability to any Person for any brokerage or finder's fee or agent's commission, or the like, in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of MCI, and MCI shall be solely responsible for any such fees and expenses attributable to MCI. ARTICLE IV COVENANTS OF HP ENTITIES Each of the HP Entities covenants and agrees with MCI that, from the date of this Agreement until the earlier of the Closing or the termination of this Agreement in accordance with Article VII hereof (except where such other time period is specifically provided in the terms hereof), it will comply with all covenants and provisions of this Article IV required to be performed by it, except to the extent (i) MCI may otherwise consent in writing (which consent may be withheld in the sole and absolute discretion of MCI), (ii) otherwise required by applicable Law, or (iii) otherwise required or permitted by this Agreement. Section 4.1 No Disposition of the Shares. Except as specifically permitted under Section 8.5 hereof, Holdings will not, and will not permit any of its Affiliates owning any portion of the Shares to, sell, assign, transfer, convey, deliver or dispose of, or agree to sell, assign, convey, transfer, deliver or dispose of, the Shares to any Person other than pursuant to this Agreement, and shall not, and shall not permit any of its Affiliates owning any portion of the Shares to, issue or grant to any Person (other than pursuant hereto) any option or right to purchase the Shares or any portion thereof, or enter into any agreement, commitment or understanding to, or with respect to, any of the foregoing. The HP Entities also agree that, between the date of this Agreement through (and including) the earlier of (i) the Closing Date and (ii) the termination of this Agreement under the terms of Article VII hereof, neither of the HP Entities nor any of their respective Affiliates, officers, directors, representatives or agents will solicit any offers from any Person relating to any acquisition or purchase of all or any portion of the Shares. Section 4.2 All Reasonable Efforts; Cooperation. Subject to the terms and conditions of this Agreement, each of the HP Entities agrees to use all reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done as promptly as practicable, all things necessary, proper and advisable under applicable laws and regulations to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement (including, without limitation, receipt of all applicable regulatory approvals). Each of the HP Entities agrees 7 to cooperate in good faith and deal fairly with MCI and its Affiliates when interpreting their respective obligations hereunder. Section 4.3 Regulatory Approvals. Each of the HP Entities will, and will cause, as applicable, its respective Affiliates to, (i) provide such information and communications to such Governmental Authorities as such authorities may reasonably request and (ii) reasonably cooperate with MCI in obtaining, as promptly as practicable, all approvals, authorizations, and clearances of Governmental Authorities required of MCI to consummate the transactions contemplated hereby. Section 4.4 Notices of Certain Events. Each of HPQ and Holdings shall, and shall cause their respective Affiliates to, promptly notify MCI of: (i) any notice or other communication from any Person received by it alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement; (ii) any notice or other communication from any Governmental Authority received by it in connection with the transactions contemplated by this Agreement; and (iii) any actions, suits, claims, investigations or proceedings that, to its actual knowledge, have commenced or are threatened against, relating to, or involving or otherwise affecting MCI that relate to the consummation of the transactions contemplated by this Agreement. ARTICLE V COVENANTS OF MCI MCI covenants and agrees with the HP Entities that, from the date of this Agreement until the earlier of the Closing or the termination of this Agreement in accordance with Article VII hereof (except where such other time period is specifically provided in the terms hereof), it will comply with all covenants and provisions of this Article V required to be performed by it except to the extent (i) the HP Entities may otherwise consent in writing (which consent may be withheld in the sole and absolute discretion of the HP Entities), (ii) otherwise required by applicable Law, or (iii) otherwise required or permitted by this Agreement. Section 5.1 All Reasonable Efforts; Cooperation. Subject to the terms and conditions of this Agreement, MCI agrees to use all reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done as promptly as practicable, all things necessary, proper and advisable under applicable laws and regulations to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement (including, without limitation, receipt of all applicable regulatory approvals). MCI agrees to cooperate in good faith and deal fairly with the HP Entities and their respective Affiliates when interpreting its obligations hereunder. Section 5.2 Regulatory Approvals. MCI will, and will cause, as applicable, its Affiliates to, (i) provide such information and communications to such Governmental Authorities as such authorities may reasonably request and (ii) reasonably cooperate with the HP Entities in obtaining, as promptly as practicable, all approvals, authorizations, and clearances of Governmental Authorities required of the HP Entities to consummate the transactions contemplated hereby. 8 Section 5.3 Notices of Certain Events. MCI shall, and shall cause its Affiliates to, promptly notify the HP Entities of: (i) any notice or other communication from any Person received by it alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement; (ii) any notice or other communication from any Governmental Authority received by it in connection with the transactions contemplated by this Agreement; and (iii) any actions, suits, claims, investigations or proceedings that, to its actual knowledge, have or are threatened against, relating to, or involving or otherwise affecting the HP Entities that relate to the consummation of the transactions contemplated by this Agreement. ARTICLE VI CLOSING; CONDITIONS TO OBLIGATIONS Section 6.1 Conditions to Obligations of the HP Entities. The obligations of the HP Entities and of their respective Affiliates hereunder are subject to the fulfillment, at or concurrent with the Closing, of each of the following conditions (all or any of which, except for the condition requiring the approval described in Schedule 3.2.2 to have been obtained and be in full force and effect, may be waived in whole or in part by HPQ): 6.1.1 Representations and Warranties. The representations and warranties made by MCI in this Agreement shall be true, complete and correct in all material respects as of the Closing. 6.1.2 No Injunction or Proceeding. There shall not be in effect on and as of the Closing Date any writ, judgment, injunction, decree or similar order of any court or governmental or regulatory authority restraining, enjoining, or otherwise preventing consummation of any of the transactions contemplated by this Agreement, and there shall not be pending on and as of the Closing Date any claim, action, suit or other proceeding brought by any governmental or regulatory authority to restrain, enjoin, or otherwise prevent consummation of any of the transactions contemplated by this Agreement. 