-----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, Sl/hlf4hXmy/GJmtJAB9A5im2VkrgKDLKR5W5/2WNffuOvN4y6srYtRvN9+G1Et0 0YxpLFCaaWI7VxC9LZPpfg== 0000940180-97-000543.txt : 19970612 0000940180-97-000543.hdr.sgml : 19970612 ACCESSION NUMBER: 0000940180-97-000543 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 19970611 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: DIGEX INC CENTRAL INDEX KEY: 0000943756 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 521672337 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: 1934 Act SEC FILE NUMBER: 005-50247 FILM NUMBER: 97622302 BUSINESS ADDRESS: STREET 1: 6800 VIRGINIA MANOR CITY: BELTSVILLE STATE: MD ZIP: 20705 BUSINESS PHONE: 3018475000 MAIL ADDRESS: STREET 1: 6800 VIRGINIA MANOR ROAD CITY: BELTSVILLE STATE: MD ZIP: 20705 FORMER COMPANY: FORMER CONFORMED NAME: DIGITAL EXPRESS GROUP INC DATE OF NAME CHANGE: 19960523 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: INTERMEDIA COMMUNICATIONS OF FLORIDA INC CENTRAL INDEX KEY: 0000885067 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 592913586 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 3625 QUEEN PALM DR STREET 2: STE 720 CITY: TAMPA STATE: FL ZIP: 33619 BUSINESS PHONE: 8136210011 SC 14D1 1 SCHEDULE 14D1 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- SCHEDULE 14D-1 Tender Offer Statement Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934 AND SCHEDULE 13D Pursuant to Section 13(d) of the Securities Exchange Act of 1934 ---------------- DIGEX, INCORPORATED (Subject Company) ---------------- INTERMEDIA COMMUNICATIONS INC. DAYLIGHT ACQUISITION CORP. (Bidders) ---------------- Common Stock, Par Value $.01 Per Share (Title of Class of Securities) ---------------- 253754105 (CUSIP Number of Class of Securities) ---------------- Robert M. Manning Senior Vice President, Chief Financial Officer Intermedia Communications Inc. 3625 Queen Palm Drive Tampa, Florida 33619 (813) 829-0011 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS) ---------------- Copy to: Ralph J. Sutcliffe, Esq. Kronish, Lieb, Weiner & Hellman LLP 1114 Avenue of Americas New York, New York 10036-7798 (212) 479-6170 Exhibit Index is located on Page 8 THIS FILING SHALL BE DEEMED TO CONSTITUTE AN ORIGINAL FILING ON SCHEDULE 13D ON BEHALF OF INTERMEDIA COMMUNICATIONS INC. PURSUANT TO SECTION 13(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934 CALCULATION OF FILING FEE - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
TRANSACTION VALUATION AMOUNT OF FILING FEE - ------------------------------------------------------------------------------ $151,765,393.00* $30,353.08**
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- * For purposes of calculating fee only. Transaction valuation assumes the purchase of 11,674,261 shares of Common Stock of the Subject Company at $13.00 in cash per share. ** The amount of the filing fee, calculated in accordance with Regulation 240.0-11 of the Securities Exchange Act of 1934, equals 1/50 of one percent of the value of the shares to be purchased. // Check Box if any part of the fee is offset as provided by Rule O-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the provisions filing by registration statement number, or the Form or Schedule and the date of its filing. Filing Party: Intermedia Amount Previously Paid: Communications Inc. Form or Registration No.: Daylight Acquisition Corp. Date Filed: June 11, 1997 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SCHEDULE 14D-1 - --------------------- CUSIP No. 253754105 - --------------------- - -------------------------------------------------------------------------------------------- NAME OF REPORTING PERSONS: 1 S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON Daylight Acquisition Corp. Not Assigned - -------------------------------------------------------------------------------------------- CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] 2 (See Instructions) (b) [_] - -------------------------------------------------------------------------------------------- SEC USE ONLY 3 - -------------------------------------------------------------------------------------------- SOURCES OF FUNDS (See Instructions) 4 AF - -------------------------------------------------------------------------------------------- CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED 5 PURSUANT TO ITEMS 2(e) or 2(f) [_] - -------------------------------------------------------------------------------------------- CITIZENSHIP OR PLACE OF ORGANIZATION 6 Delaware - -------------------------------------------------------------------------------------------- AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH 7. REPORTING PERSON 5,877,582 shares of Common Stock, $.01 par value - -------------------------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES 8. CERTAIN SHARES (See Instructions) [_] - -------------------------------------------------------------------------------------------- PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 9 50.3% - -------------------------------------------------------------------------------------------- TYPE OF REPORTING PERSON (See Instructions) 10 CO - --------------------------------------------------------------------------------------------
2 SCHEDULE 14D-1 - --------------------- CUSIP No. 253754105 - --------------------- - -------------------------------------------------------------------------------------------- NAME OF REPORTING PERSONS: 1 S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON Intermedia Communications Inc. 59-291-3586 - -------------------------------------------------------------------------------------------- CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] 2 (See Instructions) (b) [_] - -------------------------------------------------------------------------------------------- SEC USE ONLY 3 - -------------------------------------------------------------------------------------------- SOURCES OF FUNDS (See Instructions) 4 WC - -------------------------------------------------------------------------------------------- CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED 5 PURSUANT TO ITEMS 2(e) or 2(f) [_] - -------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------------------- 7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 5,877,582 shares of Common Stock, $.01 par value - -------------------------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES 8 CERTAIN SHARES (See Instructions) [_] - -------------------------------------------------------------------------------------------- PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 9 50.3% - -------------------------------------------------------------------------------------------- TYPE OF REPORTING PERSON (See Instructions) 10 HC, CO - --------------------------------------------------------------------------------------------
3 INTRODUCTION This Tender Offer Statement on Schedule 14D-1 and Schedule 13D relates to a tender offer by Daylight Acquisition Corp., a Delaware corporation ("Purchaser") and a wholly owned subsidiary of Intermedia Communications Inc., a Delaware corporation ("Parent"), to purchase all outstanding shares of Common Stock, par value $.01 per share (the "Shares"), of DIGEX, Corporation, a Delaware corporation (the "Company"), at $13.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated June 11, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"), copies of which are filed as Exhibits (a)(1) and (a)(2) hereto, respectively and are incorporated herein by reference. ITEM 1. SECURITY AND SUBJECT COMPANY (a) The subject company to which this Statement on Schedule 14D-1 relates is DIGEX, Corporation, a Delaware corporation which has its principal executive offices at One DIGEX Plaza, Beltsville, Maryland 20705. (b) This statement relates to a tender offer by Purchaser, a wholly owned subsidiary of Parent, to purchase all outstanding shares of Common Stock, par value $.01 per share, of the Company at $13.00 per share, net to the seller in cash. As of June 4, 1997, there were 11,674,261 Shares outstanding (15,339,741 Shares on a fully diluted basis including all Shares issuable upon the exercise of certain outstanding options and warrants). The information set forth in "Introduction" and "Section 1. Terms of the Offer; Expiration" of the Offer to Purchase is incorporated herein by reference. (c) The information regarding the principal market for, and price of, the Shares set forth in "Section 6. Price Range of the Shares; Dividends" of the Offer to Purchase is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND (a)-(d), (g) The persons filing this statement are Purchaser and Parent. Purchaser, a Delaware corporation, was incorporated on May 30, 1997 for the purpose of entering into the Merger Agreement and consummating the transactions contemplated thereby. It has conducted no business other than related to its formation and the transactions contemplated by the Merger Agreement. All the outstanding capital stock of Purchaser is owned by Parent. Parent is a publicly held Delaware corporation. Parent, directly and through its subsidiaries, is a rapidly growing integrated communications services provider, offering a full suite of local, long distance and enhanced data telecommunications services to business and government end user customers, long distance carriers, Internet service providers, resellers and wireless communications companies. The principal office of Purchaser and Parent is located at 3625 Queen Palm Drive, Tampa, Florida 33619. The information set forth in "Section 9. Certain Information Concerning Purchaser and Parent" of the Offer to Purchase is incorporated herein by reference. The names, business addresses, present principal occupations or employment, material occupations, positions, offices or employments during the last five years and citizenship of the directors and executive officers of Purchaser and Parent are set forth in "Annex I-Directors and Executive Officers of Purchaser and Parent" of the Offer to Purchase, which Annex is incorporated herein by reference. (e)-(f) During the last five years, neither Purchaser nor Parent nor, to the best knowledge of Purchaser or Parent, any persons listed in "Annex I- Directors and Executive Officers of Purchaser and Parent" of the Offer to Purchase, (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, Federal or State securities laws or finding any violation of such laws. 4 ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY (a) Except as set forth in the "Introduction," "Section 8. Certain Information Concerning the Company," "Section 9. Certain Information Concerning Purchaser and Parent" and "Section 11. Background of the Transaction" of the Offer to Purchase, which are incorporated herein by reference, neither Purchaser nor Parent nor, to the best knowledge of Purchaser or Parent, any of the persons listed on "Annex I-Directors and Executive Officers of Purchaser and Parent" to the Offer to Purchase, has engaged in any transaction since January 1, 1994 with the Company, any corporation affiliated with the Company, or any of the Company's executive officers, directors or affiliates that would be required to be disclosed under this Item 3(a). (b) Except as set forth in the "Introduction," "Section 8. Certain Information Concerning the Company," "Section 9. Certain Information Concerning Purchaser and Parent," "Section 11. Background of the Transaction" and "Section 12. Purpose of the Offer; The Merger Agreement and the Stock Purchase Agreement" of the Offer to Purchase, which are incorporated herein by reference, there have been no contacts, negotiations or transactions since January 1, 1994 between Purchaser or Parent or their subsidiaries or, to the best knowledge of the Purchaser and Parent, any of the persons listed in "Annex I-Directors and Executive Officers of Purchaser and Parent" to the Offer to Purchase, which is incorporated herein by reference, on the one hand, and the Company or any of the Company's executive officers, directors or affiliates, on the other hand, concerning: a merger, consolidation or acquisition; a tender offer or other acquisition of securities; an election of directors; or a sale or other transfer of a material amount of assets. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION (a) The total amount of funds required by Purchaser to purchase all outstanding Shares and to pay related fees and expenses in connection with the Offer, the Merger and the Stock Purchase Agreement, is estimated to be approximately $154.2 million. Purchaser expects to obtain the necessary funds directly from Parent from Parent's existing cash reserves. The information set forth in "Section 10. Source and Amount of Funds" of the Offer to Purchase is incorporated herein by reference. (b)-(c) Not applicable. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDERS (a)-(e) The purpose of the Offer is to enable Purchaser to acquire, in one or more transactions, control of the Company. The information concerning the purpose of the Offer set forth in the "Introduction," "Section 8. Certain Information Concerning the Company" and "Section 12. Purpose of the Offer; The Merger Agreement and the Stock Purchase Agreement" of the Offer to Purchase is incorporated herein by reference. (f)-(g) The information set forth in "Section 7. Certain Effects of the Transaction" of the Offer to Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY (a)-(b) Parent has entered into a stock purchase agreement with certain stockholders who own an aggregate of approximately 50.3% of the outstanding Shares (approximately 38.3% of the Shares on a fully diluted basis), pursuant to which, among other things, such stockholders have agreed to validly tender (and not to withdraw) all such shares pursuant to the Offer and granted Parent an option to purchase all such shares at a price of $13.00 per share exercisable individually from each stockholder, in whole or in part, at any time or from time to time, on or after June 4, 1997 and prior to the Termination Date (as defined in Section 12 of the Offer to Purchase). The information set forth in "Section 9. Certain Information Concerning Purchaser and Parent" and "Section 12. Purpose of the Offer; The Merger Agreement and the Stock Purchase Agreement" of the Offer to Purchase is incorporated herein by reference. Except as set forth in said Sections 9 and 12 of the Offer to Purchase, none of the Purchaser or Parent or, to the best knowledge of Purchaser or Parent any of the persons listed in "Annex I-Directors and Executive Officers of Purchaser and Parent" to the Offer to Purchase or any associate or majority-owned subsidiary of Purchaser or Parent or any of the persons so listed, owns beneficially or has any right to acquire, directly or indirectly, any Shares; and neither Purchaser nor Parent nor, to the best knowledge of Purchaser or Parent, any of the persons or entities referred to above nor any director, executive officer or subsidiary of any of the foregoing, has effected any transaction in the Shares during the past sixty days. 5 ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES The description of all contracts, arrangements, understandings or relationships between Purchaser or Parent or, to the best knowledge of Purchaser or Parent, any of the persons listed in "Annex I- Directors and Executive Officers of Purchaser and Parent" to the Offer to Purchase and any person with respect to any securities of the Company set forth in "Section 1. Terms of the Offer; Expiration," "Section 9. Certain Information Concerning Purchaser and Parent," "Section 10. Source and Amount of Funds," "Section 11. Background of the Transaction" and "Section 12. Purpose of the Offer; The Merger Agreement and the Stock Purchase Agreement" of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED The information with respect to persons employed, retained or to be compensated by Purchaser or by any person on its behalf to make solicitations or recommendations in connection with the Offer and the terms of such employment, retention and compensation set forth in the "Introduction" and in "Section 16. Fees and Expenses" of the Offer to Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS Reference is hereby made to the financial information set forth in "Section 9. Certain Information Concerning Purchaser and Parent" of the Offer to Purchase which is incorporated herein by reference. The financial statements of Parent contained in the Offer to Purchase do not constitute an admission that such information is material to a decision by a security holder of the Company to sell, tender or hold the securities being sought in the Offer. ITEM 10. ADDITIONAL INFORMATION (a) The information with respect to present or proposed material contracts, arrangements, understandings or relationships between Purchaser or Parent, any of their subsidiaries, or, to the best knowledge of Purchaser or Parent, any of the persons listed on "Annex I-Directors and Executive Officers of Purchaser and Parent" to the Offer to Purchase, set forth in "Section 8. Certain Information Concerning the Company," "Section 9. Certain Information Concerning Purchaser and Parent," "Section 11. Background of the Transaction" and "Section 12. Purpose of the Offer; The Merger Agreement and the Stock Purchase Agreement" of the Offer to Purchase are incorporated herein by reference. (b)-(c) The information relating to regulatory requirements and regulatory approvals that may be required and the applicability of antitrust laws set forth in "Section 15. Certain Legal Matters" of the Offer to Purchase is incorporated herein by reference. (d) The information relating to the applicability of the margin requirements of Section 7 of the Exchange Act set forth in "Section 7. Certain Effects of the Transaction" of the Offer to Purchase is incorporated herein by reference. (e) Not Applicable. (f) Additional information with respect to the Offer contained in Exhibits (a)(1) and (a)(2) hereto is incorporated by reference herein in its entirety. ITEM 11. MATERIAL TO BE FILED AS EXHIBITS See Exhibit Index. 6 SIGNATURES After due inquiry and to the best of its knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct. INTERMEDIA COMMUNICATIONS INC. /s/ Robert M. Manning By___________________________________ Name: Robert M. Manning Title:Senior Vice President, Chief Financial Officer & Secretary DAYLIGHT ACQUISITION CORP. /s/ Robert M. Manning By___________________________________ Name: Robert M. Manning Title:President, Secretary and Treasurer Dated: June 11, 1997 7 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE NO. ----------- ----------- -------- (a)(1) Offer to Purchase dated June 11, 1997................... (a)(2) Form of Letter of Transmittal........................... (a)(3) Form of Notice of Guaranteed Delivery................... (a)(4) Form of Letter from Bear, Stearns & Co. Inc. to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees................................................ (a)(5) Form of Letter to Clients from Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.... (a)(6) Summary Advertisement published June 11, 1997........... (a)(7) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9........................... (a)(8) Text of Press Release issued on June 5, 1997............ (a)(9) Text of Press Release issued on June 11, 1997........... (c)(1) Agreement and Plan of Merger dated as of June 4, 1997 among DIGEX, Incorporated, Intermedia Communications Inc. and Daylight Acquisition Corp. .................... (c)(2) Stock Purchase Agreement dated as of June 4, 1997 among Intermedia Communications Inc. and certain specified Stockholders............................................ (c)(3) Confidentiality Agreement, dated as of March 27, 1997, between Parent and the Company.......................... (c)(4) Letter from Parent to the Company dated June 4, 1997.... (d) Not applicable.......................................... (e) Not applicable.......................................... (f) Not applicable..........................................
EX-99.(A)(1) 2 OFFER TO PURCHASE EXHIBIT 99(A)(1) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF DIGEX, INCORPORATED BY DAYLIGHT ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF INTERMEDIA COMMUNICATIONS INC. AT $13.00 NET PER SHARE THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, JULY 9, 1997, UNLESS THE OFFER IS EXTENDED. THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. INTERMEDIA COMMUNICATIONS INC. HAS ENTERED INTO A STOCK PURCHASE AGREEMENT WITH CERTAIN STOCKHOLDERS WHO OWN AN AGGREGATE OF APPROXIMATELY 50.3% OF THE OUTSTANDING SHARES OF THE COMPANY'S COMMON STOCK (AND APPROXIMATELY 38.3% OF THE COMPANY'S COMMON STOCK ON A FULLY DILUTED BASIS), PURSUANT TO WHICH, AMONG OTHER THINGS, SUCH STOCKHOLDERS HAVE AGREED TO VALIDLY TENDER (AND NOT TO WITHDRAW) ALL SUCH SHARES PURSUANT TO THE OFFER AND GRANTED INTERMEDIA COMMUNICATIONS INC. AN OPTION TO PURCHASE ALL SUCH SHARES AT A PRICE OF $13.00 PER SHARE EXERCISABLE INDIVIDUALLY FROM EACH STOCKHOLDER, IN WHOLE OR IN PART, AT ANY TIME OR FROM TIME TO TIME, ON OR AFTER JUNE 4, 1997 AND PRIOR TO THE TERMINATION DATE. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN AT THE EXPIRATION OF THE OFFER A MAJORITY OF THE THEN OUTSTANDING SHARES OF THE COMPANY'S COMMON STOCK ON A FULLY DILUTED BASIS (INCLUDING, WITHOUT LIMITATION, ALL SHARES ISSUABLE UPON THE CONVERSION OF ANY CONVERTIBLE SECURITIES OR UPON THE EXERCISE OF ANY OPTIONS, WARRANTS OR RIGHTS). THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE SECTIONS 1 AND 14. --------------- IMPORTANT Any stockholder desiring to tender all or a portion of such stockholder's Shares should either (i) complete and sign the Letter of Transmittal or a facsimile thereof in accordance with the instructions in the Letter of Transmittal, mail or deliver it and any other required documents to the Depositary and either deliver the Certificates for such Shares to the Depositary along with the Letter of Transmittal or deliver such Shares pursuant to the procedures for book-entry transfer set forth in Section 3 or (ii) request such stockholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such stockholder. Any stockholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if such stockholder desires to tender such Shares. Any stockholder who desires to tender Shares and whose Certificates representing such Shares are not immediately available, or who cannot comply with the procedure for book-entry transfer on a timely basis, may tender such Shares by following the procedures for guaranteed delivery set forth in Section 3. Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other tender offer documents may be obtained at Purchaser's expense from the Information Agent or from brokers, dealers, commercial banks or trust companies. --------------- The Dealer Manager for the Offer is: BEAR, STEARNS & CO. INC. June 11, 1997 TABLE OF CONTENTS
PAGE ---- INTRODUCTION.............................................................. 1 THE OFFER................................................................. 3 1. Terms of the Offer; Expiration........................................ 3 2. Acceptance for Payment and Payment for Shares......................... 5 3. Procedure for Tendering Shares........................................ 6 4. Withdrawal Rights..................................................... 9 5. Certain Federal Income Tax Consequences............................... 10 6. Price Range of the Shares; Dividends.................................. 11 7. Certain Effects of the Transaction.................................... 11 8. Certain Information Concerning the Company............................ 12 9. Certain Information Concerning Purchaser and Parent................... 14 10. Source and Amount of Funds............................................ 16 11. Background of the Transaction......................................... 16 12. Purpose of the Offer; The Merger Agreement and the Stock Purchase Agreement............................................................ 19 13. Dividends and Distributions........................................... 28 14. Conditions of the Offer............................................... 28 15. Certain Legal Matters................................................. 31 16. Fees and Expenses..................................................... 32 17. Miscellaneous......................................................... 33
Annex I--Directors And Executive Officers of Purchaser and Parent To the Holders of Common Stock of DIGEX, Incorporated: INTRODUCTION Daylight Acquisition Corp., a Delaware corporation ("Purchaser") and a wholly owned subsidiary of Intermedia Communications Inc., a Delaware corporation ("Parent"), hereby offers to purchase all of the outstanding shares of the common stock, par value $.01 per share (the "Shares"), of DIGEX, Incorporated, a Delaware corporation (the "Company"), at a purchase price of $13.00 per Share (the "Offer Price") net to the seller in cash, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any supplements or amendments thereto, collectively constitute the "Offer"). See Section 9 for additional information concerning Parent and Purchaser. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 to the Letter of Transmittal, stock transfer taxes on the purchase of Shares pursuant to the Offer. However, any tendering stockholder or other payee who fails to complete and sign the Substitute Form W-9 that is included in the Letter of Transmittal may be subject to a required backup U.S. federal income tax withholding of 31% of the gross proceeds payable to such holder or other payee pursuant to the Offer. See Section 5. Purchaser will pay all charges and expenses of Bear, Stearns & Co. Inc. ("Bear Stearns"), as the dealer manager (in such capacity, the "Dealer Manager"), Continental Stock Transfer & Trust Company, as the depositary (the "Depositary"), and Georgeson & Company Inc., as the information agent (the "Information Agent"), incurred in connection with the Offer. See Section 16. THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT THE OFFER AND THE MERGER (AS DEFINED BELOW) ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. FRIEDMAN, BILLINGS, RAMSEY & CO. INC. ("FRIEDMAN"), THE COMPANY'S INDEPENDENT FINANCIAL ADVISOR, HAS ADVISED THE COMPANY'S BOARD OF DIRECTORS THAT, IN ITS OPINION, THE CONSIDERATION TO BE PAID IN THE OFFER AND THE MERGER TO THE COMPANY'S STOCKHOLDERS IS FAIR, FROM A FINANCIAL POINT OF VIEW, TO SUCH STOCKHOLDERS. A COPY OF THE OPINION OF FRIEDMAN IS CONTAINED IN THE COMPANY'S SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE "SCHEDULE 14D-9") FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") IN CONNECTION WITH THE OFFER, A COPY OF WHICH (WITHOUT CERTAIN EXHIBITS) IS BEING FURNISHED TO STOCKHOLDERS CONCURRENTLY HEREWITH. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN AT THE EXPIRATION OF THE OFFER A MAJORITY OF THE THEN OUTSTANDING SHARES ON A FULLY DILUTED BASIS (INCLUDING, WITHOUT LIMITATION, ALL SHARES ISSUABLE UPON THE CONVERSION OF ANY CONVERTIBLE SECURITIES OR UPON THE EXERCISE OF ANY OPTIONS, WARRANTS OR RIGHTS) (THE "MINIMUM CONDITION"). THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE SECTIONS 1 AND 14. PARENT HAS ENTERED INTO A STOCK PURCHASE AGREEMENT WITH CERTAIN STOCKHOLDERS WHO OWN AN AGGREGATE OF APPROXIMATELY 50.3% OF THE OUTSTANDING SHARES (APPROXIMATELY 38.3% OF THE SHARES ON A FULLY DILUTED BASIS), PURSUANT TO WHICH, AMONG OTHER THINGS, SUCH STOCKHOLDERS HAVE AGREED TO VALIDLY TENDER (AND NOT TO WITHDRAW) ALL SUCH SHARES PURSUANT TO THE OFFER AND GRANTED PARENT AN OPTION TO PURCHASE ALL SUCH SHARES AT A PRICE OF $13.00 PER SHARE EXERCISABLE INDIVIDUALLY FROM EACH STOCKHOLDER, IN WHOLE OR IN PART, AT ANY TIME OR FROM TIME TO TIME, ON OR AFTER JUNE 4, 1997 AND PRIOR TO THE TERMINATION DATE (AS DEFINED IN SECTION 12 HEREOF). 1 The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of June 4, 1997 (the "Merger Agreement"), among Purchaser, Parent and the Company. The purpose of the Offer is to acquire control of, and the entire equity interest in, the Company as the first step in Purchaser's proposed acquisition of all the Shares. The Merger Agreement provides, among other things, for the making of the Offer by Purchaser and further provides that, following the Offer and subject to the satisfaction or waiver of certain conditions and in accordance with the General Corporation Law of the State of Delaware (the "DGCL"), Purchaser will be merged with and into the Company (the "Merger"), with the Company surviving the Merger as a wholly owned subsidiary of Parent (the "Surviving Corporation"). Upon consummation of the Merger (the "Effective Time"), each Share issued and outstanding immediately prior to the Effective Time (other than Shares owned by Parent or Purchaser or any of their subsidiaries or held in the treasury of the Company (which shares shall be cancelled) or by stockholders who have properly exercised their appraisal rights under Delaware law) will be converted into the right to receive an amount in cash equal to the price per Share paid in the Offer, without interest (the "Merger Consideration"). For a description of the Merger Agreement, see Section 12. Certain federal income tax consequences of the sale of Shares pursuant to the Offer and the conversion of Shares for cash pursuant to the Merger (whether as Merger Consideration or pursuant to the proper exercise of appraisal rights) are described in Section 5. Concurrently with the execution of the Merger Agreement, and as a condition to Parent and Purchaser entering into the Merger Agreement, Parent entered into a Stock Purchase Agreement, dated as of June 4, 1997 (the "Stock Purchase Agreement"), with Grotech Partners IV, L.P., Grotech Partners III, L.P., Grotech III Companion Fund, L.P., Grotech III Pennsylvania Fund, L.P., Venrock Associates, Venrock Associates II, L.P., Southern Venture Fund II, L.P., Blue Chip Capital Fund Limited Partnership, DIGEX Investors, Ltd., Douglas E. Humphrey and Michael T. Doughney (together, the "Investors", each an "Investor"), the owners of an aggregate of 5,877,582 Shares (representing approximately 50.3% of the outstanding Shares and approximately 38.3% of the Shares on a fully diluted basis) (collectively, the "Investor Shares"). Pursuant to the Stock Purchase Agreement, each of the Investors has (i) irrevocably agreed to validly tender and sell (and not to withdraw) such Investor's Investor Shares pursuant to and in accordance with the Offer and (ii) granted Parent an option (each an "Investor Option" and collectively, the "Investor Options") to purchase such Investor's Investor Shares at a price of $13.00 per Investor Share. The Investor Options are exercisable individually from each Investor, in whole or in part, at any time or from time to time, on or after June 4, 1997 and prior to the Termination Date (as defined in Section 12--the Stock Purchase Agreement). Parent may exercise any Investor Option by sending a written notice to such Investor specifying the number of Investor Shares Parent intends to purchase. For a description of the Stock Purchase Agreement, see Section 12. The Company has represented pursuant to the Merger Agreement that as of June 4, 1997, 11,674,261 Shares were issued and outstanding (all of which are validly issued, fully paid and nonassessable) and that, as of that date, not more than 15,339,741 Shares were outstanding on a fully diluted basis (including 2,900,480 Shares for issuance upon the exercise of outstanding stock options granted to employees or directors of the Company, 415,000 Shares for issuance upon exercise of currently outstanding warrants and 350,000 Shares for issuance to employees pursuant to the Company's Amended and Restated 1997 Employee Stock Purchase Plan). Parent, Purchaser and their affiliates do not currently beneficially own any Shares or rights to acquire Shares other than the rights to acquire the Investor Shares pursuant to the Stock Purchase Agreement. The Minimum Condition will be satisfied if 7,669,871 Shares (inclusive of the Investor Shares) are duly tendered and not withdrawn pursuant to the Offer, including 1,792,289 Shares held by Stockholders other than the Investors. The consummation of the Merger is subject to the satisfaction or waiver of a number of conditions, including, if required, the approval of the Merger by the requisite vote of the stockholders of the Company. Under the DGCL, the stockholder vote necessary to approve the Merger will be the affirmative vote of a majority of the outstanding Shares, including any Shares held by Parent and Purchaser as a result of the purchase of Shares pursuant to the Offer and the Stock Purchase Agreement. UPON CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THE STOCK PURCHASE AGREEMENT, PARENT AND PURCHASER, BY VIRTUE OF THE ACQUISITION OF APPROXIMATELY 50.3% OF THE OUTSTANDING SHARES, WILL OWN A NUMBER OF SHARES SUFFICIENT, EVEN IF NO OTHER SHARES ARE TENDERED IN THE OFFER, TO CAUSE THE MERGER TO OCCUR WITHOUT THE AFFIRMATIVE VOTE OF ANY OTHER 2 HOLDER OF SHARES, IF NO OTHER SHARES ARE ISSUED BY THE COMPANY. See Sections 12 and 14. In addition, if Purchaser acquires at least 90% of the outstanding Shares pursuant to the Offer, the Stock Purchase Agreement or otherwise, Purchaser will be able to effect the Merger pursuant to the "short-form" merger provisions of Section 253 of the DGCL, without prior notice to, or any action by, any other stockholder. In such event, Purchaser intends to effect the Merger promptly following the purchase of Shares pursuant to the Offer and the Stock Purchase Agreement. If, however, Purchaser does not acquire at least 90% of the outstanding Shares pursuant to the Offer, the Stock Purchase Agreement or otherwise, and a vote of the Company's stockholders is required under the DGCL, a significantly longer period of time will be required to effect the Merger. In connection with the Merger, holders of Shares who have not sold their Shares pursuant to the Offer (or otherwise) may have certain rights under the DGCL to demand appraisal of, and payment in cash of the fair value (as judicially determined) of, their Shares. See Section 12. The Offer is not being made for the Company's outstanding warrants (the "Warrants") issued by the Company to WinStar Communications, Inc., on June 10, 1996 and to Electonic Press Services, Inc. on January 3, 1997. Holders of Warrants who wish to participate in the Offer must exercise such Warrants and tender the Shares issued upon such exercise prior to expiration of the Offer. The Company has advised Purchaser that the Company has been advised by each of its directors and executive officers that they intend either to tender all Shares beneficially owned by them to Purchaser pursuant to the Offer or to vote such Shares in favor of approval and adoption of the Merger Agreement. THIS OFFER TO PURCHASE, THE LETTER OF TRANSMITTAL AND THE SCHEDULE 14D-9 CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BY STOCKHOLDERS BEFORE THEY MAKE ANY DECISION WHETHER TO TENDER THEIR SHARES PURSUANT TO THE OFFER. THE OFFER 1. TERMS OF THE OFFER; EXPIRATION Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will, and Parent has agreed in the Merger Agreement to cause Purchaser to, accept for payment, and pay for, all Shares validly tendered and not properly withdrawn as provided in Section 4 prior to the Expiration Date. As used herein, the term "Expiration Date" shall mean 12:00 midnight, New York City time, on Wednesday, July 9, 1997, unless and until Purchaser shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, shall expire. Pursuant to the Merger Agreement, Parent and Purchaser may, without the consent of the Company, extend the Offer, if at any scheduled Expiration Date of the Offer any of the conditions of the Offer shall not be satisfied or waived, until such time as such conditions are satisfied or waived; provided, however, in the event Purchaser desires to extend the Offer beyond July 31, 1997, in the event the proposed length of the extension is, in the aggregate, more than three days, the Company shall have the right to consent to such longer extension. As used in this Offer to Purchase, "business day" means any day other than a Saturday, Sunday or a U.S. federal holiday, and consists of the time period from 12:01 a.m. through 12:00 Midnight, New York City time. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE EXPIRATION OR TERMINATION OF ALL WAITING PERIODS IMPOSED BY THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"), AND THE MINIMUM CONDITION BEING SATISFIED. THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTIONS 1 AND 14. 3 Purchaser reserves the right (but will not be obligated), in accordance with applicable rules and regulations of the Commission, to waive or reduce the Minimum Condition or to waive any other condition to the Offer. However, Purchaser does not presently intend to waive the Minimum Condition. If the Minimum Condition or any of the other conditions set forth in Section 14 has not been satisfied by the scheduled expiration date of the Offer, Purchaser may elect (i) to extend the Offer and, subject to applicable withdrawal rights, retain all tendered Shares until the expiration of the Offer, as extended, subject to the terms of the Offer and the Merger Agreement, (ii) subject to complying with applicable rules and regulations of the Commission, to waive the unsatisfied conditions and accept for payment all Shares so tendered and not extend the Offer, (iii) subject to the terms of the Merger Agreement, to terminate the Offer and not accept for payment any Shares and return all tendered Shares to tendering stockholders, or (iv) subject to the terms of the Merger Agreement, to amend the Offer. Subject to the limitations set forth in the Merger Agreement as described above, Purchaser reserves the right (but will not be obligated), at any time or from time to time in its sole discretion, to extend the period during which the Offer is open by giving oral or written notice of such extension to the Depositary and by making a public announcement of such extension. There can be no assurance that Purchaser will exercise its right to extend the Offer. Subject to the applicable rules and regulations of the Commission, Purchaser also expressly reserves the right, in its sole discretion at any time and from time to time, (i) subject to the limitations set forth in the Merger Agreement, to delay payment for any Shares regardless of whether such Shares were theretofore accepted for payment, or to terminate the Offer and not to accept for payment or pay for any Shares not theretofore accepted for payment or paid for, if the Minimum Condition or any other condition to the Offer is not satisfied, by giving oral or written notice of such delay or termination to the Depositary, and (ii) subject to the limitations set forth in the Merger Agreement, to amend the Offer in any respect. However, in the Merger Agreement, Purchaser has agreed that it will not, without the consent of the Company, (i) decrease the price per Share payable in the Offer or change the form of consideration payable in the Offer, (ii) decrease the number of Shares sought pursuant to the Offer, (iii) impose additional conditions of the Offer other than those set forth in Section 14, or (iv) modify the conditions of the Offer (provided that Parent or Purchaser in its sole discretion may waive any such conditions). Purchaser's right to delay payment for any Shares or not to pay for any Shares theretofore accepted for payment is subject to the applicable rules and regulations of the Commission, including Rule 14e-1(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), relating to Purchaser's obligation to pay for or return tendered Shares promptly after the termination or withdrawal of the Offer. The obligation of Purchaser to consummate the Offer and to accept for payment and to pay for any Shares tendered pursuant to the Offer will be subject to the conditions of the Offer. See Section 14. Any extension of the period during which the Offer is open, delay in acceptance for payment or payment, or termination or amendment of the Offer will be followed, as promptly as practicable, by public announcement thereof, such announcement in the case of an extension to be issued not later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date in accordance with the public announcement requirements of Rule 14d-4(c) under the Exchange Act. Without limiting the obligation of Purchaser under such rule or the manner in which Purchaser may choose to make any public announcement, Purchaser currently intends to make announcements only by issuing a press release to the Dow Jones News Service and making any appropriate filing with the Commission. If Purchaser makes a material change in the terms of the Offer or the information concerning the Offer or if it waives a material condition of the Offer (including a waiver of the Minimum Condition), Purchaser will disseminate additional tender offer materials and extend the Offer if and to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which a tender offer must remain open following a material change in the terms of the Offer or information concerning the Offer, other than a change in the price or in the number of Shares sought, will depend on the facts and circumstances then existing, including the relative materiality of the change. With respect to a change in the price or number of Shares sought, a minimum of ten business days is generally required to permit adequate disclosure to stockholders. 