6.1.3 Approvals and Consents. All approvals, authorizations and clearances of any Governmental Authority (including, without limitation, the consent and approval described in Schedule 3.2.2) and any third parties necessary for the consummation of the transactions contemplated hereby and the performance of the obligations of MCI hereunder shall have been obtained and shall be in full force and effect. Section 6.2 Conditions to Obligations of MCI. The obligations of MCI hereunder are subject to the fulfillment, at or concurrent with the Closing, of each of the following conditions (all or any of which, except for the condition requiring the approval described in Schedule 3.2.2 to have been obtained and be in full force and effect, may be waived in whole or in part by MCI): 6.2.1 Representations and Warranties. The representations and warranties made by the HP Entities in this Agreement shall be true, complete and correct in all material respects as of the Closing. 9 6.2.2 No Injunction or Proceeding. There shall not be in effect on and as of the Closing Date any writ, judgment, injunction, decree or similar order of any court or governmental or regulatory authority restraining, enjoining, or otherwise preventing consummation of any of the transactions contemplated by this Agreement, and there shall not be pending on and as of the Closing Date any claim, action, suit or other proceeding brought by any governmental or regulatory authority to restrain, enjoin, or otherwise prevent consummation of any of the transactions contemplated by this Agreement. 6.2.3 Approvals and Consents. All approvals, authorizations and clearances of any Governmental Authority (including, without limitation, the consent and approval described in Schedule 3.2.2) and any third parties necessary for the consummation of the transactions contemplated hereby and the performance of the obligations of each of the HP Entities hereunder shall have been obtained and shall be in full force and effect. 6.2.4 Delivery of Shares and Documents. The share certificates representing the Shares shall have been delivered to MCI (or its designated Affiliate) duly endorsed for transfer or accompanied by duly signed stock powers. 6.2.5 Consummation of the Acquisition. MCI shall have successfully consummated the Acquisition. ARTICLE VII TERMINATION Section 7.1 Termination. This Agreement may be terminated and the transactions contemplated hereby may be abandoned: 7.1.1 at any time before the Closing by mutual written agreement of HPQ and MCI; 7.1.2 by the HP Entities or MCI at any time after December 31, 2003 if the transactions contemplated by Section 2.1 and Section 2.2 of this Agreement have not been consummated on or before such date and such failure to consummate is not caused by a breach of this Agreement by the party electing to terminate pursuant to this Section 7.1.2; or 7.1.3 by the HP Entities or MCI at any time before the Closing in the event there exists a final and non-appealable injunction or other court order prohibiting the consummation of the transactions contemplated by Section 2.1 of this Agreement. Section 7.2 No Termination if in Breach. The HP Entities may not terminate this Agreement pursuant to Section 7.1.2 hereof due to a breach by MCI of any representation or warranty provided in Section 3.2 or of any of its covenants or agreements set forth herein, if either of them is, at the time of such attempted termination, in material breach of any of its representations, warranties, covenants, or agreements under this Agreement. MCI may not terminate this Agreement pursuant to Section 7.1.2 hereof due to a breach by the HP Entities of any representation or warranty provided in Section 3.1 or of any of its covenants or agreements 10 set forth herein, if MCI is, at the time of such attempted termination, in material breach of any of its representations, warranties, covenants or agreements under this Agreement. Section 7.3 Procedure and Effect of Termination. In the event of termination of this Agreement pursuant to Section 7.1 hereof, and abandonment of the transactions contemplated under Sections 2.1 and 2.2 hereof, written notice thereof shall forthwith be given by the terminating party to the other party and this Agreement shall terminate and the transactions contemplated hereunder shall be abandoned without further action by any of the parties hereto and all filings, applications and other submissions made pursuant to this Agreement, to the extent practicable, shall be withdrawn from the agency or other Governmental Authority or Person to which they were made. Such termination shall not affect the rights of the parties hereto with respect to breaches of any agreement, covenant, representation or warranty contained in this Agreement. ARTICLE VIII MISCELLANEOUS Section 8.1 Confidentiality. This Agreement shall be subject to terms of the Non-Disclosure Agreement. Section 8.2 Notices. Any notice or other communication given pursuant to this Agreement must be in writing and (a) delivered personally, (b) sent by facsimile or other similar facsimile transmission, (c) delivered by overnight express, or (d) sent by registered or certified mail, postage prepaid, as follows: 8.2.1 if to HPQ or Holdings: Hewlett-Packard Company 3000Hanover St. Palo Alto, CA 94304 Attn: Vice President, Strategy and Corporate Development with a copy to: 3000 Hanover St. Palo Alto, CA 94304 Attn: Deputy General Counsel and with a copy to (which shall not constitute notice): Wilson, Sonsini Goodrich & Rosati 650 Page Mill Road Palo Alto, CA 94304 Attn: Richard S. Arnold, Jr., Esq. 8.2.2 if to MCI: 11 WorldCom, Inc. Attn: Jonathan Crane 22001 Loudon County Parkway Ashburn, VA 20147 Facsimile No.: 703-116-0114 and WorldCom, Inc. Attn: Roland J. Behm 1133 19th St., N.W. Washington, D.C. 20036 Facsimile No.: 202-736-6309 with a copy to (which shall not constitute notice): Steven D. Rubin c/o Weil, Gotshal & Manges LLP 700 Louisiana, Suite 1600 Houston, TX 77002 Facsimile No.: 713-224-9511 All notices and other communications required or permitted under this Agreement that are addressed as provided in this Section 8.2 will (A) if delivered personally or by overnight express, be deemed given upon delivery; (B) if delivered by facsimile or similar facsimile transmission, be deemed given when electronically confirmed; and (C) if sent by registered or certified mail, be deemed given when received. Any party from time to time may change its address for the purpose of notices to that party by giving a similar notice to all parties specifying a new address, but no such notice will be deemed to have been given until it is actually received by the party sought to be charged with the contents thereof. Section 8.3 Entire Agreement. This Agreement, and the Schedules and the Non-Disclosure Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and there are no agreements, understandings, representations or warranties between the parties other than those set forth or referred to herein. Section 8.4 Expenses and Fees. All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the party incurring such costs and expenses. Section 8.5 Binding Effect; No Assignment. This Agreement is binding upon and will inure to the benefit of the parties hereto and each of their respective successors and permitted assigns. No party hereto may assign, delegate or otherwise transfer, all or any part of its obligations hereunder without the prior written consent of each of the other parties hereto (and any attempt to do so will be void); provided, however, that any party may