4 The Company has provided Purchaser with the Company's stockholder list and security position listings for the purpose of disseminating the Offer to stockholders. This Offer to Purchase, the related Letter of Transmittal and certain other relevant materials will be mailed to record holders of Shares and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the Company's stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will, and Parent has agreed to cause Purchaser to, accept for payment, and pay for, all Shares validly tendered and not properly withdrawn prior to the Expiration Date, promptly after the later to occur of (i) the Expiration Date and (ii) subject to compliance with Rule 14e-1(c) under the Exchange Act, the date of satisfaction or waiver of all of the conditions of the Offer set forth in Section 14 (including expiration or termination of the waiting period under the HSR Act). Subject to compliance with Rule 14e-1(c) under the Exchange Act and the terms and conditions of the Merger Agreement, Purchaser expressly reserves the right, in its discretion, to delay acceptance for payment of or payment for Shares in order to comply, in whole or in part, with any applicable law or government regulation or any condition contained herein. See Sections 14 and 15. In all cases, payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates evidencing such Shares (or a timely Book-Entry Confirmation (as defined in Section 3) with respect to such Shares), (ii) the Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed with all required signature guarantees or an Agent's Message, as defined below, in connection with a book-entry transfer, and (iii) all other documents required by the Letter of Transmittal. See Section 3. The term "Agent's Message" means a message transmitted by the Book-Entry Transfer Facility (as defined in Section 3) to, and received by, the Depositary and forming a part of a Book- Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares which are the subject of such Book- Entry Confirmation that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that Purchaser may enforce such agreement against such participant. On June 10, 1997, Parent filed with the Federal Trade Commission (the "FTC") and the Antitrust Division of the Department of Justice (the "Antitrust Division") its Premerger Notification and Report Forms under the HSR Act with respect to both the Offer and the Stock Purchase Agreement. The Company anticipates that it will make its filings under the HSR Act with the Antitrust Division and the FTC on June 11, 1997. Accordingly, it is anticipated that the waiting period under the HSR Act with respect to the Offer and the Stock Purchase Agreement will expire at 11:59 p.m., New York City time, on June 25, 1997. Prior to the expiration or termination of such waiting period, the FTC or the Antitrust Division may extend such waiting period by requesting additional information from Parent and/or the Company with respect to the Offer or the Stock Purchase Agreement. If such a request is made, the waiting period will expire at 11:59 p.m., New York City time, on the tenth calendar day after substantial compliance by Parent with such a request. Thereafter, the waiting period may only be extended by court order. The waiting period under the HSR Act may be terminated by the FTC and the Antitrust Division prior to the expiration thereof. Parent and the Company have requested early termination of the waiting period, although there can be no assurance that this request will be granted. See Section 15 for additional information regarding the HSR Act. For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not withdrawn as, if and when Purchaser gives oral or written notice to the Depositary of Purchaser's acceptance of such Shares for payment. In all cases, payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from Purchaser and transmitting 5 payment to tendering stockholders whose Shares have theretofore been accepted for payment. If, for any reason, acceptance for payment of any Shares tendered pursuant to the Offer is delayed, or Purchaser is unable to accept for payment Shares tendered pursuant to the Offer, then, without prejudice to Purchaser's rights under Section 14, the Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent that the tendering stockholders are entitled to withdrawal rights as described in Section 4 and as otherwise required by Rule 14e-1(c) under the Exchange Act. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE OFFER PRICE BE PAID BY PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. If any tendered Shares are not purchased for any reason or if certificates are submitted for more Shares than are tendered, certificates for such Shares not purchased or tendered will be returned pursuant to the instructions of the tendering stockholder without expense to the tendering stockholder (or, in the case of Shares delivered by book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility pursuant to the procedures set forth in Section 3, such Shares will be credited to an account maintained at the Book- Entry Transfer Facility) as promptly as practicable following the expiration, termination or withdrawal of the Offer. If, prior to the Expiration Date, Purchaser (in its sole discretion) increases the consideration to be paid per Share pursuant to the Offer, Purchaser will pay such increased consideration for all such Shares purchased pursuant to the Offer, whether or not such Shares were tendered prior to such increase in consideration. Purchaser reserves the right to transfer or assign, in whole or in part, to Parent or one or more of Parent's subsidiaries the right to purchase Shares tendered pursuant to the Offer; provided, however, that no such transfer or assignment will release Purchaser from its obligations under the Offer or prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 3. PROCEDURE FOR TENDERING SHARES Valid Tenders. For Shares to be validly tendered pursuant to the Offer, a Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message in connection with a book-entry delivery of Shares and any other required documents, must be received by the Depositary at its address set forth on the back cover of this Offer to Purchase prior to the Expiration Date, and (i) certificates representing Shares must be received by the Depositary at such address on or prior to the Expiration Date, (ii) such Shares must be delivered pursuant to the procedures for book-entry transfer set forth below and a Book-Entry Confirmation must be received by the Depositary, in each case prior to the Expiration Date, or (iii) the tendering stockholder must comply with the guaranteed delivery procedures set forth below. No alternative, conditional or contingent tenders will be accepted. Book-Entry Transfer. The Depositary will make a request to establish an account with respect to the Shares at The Depository Trust Company (the "Book- Entry Transfer Facility") for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the Book-Entry Transfer Facility's system may make book-entry delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary's account at the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility's procedure for such transfer. However, although delivery of Shares may be effected through book- entry transfer into the Depositary's account at the Book-Entry Transfer Facility, the Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees (or an Agent's Message in connection with a book-entry transfer) and any other required documents, must, in any case, be transmitted to, and received by, the Depositary at its address set forth on the back cover of this Offer to Purchase on or prior to the Expiration Date, or the tendering stockholder must comply with the guaranteed delivery procedures described below. The confirmation of a book-entry transfer of Shares into the Depositary's account at the Book-Entry Transfer Facility as described 6 above is referred to herein as a "Book-Entry Confirmation." DELIVERY OF DOCUMENTS (INCLUDING AN EXECUTED LETTER OF TRANSMITTAL) TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Signature Guarantees. Signatures on all Letters of Transmittal must be guaranteed by a member in good standing of the Securities Transfer Association's Medallion Program, or by any other bank, broker, dealer, credit union, savings association or other entity that is an "eligible guarantor institution," as such term is defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing constituting an "Eligible Institution"), unless the Shares tendered thereby are tendered (i) by a registered holder (which term, for purposes of this Section, includes any participant in the Book-Entry Transfer Facility's system whose name appears on a security position listing as the owner of the Shares) of Shares who has not completed either the box labeled "Special Delivery Instructions" or the box labeled "Special Payment Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. See Instruction 1 of the Letter of Transmittal. If the certificates representing Shares are registered in the name of a person or persons other than the signer of the Letter of Transmittal, or if payment is to be made or certificates for Shares not accepted for payment or not tendered are to be issued to a person other than the registered holder, then the certificates representing Shares must be endorsed or accompanied by appropriate stock powers, in each case signed exactly as the name or names of the registered holder or holders appear on the certificates, with the signatures on the certificates or stock powers guaranteed as described above and as provided in the Letter of Transmittal. See Instructions 1 and 5 of the Letter of Transmittal. Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's certificates are not immediately available or the procedures for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such Shares may nevertheless be tendered if all of the following guaranteed delivery procedures are complied with: (i) such tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by Purchaser herewith, is received by the Depositary, as provided below, prior to the Expiration Date; and (iii) the certificates for all tendered Shares in proper form for transfer, or a Book-Entry Confirmation with respect to all tendered Shares, in either case together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), with any requested signature guarantees (or, in the case of a book-entry transfer, an Agent's Message), and any other documents required by the Letter of Transmittal, are received by the Depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery. A "trading day" is any day on which the New York Stock Exchange, Inc. is open for business. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, facsimile transmission or mail to the Depositary and must include an endorsement by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. THE METHOD OF DELIVERY OF CERTIFICATES FOR SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer in all cases will be made only after timely receipt by the Depositary of (i) certificates for (or a Book-Entry 7 Confirmation with respect to) such Shares, (ii) a Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message, and (iii) all other documents required by the Letter of Transmittal. Backup Withholding. In order to avoid "backup withholding" of federal income tax on payments of cash pursuant to the Offer, a stockholder surrendering Shares in the Offer must, unless an exemption applies, provide the Depositary with such stockholder's correct taxpayer identification number ("TIN") on a Substitute Form W-9 and certify under penalties of perjury that such TIN is correct and that such stockholder is not subject to backup withholding. If a stockholder does not provide such stockholder's correct TIN or fails to provide the certifications described above, the Internal Revenue Service (the "IRS") may impose a penalty on such stockholder and payment of cash to such stockholder pursuant to the Offer may be subject to backup withholding of 31%. All stockholders surrendering Shares pursuant to the Offer should complete and sign the main signature form and the Substitute Form W-9 included as part of the Letter of Transmittal to provide the information and certification necessary to avoid backup withholding (unless an applicable exemption exists and is proved in a manner satisfactory to the Purchaser and the Depositary). Certain stockholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. Noncorporate foreign stockholders should complete and sign the main signature form and a Form W-8 (Certificate of Foreign Status), a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See Instruction 10 to the Letter of Transmittal. Determination of Validity. All questions as to the form of documents and the validity, eligibility (including time of receipt) and acceptance for payment of any tender of Shares pursuant to any of the procedures described above will be determined by Purchaser in its sole discretion, which determination shall be final and binding on all parties. Purchaser reserves the absolute right to reject any or all tenders of Shares that are determined by it not to be in proper form or the acceptance of or payment for which, in the opinion of Purchaser, may be unlawful. Purchaser also reserves the absolute right to waive any defect or irregularity in any tender of Shares. Subject to the terms of the Merger Agreement, Purchaser also reserves the absolute right to waive or to amend any of the conditions of the Offer. See Sections 1 and 14. Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding on all parties. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. None of Purchaser, Parent, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. Appointment as Proxy. By executing a Letter of Transmittal, a tendering stockholder irrevocably appoints designees of Purchaser as such stockholder's attorneys-in-fact and proxies, each with full power of substitution, in the manner set forth in the Letter of Transmittal, to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder and accepted for payment by Purchaser (and with respect to any and all other Shares or other securities issued or issuable in respect of such Shares on or after the date hereof). All such powers of attorney and proxies shall be considered coupled with an interest in the tendered Shares. Such powers of attorney and proxies shall be irrevocable and shall be effective when, and only to the extent that, Purchaser accepts such Shares for payment. Upon such acceptance for payment, all prior powers of attorney and proxies given by such stockholder with respect to such Shares (and any other Shares or other securities so issued in respect of such purchased Shares) will be revoked, without further action, and no subsequent powers of attorney and proxies may be given (and, if given, will not be deemed effective) by such stockholder. The designees of Purchaser will be empowered to exercise all voting and other rights of such stockholder with respect to such Shares (and any other Shares or securities so issued in respect of such accepted Shares) as they in their sole discretion may deem proper, including, without limitation, in respect of any annual or special meeting of the Company's stockholders, or any adjournment or postponement thereof, or in connection with any action by written consent in lieu of any such meeting or otherwise (including any such meeting or action by written consent to approve the Merger). Purchaser reserves the absolute right to require that, in order for Shares to be validly tendered, immediately upon Purchaser's acceptance for payment of such Shares, Purchaser must be able to 8 exercise full voting and other rights with respect to such Shares (and any other Shares or securities so issued in respect of such accepted Shares), including voting at any meeting of stockholders then scheduled or giving or withdrawing written consents as to which the record date has passed. Binding Agreement. The tender of Shares pursuant to any one of the procedures described above will constitute the tendering stockholder's acceptance of the terms and conditions of the Offer, as well as the tendering stockholder's representation and warranty that such stockholder has full power and authority to tender, sell, assign and transfer such stockholder's Shares tendered in the Offer. The valid tender of Shares tendered pursuant to the Offer will constitute a binding agreement between the tendering stockholder and Purchaser upon the terms and subject to the conditions of the Offer. 4. WITHDRAWAL RIGHTS Except as otherwise provided in this Section 4, tenders of Shares pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by Purchaser as provided herein, may also be withdrawn at any time after August 9, 1997. If Purchaser extends the Offer, is delayed in its purchase of or payment for Shares or is unable to purchase or pay for Shares for any reason, then, without prejudice to the rights of Purchaser hereunder, tendered Shares may be retained by the Depositary on behalf of Purchaser and may not be withdrawn except to the extent that tendering stockholders are entitled to withdrawal rights as set forth in this Section 4 subject to the provisions of Rule 14e-1(c) under the Exchange Act, which requires Purchaser to pay the consideration offered or return Shares deposited by or on behalf of stockholders promptly after the termination or withdrawal of the Offer. For a withdrawal of tendered Shares to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at its address set forth on the back cover of this Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Shares. If certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then prior to the physical release of such certificates, the tendering stockholder must also submit to the Depositary the serial numbers shown on such certificates, and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution (except in the case of Shares tendered for the account of an Eligible Institution). If Shares have been tendered pursuant to the procedure for book-entry transfer set forth in Section 3, any notice of withdrawal with respect to such Shares must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. ALL QUESTIONS AS TO THE FORM AND VALIDITY (INCLUDING TIME OF RECEIPT) OF NOTICES OF WITHDRAWAL WILL BE DETERMINED BY PURCHASER, IN ITS SOLE DISCRETION, WHOSE DETERMINATION SHALL BE FINAL AND BINDING ON ALL PARTIES. NO WITHDRAWAL OF SHARES SHALL BE DEEMED TO HAVE BEEN PROPERLY MADE UNTIL ALL DEFECTS AND IRREGULARITIES HAVE BEEN CURED OR WAIVED. NONE OF PURCHASER, PARENT, THE DEALER MANAGER, THE DEPOSITARY, THE INFORMATION AGENT OR ANY OTHER PERSON WILL BE UNDER ANY DUTY TO GIVE NOTIFICATION OF ANY DEFECTS OR IRREGULARITIES IN ANY NOTICE OF WITHDRAWAL OR INCUR ANY LIABILITY FOR FAILING TO GIVE SUCH NOTIFICATION. Any Shares properly withdrawn will be deemed not to have been validly tendered for purposes of the Offer, but may be retendered at any subsequent time prior to the Expiration Date by following any of the procedures described in Section 3. 