assign its rights and obligations hereunder to any Affiliate of such party provided that the original party shall remain liable for all of its obligations hereunder notwithstanding such assignment. Holdings may assign 12 its rights and obligations, and/or transfer the Shares, to HPQ provided that HPQ assumes the obligations of Holdings hereunder. Section 8.6 Specific Performance. Each of the parties hereto acknowledges and agrees that the other party hereto would be irreparably damaged in the event any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, each of the parties hereto agrees that the other parties hereto will be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action, in addition to any other remedy to which any party hereto may be entitled, at Law or in equity. Section 8.7 Further Assurances. The HP Entities and MCI agree that, from time to time after the Closing, upon the reasonable request of the other, they will cooperate and will, execute and/or deliver such documents and instruments as any other party hereto may reasonably request containing terms and conditions mutually satisfactory to such parties to further effectuate the terms hereof. Section 8.8 Amendments and Waivers. This Agreement may not be modified or amended except by an instrument or instruments in writing signed by the party against whom enforcement of any such modification or amendment is sought. Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof. Such waiver must be in writing and must be executed by an executive officer of such party. A waiver on one occasion will not be deemed to be a waiver of the same or any other breach or non-fulfillment on a future occasion. All remedies, either under this Agreement, or by Law or otherwise afforded, will be cumulative and not alternative. Section 8.9 Agreement of the Parties' Benefit. The terms and provisions of this Agreement are intended solely for the benefit of the HP Entities and MCI and their respective successors and permitted assigns, and no Person other than the parties hereto or the foregoing-described Persons is entitled to rely on any representation, warranty or covenant contained herein. Section 8.10 Governing Law. This Agreement, including, without limitation, the interpretation, construction, validity and enforceability thereof, shall be governed by the Bankruptcy Code and, to the extent not inconsistent therewith, the internal Laws of the State of New York, including Section 5-1401 of the General Obligations Law of the State of New York, without regard to the principles of conflict of Laws thereof. Section 8.11 Submission to Jurisdiction; Service of Process. 8.11.1 Any legal action or proceeding with respect to this Agreement or any document related thereto shall be brought solely in the Bankruptcy Court, and, by execution and delivery of this Agreement, each party hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The parties hereto hereby irrevocably waive any objection, including, without limitation, any objection to the laying of 13 venue or based on the grounds of forum non conveniens, which any of them may now or hereafter have to the bringing of any such action or proceeding in such respective jurisdictions. 8.11.2 Each party hereto irrevocably consents to the service of process of any of the aforesaid courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such party, respectively, at its address provided herein. 8.11.3 Nothing contained in this Section 8.11 shall affect the right of any party hereto to serve process in any other manner permitted by Law. Section 8.12 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. Section 8.13 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. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, (a) such term or other provision shall be fully severable; (b) this Agreement will be construed and enforced as if such illegal, invalid, or unenforceable term or other provision had never comprised a part hereof; and (c) the remaining terms and provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid, or unenforceable term or other provision or by its severance from this Agreement. Section 8.14 Public Announcements. Each party agrees that it shall not issue any press release or other public announcement concerning this Agreement or the transactions contemplated hereby without providing prior notice of the specific subject matter thereof to the other party hereto and giving the other party hereto the opportunity to comment thereon. Section 8.15 Headings. The headings of the Articles and Sections of this Agreement have been inserted for convenience of reference only, are not intended to be considered a part hereof, and shall not affect in any way the meaning or interpretation of this Agreement. Section 8.16 Counterparts. This Agreement may be executed simultaneously in any number of counterparts, each of which will be deemed an original, but all of which will constitute one and the same instrument. This Agreement and Section 8.17 Transfer Taxes. MCI shall be liable for and shall pay, and shall indemnify and hold harmless HPQ and its Affiliates against, all sales, use, stamp, documentary, filing, recording, transfer or similar fees or taxes or governmental charges as levied by any taxing authority or Governmental Authority by reason of the transfer of the Shares pursuant to this Agreement (other than taxes measured by or with respect to income or gains of HPQ or its Affiliates). Each of the HP Entities and MCI agree to use commercially reasonable efforts to minimize any such fees or charges that may applicable. Each of the HP Entities and MCI, as may be applicable, hereby agree to file all necessary documents (including, but not limited to, all tax returns) with respect to all such amounts in a timely manner. 14 Section 8.18 Survival of Representations and Warranties. The representations and warranties of each of the HP Entities and MCI shall survive the Closing. 15 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective authorized officers as of the date first written above. HEWLETT-PACKARD COMPANY By: /s/ Shane Robison ----------------------------------------------- Name: Shane Robison ---------------------------------------- Title: CTO --------------------------------------- HPQ HOLDINGS, LLC By: /s/ Shane Robison ----------------------------------------------- Name: Shane Robison ---------------------------------------- Title: CTO --------------------------------------- WORLDCOM, INC. By: /s/ Paul M. Eskildsen ----------------------------------------------- Name: Paul M. Eskildsen ---------------------------------------- Title: Acting General Counsel and VP --------------------------------------- Schedule 3.2.2 MCI and its applicable Affiliates will need to obtain the consent and approval of the Bankruptcy Court necessary to authorize MCI to enter into, undertake and consummate the transactions contemplated by the Agreement, including the Acquisition. EX-3 4 exh3.txt EXHIBIT 3 - MOTION OF THE DEBTORS Exhibit 3 HEARING DATE AND TIME: August 5, 2003 @ 10:00 a.m. OBJECTION DEADLINE: August 4, 2003 @ 9:00 a.m. WEIL, GOTSHAL & MANGES LLP Attorneys for Debtors and Debtors in Possession 767 Fifth Avenue New York, NY 10153-0119 Telephone: (212) 310-8000 Facsimile: (212) 310-8007 Marcia L. Goldstein, Esq. (MG 2606) Lori R. Fife, Esq. (LF 2839) Alfredo R. Perez, Esq. UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK - ----------------------------------------------------x In re : : Chapter 11 Case No. WORLDCOM, INC., et al., : 02-13533 (AJG) -- -- : : (Jointly Administered) Debtors. : - ----------------------------------------------------x MOTION OF THE DEBTORS PURSUANT TO SECTION 363 OF THE BANKRUPTCY CODE AUTHORIZING ACQUISITION OF DIGEX, INCORPORATED TO THE HONORABLE ARTHUR J. GONZALEZ, UNITED STATES BANKRUPTCY JUDGE: WorldCom, Inc. and certain of its direct and indirect subsidiaries, as debtors and debtors in possession (collectively, "WorldCom"), respectfully represent: Background 1. On July 21, 2002 (the "Commencement Date") and November 8, 2002, WorldCom, Inc. and certain of its direct and indirect subsidiaries commenced cases under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code"). By Orders, dated July 22, 2002 and November 12, 2002, WorldCom's chapter 11 cases have been consolidated for procedural purposes only and are being jointly administered. WorldCom continues to operate its businesses and manage its properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. On July 29, 2002, the United States Trustee for the Southern District of New York (the "U.S. Trustee") appointed the statutory committee of unsecured creditors (the "Committee"). 2. WorldCom, Inc., together with approximately 200 direct and indirect domestic subsidiaries and 200 non-debtor foreign affiliates (collectively, the "Company"), is one of the world's preeminent global communications companies that provides a broad range of communication services in over 200 countries on six continents. Through its core communications services business, which includes voice, data, Internet, and international services, the Company carries more data over its networks than any other entity. The Company is also the second largest carrier of consumer and small business long distance telecommunications services in the United States providing a broad range of retail and wholesale communications services, including long distance voice and data communications, consumer local voice communications, wireless messaging and voice services, private line services, and dial-up Internet access services. 3. For the year ended December 31, 2001, WorldCom recorded revenue of more than $30 billion.1 As of March 31, 2002, WorldCom's books and records reflected liabilities totaling approximately $41 billion. As of June 30, 2002, WorldCom employed more than 63,900 individuals, of which approximately 57,700 were full-time employees and approximately 6,200 were part-time employees. _______________ 1 The amounts in this paragraph are stated on a consolidated basis, including WorldCom and non-debtor domestic subsidiaries only. WorldCom, Inc. has announced its intention to restate the financial statements for 2000, 2001, and the first quarter of 2002. 2 Jurisdiction 4. This Court has jurisdiction to consider this matter pursuant to 28 U.S.C. ss.ss. 157 and 1334. This is a core proceeding pursuant to 28 U.S.C. ss. 157(b). Venue is proper before this Court pursuant to 28 U.S.C. ss.ss. 1408 and 1409. Digex, Incorporated 5. In July 2001, WorldCom. Inc. acquired Intermedia Communications Inc. ("Intermedia"), one of the Debtors in these chapter 11 cases and a provider of integrated data and voice communications services. The primary purpose for the Company's acquisition of Intermedia was to obtain Intermedia's controlling interest in Digex, Incorporated ("Digex"). 6. Digex is a leading provider of managed hosting services. Digex services include server management, application support, managed networking services, and customer care and support services. Additionally, Digex offers value-added information technology services, such as enhanced security services, database services, high-availability services, application optimization services, stress-testing services, and consulting services. As part of these services, Digex provides for installation and maintenance of computer hardware and software, network technology, and systems management to offer its customers a broad range of managed hosting solutions. 7. Intermedia, through its indirect wholly-owned subsidiary, Intermedia Investment, Inc. ("Intermedia Investment"), currently owns 60.7% of the outstanding shares of common stock and 93.9% of the voting rights of such common stock of Digex. Intermedia Investment is one of the Debtors in these chapter 11 cases. Specifically, Intermedia Investments owns 39,350,000 shares of Class B Common Stock, par value $.01 per share (the "Class B Stock"), of Digex. Shares of Class B Stock vote 3 together with shares of the Class A Common Stock, par value $.01 per share (the "Class A Common Stock"), of Digex in matters submitted to the holders of common stock of Digex, and the rights of the holders of shares of the Class B Stock and the Class A Common Stock are the same, except that each share of Class B Stock is entitled to ten votes, where each share of Class A Common Stock is entitled to one vote, and each share of Class B Stock is convertible, at the option of its holder, into a share of Class A Common Stock. 8. The publicly traded shares of common stock of Digex are the shares of Class A Common Stock, the outstanding shares of which represent approximately 39.3% of the common stock and approximately 6.1% of the voting rights of Digex (the "Publicly Traded Shares"). Finally, Hewlett-Packard Company ("HPC"), through its wholly-owned subsidiary HPQ Holdings, LLC ("HPQ" and, together with HPC, "HP"), holds 50,000 shares of Series A Convertible Preferred Stock of Digex, liquidation value $1,000 per share (the "Preferred Stock"), which currently is convertible into shares of Class A Common Stock representing approximately .01% of the common stock and .002% of the voting rights of Digex calculated on an as-converted basis. Subject to the legal availability of funds, the Preferred Stock is redeemable on January 12, 2004 for $50 million. 9. In addition to the ownership interest in Digex, WorldCom has the following commercial agreements with Digex (collectively, the "Digex Commercial Agreements"): (i) a master channel agreement, dated January 1, 2001 (the "Master Channel Agreement"), pursuant to which MCI WorldCom Network Services, Inc. ("WNS") rebrands Digex Managed Hosting Services and distributes such services as 4 WorldCom Managed Hosting Services; (ii) a master facilities agreement, dated January 1, 2001, pursuant to which WNS licenses to Digex the right to occupy space and agrees to provide to Digex ancillary services in certain of WorldCom's data centers; and (iii) a UUNet Multi-Megabit Agreement, dated October 18, 2000, pursuant to which Digex purchases bandwidth and connectivity from UUNet Technologies, Inc. 10. In addition, WorldCom has the following two Note Purchase Agreements (the "Note Purchase Agreements") with Digex, pursuant to which Digex borrowed funds from WorldCom: (i) a Note Purchase Agreement for $102,200,000 Floating Rate Senior Notes due December 31, 2002 (the "First Note Purchase Agreement"); and (ii) a Note Purchase Agreement for $25,000,000 Floating Rate Senior Notes due December 31, 2003 (the "Second Note Purchase Agreement"). The First Note Purchase Agreement and the Digex Commercial Agreements were entered into pursuant to the terms of a settlement among Digex shareholders, Intermedia, and WorldCom, Inc., which settlement was approved by the Delaware Chancery Court in March 2001 (the "Digex Settlement"). Funds made available under the First Note Purchase Agreement funded Digex's business plans for 2001 and 2002. In December 2002, Digex exercised its right to extend the maturity of all outstanding notes under the First Note Purchase Agreement to December 31, 2006. Having exercised that right, the First Note Purchase Agreement obligates Digex to make equal monthly straight-line amortization payments on the outstanding principal amount due to WorldCom. 