9 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES The following is a summary of the principal federal income tax consequences of the Offer and the Merger to holders whose Shares are purchased pursuant to the Offer or whose Shares are converted into the right to receive cash in the Merger (whether upon receipt of the Merger Consideration or pursuant to the proper exercise of appraisal rights). The discussion applies only to holders of Shares in whose hands Shares are capital assets, and may not apply to Shares received pursuant to the exercise of employee stock options or otherwise as compensation, or to holders of Shares who are not citizens or residents of the United States of America. THE TAX DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL INFORMATIONAL PURPOSES ONLY AND IS BASED UPON PRESENT LAW. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH STOCKHOLDER AND THE PARTICULAR TAX EFFECTS OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS. The receipt of the Offer Price and the receipt of cash pursuant to the Merger (whether as Merger Consideration or pursuant to the proper exercise of appraisal rights) will be a taxable transaction for federal income tax purposes (and also may be a taxable transaction under applicable state, local and other income tax laws). In general, for federal income tax purposes, a holder of Shares will recognize gain or loss equal to the difference between such holder's adjusted tax basis in the Shares sold pursuant to the Offer or converted to cash in the Merger and the amount of cash received therefor. Gain or loss must be determined separately for each block of Shares (i.e., Shares acquired at the same cost in a single transaction) sold pursuant to the Offer or converted to cash in the Merger. Such gain or loss will be capital gain or loss and will be long-term gain or loss if, on the date of sale (or, if applicable, the date of the Merger), the Shares were held for more than one year. Payments in connection with the Offer or the Merger may be subject to backup withholding at a 31% rate. Backup withholding generally applies if the stockholder (i) fails to furnish such stockholder's social security number or TIN, (ii) furnishes an incorrect TIN, (iii) fails properly to report interest or dividends or (iv) under certain circumstances, fails to provide a certified statement, signed under penalties of perjury, that the TIN provided is such stockholder's correct number and that such stockholder is not subject to backup withholding. Backup withholding is not an additional tax but merely an advance payment, which may be refunded to the extent it results in an overpayment of tax. Certain persons, including corporations and financial institutions generally, are exempt from backup withholding. Certain penalties apply for failure to furnish correct information and for failure to include the reportable payments in income. Each stockholder should consult with such stockholder's own tax advisor as to such stockholder's qualification for exemption from withholding and the procedure for obtaining such exemption. 10 6. PRICE RANGE OF THE SHARES; DIVIDENDS According to the Company's Annual Report on Form 10-KSB for the year ended December 31, 1996 (the "Company 10-K"), the Shares commenced trading on The National Association of Securities Dealers, Inc. ("NASD") Automated Quotation System ("NASDAQ") National Market System under the symbol DIGX on October 17, 1996. According to the Company 10-K, the Company's Quarterly Report on Form 10-QSB for the quarter ended March 31, 1997 (the "Company 10-Q") and information supplied to Purchaser by the Company, since that date the Company has not paid any cash dividends on the Shares. The following table sets forth, for the periods indicated, the high and low sales prices per Share on the NASDAQ National Market System, as reported in published financial sources.
HIGH LOW ------- ------- Fiscal Year Ended December 31, 1996: Fourth Quarter (commencing October 17, 1996)............... $12.750 $10.000 Fiscal Year Ended December 31, 1997: First Quarter.............................................. $12.750 $ 7.000 Second Quarter (ending June 10, 1997)...................... $12.875 $ 6.813
On June 4, 1997, the last full trading day prior to announcement of the execution of the Merger Agreement and the Stock Purchase Agreement and of Purchaser's intention to commence the Offer, the closing price per Share on the NASDAQ National Market System was $10.875. On June 10, 1997, the last full trading day before the commencement of the Offer, the closing price per Share on the NASDAQ National Market System was $12.828. STOCKHOLDERS ARE ENCOURAGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. 7. CERTAIN EFFECTS OF THE TRANSACTION The purchase of Shares pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and the number of holders of Shares, which could adversely affect the liquidity and market value of the remaining Shares held by the public. Based on information provided by the Company, as of June 4, 1997, there were 11,674,261 Shares outstanding and 72 stockholders of record of the Shares (not taking into account ownership through nominees and depositaries). The extent of the public market for the Shares and, according to the published guidelines of the Nasdaq Stock Market, Inc., the continued trading of the Shares on the NASDAQ National Market System after the purchase of Shares pursuant to the Offer will depend upon the number of holders of Shares remaining at such time, the interest in maintaining a market in such Shares on the part of securities firms, the possible termination of registration of such Shares under the Exchange Act, as described below, and other factors. If, as a result of the purchase of Shares pursuant to the Offer or otherwise, trading of the Shares on the NASDAQ National Market System is discontinued, the liquidity of and market for the Shares could be adversely affected. Purchaser cannot predict whether or to what extent the reduction in the number of Shares that might otherwise trade publicly would result in the suspension of trading of the Shares on the NASDAQ National Market System or would have an adverse or beneficial effect on the market price for or marketability of the Shares or whether it would cause future prices to be greater or less than the Offer Price. Depending upon the number of Shares purchased pursuant to the Offer, sales prices and price quotations for the Shares may no longer be reported by the NASD through the NASDAQ National Market System or by any other quotation service. According to the NASD's published guidelines, the NASD would consider suspending authorization of the Shares for quotation on the NASDAQ National Market System if the number of publicly held Shares should fall below 100,000. For purposes of the preceding sentence, "publicly held" shares do not include holdings of officers, directors or their immediate families and other concentrated holdings of 10% or more. If the NASD were to suspend authorization of the Shares for quotation on the NASDAQ National Market System, it is possible that the Shares would continue to trade in the over-the-counter market and that price quotations for the Shares would be reported through other sources. The extent of the public market for the Shares 11 and availability of such quotations, however, would, depend upon the number of Shares remaining at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration under the Exchange Act, as described below, and other factors. The Shares are currently "margin securities," as such term is defined under the rules of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of the Shares. Depending upon factors similar to those described above regarding listing and market quotations, following consummation of the Offer it is possible that the Shares might no longer constitute "margin securities" for purposes of the margin regulations of the Federal Reserve Board, in which event such Shares could no longer be used as collateral for loans made by brokers. The Shares are currently registered under the Exchange Act. Registration of the Shares under the Exchange Act may be terminated upon application of the Company to the Commission if the Shares are not listed on a national securities exchange (including the NASDAQ National Market System) and there are fewer than 300 record holders of the Shares. Termination of registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to its stockholders and to the Commission and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a proxy statement in connection with stockholders' meetings pursuant to Section 14(a) of the Exchange Act, and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions, no longer applicable to the Company. In addition, "affiliates" of the Company and persons holding "restricted securities" of the Company may be deprived of the ability to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended (the "Securities Act"). It is the present intention of Purchaser to seek to cause the Company to make an application for the termination of the registration of the Shares under the Exchange Act as soon as possible after the purchase of all validly tendered Shares in the Offer if the requirements for termination of registration are met. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities" or be eligible for the NASDAQ National Market System reporting. If registration of the Shares is not terminated prior to the Merger, the registration of the Shares under the Exchange Act will be terminated following consummation of the Merger. See Section 12. 8. CERTAIN INFORMATION CONCERNING THE COMPANY Except as otherwise stated in this Offer to Purchase, the information concerning the Company contained herein has been taken from or based upon publicly available documents and records on file with the Commission and other public sources including, but not limited to, the Company 10-K and the Company 10-Q. Although neither Parent nor Purchaser has any knowledge that any statements contained herein based on such documents and records are untrue, neither Parent nor Purchaser takes any responsibility for the accuracy or completeness of the information concerning the Company, furnished by the Company or contained in such documents and records, or for any failure by the Company to disclose events that may have occurred and may affect the significance or accuracy of any such information. The Company is a Delaware corporation with its principal executive offices and facilities located at One Digex Plaza, Beltsville, Maryland 20705. The Company is an independent national Internet carrier that focuses exclusively on businesses, government agencies and other institutional customers. The Company offers a comprehensive range of Internet solutions, including a complete product line of dedicated Internet connectivity solutions to its business customers, Web site management, consulting and security, and private network solutions. The Company offers its Internet solutions through three separate and highly focused business units. The Business Internet Connectivity Group offers dedicated high-bandwidth Internet connectivity and security solutions for commercial Internet and Intranet communication applications. The Web Site Management Group provides fault tolerant Web site management and electronic commerce integration services to companies seeking to outsource the management of "mission-critical" World Wide Web presences. The Private Network Solutions Group seeks to create customized private label solutions for businesses seeking to provide Internet services without incurring the cost of building and managing their own facilities. 12 Set forth below are selected historical financial data and other historical operating data of the Company as of and for the periods indicated that have been taken or derived from the audited financial statements contained in the Company 10-K and the unaudited financial statements contained in the Company 10-Q filed with the Commission. More comprehensive financial information and other information is included in the Company 10-K, the Company 10-Q and other documents filed by the Company with the Commission, and the following summary financial information is qualified in its entirety by reference to such reports and other documents including the financial statements and related notes contained therein. The reports may be examined and copies may be obtained at the offices of the Commission in the manner set forth below. DIGEX, INCORPORATED SELECTED CONSOLIDATED FINANCIAL DATA
YEAR ENDED DECEMBER 31, ----------------------------------- 1994 1995 1996 ---------- ---------- ----------- STATEMENT OF OPERATIONS DATA: Net Revenue.......................... $1,577,609 $5,075,316 $15,573,393 Loss from Operations................. (54,361) (3,822,170) (22,236,128) Net Loss............................. (81,524) (3,976,913) (23,304,860) Net Loss Per Common Share Attributable to Common Stockholder.. $ (0.01) $ (0.63) $ (3.68)
DECEMBER 31, MARCH 31, 1996 1997 ------------ ---------- (AUDITED) (UNAUDITED) BALANCE SHEET DATA: Working Capital................................... $20,052,000 $7,940,000 Total Assets...................................... 56,773,000 55,458,000 Total Liabilities................................. 23,068,000 30,797,000 Stockholders' Equity.............................. 33,705,000 24,661,000
Certain Company Projections. During the course of discussions between Parent and the Company that led to the execution of the Merger Agreement (see Section 11), the Company provided Parent with certain information relating to the Company that Purchaser believes is not publicly available. This information included projections of the operating performance of the Company for the years ending December 31, 1997, 1998 and 1999, based on financial projections developed by the Company. The projections do not reflect consummation of the Offer or the Merger. The projections include the following information regarding the Company's anticipated results of operations (in millions) for the years ending December 31, 1997, 1998 and 1999:
YEAR ENDED DECEMBER 31, --------------------- 1997 1998 1999 ------ ------ ------ Revenues............................................... $ 58.6 $122.3 $189.3 Gross Profit........................................... 32.6 65.4 108.0 Operating Income....................................... (23.5) * * Net Income............................................. (25.3) * *
* Information not provided. 13 These projections are based on a variety of estimates and assumptions, which involve judgments with respect to future economic and competitive conditions, inflation rates and technology trends. The Company does not as a matter of course make public any projections as to future performance or earnings, and the projections set forth above are included in this Offer to Purchase only because the information was made available to Parent by the Company. Parent understands that the projections were not prepared with a view to public disclosure or compliance with the published guidelines of the Commission or the guidelines established by the American Institute of Certified Public Accountants regarding projections or forecasts. Projected information of this type is based on estimates and assumptions that are inherently subject to significant economic and competitive uncertainties and contingencies, all of which are difficult to predict and many of which are beyond the control of the Company and Parent. Accordingly, actual results may vary materially from such projections and none of the Company, or Parent or their respective financial advisors assumes any responsibility for the accuracy or validity of any of the projections. The inclusion of the foregoing projections should not be regarded as an indication that the Company, Parent or any other person who received such information considers it an accurate prediction of future events, and Parent has not relied on them as such. Available Information. The Company is subject to the informational filing requirements of the Exchange Act. In accordance therewith, the Company files periodic reports, proxy statements and other information with the Commission under the Exchange Act relating to its business, financial condition and other matters. The Company is required to disclose in such proxy statements certain information, as of particular dates, concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company. Such reports, proxy statements and other information may be inspected at the Commission's office at 450 Fifth Street, N.W., Washington, D.C. 20549, and also should be available for inspection and copying at the regional offices of the Commission located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661- 2511; and 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such reports, proxy statements and other information may be obtained by mail upon payment of the Commission's prescribed fees, from the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. 9. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT Purchaser, a Delaware corporation, was incorporated on May 30, 1997 for the purpose of entering into the Merger Agreement and consummating the transactions contemplated thereby. It has conducted no business other than related to its formation and the transactions contemplated by the Merger Agreement. All the outstanding capital stock of Purchaser is owned by Parent. Until immediately prior to the time that Purchaser will purchase Shares pursuant to the Offer, it is not anticipated that Purchaser will have any significant assets or liabilities or engage in activities other than those incident to its formation and capitalization and the transactions contemplated by the Offer. Since Purchaser is newly formed and has minimal assets and capitalization, no meaningful financial information is available. Parent is a publicly held Delaware corporation. Parent, directly and through its subsidiaries, is a rapidly growing integrated communications services provider, offering a full suite of local, long distance and enhanced data telecommunications services to business and government end user customers, long distance carriers, Internet service providers, resellers and wireless communications companies. The common stock of Parent is listed for trading on the NASDAQ National Market System under the symbol ICIX. For the year ended December 31, 1996, Parent had revenues of $103.4 million. The principal executive offices of Parent and Purchaser are located at 3625 Queen Palm Drive, Tampa, Florida 33619. 14 See Annex I to this Offer to Purchase for certain biographical and other information concerning the executive officers and directors of Purchaser and Parent. Except as described in this Offer to Purchase, (i) none of Purchaser or Parent or, to the best knowledge of Purchaser or Parent, any of the persons listed in Annex I or any associate or majority owned subsidiary of any such persons, beneficially owns or has a right to acquire any equity security of the Company and (ii) none of Purchaser or Parent, or to the best knowledge of Purchaser or Parent, any of the other persons referred to above, or any of the respective directors, executive officers or subsidiaries of any of the foregoing, has effected any transaction in any equity security of the Company during the past 60 days. Except as described in this Offer to Purchase, (i) none of Purchaser or Parent or, to the best knowledge of Purchaser or Parent, any of the persons listed in Annex I, has any contract, arrangement, understanding or relationship (whether or not legally enforceable) with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any such securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss, or the giving or withholding of proxies and (ii) there have been no contacts, negotiations or transactions between Purchaser, Parent or any of their respective subsidiaries or, to the best knowledge of Purchaser or Parent, any of the persons listed in Annex I on the one hand, and the Company or any of its directors, officers or affiliates on the other hand, concerning a merger, consolidation or acquisition, a tender offer or other acquisition of securities, election of directors or a sale or transfer of a material amount of assets, that are required to be disclosed pursuant to the rules and regulations of the Commission. Set forth below are selected historical financial data and other historical operating data of Parent as of and for the periods indicated that have been taken or derived from the audited financial statements contained in Parent's Annual Report on Form 10-K for the year ended December 31, 1996 ("Parent 10- K") and the unaudited financial statements contained in Parent's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 ("Parent 10-Q"). More comprehensive financial information and other information is included in the Parent 10-K, the Parent 10-Q and other documents filed by Parent with the Commission, and the following summary financial information is qualified in its entirety by reference to such reports and other documents including the financial statements and related notes contained therein. The reports may be examined and copies may be obtained at the offices of the Commission in the manner set forth in Section 8. INTERMEDIA COMMUNICATIONS INC. SELECTED CONSOLIDATED FINANCIAL DATA
YEAR ENDED DECEMBER 31, ---------------------------------------- 1994 1995 1996 ----------- ------------- ------------ CONSOLIDATED STATEMENT OF OPERATIONS DATA: Revenues........................ $14,272,396 $ 38,630,574 $103,396,887 Loss Before Income Tax Benefit and Extraordinary Item............. (3,067,379) (19,253,549) (57,198,711) Net Loss........................ (3,067,379) (20,748,642) (57,198,711) Net Loss Per Share.............. $ (0.34) $ (2.07) $ (4.08) DECEMBER 31, MARCH 31, 1996 1997 ------------- ------------ (AUDITED) (UNAUDITED) CONDENSED CONSOLIDATED BALANCE SHEET DATA: Cash and Cash Equivalents................... $ 189,546,000 $435,859,000 Working Capital............................. 206,030,000 448,890,000 Total Assets................................ 512,940,000 787,388,000 Total Liabilities........................... 398,710,000 411,272,000 Series A Redeemable Exchangeable Preferred Stock and Accrued Dividends................ -- 292,250,000 Total Stockholders' Equity.................. 114,230,000 83,866,000
15 Loss per share is based on the weighted average shares outstanding. Common Stock equivalents are not considered in Parent's calculation of loss per share as all are antidilutive and would have no impact on the results. 10. SOURCE AND AMOUNT OF FUNDS The total amount of funds required by Purchaser to purchase all outstanding Shares (including the Investor Shares) and to pay related fees and expenses in connection with the Offer, the Merger and the Stock Purchase Agreement is estimated to be approximately $154.2 million. Purchaser expects to obtain the necessary funds directly from Parent from Parent's existing cash reserves. 11. BACKGROUND OF THE TRANSACTION In July 1996, the Company began using Parent's collocation services through purchases from a third party vendor. In August 1996, the Company began using Parent's dedicated access services, also through purchases from a third party vendor. Parent was unaware the Company was the ultimate customer of these services. Parent charged the third party vendor customary rates, but has no knowledge of the arrangements between the Company and such third party vendor. Parent and the Company held discussions in late 1996 relating to the possibility of the Company becoming a direct customer of Parent. The Company, as a provider of Internet services, requires certain telecommunications services underlying the services the Company provides to its customers. Since the Company's telecommunication needs were in Parent's service territory, Parent was in a position to offer the Company telecommunications services at competitive rates. Representatives of Parent and the Company discussed the kinds of services Parent could provide to the Company. During the course of these discussions and based on the Company's stated requirements, Parent established a sales team which focused on offering frame relay services, equipment collocation services and dedicated access services to the Company. In late 1996, the Company began purchasing collocation services and dedicated access services directly from the Company. For the 1996 calendar year, Parent invoiced the Company an aggregate of $16,572 for such services. The Company continues to use such services, with invoices for May 1997 being $2,238 and aggregate invoices for 1997 through May 31, 1997 totalling $47,628. All rates charged by Parent to the Company were, and continue to be, at the prevailing market rates that Parent would charge to a similar customer with similar term and volume requirements. For the past several years, Parent's business strategy has been to offer its customers an integrated package of telecommunications services, including providing data services to its customers. Throughout 1996 and the first half of 1997, Parent monitored various Internet service providers with a view toward either internally developing the capacity to provide Internet services to its customers or acquiring a company which had already established such a business. Parent had determined that it was strategically important to offer these services to its customers in order to complement the services already offered by Parent. While Parent was able to internally develop the capability of providing Internet services, Parent concluded that, because of the growth of the Internet market, the best and most rapid way for Parent to successfully enter the Internet services market would be for Parent to acquire a company already offering such services. Parent reached this conclusion as a result of numerous meetings and discussions among various members of Parent's senior management. Once Parent reached the decision to acquire an established Internet service provider, Parent solicited input from several investment banking professionals, including Bear Stearns and UBS Securities, Inc. Both of these firms profiled various companies, including the Company, as suitable for Parent to investigate. The first contact between Parent and the Company regarding a possible business combination was arranged by Benji Diesbach, a consultant to the Bass Group who was familiar with management of both companies. Mr. Diesbach suggested that David C. Ruberg, Chairman, President and Chief Executive Officer of Parent, meet with Christopher R. McCleary, Chairman, President and Chief Executive Officer of the Company, in order to discuss potential business opportunities for the two companies. Mr. Diesbach is not entitled to a fee in this transaction. Mr. Ruberg met with Mr. McCleary at Parent's corporate headquarters in mid- February 1997. At this meeting, Mr. Ruberg indicated that Parent would like to commence discussions about a possible business 16 combination. Mr. McCleary indicated to Mr. Ruberg that the Company had received indications of interest in the past which the Company believed were inadequate. Mr. McCleary did indicate, however, that if Parent was prepared to pay a fair price for the Company, he would be interested in furthering such discussions. Mr. Ruberg and Mr. McCleary continued such discussions at a meeting at the Company's corporate headquarters in early March 1997. At this meeting, Mr. Ruberg toured the Company's facilities. Mr. Ruberg and Mr. McCleary agreed that Robert M. Manning, Senior Vice President and Chief Financial Officer of Parent, would call Mr. McCleary by telephone to begin the process of investigating a business combination. Mr. Manning contacted Mr. McCleary by telephone during the week of March 24, 1997. Mr. Manning and Mr. McCleary agreed that Parent and the Company should exchange confidentiality agreements, which were completed and executed by Parent and the Company on March 27, 1997. Shortly after the execution of such confidentiality agreements, Parent and the Company began a substantial exchange of information and documents, which continued throughout the months of April and May. Shortly after the exchange of documents commenced, Mr. Manning and Mr. McCleary agreed that detailed due diligence visits would be required. On April 1, 1997, representatives of Parent, including financial advisors, visited with the Company's senior management and representatives of the Company's financial advisor at the Company's corporate headquarters to review the business plans of the Company and the Company's historical financial results, as well as all aspects of the Company's business. Mr. Manning and Mr. McCleary again met at the offices of Mr. McCleary on April 16, 1997 to discuss a possible business combination. Broad terms of a potential transaction were discussed. Mr. Manning and Mr. McCleary also discussed the form of consideration, whether in cash or in securities, the various stockholder constituencies of the Company would prefer. Mr. Manning and Mr. McCleary decided to establish a price range per Share before determining the structure of a business combination. In addition, Mr. Manning indicated that because it was Parent's intent to retain existing senior management to manage the Company as a separate business division of Parent, Parent would not be interested in pursuing discussions unless Mr. McCleary and other members of the Company's senior management would be fully supportive of any business combination. Several additional telephone conversations were held during the month of April among the various members of senior management of both companies to evaluate the business of the Company and to allow Parent to form a preliminary valuation of the price per Share that Parent would be willing to pay. Mr. Manning and Mr. McCleary then agreed that the Company should evaluate Parent as a potential acquiror, especially with the view towards determining the value of Parent common stock in the event that capital stock of Parent was to be used as consideration in a transaction. Meetings were held at the corporate headquarters of Parent on April 28, 1997, where certain members of senior management of Parent and the Company, together with their financial advisors, exchanged information, discussed the business of a combined company and discussed synergies and cost savings that could be achieved by combining both companies. During these meetings, senior executives of Parent presented information about the nature of Parent's business, business philosophy, strategies and long term plans. In addition, such executives explained their views of the advantages of a business combination with the Company and discussed how the combined businesses might be operated. Senior executives of the Company then presented similar information to Parent. The meetings concluded with a conversation among Mr. Ruberg, Mr. Manning, Mr. McCleary and William F. Earthman III, a director of the Company, that a business combination could be in the best interest of both companies and their stockholders, provided that an appropriate price per Share was paid. Mr. Manning and Mr. McCleary then continued the discussion, focusing on the possible principal concerns of the Company's stockholders in considering a sale of the Company. Mr. Manning indicated to Mr. McCleary that the price range for a possible business combination was between $8.50 per Share and $10.50 per Share, but that, with more information and with a better understanding of the future potential of the business of the Company, a higher price could be possible. 17 On April 30, 1997, Mr. McCleary delivered a letter to Mr. Ruberg indicating Mr. McCleary's belief that Parent and the Company should continue to pursue a possible business combination and that a price per Share of $13.00, payable all in stock of Parent, would be acceptable to the Company's venture investors, founders and employees. Mr. McCleary also indicated his belief that such a price would reflect a preemptive transaction valuation obviating the need for protracted negotiation on the subject of breakup in the event of a competing offer. Mr. Ruberg then telephoned Mr. McCleary and they agreed that the price range under discussion for a business combination was between $10.50 per Share and $13.00 per Share. During the week of May 1, 1997, Mr. Manning contacted Mr. McCleary to arrange a series of follow up due diligence sessions. Mr. Manning and Mr. McCleary agreed that two days of comprehensive meetings would be held among the members of senior management of both companies and would include key functional groups of both Parent and the Company such as finance, accounting, MIS, network operations, engineering, strategic planning, sales and marketing. These meetings occurred on May 8 and 9, 1997, with certain meetings being held at the offices of Latham & Watkins, counsel to the Company, in Washington, D.C. and others being held at the corporate headquarters of the Company. On May 22, 1997, Parent convened a regularly scheduled meeting of its Board of Directors. During such meeting, the possible acquisition of the Company was discussed. Mr. Ruberg and Mr. Manning presented to the Board of Directors of Parent the rationale for the transaction as well as the status of the negotiations. The Board of Directors of Parent also discussed the form of the consideration to be paid, discussing the benefits of a cash transaction and a stock transaction. The Board of Directors of Parent unanimously agreed that a business combination with the Company would benefit Parent and was in line with the business strategy of Parent. Therefore, management was instructed to proceed with negotiations and attempt to conclude a transaction at a fair price. Over the course of the next several days, Mr. Manning contacted Mr. McCleary to discuss the nature of Parent's valuation efforts and of Parent's conclusions. Mr. Manning and Mr. McCleary agreed that senior executives from Parent and the Company would meet promptly in New York to continue negotiations. On May 30, 1997, representatives of Parent and the Company, and their legal and financial advisors, met at the offices of Kronish, Lieb, Weiner & Hellman LLP, counsel to Parent and Purchaser, to continue to negotiate the structure and terms of a possible transaction. During the course of such negotiations, Parent stated that it was prepared to pay a price of $13.00 per Share, but that the consideration would be paid in a combination of cash and preferred securities of Parent. Parent stated that it was not willing to use its common stock as part of the consideration. Parent also stated that the holders of a majority of the outstanding Shares would be required to agree to grant an option to Parent to acquire all of their Shares as part of any transaction. The parties were unable to resolve several important business issues relating to the structure and terms of the transaction, including the form of consideration. On May 30 and 31 and June 1, 1997, Mr. McCleary discussed the transaction with various members of the Board of Directors of the Company. Mr. McCleary also discussed the proposed transaction and the possible combinations of cash and preferred securities or common stock of Parent with the Company's financial advisors. The directors indicated that Mr. McCleary should attempt to negotiate an all cash consideration transaction at a price of $13.00 per Share. On June 1, 1997, the Board of Directors of Parent convened a meeting at which the acquisition of the Company was discussed. The Board of Directors of Parent authorized management of Parent to continue to attempt to negotiate an agreement, using a price of $13.00 per Share and all cash as the consideration, subject to final approval of any such transaction and related agreements by the Board of Directors of Parent. On June 2, 1997, Mr. McCleary and Mr. Manning, in a telephone conversation, discussed a possible transaction involving a price per Share of $13.00, payable all in cash, subject to negotiation of satisfactory 18 definitive acquisition agreements and certain other terms and conditions. Representatives of Parent and the Company, including legal and financial advisors, then continued to negotiate the terms and conditions of the Merger Agreement. These negotiations continued on June 3 and were concluded on June 4, 1997. During the morning of June 4, 1997, the Board of Directors of Parent met and approved and adopted the Merger Agreement and the Stock Purchase Agreement with a price per Share of $13.00, payable all in cash. The Board of Directors of the Company met during the afternoon of June 4, 1997 and, after the market closed on June 4, 1997, approved and adopted the Merger Agreement and approved the Stock Purchase Agreement. The same day, the Investors approved and subsequently executed the Stock Purchase Agreement. 12. PURPOSE OF THE OFFER; THE MERGER AGREEMENT AND THE STOCK PURCHASE AGREEMENT General The purposes of the Offer and the Stock Purchase Agreement are to enable Parent to acquire, in one or more transactions, control of the Company. The purpose of the Merger is for Parent to acquire all Shares not purchased pursuant to the Offer and the Stock Purchase Agreement. The acquisition of the entire equity interest in the Company is structured as a cash tender offer followed by the Merger in order to provide a prompt and orderly transfer of ownership of the Company from the public stockholders to Parent. Upon consummation of the Merger, the Company will become a wholly owned subsidiary of Parent. The Offer is being made in accordance with the Merger Agreement. Under the DGCL, the approval of the Board of Directors of the Company and the affirmative vote of the holders of a majority of the outstanding Shares is required to approve and adopt the Merger Agreement. The Board of Directors of the Company has approved and adopted the Merger Agreement and the transactions contemplated thereby and, unless the Merger is consummated pursuant to the short-form merger provisions under the DGCL described below, the only remaining required corporate action of the Company is the approval and adoption of the Merger Agreement by the affirmative vote of the holders of a majority of the outstanding Shares. UPON CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THE STOCK PURCHASE AGREEMENT, PARENT AND PURCHASER, BY VIRTUE OF THE ACQUISITION OF APPROXIMATELY 50.3% OF THE OUTSTANDING SHARES, WILL OWN A NUMBER OF SHARES SUFFICIENT, EVEN IF NO OTHER SHARES ARE TENDERED INTO THE OFFER, TO CAUSE THE MERGER TO OCCUR WITHOUT THE AFFIRMATIVE VOTE OF ANY OTHER HOLDER OF SHARES, IF NO OTHER SHARES ARE ISSUED BY THE COMPANY. In the Merger Agreement, the Company has agreed to convene a meeting of its stockholders as soon as practicable after the consummation of the Offer for the purpose of the approval and adoption of the Merger Agreement and the transactions contemplated thereby, if such action is required by the DGCL, and to include in the proxy statement with respect to such meeting the recommendation of its Board of Directors that stockholders of the Company vote in favor of the approval and adoption of the Merger Agreement. Purchaser and Parent have each agreed that all Shares acquired pursuant to the Offer, the Stock Purchase Agreement or otherwise by Purchaser or Parent or any of their affiliates will be voted in favor of the Merger. Under the "short-form" merger provisions of the DGCL, if Purchaser acquires, pursuant to the Offer, the Stock Purchase Agreement or otherwise, at least 90% of the outstanding Shares, Purchaser will be able to approve the Merger without a vote of the Company's stockholders promptly following the transfer of record ownership into the name of Purchaser of the Shares so acquired. The Company's certificate of incorporation provides that the stockholders of the Company may act only at a meeting of the stockholders and not by written consent. Therefore, if Purchaser does not acquire at least 90% of the outstanding Shares pursuant to the Offer, the Stock Purchase Agreement or otherwise and a vote of the Company's stockholders is required under the DGCL, a significantly longer period of time would be required to effect the Merger by reason of the need for the preparation and distribution of a proxy statement in advance of a meeting of stockholders. 