11. The Second Note Purchase Agreement, which was entered into subsequent to the First Note Purchase Agreement and the Commercial Agreements, was not a condition of the Digex Settlement. Digex borrowed the entire $25,000,000 5 available under the Second Note Purchase Agreement in 2001. Interest is payable on the notes issued under the Second Note Purchase Agreement on a monthly basis. Principal is due in a single payment at maturity - - December 31, 2003. Unlike the First Note Purchase Agreement, Digex does not have the option to extend the maturity of the notes under the Second Note Purchase Agreement. 12. Digex ceased making any payments to WorldCom under the First and Second Note Purchase Agreements in March 2003. 13. As of the Commencement Date, WNS owed Digex approximately $60,000,000 under the Master Channel Agreement. In its proof of claim filed in January 2003, Digex asserts that it is owed approximately $157,000,000 under that same agreement. The amount claimed by Digex is predicated on the application of a take-or-pay commitment, or "Underutilization Fee," in the Master Channel Agreement through the end of 2002, but does not take into account an EBITDA sharing provision in such agreement that would result in a payment back to WorldCom. 14. As of the Commencement Date, Digex owed to Intermedia in excess of $116,300,000 under the Note Purchase Agreements. Digex has asserted that it is entitled to setoff any amounts it owes under the Note Purchase Agreements against any amounts it is owed under the Master Channel Agreement. The Debtors dispute such assertion. 15. Following the Commencement Date, three independent directors were appointed to the Digex Board of Directors (the "Independent Directors"). As a result of the commencement of the Debtors' chapter 11 cases as well as the financial difficulties in the telecommunications sector, Digex determined that it required financial 6 restructuring in order to ensure continued operations as a going concern. The Independent Directors, comprising a special committee of the Board of Directors of Digex (the "Special Committee"), reviewed strategic alternatives for Digex and retained separate legal and financial advisors to represent the interests of Digex. 16. During an approximate five-month period commencing October 2002, the Special Committee and its advisors contacted approximately 120 potential strategic and financial buyers to solicit bids for acquiring Digex. Approximately 50 potential buyers received a confidential information memorandum and 11 of those potential buyers made a non-binding initial indication of interest. Following management presentations and further due diligence, only one final offer was received by the Special Committee. Following consultation with WorldCom as the majority stockholder of Digex, the Special Committee notified the offeror that Digex could not accept the offer. The offeror did not make any further offer. 17. WorldCom has undertaken an analysis of the operations, assets, and liabilities of Digex. Such analysis included considerations of the liquidity issues faced by Digex and the concern about Digex's ability to continue as a going concern if Digex is unable to obtain external financing for its operations. Following such analysis and upon consideration of WorldCom's financial interests in Digex, including Intermedia's common stock interest, the impact upon WorldCom's customers of an interruption in the services provided by Digex or obtained under the Digex Commercial Agreements, and the approximately $127,000,000 owed to Intermedia under the Note Purchase Agreements and the setoff issues related thereto, WorldCom has determined 7 that it is in the best interest of WorldCom, its estates, and creditors to acquire Digex as set forth herein. The Acquisition of Digex 18. In order to effectuate the acquisition of Digex, WorldCom has taken or will undertake the follow steps: o On July 23, 2003, WorldCom, Inc. and HP entered into that certain Stock Purchase Agreement pursuant to which WorldCom will acquire the outstanding shares of Preferred Stock for $11 million (the "Stock Purchase Agreement"). The Stock Purchase Agreement is subject to Court approval and consummation of the purchase and the payment of the $11 million under such agreement are contingent upon the successful consummation of the Tender Offer (as defined below). o As promptly as practicable after the Court authorizes and approves such action and transaction, WorldCom will commence a tender offer to acquire all of the outstanding Publicly Traded Shares of Digex not owned by WorldCom, Intermedia, or Intermedia Investment (the "Tender Offer") for cash in the amount of $0.70 per share. Consummation of the Tender Offer is conditioned upon WorldCom's receiving valid tenders (that have not been withdrawn prior to expiration of the Tender Offer) of a sufficient number of the Publicly Traded Shares such that, after purchase of the shares pursuant to the Tender Offer, WorldCom, Inc., Intermedia, and Intermedia Investment would own at least 90% of the outstanding shares of Class A Common Stock on an as-converted basis (the "Minimum Condition").2 "On an as-converted basis" means the percentage of shares of the Class A Common Stock that WorldCom, Intermedia, and Intermedia Investment would own following conversion into shares of Class A Common Stock of the shares of Class B Common Stock they own and the shares of Preferred Stock they propose to purchase under the Stock Purchase Agreement. _______________ 2 Based upon information available to WorldCom regarding the outstanding shares of Class A Common Stock, WorldCom believes that there are 25,519,461 shares of Class A Common Stock outstanding and that WorldCom will need to acquire approximately 18,959,416, or approximately 74.3%, of such outstanding shares to meet the Minimum Condition. 8 0 Upon acquisition of a sufficient number of Publicly Traded Shares as part of the Tender Offer to meet the Minimum Condition, WorldCom will cause Digex to be merged with Intermedia Investment (the "Merger") in a short-form merger pursuant to the provisions of Section 253 of the Delaware General Corporation Law ("DGCL"). As part of such Merger, WorldCom will cause to be paid to the remaining holders (other than WorldCom, Intermedia, or Intermedia Investment) of shares of Class A Common Stock for such shares (i) the same consideration for their shares as paid to the holders of Class A Common Stock who tendered their shares in the Tender Offer or (ii) for those holders that exercise appraisal rights in respect of such shares pursuant to Section 262 of the DGCL, the fair value of their shares (which may be an amount less than, more than, or equal to the consideration paid in the Tender Offer). o Following consummation of the Tender Offer and the Merger, WorldCom, Inc. will have an administrative claim pursuant to section 503 of the Bankruptcy Code against Intermedia and its subsidiaries (the "Administrative Claim") in an amount equal to the sum of (i) the purchase price of the Preferred Stock, (ii) the purchase price for the Publicly Traded Shares (whether acquired pursuant to the Tender Offer or otherwise), and (iii) any other related costs. To the extent the Debtors' proposed plan of reorganization, dated July 9 2003 (the "Plan"), is confirmed by the Court, upon confirmation of the Plan, the Administrative Claim shall be deemed satisfied. 