19 The Merger Agreement The following is a summary of the material terms of the Merger Agreement. This summary is not a complete description of the terms and conditions thereof and is qualified in its entirety by reference to the full text thereof, which is incorporated herein by reference and a copy of which has been filed with the Commission as an exhibit to the Schedule 14D-1. The Schedule 14D-1 (including the Merger Agreement and other exhibits) may be examined, and copies thereof may be obtained, as set forth in Section 17. The Offer. The Merger Agreement provides for the making of the Offer. Without the prior written consent of the Company, Purchaser has agreed that it will not (i) decrease the price per Share payable in the Offer or change the form of consideration payable in the Offer, (ii) decrease the number of Shares sought pursuant to the Offer, (iii) impose additional conditions to the Offer other than those set forth in Section 14 or (iv) modify the conditions of the Offer (provided that Parent or Purchaser in its sole discretion may waive any such conditions). The obligation of Purchaser to consummate the Offer and to accept for payment and to pay for any Shares tendered pursuant to the Offer will be subject only to the conditions set forth in Section 14. The Offer may not be extended for more than 20 days beyond its original scheduled expiration date unless any of the conditions to the Offer have not been satisfied; provided, however, in the event Purchaser desires to extend the Offer beyond July 31, 1997, and the proposed length of the extension is, in the aggregate, more than three days, the Company will have the right to consent to such longer extension. Parent has agreed to cause Purchaser to, and Purchaser has agreed to use its reasonable best efforts to, consummate the Offer as soon as legally permissible, subject to satisfaction of the conditions to the Offer and its right to extend for 20 additional days as provided above. Board Representation. The Merger Agreement provides that promptly upon the purchase by Purchaser of Shares pursuant to the Offer or the Stock Purchase Agreement, and from time to time thereafter, Purchaser shall be entitled to designate up to such number of directors, rounded up to the next whole number, on the Board of Directors of the Company as will give Purchaser representation on the Board of Directors of the Company equal to the product of the number of directors on the Board of Directors of the Company (giving effect to the directors elected pursuant to this sentence) multiplied by the percentage that the aggregate number of Shares beneficially owned by Purchaser or any affiliate of Purchaser following such purchase bears to the total number of Shares then outstanding, and the Company shall, at such time, promptly take all actions necessary to cause Purchaser's designees to be elected or designated as directors of the Company, including increasing the size of the Board of Directors of the Company or securing the resignations of incumbent directors or both. Notwithstanding the foregoing, until the earlier of (i) the time Purchaser acquires a majority of the then outstanding Shares on a fully diluted basis and (ii) the Effective Time, the Company will use its reasonable best efforts to ensure that all the members of the Board of Directors of the Company and each committee thereof as of June 4, 1997 who are not employees of the Company will remain members of the Board of Directors and of such committees. The Company will also use its reasonable best efforts to cause persons designated by Purchaser to constitute the same percentage as persons designated by Purchaser shall constitute of the entire Board of Directors of the Company to be on each committee of the Board of Directors of the Company. The Company's obligations to appoint designees to its Board of Directors shall be subject to Section 14(f) of the Exchange Act. At the request of Purchaser and subject to applicable law, the Company has agreed to take all action necessary to effect any such election or appointment of Purchaser's designees, including mailing to its stockholders the information required by Section 14(f) of the Exchange Act and Rule 14f-l promulgated thereunder. Purchaser and Parent are obligated to supply to the Company all information with respect to themselves and their officers, directors and affiliates required by such Section and Rule. The Merger. The Merger Agreement provides that upon the terms and subject to the conditions of the Merger Agreement, and in accordance with relevant law, Purchaser shall be merged with and into the Company as soon as practicable following the satisfaction or waiver, if permissible, of the conditions to the Merger. The Company shall be the Surviving Corporation and shall continue its existence under the laws of the State of Delaware. The Certificate of Incorporation of the Company shall be the Certificate of Incorporation of the Surviving Corporation, provided that such Certificate of Incorporation shall be amended in its entirety to read as Purchaser's Certificate of Incorporation (except the name of the Surviving Corporation shall be "DIGEX, 20 Incorporated"). The By-Laws of the Purchaser in effect immediately prior to the Effective Time will be the By-Laws of the Surviving Corporation. The Directors of Purchaser immediately prior to the Effective Time and the officers of the Company immediately prior to the Effective Time shall be the directors and officers, respectively, of the Surviving Corporation until their respective successors are duly elected and qualified. Upon consummation of the Merger, each share of the common stock of Purchaser issued and outstanding immediately prior to the Effective Time shall be converted into and become one share of common stock of the Surviving Corporation, which will thereupon become a direct wholly owned subsidiary of Parent. The parties to the Merger Agreement will cause the Merger to be consummated by filing with the Secretary of State of the State of Delaware a certificate of merger, as required by the DGCL. The Merger will become effective upon such filing or at such time thereafter as is provided under applicable law. Consideration to be Paid in the Merger. In the Merger, each Share issued and outstanding immediately prior to the Effective Time (other than Shares held by Purchaser, Parent or any subsidiary of Purchaser or Parent or in the treasury of the Company, all of which will be canceled, and other than Shares held by stockholders who have properly exercised their rights of appraisal), by virtue of the Merger and without any action on the part of the holder thereof, shall be converted into, exchanged for and represent the right to receive in cash an amount per Share equal to the price per Share paid in the Offer, without interest. Company Stock Options and Warrants. At the Effective Time, all options and warrants then outstanding under the Company's 1995 Incentive Stock Option Plan and the 1996 Equity Participation Plan (collectively, the "Company Stock Option Plans") will be assumed by Parent in such manner that Parent is a corporation "assuming a stock option in a transaction to which Section 424(a) applies" within the meaning of Section 424 of the Internal Revenue Code of 1986, as amended (the "Code"). The options and warrants assumed by Parent as provided above will be exercisable upon the same terms and conditions as under the Company Stock Option Plans and the option agreements and warrants issued thereunder, except that each such option or warrant (i) will be exercisable for that number of shares of Parent's common stock equal to the product of (A) the number of shares of the Company's common stock subject to such option or warrant immediately prior to the Effective Time multiplied by (B) a fraction, the numerator of which will be $13.00 and the denominator of which will be $27 1/8 (with any fractional share of Parent's common stock being disregarded) and (ii) the exercise price per share of Parent's common stock will equal the exercise price per share of the Company's common stock theretofore in effect multiplied by a fraction, the numerator of which will be $27 1/8 and the denominator of which will be $13.00. From and after the Effective Time, no additional options or warrants will be granted under the Company Stock Option Plans. In connection with the assumption of the options outstanding under the Company Stock Option Plans, Parent will use its best efforts to effect such assumption in such a manner as to not affect the incentive stock option status of those options which are intended to be incentive stock options at the Effective Time. The Company has agreed not to accelerate, or take any action which would cause the acceleration of, the vesting of any of the options outstanding under the Company Stock Option Plans by reason of the Offer or the Merger. On June 4, 1997, Parent consented to the grant by the Company of options to purchase up to 200,000 Shares at an exercise price of $3.00 per Share to certain senior officers of the Company. Stockholder Meeting. The Merger Agreement provides that, if required by applicable law in order to consummate the Merger, the Company will, as soon as practicable following consummation of the Offer, duly call, give notice of, convene and hold a meeting of its stockholders for the purpose of considering and taking action on the Merger Agreement and the transactions contemplated thereby. The Merger Agreement also provides that the Company will (i) include in the proxy statement related to such stockholders meeting the unanimous recommendation of the Board of Directors of the Company that the stockholders of the Company approve and adopt the Merger Agreement and the transactions contemplated thereby and (ii) use its reasonable best efforts to secure such approval and adoption. Parent and Purchaser have each agreed under the Merger Agreement that, at such stockholder meeting, all of the Shares then owned by Parent or Purchaser or any of their affiliates will be voted in favor of the Merger. 21 If Purchaser or Parent acquires at least 90% of the outstanding Shares, the Merger may be effected without a meeting of the stockholders in accordance with the "short-form" merger provisions of Section 253 of the DGCL. Representations and Warranties. The Merger Agreement contains various representations and warranties of the parties thereto. These include representations and warranties by the Company with respect to corporate existence and good standing, capital structure, subsidiaries, corporate authorization, absence of changes, Commission filings, consents and approvals, no violations of other agreements, investment banking fees, employee benefits, labor relations, litigation, taxes, compliance with applicable laws, intellectual property, real property, insurance, material contracts, related party transactions, liens and other matters. Purchaser and Parent have also made certain representations and warranties with respect to corporate existence and good standing, corporate authorization, Commission filings relating to the Offer and the Merger, consents and approvals, no violations of other agreements, solvency and other matters. Conduct of Business and Other Covenants Pending the Merger. The Company has agreed that, except with the prior written consent of Parent and Purchaser, during the period from the date of the Merger Agreement to the Effective Time, the Company will carry on its business in, and only in, the ordinary and usual course in the same manner as previously conducted and, to the extent consistent with such business, the Company will use all reasonable efforts to preserve intact its current business organization, to keep available the services of its current officers and employees and to preserve the goodwill of, and maintain satisfactory relationships with, customers, suppliers and others having business dealings with the Company. The Company has agreed to promptly advise Parent and Purchaser in writing of the occurrence of any event which will or may result in the failure to satisfy the conditions to the Offer or the Merger. In addition, except with the prior written consent of Parent and Purchaser, prior to the time specified in the first sentence in the preceding paragraph, the Company has agreed that it will: (i) not amend its Certificate of Incorporation or By-Laws; (ii) maintain all of its material structures, equipment and other tangible personal property in good repair, order and condition, except for depletion, depreciation, ordinary wear and tear and damage by unavoidable casualty; (iii) keep in full force and effect insurance comparable in amount and scope of coverage to insurance currently carried by it; (iv) perform in all material respects all of its obligations under agreements, contracts and instruments relating to or affecting its properties, assets and business; (v) maintain its books of account and records in the usual, regular and ordinary manner; (vi) comply in all material respects with all statutes, laws, ordinances, rules and regulations applicable to it and to the conduct of its business; (vii) not enter into, assume or amend in any material respect any material agreement, contract or commitment of the Company, except, in certain cases, in the ordinary course of business consistent with past practice; (viii) not enter into any additional contracts or agreements for network capacity or local transport services which are not terminable by the Company, without penalty or other adverse consequence, on not more than 60 days notice; (ix) not enter into any additional customer contracts or agreements containing rates which are materially different from the rates charged by the Company to current customers of similar creditworthiness, ordering similar amounts of services and over a similar term; (x) not merge or consolidate with, or agree to merge or consolidate with, or purchase substantially all the assets of, or otherwise acquire any business of any corporation, partnership, association or other business organization or division thereof; (xi) not purchase for cash and cancel any options outstanding under the Company Stock Option Plans or otherwise amend such Company Stock Option Plans; (xii) promptly advise Parent and Purchaser in writing of any materially adverse change in the consolidated financial condition, operations or business of the Company; (xiii) not declare or pay dividends (cash or otherwise) or make any distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of its outstanding capital stock; (xiv) not effect any stock split or other reclassification; (xv) not authorize the creation or issuance of or issue, sell or dispose of, or create any obligation to issue, sell or dispose of, any shares of its capital stock or any securities or obligations convertible into or exchangeable for, any shares of its capital stock (other than pursuant to stock options or warrants heretofore outstanding); (xvi) not issue any press releases without first consulting with Parent regarding any such press release; (xvii) not create, incur, assume, guarantee or otherwise become directly or indirectly liable with respect to any indebtedness for borrowed money other than in the 22 ordinary course of business consistent with past practice under agreements existing on the date of the Merger Agreement and identified in writing to Parent and Purchaser; and (xviii) not enter into any agreement or understanding to do or engage in any of the foregoing. No Solicitation. The Company has agreed that it will not, directly or indirectly, through any officer, director, agent or otherwise (a) solicit, initiate or encourage the submission of any proposal or offer from any person relating to any acquisition or purchase of all or (other than in the ordinary course of business) any portion of the assets of, or any equity interest in, the Company or any business combination (other than private network agreements entered into by the Company in the ordinary course of business) with the Company (a "Company takeover proposal") or (b) except to the extent required by fiduciary obligations under applicable law as advised in writing by independent counsel, participate in any negotiations regarding, or furnish to any other person any information with respect to, or otherwise cooperate in any way with, or assist or participate in, facilitate or encourage, any effort or attempt by any other person to do or seek any of the foregoing. The Company must notify Parent promptly of any Company takeover proposal or any inquiry or contact with any person with respect thereto, that is made and must, in any such notice to Parent, indicate in reasonable detail the identity of the person making such Company takeover proposal or related inquiry or contact and the terms and conditions of such Company takeover proposal or related inquiry or contact. In addition, the Company may not release any third party from, or waive any provision of, any confidentiality or standstill agreement to which the Company is a party. Fees and Expenses. The Merger Agreement provides that all costs and expenses incurred in connection with the Merger Agreement and the transactions contemplated by the Merger Agreement shall be paid by the party incurring such expenses, except that (i) the Company will be required to pay a termination payment and reimburse certain expenses of Parent and Purchaser to Parent under certain circumstances described in "Termination Payment" below and (ii) Parent and the Company have agreed to share evenly any filing fees required by the HSR Act. Conditions to the Merger. Pursuant to the Merger Agreement, the respective obligations of each party to effect the Merger are subject to the satisfaction or waiver, prior to the proposed Effective Time, of the following conditions: (i) unless the Merger is consummated pursuant to the "short-form" merger provisions of Section 253 of the DGCL, the Merger and the Merger Agreement shall have been validly approved and adopted by the affirmative votes of the holders of a majority of the outstanding Shares; (ii) all permits, approvals and consents of any governmental or regulatory authority or any other third party necessary or appropriate for consummation of the Merger shall have been obtained, other than consents the failure to obtain which would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the Company or a material adverse effect on the consummation of the transactions contemplated by the Merger Agreement; (iii) Purchaser or a permitted assignee shall have purchased all Shares validly tendered and not withdrawn pursuant to the Offer; provided, however, that this condition will not be applicable to the obligations of Parent and Purchaser if, in breach of the Merger Agreement or the terms of the Offer, Purchaser fails to purchase any Shares validly tendered and not withdrawn pursuant to the Offer; (iv) no preliminary or permanent injunction or other order of a court or governmental or regulatory authority shall have been issued and be in effect, and no United States federal or state statute, rule or regulation shall have been enacted or promulgated after the date hereof and be in effect, that (A) prohibits the consummation of the Merger or (B) imposes material limitations on the ability of Parent to exercise full rights of ownership of the Company's assets or business; (v) there shall not be any action or proceeding commenced by or before any governmental or regulatory authority in the United States, or threatened by any governmental or regulatory authority in the United States, that challenges the consummation of the Merger or seeks to impose material limitations on the ability of Parent to exercise full rights of ownership of the Company's assets or business, other than any such action or proceeding commenced by a stockholder or stockholders of Parent or the Company, either derivatively on behalf of Parent or the Company, respectively, or on behalf of such stockholder or stockholders, alleging that the directors or officers of Parent or the Company, respectively, have breached their fiduciary duties to stockholders under Delaware law or Parent or the Company has failed to make disclosures required to be made under applicable state or federal securities laws, in each case in connection with the transactions contemplated by the Merger Agreement, or making any similar claim; and 23 (vi) any waiting period applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated. For a description of conditions of the Offer, see Section 14. Termination. The Merger Agreement may be terminated at any time prior to the Effective Time, whether before or after approval by the stockholders of the Company: (i) by consent of the Boards of Directors of the Company, Parent and Purchaser, except that in the case of termination after the consummation of the Offer, the termination must be consented to by a majority of the independent directors of the Company; (ii) by Parent and Purchaser upon notice to the Company if any material default under or material breach of any covenant or agreement in the Merger Agreement by the Company shall have occurred and shall not have been cured within ten days after receipt of such notice, or any representation or warranty contained in the Merger Agreement on the part of the Company shall not have been true and correct in any material respect at and as of the date made; (iii) by the Company upon notice to Parent and Purchaser if any material default under or material breach of any covenant or agreement in the Merger Agreement by Parent or Purchaser shall have occurred and shall not have been cured within ten days after receipt of such notice, or any representation or warranty contained in the Merger Agreement on the part of Parent or Purchaser shall not have been true and correct in any material respect at and as of the date made; (iv) by Parent and Purchaser, on the one hand, or the Company, on the other, upon notice to the other if the Merger shall not have become effective on or before October 31, 1997, unless such date is extended by the consent of the Boards of Directors of the Company, Parent and Purchaser evidenced by appropriate resolutions; provided, however, that the right to terminate the Merger Agreement under this provision is not available to any party whose failure to fulfill any obligation under the Merger Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date; (v) by Parent if due solely to an occurrence or circumstance that would result in a failure to satisfy any condition to the Offer, Purchaser shall have (A) failed to commence the Offer within 60 days following the date of the Merger Agreement, (B) terminated the Offer without having accepted any Shares for payment thereunder or (C) failed to pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer, unless such failure to pay for Shares shall have been caused by or resulted from the failure of Parent or Purchaser to perform in any material respect any material covenant or agreement of either of them contained in the Merger Agreement or the material breach by Parent or Purchaser of any material representation or warranty of either of them contained in the Merger Agreement; (vi) by the Company, upon approval of the Board of Directors of the Company, if due to an occurrence or circumstance that would result in a failure to satisfy any of the conditions to the Offer, Purchaser shall have (A) failed to commence the Offer within 60 days following the date of the Merger Agreement, (B) terminated the Offer without having accepted any Shares for payment thereunder or (C) failed to pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer, unless such failure to pay for Shares shall have been caused by or resulted from the failure of the Company to perform in any material respect any material covenant or agreement of it contained in the Merger Agreement or the material breach by the Company of any material representation or warranty of it contained in the Merger Agreement; (vii) by any of Parent, Purchaser and the Company if the approval of the stockholders of the Company required for consummation of the Merger shall not have been obtained by reason of the failure to obtain the required vote at a duly held meeting of stockholders or any adjournment thereof; (viii) by Parent or Purchaser if the Company breaches the provisions of the Merger Agreement relating to solicitation of other offers (as described above); or (ix) by Parent or Purchaser if, at any time, the Company shall have withdrawn or modified in any manner adverse to Parent or Purchaser its approval or recommendation of the Offer, the Merger Agreement or the Merger. Effect of Termination. In the event of the termination of the Merger Agreement as provided above, the provisions of the Merger Agreement (other than the provisions relating to confidentiality, expenses, and the termination payment) will become void and have no effect, with no liability on the part of any party thereto or its stockholders or directors or officers in respect thereof, except with respect to the termination payment, provided that nothing contained in the Merger Agreement will be deemed to relieve any party of any liability it may have to any other party with respect to a willful breach of its obligations under the Merger Agreement. Termination Payment. The Company agreed to pay to Parent the sum of $3,794,135 plus all reasonably documented out-of-pocket expenses (including, but not limited to, the reasonable fees and expenses of counsel 24 and its other advisers) of Parent and Purchaser incurred in connection with the transactions contemplated by the Merger Agreement (including the preparation and negotiation of the Merger Agreement) ("Parent Expenses") promptly after, but in no event later than two days following, whichever of the following first occurs: (i) Parent or Purchaser shall have exercised its right to terminate the Merger Agreement pursuant to the provisions described in clauses (ii), (vii), (viii) and (ix) of the paragraph above entitled "Termination"; (ii) Parent or Purchaser shall have exercised its right to terminate the Merger Agreement pursuant to clause (v) of the paragraph above entitled "Termination", but only because of the failure of one or more of the conditions specified in clauses 3, 5, 6, 7 or 10 of Section 14 of this Offer to Purchase; (iii) the Company shall have exercised its right to terminate the Merger Agreement pursuant to clause (vii) of the paragraph above entitled "Termination"; or (iv) any person or group, other than Parent or an affiliate thereof, shall have acquired at least 50% of the outstanding Shares. The Company is not obligated to make such termination payment if at the time such payment becomes due Parent or Purchaser is in material breach of its obligations under the Merger Agreement. Compliance with Conditions Precedent, etc. Parent, Purchaser and the Company each agreed to use commercially reasonable efforts to cause the conditions precedent to the Offer and the Merger to be fulfilled and, subject to the terms and conditions in the Merger Agreement, to take, or cause to be taken, all action, and to do or cause to be done all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by the Merger Agreement and the Merger, including without limitation, to lift any injunction or remove any other impediment to the consummation of such transactions or the Merger. Access and Information. The Company agreed to give to Parent and Purchaser and their representatives reasonable access during normal business hours to the personnel, properties, books, records, contracts and commitments of the Company and to furnish all such information and documents relating to the properties and business of the Company as Parent and Purchaser may reasonably request. Public Announcements. Parent and the Company agreed to consult with each other before issuing any press release or otherwise making any public statements with respect to the Merger Agreement or any transaction contemplated therein and not to issue any such press release or make any such public statement prior to such consultation, except as may be required by law or any listing agreement with a national securities exchange or the NASDAQ National Market System to which Parent or the Company is a party. Indebtedness of the Company. The Company agreed that prior to the consummation of the Offer by Purchaser (and as a condition thereto), the Company will, if Parent makes available a Parent Loan (as described below), repay all indebtedness of the Company other than vendor indebtedness, it being expressly understood that if Parent does not make available to the Company a Parent Loan, then the repayment of such indebtedness will not be a condition to the consummation of the Offer. To the extent requested by the Company, Parent will make a loan to the Company in principal amount sufficient to pay in full (including principal, accrued interest, fees, penalties and other charges) all indebtedness required to be repaid by Company pursuant to the preceding sentence (the "Parent Loan"). The Parent Loan will (i) have a maturity of 180 days, (ii) bear interest at a rate to be negotiated in good faith by the parties taking into account the interest rate that could be obtained by the Company on any bank or other financial institution financing and (iii) have such other terms as shall be mutually agreed to by the Company and Parent, acting in good faith and in a commercially reasonably manner. Non-Survival of Representations, Warranties and Agreements. No representations, warranties or agreements in the Merger Agreement or in any instrument delivered by Parent, Purchaser or Company pursuant to the Merger Agreement will survive the Merger. Parties in Interest. Nothing in the Merger Agreement is intended to confer upon any person, other than the parties thereto, any rights or remedies. 25 Timing. Although Parent, Purchaser and the Company have agreed to use all reasonable efforts to consummate and make effective as promptly as practicable the transactions contemplated by the Merger Agreement, there can be no assurance that the Merger will be consummated or as to the timing of the Merger because the Merger is subject to certain conditions as described above. Purchaser and its affiliates reserve the right to acquire, to the extent permitted by applicable law and except as prohibited by the Merger Agreement, following the consummation or termination of the Offer, additional Shares through open market purchases, privately negotiated transactions, or otherwise, upon such terms and at such prices as they shall determine, which may be more or less than the price to be paid pursuant to the Offer and the Merger. Delaware Law. The Board of Directors of the Company has approved and adopted the Merger Agreement and the transactions contemplated thereby, including the Offer, the Stock Purchase Agreement and the Merger. Accordingly, the restrictions of Section 203 of the DGCL do not apply to the transactions contemplated by the Offer, the Stock Purchase Agreement and the Merger Agreement. Section 203 of the DGCL prevents an "interested stockholder" (generally, a stockholder owning or having the right to acquire 15% or more of a corporation's outstanding voting stock or an affiliate or associate thereof) from engaging in a "business combination" (defined to include a merger and certain other transactions) with a Delaware corporation for a period of three years following the date on which such stockholder became an interested stockholder unless (i) prior to such time, the corporation's Board of Directors approved either the business combination or the transaction which resulted in such stockholder becoming an interested stockholder, (ii) upon consummation of the transaction which resulted in such stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the corporation's voting stock outstanding at the time the transaction commenced (excluding shares owned by certain employee stock plans and persons who are directors and also officers of the corporation) or (iii) at or subsequent to such time the business combination is approved by the corporation's Board of Directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock not owned by the interested stockholder. As described above, Section 203 of the DGCL does not apply to the Offer, the Stock Purchase Agreement or the Merger because the Company's Board of Directors properly approved, among other things, the Offer, the Stock Purchase Agreement and the Merger. Appraisal Rights. No appraisal rights are available to holders of Shares in connection with the Offer. However, if the Merger is consummated, holders of Shares may have certain rights under Section 262 of the DGCL to demand appraisal of, and payment in cash for the fair value of, their Shares. Such rights, if the statutory procedures are complied with, could lead to a judicial determination of the fair value (excluding any element of value arising from accomplishment or expectation of the Merger) required to be paid in cash to such holders for their Shares. Any such judicial determination of the fair value of Shares could be based upon considerations other than or in addition to the Offer Price and the market value of the Shares, including asset values and the investment value of the Shares. The value so determined could be more or less than the Offer Price or the Merger Consideration. If any holder of Shares who demands appraisal under Section 262 of the DGCL fails to perfect, or effectively withdraws or loses such stockholder's right to appraisal, as provided in the DGCL, the Shares of such holder will be converted into the Merger Consideration in accordance with the Merger Agreement. A stockholder may withdraw such stockholder's demand for appraisal by delivery to Purchaser of a written withdrawal of such stockholder's demand for appraisal and acceptance of the Merger. Failure to follow the steps required by Section 262 of the DGCL for perfecting appraisal rights may result in the loss of such rights. Stock Purchase Agreement The following is a summary of the material terms of the Stock Purchase Agreement. This summary is not a complete description of the terms and conditions thereof and is qualified in its entirety by reference to the full text thereof which is incorporated herein by reference and a copy of which has been filed with the Commission 26 as an exhibit to the Schedule 14D-1. The Stock Purchase Agreement may be examined, and copies thereof may be obtained, as set forth in Section 17. Tender of Shares. Each of the Investors has irrevocably agreed to validly tender and sell (and not withdraw), pursuant to and in accordance with the terms of the Offer, all of such Investor's Investor Shares (provided, that the consideration in the Offer must be in cash and in an amount equal to $13.00 per Share). The Investors own an aggregate of 5,877,582 Shares, constituting approximately 50.3% of the currently outstanding Shares (approximately 38.3% of the outstanding Shares on a fully diluted basis). UPON CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THE STOCK PURCHASE AGREEMENT, PARENT AND PURCHASER, BY VIRTUE OF THE ACQUISITION OF APPROXIMATELY 50.3% OF THE OUTSTANDING SHARES, WILL OWN A NUMBER OF SHARES SUFFICIENT, EVEN IF NO OTHER SHARES ARE TENDERED INTO THE OFFER, TO CAUSE THE MERGER TO OCCUR WITHOUT THE AFFIRMATIVE VOTE OF ANY OTHER HOLDER OF SHARES, IF NO OTHER SHARES ARE ISSUED BY THE COMPANY. Voting of Shares. At any meeting of the stockholders of the Company, or in any consent in lieu of such a meeting from the date of the Stock Purchase Agreement, until the first to occur of (i) the Effective Time, (ii) the termination of the Stock Purchase Agreement by Parent or (iii) the termination of the Merger Agreement in accordance with its terms (the "Termination Date"), each of the Investors has agreed to vote (or cause to be voted) all of its Investor Shares in favor of the consummation of the transactions contemplated by the Merger Agreement, against any transactions inconsistent therewith, and as otherwise reasonably requested by Purchaser in order to carry out the purposes of the Merger Agreement. Investor Option. To induce Parent and Purchaser to enter into the Merger Agreement, each of the Investors has granted Parent an Investor Option to purchase its Investor Shares at $13.00 per Investor Share. Parent may assign to any subsidiary or affiliate of Parent (including Purchaser) the right to exercise the Investor Options. Each Investor Option may be exercised individually from each Investor, in whole or in part, at any time and from time to time, on or after June 4, 1997 and prior to the Termination Date. Irrevocable Proxy. Each Investor has irrevocably appointed Parent, until the Termination Date, as its attorney and proxy pursuant to the provisions of Section 212 of the DGCL, with full power of substitution, to vote and take other actions (by written consent or otherwise) in favor of the consummation of the transactions contemplated by the Merger Agreement, against any transactions inconsistent therewith, and as otherwise reasonably required in order to carry out the purposes of the Merger Agreement, with respect to the Investor Shares (and all other securities issued to such Investor in respect of the Investor Shares) which each Investor is entitled to vote at any meeting of stockholders of the Company (whether annual or special and whether or not an adjourned or postponed meeting) or in respect of any consent in lieu of any such meeting or otherwise. This proxy and power of attorney is irrevocable and coupled with an interest in favor of Parent. Each Investor revoked all other proxies and powers of attorney with respect to the Investor Shares (and all other securities issued to such Investor in respect of the Investor Shares) which it may have heretofore appointed or granted. No subsequent proxy or power of attorney may be given or written consent executed (and if given or executed, will not be effective) by the Investors with respect thereto. Restrictions on Transfer. Each Investor agreed that, until the expiration of the Investor Options, except as contemplated by the Stock Purchase Agreement, such Investor will not, and will not offer or agree to, sell, transfer, tender, assign, hypothecate or otherwise dispose of, or create or permit to exist any security interest, lien, claim, pledge, option, right of first refusal, agreement, limitation on such Investor's voting rights, charge or other encumbrance of any nature whatsoever with respect to the Investor Shares. No Solicitation. Each Investor agreed not to, directly or indirectly, through any agent or representative or otherwise, (i) solicit, initiate or encourage the submission of any proposal or offer from any individual, corporation, partnership, limited partnership, syndicate, person (including, without limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government (collectively, other than Parent and any affiliate of Parent, a "Person") relating to (A) any acquisition or purchase of all or any of the Investor Shares or (B) any acquisition 27 or purchase of all or any portion of the assets of, or any equity interest in, the Company or any subsidiary of the Company or any business combination with the Company or any subsidiary of the Company or (ii) participate in any negotiations regarding, or furnish to any Person any information with respect to, or otherwise cooperate in any way with, or assist or participate or facilitate or encourage, any effort or attempt by any Person to do or seek any of the foregoing. Each Investor also agreed to notify Parent promptly if any such proposal or offer, or any inquiry or contact with any Person with respect thereto. Plans for the Company It is expected that, initially following the Offer and the Merger, the business and operations of the Company will, except as set forth in this Offer to Purchase, be continued by the Company substantially as they are currently being conducted, and that the Company's current management, under the direction of the Board of Directors of Parent, will continue to manage the Company. Following consummation of the Merger, however, Parent intends to conduct a review of the Company and its assets, its corporate structure, operations, properties, management and personnel and consider what, if any, changes would be desirable in light of the circumstances which then exist although, except as disclosed in this Offer to Purchase, Purchaser has no current plans with respect to any of such matters. Such changes could include the acquisition or disposition of assets or other changes in the Company's capitalization, dividend policy, corporate structure, business, Certificate of Incorporation, By-laws, Board of Directors or management. Except as noted in this Offer to Purchase, neither Parent nor Purchaser has any present plans or proposals that would result in an extraordinary corporate transaction, such as a merger, reorganization, liquidation, or sale or transfer of a material amount of assets, involving the Company, or any material changes in the Company's capitalization, dividend policy, corporate structure, business or composition of its management. 