19. In view of the overall value of Digex to WorldCom, acquisition of the Preferred Stock by WorldCom is eminently reasonable and, in fact, is a necessary component to WorldCom's acquisition of Digex and realization of such value. The Stock Purchase Agreement was negotiated at length with HP and its representatives. WorldCom submits that the terms of the Stock Purchase Agreement are favorable to WorldCom and, based upon the rights of holders of the Preferred Stock and the valuation of Digex performed by WorldCom, the purchase price for the Preferred Stock is fair and reasonable under the circumstances. 20. The proposal of WorldCom to make the Tender Offer for the Publicly Traded Shares as set forth herein is not intended to be legally binding. If 9 WorldCom makes the Tender Offer, it would be made in accordance with all applicable securities laws and would involve the filing of appropriate materials with the Securities and Exchange Commission (the "SEC") and the mailing of appropriate materials to the holders of the Publicly Traded Shares. 21. Any communication regarding the potential Tender Offer will be filed with the SEC on Schedule TO as "pre-commencement communications" to a tender offer. When it becomes available, stockholders of Digex should read the tender offer statement on Schedule TO (including a "going private" statement on Schedule 13E-3) to be filed by WorldCom as it will contain important information about the Tender Offer. When it becomes available, stockholders can obtain such tender offer statement on Schedule TO free of charge from the SEC's website at http://www.sec.gov or from WorldCom by directing a request to WorldCom, Inc., 22001 Loudon County Parkway, Ashburn, VA 20147. Relief Requested 22. Pursuant to section 363 of the Bankruptcy Code, WorldCom is seeking (i) approval of the Stock Purchase Agreement, (ii) authorization to commence and consummate the Tender Offer, (iii) to the extent necessary, authorization to implement the Merger; and (iv) authorization of payment for shares pursuant to the Stock Purchase Agreement, the Tender Offer, and the Merger, and other related costs. 23. Section 363(b)(1) of the Bankruptcy Code provides, in relevant part, that "[t]he trustee, after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate." 11 U.S.C. ss. 363(b)(1). Although section 363 of the Bankruptcy Code does not set forth a standard for determining when it 10 is appropriate for a court to authorize the sale or disposition of a debtor's assets, courts in the Second Circuit and others, in applying this section, have required that it be based upon the sound business judgment of the debtor. See In re Chateaugay Corp., 973 F.2d 141 (2d Cir. 1992) (holding that a judge determining a ss. 363(b) application must find from the evidence presented before him a good business reason to grant such application); Committee of Equity Sec. Holders v. Lionel Corp. (In re Lionel Corp.), 722 F.2d 1063, 1071 (2d Cir. 1983) (same). Acquisition of Digex is an Exercise of Sound Business Judgment and is in the Best Interests of the Estates and all Creditors 24. The decision to acquire Digex is an exercise of sound business judgment for several reasons. First, the Web hosting services provided by Digex to WorldCom's customers (through WNS) are an integral component of the services that WorldCom supplies to its customers. Absent a financial restructuring of Digex, there exists a likelihood of an interruption of such services to WorldCom's customers. Such interruptions could cause customers to terminate their relationships with WorldCom with respect to not only the Web hosting services provided through Digex, but of the entire package of services provided to such customers. WorldCom submits that acquisition of Digex as set forth herein ensures WorldCom's ability to continue to provide such services to its customers and enhances the product offerings available from WorldCom. 25. Second, in the event of a chapter 11 filing by Digex, there exists a high likelihood that Intermedia's invested ownership interest in Digex would be extinguished. Acquisition of Digex preserves a valuable asset of WorldCom's estates, i.e., its financial interests in Digex. 11 26. Third, WorldCom believes that it can obtain additional value from Digex's operations as a result of cost and revenue synergies. WorldCom believes meaningful synergies can be obtained through (i) reduction in certain back-office staffing and infrastructure; (ii) streamlining customer support and management functions; (iii) integrating Digex into WorldCom's sales process, including, without limitation, improved training and incentives for WorldCom's sales force; and (iv) enhancement of WorldCom's and Digex's product offerings. The increased value resulting from the synergies between WorldCom and Digex is a significant benefit to the estates. 27. Fourth, while WorldCom believes that there are defenses to Digex's assertion that it is entitled to setoff any amounts it owes under the Note Purchase Agreement against any amounts it is owed under the Master Channel Agreement, litigation regarding this issue is uncertain and may be complex and protracted. As noted by Digex in its public filings, without finding from an external source, there is substantial doubt about Digex's ability to continue as a going concern. Therefore, Digex may not be able to survive such litigation. Acquisition of Digex eliminates the need for litigation regarding this issue. 28. In addition, WorldCom submits that entry into and consummation of the Stock Purchase Agreement is an exercise of sound business judgment. As set forth at length above, acquisition of Digex as set forth herein provides several significant benefits to WorldCom, its estates, and creditors. Acquisition of the Preferred Stock pursuant to the Stock Purchase Agreement is an integral component of the acquisition of Digex. Moreover, the terms of the Stock Purchase Agreement and the purchase price of the Preferred Stock are the product of good faith, arm's-length negotiations and represent 12 terms and pricing that are favorable to WorldCom and reasonable under the circumstances. 29. Based upon the foregoing, WorldCom submits that the acquisition of Digex as set forth herein is an exercise of sound business judgment, is in the best interests of WorldCom, its estates, and creditors, and should be authorized in all respects. Memorandum of Law 30. This motion does not raise any novel issues of law, and accordingly, the Debtors respectfully request that the Court waive the requirement contained in Rule 9013-1(b) of the Local Bankruptcy Rules for the Southern District of New York that a separate memorandum of law be submitted in support of the Motion. Notice 31. Notice of this Motion has been provided in accordance with the First Amended Case Management Order, dated December 23, 2002. The Debtors submit that no other or further notice need be provided. 32. No previous motion or application for the relief sought herein has 13 been made to this or any other court. WHEREFORE the Debtors respectfully request that the Court grant the relief requested herein and grant the Debtors such other and further relief as is just. Dated: New York, New York July 24, 2003 /s/ Lori R. Fife ------------------------- Marcia L. Goldstein, Esq. (MG 2606) Lori R. Fife, Esq. (LF 2839) WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, NY 10153-0119 Telephone: (212) 310-8000 Facsimile: (212) 310-8007 and Alfredo R. Perez, Esq. WEIL, GOTSHAL & MANGES LLP 700 Louisiana, Suite 1600 Houston, TX 77002 Telephone: (713) 546-5000 Facsimile: (713) 224-9511 Attorneys for Debtors and Debtors in Possession 14 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK - --------------------------------------------------x In re : : Chapter 11 Case No. WORLDCOM, INC., et al., : 02-13533 (AJG) -- -- : : (Jointly Administered) Debtors. : - --------------------------------------------------x ORDER PURSUANT TO SECTION 363 OF THE BANKRUPTCY CODE AUTHORIZING ACQUISITION OF DIGEX, INCORPORATED Upon the motion, dated July 24, 2003 (the "Motion"), of WorldCom, Inc. and certain of its direct and indirect subsidiaries, as debtors and debtors in possession (collectively, the "Debtors"), for an order, pursuant to section 363 of title 11 of the United States Code (the "Bankruptcy Code") authorizing the acquisition of Digex, Incorporated, all as more fully set forth in the Motion; and the Court having jurisdiction to consider the Motion and the relief requested therein pursuant to 28 U.S.C. ss.ss. 157 and 1334; and consideration of the Motion and the relief requested therein being a core proceeding pursuant to 28 U.S.C. ss. 157(b); and venue being proper before this Court pursuant to 28 U.S.C. ss.ss. 1408 and 1409; and due and proper notice of the Motion having been provided, and no other or further notice need be provided; and the relief requested in the Motion being in the best interests of the Debtors and their estates and creditors; and the Court having reviewed the Motion and having heard the statements in support of the relief requested therein at a hearing before the Court (the "Hearing"); and the Court having determined that the legal and factual bases set forth in the Motion and at the Hearing establish just cause for the relief granted herein; and upon all of the proceedings had before the Court and after due deliberation and sufficient cause appearing therefor, it is ORDERED that the Motion is granted; and it is further ORDERED that, pursuant to section 363 of the Bankruptcy Code, the Debtors are authorized to enter into the Stock Purchase Agreement1; and it is further ORDERED that the Debtors are authorized to commence the Tender Offer for the Publicly Traded Shares and to acquire such shares for cash in the amount of $0.70 per share; and it is further ORDERED that, upon acquisition of the Preferred Stock and the Publicly Traded Shares, or necessary portion thereof, the Debtors are authorized to implement the Merger between Intermedia Investment and Digex; and it is further ORDERED that the Debtors are authorized to execute all documents and take all actions necessary or appropriate in furtherance of the Stock Purchase Agreement, the Tender Offer, and the Merger; and it is further ORDERED that, following consummation of the Tender Offer and the Merger, WorldCom, Inc. will have an administrative claim pursuant to section 503 of the Bankruptcy Code against Intermedia and its subsidiaries (the "Administrative Claim") in an amount equal to the sum of (i) the purchase price of the Preferred Stock, (ii) the purchase price for the Publicly Traded Shares (whether acquired pursuant to the Tender Offer or otherwise), and (iii) any other related costs; provided, however, that to the extent the Plan is confirmed by the Court, upon confirmation of the Plan, the Administrative _______________ 1 Capitalized terms used herein but not defined shall have the meanings ascribed to such terms in the Motion. 2 Claim shall be deemed satisfied and no further obligations shall be due an owing on account of such claim; and it is further ORDERED that this Order shall be effective and enforceable immediately upon entry of this Order, pursuant to Fed. R. Bankr. P. 6004(g); and it is further ORDERED that the requirement under Rule 9013-1(b) of the Local Bankruptcy Rules for the Southern District of New York for the filing of a memorandum of law is waived. Dated: New York, New York August __, 2003 ------------------------------ UNITED STATES BANKRUPTCY JUDGE 3 HEARING DATE AND TIME: August 5, 2003 @ 10:00 a.m. OBJECTION DEADLINE: August 4, 2003 @ 9:00 a.m. WEIL, GOTSHAL & MANGES LLP Attorneys for Debtors and Debtors in Possession 767 Fifth Avenue New York, NY 10153-0119 Telephone: (212) 310-8000 Facsimile: (212) 310-8007 Marcia L. Goldstein, Esq. (MG 2606) Lori R. Fife, Esq. (LF 2839) Alfredo R. Perez, Esq. UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK - -------------------------------------------------x : In re : : Chapter 11 Case No. WORLDCOM, INC., et al., : 02-13533 (AJG) -- -- : : (Jointly Administered) Debtors. : - -------------------------------------------------x NOTICE OF HEARING REGARDING MOTION OF THE DEBTORS PURSUANT TO SECTION 363 OF THE BANKRUPTCY CODE AUTHORIZING ACQUISITION OF DIGEX, INCORPORATED PLEASE TAKE NOTICE that a hearing will be held before the Honorable Arthur J. Gonzalez, United States Bankruptcy Judge, in Room 523 of the United States Bankruptcy Court, Alexander Hamilton Custom House, One Bowling Green, New York, New York, on August 5, 2003, at 10:00 a.m. (the "Hearing"), or as soon thereafter as counsel may be heard to consider the Motion of the Debtors Pursuant to Section 363 of the Bankruptcy Code Authorizing Acquisition of Digex, Incorporated (the "Motion"). PLEASE TAKE FURTHER NOTICE that responses or objections to the Motion, if any, must be in writing, shall conform to the Federal Rules of Bankruptcy Procedure and the Local Rules of the Bankruptcy Court, and shall be filed with the Bankruptcy Court electronically in accordance with General Order M-242 (General Order M-242 and the User's Manual for the Electronic Case Filing System can be found at www.nysb.uscourts.gov), by registered users of the Bankruptcy Court's case filing system and, by all other parties in interest, on a 3.5 inch disk, preferably in Portable Document Format (PDF), WordPerfect or any other Windows-based word processing format (with a hard-copy delivered directly to Chambers), and shall be served in accordance with General Order M-242 upon (i) the Debtors, 1133 19th Street, Washington, D.C. 20036, Attention: Paul Eskildsen, Esq., Acting General Counsel, (ii) Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153, Attention: Marcia L. Goldstein, Esq. and Lori R. Fife, Esq., attorneys for the Debtors; (iii) the Office of the United States Trustee for the Southern District of New York, 33 Whitehall Street, 21st floor, New York, New York 10004, Attention: Mary Elizabeth Tom, Esq.; (iv) Akin Gump Strauss Hauer & Feld, LLP, 590 Madison Avenue, New York, New York 10022, Attention: Daniel Golden, Esq., attorneys for the statutory committee of creditors; (v) Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, Washington, DC 20036, Attention: Richard Thornburgh, Esq. attorneys for the examiner; and (vi) Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022, Attention: Douglas Bartner, Esq., attorneys for the Debtors' postpetition lenders, and shall be filed with the Clerk of the United States Bankruptcy Court for the Southern 2 District of New York, in each case so as to be received no later than August 4, 2003, at 9:00 a.m. (New York City Time). Dated: New York, New York July 24, 2003 /s/ Lori R. Fife ----------------- Marcia L. Goldstein, Esq. (MG 2606) Lori R. Fife, Esq. (LF 2839) WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, NY 10153-0119 Telephone: (212) 310-8000 Facsimile: (212) 310-8007 and Alfredo R. Perez, Esq. WEIL, GOTSHAL & MANGES LLP 700 Louisiana, Suite 1600 Houston, TX 77002 Telephone: (713) 546-5000 Facsimile: (713) 224-9511 Attorneys for Debtors and Debtors in Possession 3 EX-4 5 ex4.txt EXHIBIT 4 - LETTER Exhibit 4 WorldCom, Inc. 22001 Loudoun County Parkway Ashburn, VA 20147 July 24, 2003 Digex, Incorporated 14400 Sweitzer Lane Laurel, MD 20707 Attn: Max D. Hopper Chairman, Special Committee of the Board of Directors Re: Potential Tender Offer for Class A Common Stock of Digex, Incorporated Dear Mr. Hopper: We are pleased to propose the acquisition of all of the outstanding shares of Class A Common Stock, par value $.01 per share (the "Class A Common Stock"), of Digex, Incorporated (the "Company") not beneficially owned by WorldCom, Inc. ("MCI") and its subsidiaries for a cash purchase price of $0.70 per share. It is currently contemplated that the acquisition of such shares by MCI would take the form of a tender offer by MCI, subject to customary conditions, as well as the conditions that (i) sufficient shares of the Class A Common Stock are validly tendered (and not withdrawn) so that, together with the shares MCI and its subsidiaries currently beneficially owns and the shares which MCI has contracted to acquire from Hewlett-Packard Company and its wholly owned subsidiary, HPQ Holdings, LLC, MCI and its subsidiaries would beneficially own at least 90% of the outstanding shares of Class A Common Stock on an as-converted basis, and (ii) MCI receive the bankruptcy court approval mentioned below. Promptly following consummation of the tender offer, we intend to acquire indirectly, through our indirect subsidiary Intermedia Investment, Inc. ("Intermedia Investment"), which currently owns all of the Company's outstanding shares of Class B Common Stock, par value of $.01 per share, the remaining outstanding shares of Class A Common Stock not owned by MCI and its subsidiaries, if any, at the same cash price of $0.70 per share pursuant to a short form merger between Intermedia Investment and the Company. We request that the Special Committee of the Board of Directors, together with its financial and legal advisors, proceed to evaluate this proposal for purposes of the Special Committee making a recommendation with respect to the proposal. We are prepared to meet with you at your earliest convenience to review our proposal. We believe our proposal is both fair and appropriate based on the financial condition of the Company. Our proposed price is 19% above the average trading price of the Class A Common Stock during the 20 day trading period prior to July 24, 2003, 55% above the average trading price during the 90 day period prior to July 24, 2003, and 83% above the average trading price during the 12-month period prior to July 24, 2003. We would also note that our proposed price is 49% above the trading price on July 8, 2003, when the stock began to increase significantly due to what we believe to be market speculation regarding an offer by MCI. Please note that we have also entered into an agreement with Hewlett-Packard Company and its wholly owned subsidiary, HPQ Holdings, LLC, to acquire all of the Company's outstanding shares of Series A Convertible Preferred Stock. Such acquisition of the Series A Convertible Preferred Stock is conditioned upon our successful consummation of the acquisition of beneficial ownership of at least 90% of the outstanding shares of the Class A Common Stock on an as-converted basis. Our proposal as set forth herein and our agreement to purchase the Company's outstanding shares of Series A Convertible Preferred Stock, as well as the consummation of such proposed transactions, remain subject to the authorization and approval of the United States Bankruptcy Court for the Southern District of New York, in which our chapter 11 case is pending. Depending on the response of the Special Committee to this proposal, and other factors deemed relevant by us, we may formulate other plans and/or make other proposals, and take such actions with respect to our investment in the Company, as we may determine to be appropriate. We may also amend or withdraw this proposal at any time at our sole discretion. Our proposal is not intended to be legally binding in any way. If an offer were to be made, it would be made in accordance with all applicable securities laws and would involve the filing of appropriate materials with the Securities and Exchange Commission and the mailing of appropriate materials to the public stockholders of the Company. Please be advised that we intend to disclose this proposal in a Schedule 13D relating to shares of the Class A Common Stock, as required by law. We also intend to file this letter under cover of Schedule TO as a preliminary communication in accordance with Rule 14d-2(b) under the Securities Exchange Act of 1934, as amended. We appreciate your consideration of this proposal and look forward to your response. Very truly yours, WorldCom, Inc. By: /s/ Robert T. Blakely ----------------------- Name: Robert T. Blakely Title: Executive Vice President and Chief Financial Officer cc: Board of Directors of Digex, Incorporated EX-5 6 exh_5.txt PRESS RELEASE Exhibit 5 FOR IMMEDIATE RELEASE CONTACTS: Brad Burns Claire Hassett 1-800-644-NEWS MCI SEEKS COURT APPROVAL TO ACQUIRE REMAINING INTEREST IN DIGEX ASHBURN, Va., July 24, 2003 - MCI (WCOEQ, MCWEQ) announced today that it has filed a motion with the U.S. Bankruptcy Court for the Southern District of New York seeking authorization to purchase all outstanding publicly traded common stock of Digex, Inc. for a total of approximately $18 million dollars. The purchase enables MCI to expand its managed services portfolio -- a key strategic objective of its Plan of Reorganization -- while assuring Digex and MCI customers that MCI is committed to supporting their hosting services. Subject to the Bankruptcy Court's approval, MCI intends to make an offer to acquire all of the outstanding shares of Digex's publicly traded common stock. If MCI acquires approximately 75% of the outstanding shares of publicly traded common stock, MCI would then purchase all of the outstanding Digex preferred stock pursuant to an agreement with the owners of this stock. Digex would then merge with an MCI subsidiary. The transactions have been approved by MCI's Board of Directors. MCI's offer, if and when made, would involve required filings with the Securities and Exchange Commission and the mailing of appropriate materials to the public stockholders of Digex. Digex's stockholders should read the tender offer statement on Schedule TO (including a "going private" statement on Schedule 13E-3) to be filed by MCI, which such stockholders will be able to obtain free of charge from the SEC's website at http://www.sec.gov or from MCI by directing a request to WorldCom, Inc., 22001 Loudoun County Parkway, Ashburn, VA 20147. ABOUT WORLDCOM, INC. WorldCom, Inc. (WCOEQ, MCWEQ), which currently conducts business under the MCI brand name, is a leading global communications provider, delivering innovative, cost-effective, advanced communications connectivity to businesses, governments and consumers. With the industry's most expansive global IP backbone, based on company-owned POPs, and wholly-owned data networks, WorldCom develops the converged communications products and services that are the foundation for commerce and communications in today's market. For more information, go to HTTP://WWW.MCI.COM. ### -----END PRIVACY-ENHANCED MESSAGE-----