13. DIVIDENDS AND DISTRIBUTIONS Pursuant to the terms of the Merger Agreement, the Company is prohibited from declaring or paying any dividends (cash or otherwise) or making any distribution on, or directly or indirectly redeeming, purchasing or otherwise acquiring, any shares of its outstanding capital stock or effecting any stock split or other reclassification. 14. CONDITIONS OF THE OFFER Notwithstanding any other provision of the Offer, Purchaser shall not be required to accept for payment or pay for any Shares tendered pursuant to the Offer, and may terminate or amend the Offer and may postpone the acceptance for payment of and payment for Shares tendered, if (i) the Minimum Condition shall not have been satisfied, (ii) any applicable waiting period under the HSR Act shall not have expired or been terminated prior to the expiration of the Offer, or (iii) at any time on or after the date of the Merger Agreement, and prior to the acceptance for payment of Shares, any of the following conditions shall exist: 1. there shall have been instituted or be pending any action or proceeding before any court or governmental, administrative or regulatory authority or agency, domestic or foreign, (i) that would reasonably be expected to make illegal, materially delay or otherwise directly or indirectly restrain or prohibit the making of the Offer, the acceptance for payment of, or payment for, any Shares by Parent, Purchaser or any other affiliate of Parent, the purchase of Shares pursuant to the Stock Purchase Agreement, or the consummation of any other transaction contemplated by the Merger Agreement, or that would reasonably be expected to result in material damages in connection with any transaction contemplated by the Merger Agreement, (ii) that would reasonably be expected to prohibit or limit materially the ownership or operation by the Company, Parent or any of their subsidiaries of all or any material portion of the business or assets of the Company, or to compel the Company, Parent or any of their subsidiaries to dispose of or hold separate all or any material portion of the business or assets of the Company, Parent or any of their subsidiaries, as a result of the transactions contemplated 28 by the Merger Agreement, (iii) that would reasonably be expected to impose or confirm limitations on the ability of Parent, Purchaser or any other affiliate of Parent to exercise effectively full rights of ownership of any Shares, including, without limitation, the right to vote any Shares acquired by Purchaser pursuant to the Offer, the Stock Purchase Agreement or otherwise on all matters properly presented to the Company's stockholders, including, without limitation, the approval and adoption of the Merger Agreement and the transactions contemplated thereby, (iv) that would reasonably be expected to require divestiture by Parent, Purchaser or any other affiliate of Parent of any Shares, or (v) which otherwise is a Material Adverse Change (as defined below); 2. there shall have been any action taken, or any statute, rule, regulation, legislation, interpretation, judgment, order or injunction enacted, entered, enforced, promulgated, amended, issued or deemed applicable to (i) Parent, the Company or any subsidiary or affiliate of Parent or the Company or (ii) any transaction contemplated by the Merger Agreement, by any legislative body, court, government or governmental, administrative or regulatory authority or agency, domestic or foreign, other than the routine application of the waiting period provisions of the HSR Act to the Offer, the Stock Purchase Agreement or the Merger, which is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (1) above; 3. there shall have occurred any change, condition, event or development that is a Material Adverse Change. "Material Adverse Change" means any change or effect that, individually or in the aggregate with all other changes or effects, is or is reasonably likely to be materially adverse to the business, operations, properties, condition (financial or otherwise), assets, liabilities or prospects of the Company, except for changes or effects that result primarily from the Offer, the contemplated Merger or the contemplated control of the Company by Parent, including any action or inaction by any employee (other than a senior executive officer or director) of the Company or any other third party primarily due to the Offer, the contemplated Merger or the contemplated control of the Company by Parent; 4. there shall have occurred (i) any general suspension of, or limitation on prices for, trading in securities on the Nasdaq Stock Market for more than one trading day, (ii) any decline, measured from June 4, 1997, in the Standard & Poor's 500 Index by an amount in excess of 25%, (iii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iv) any direct material limitation (whether or not mandatory) by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, on the extension of credit by banks or other lending institutions, (v) a commencement of a war or armed hostilities or other national or international calamity directly or indirectly involving the United States or (vi) in the case of any of the foregoing existing on the date of the Merger Agreement, a material acceleration or worsening thereof; 5. (i) it shall have been publicly disclosed or Purchaser shall have otherwise learned that beneficial ownership (determined for the purposes of this paragraph as set forth in Rule 13d-3 promulgated under the Exchange Act) of 30% or more of the then outstanding Shares has been acquired by any person other than Parent or any of its affiliates or other than those persons executing the Stock Purchase Agreement or (ii) (A) the Board of Directors of the Company or any committee thereof shall have withdrawn or modified in a manner adverse to Parent or Purchaser the approval or recommendation of the Offer, the Merger or the Merger Agreement, or approved or recommended any takeover proposal or any other acquisition of Shares other than the Offer and the Merger, (B) any corporation, partnership, person or other entity or group shall have entered into a definitive agreement or an agreement in principle with the Company with respect to a tender offer or exchange offer for any Shares or a merger, consolidation or other business combination with or involving the Company or (C) the Board of Directors of the Company or any committee thereof shall have resolved to do any of the foregoing; 29 6. any representation or warranty of the Company in the Merger Agreement which is qualified as to materiality shall not be true and correct or any such representation or warranty that is not so qualified shall not be true and correct in any material respect, in each case as if such representation or warranty was made as of such time on or after the date of the Merger Agreement (other than representations or warranties made as of a specific date, which shall only be made as of such date); provided, that for purposes of this condition, the term "Material Adverse Change" is substituted for the term "Material Adverse Effect" in all representations and warranties containing such term which are deemed to be made after the date of the Merger Agreement by virtue of this paragraph, and the Company shall not have delivered to Parent a certificate of the Company to such effect signed by a duly authorized officer thereof and dated as of the date on which Parent first accepts Shares for payment; 7. the Company shall have failed to perform in any material respect any obligation or to comply in any material respect with any agreement or covenant of the Company to be performed or complied with by it under the Merger Agreement and, in the case of failures to perform any agreement or covenant of the Company pursuant to Sections 5.1 (b), (c), (d) and (f) of the Merger Agreement, such failure to perform would reasonably be expected to have a Material Adverse Change; 8. the Merger Agreement shall have been terminated in accordance with its terms; 9. Purchaser and the Company shall have agreed that Purchaser shall terminate the Offer or postpone the acceptance for payment of or payment for Shares thereunder; 10. any holder of options to purchase shares of the Company's common stock (other than Clyde Heintzelman) whose options vest on a change of control shall have failed to waive the vesting of such options upon a change of control of the Company; which, in the reasonable judgment of Purchaser in any such case, and regardless of the circumstances (including any action or inaction by Parent or any of its affiliates) giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of Purchaser, Parent and their respective subsidiaries and affiliates, and may be asserted by Purchaser or Parent regardless of the circumstances giving rise to any such condition or may be waived by Purchaser or Parent in whole or in part at any time and from time to time in their sole discretion subject to the terms and conditions of the Merger Agreement. The failure by Parent or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and other circumstances shall not be deemed a waiver with respect to any other facts and circumstances, and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. Any determination by Purchaser concerning the events described in this Section 14 will be final and binding on all parties. In addition, the Company agreed that prior to the consummation of the Offer by Purchaser (and as a condition thereto), the Company will, if Parent makes available a Parent Loan, repay all indebtedness of the Company other than vendor indebtedness, it being expressly understood that if Parent does not make available to the Company a Parent Loan, then the repayment of such indebtedness will not be a condition to the consummation of the Offer. To the extent requested by the Company, Parent will make a Parent Loan to the Company in principal amount sufficient to pay in full (including principal, accrued interest, fees, penalties and other charges) all indebtedness required to be repaid by the Company pursuant to the preceding sentence. The Parent Loan will (i) have a maturity of 180 days, (ii) bear interest at a rate to be negotiated in good faith by the parties taking into account the interest rate that could be obtained by the Company on any bank or other financial institution financing and (iii) have such other terms as shall be mutually agreed to by the Company and Parent, acting in good faith and a commercially reasonably manner. 30 15. CERTAIN LEGAL MATTERS Except as described in this Section 15, Purchaser is not aware of any license or regulatory permit that appears to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by Purchaser's acquisition of Shares as contemplated herein or of any approval or other action by any governmental authority that would be required for the acquisition or ownership of Shares by Purchaser as contemplated herein. Should any such approval or other action be required, Purchaser currently contemplates that such approval or other action will be sought, except as described below under "State Takeover Laws." While, except as otherwise expressly described in this Section 15, Purchaser does not presently intend to delay the acceptance for payment of or payment for Shares tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that failure to obtain any such approval or other action might not result in consequences adverse to the Company's business or that certain parts of the Company's business might not have to be disposed of if such approvals were not obtained or such other actions were not taken or in order to obtain any such approval or other action. If certain types of adverse action are taken with respect to the matters discussed below, Purchaser could decline to accept for payment or pay for any Shares tendered. See Section 14 for certain conditions of the Offer. State Takeover Laws. A number of states throughout the United States have enacted takeover statutes that purport, in varying degrees, to be applicable to attempts to acquire securities of corporations that are incorporated or have assets, stockholders, executive offices or places of business in such states. In 1982, in Edgar v. MITE Corp., the Supreme Court of the United States held that the Illinois Business Takeover Act, which involved state securities laws that made the takeover of certain corporations more difficult, imposed a substantial burden on interstate commerce and therefore was unconstitutional, and the reasoning in such decision is likely to apply to certain other takeover contexts. In CTS Corp. v. Dynamics Corp. of America, however, the Supreme Court of the United States held that a state may, as a matter of corporate law and, in particular, those laws concerning corporate governance, constitutionally disqualify a potential acquirer from voting on the affairs of a target corporation without prior approval of the remaining stockholders, provided that such laws were applicable only under certain conditions in particular where the corporation has a substantial number of stockholders in the state and is incorporated there. Section 203 of the DGCL limits the ability of a Delaware corporation to engage in business combinations with "interested stockholders" (defined as any beneficial owner of 15% or more of the outstanding voting stock of the corporation) unless, among other things, the corporation's board of directors has given its prior approval to either the business combination or the transaction which resulted in the stockholder becoming an "interested stockholder." The Company has represented in the Merger Agreement that it properly approved, among other things, the Offer, the Stock Purchase Agreement and the Merger for purposes of Section 203 of the DGCL and that as a result the limitations on business combinations set forth in Section 203 of the DGCL will not be applicable to the Offer, the Stock Purchase Agreement or the Merger. Based on information supplied by the Company, Purchaser does not believe that any other state takeover statutes apply to the Offer or the Merger. Other than as set forth in the preceding paragraph, Purchaser has not attempted to comply with any state takeover statute or regulation. Purchaser reserves the right to challenge the applicability or validity of any state law purportedly applicable to the Offer, the Stock Purchase Agreement or the Merger and nothing in this Offer to Purchase or any action taken in connection with the Offer, the Stock Purchase Agreement or the Merger is intended as a waiver of such right. If it is asserted that any state takeover statute is applicable to the Offer, the Stock Purchase Agreement or the Merger and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer, the Stock Purchase Agreement or the Merger, Purchaser might be required to file certain information with, or to receive approvals from, the relevant state authorities, and Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer, or be delayed in consummating the Offer or the Merger. In such case, Purchaser may not be obligated to accept for payment or pay for any Shares tendered pursuant to the Offer. See Section 14. 31 Antitrust. Under the provisions of the HSR Act applicable to the Offer and the Stock Purchase Agreement, the purchase of Shares under the Offer or under the Stock Purchase Agreement may be consummated following the expiration of a 15 calendar-day waiting period following the filing by Parent as the "ultimate parent entity" of Purchaser of a Notification and Report Form with respect to the Offer and the Stock Purchase Agreement with the Antitrust Division and the FTC, unless Parent receives a request for additional information or documentary material from the Antitrust Division or the FTC or unless early termination of the waiting period is granted. Parent made its filings under the HSR Act with the Antitrust Division and the FTC on June 10, 1997. The Company anticipates it will make its filings under the HSR Act with the Antitrust Division and the FTC on June 11, 1997. Unless a request for additional information is received by Parent, the waiting period under the HSR Act with respect to the Offer and the Stock Purchase Agreement will expire at 11:59 P.M., New York City time, on June 25, 1997. If, within the initial 15- day waiting period, either the Antitrust Division or the FTC requests additional information or documentary material from Parent, the waiting period will be extended and would expire at 11:59 P.M., New York City time, on the tenth calendar day after the date of substantial compliance by Parent with such request. Only one extension of the waiting period pursuant to a request for additional information is authorized by the HSR Act. Thereafter, such waiting period may be extended only by court order or with the consent of Parent. If the acquisition of Shares is delayed pursuant to a request by the FTC or the Antitrust Division for additional information or documentary material pursuant to the HSR Act, the Offer may, at the discretion of Purchaser (subject to the terms of the Merger Agreement), be extended and, in any event, the purchase of or any payment for Shares will be deferred until ten days following the date the request is complied with by Parent, unless the waiting period is sooner terminated by the FTC and the Antitrust Division. Unless the Offer is extended, any extension of the waiting period will not give rise to any additional withdrawal rights. See Section 4. Although the Company is required to file certain information and documentary material with the FTC and the Antitrust Division in connection with the Offer, neither the Company's failure to make such filings nor a request from the FTC or the Antitrust Division for additional information or documentary material made to the Company will extend the waiting period. In practice, complying with a request for additional information or documentary material can take a significant amount of time. In addition, if the Antitrust Division or the FTC raises substantive issues in connection with a proposed transaction, the parties frequently engage in negotiations with the relevant governmental agency concerning possible means of addressing those issues and may agree to delay consummation of the transaction while such negotiations continue. The FTC and the Antitrust Division frequently scrutinize the legality under the antitrust laws of transactions such as Purchaser's proposed acquisition of the Company. At any time before or after Purchaser's purchase of Shares pursuant to the Offer, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer or the consummation of the Merger or seeking the divestiture of Shares acquired by Purchaser or the divestiture of substantial assets of Purchaser or its subsidiaries, or the Company or its subsidiaries. Private parties or state officials may also bring legal action under the antitrust laws under certain circumstances. There can be no assurance that a challenge to the Offer on antitrust grounds will not be made or, if such a challenge is made, of the result thereof. If any such action by the FTC, the Antitrust Division or any other person should be threatened or commenced, Purchaser may extend, terminate or amend the Offer. See Section 14 for certain conditions of the Offer. Purchaser believes that consummation of the Offer would not violate any antitrust laws. However, there can be no assurance that a challenge to the Offer on antitrust grounds will not be made or, if a challenge is made, what the result will be. 16. FEES AND EXPENSES Bear Stearns is acting as Dealer Manager in connection with the Offer and is acting as financial advisor to Parent with respect to the proposed acquisition of the Company. In consideration of its services, Parent has agreed to pay Bear Stearns (a) $50,000, which became payable upon execution of the engagement letter between Bear Stearns and Parent, dated January 18, 1996, (b) quarterly payments of $50,000 during the term of the 32 engagement letter, (c) $475,000, which became payable upon execution of the Merger Agreement and (d) $1,450,000 upon consummation of the Offer. Parent has also agreed to reimburse Bear Stearns for all of its reasonable out-of-pocket expenses, including the fees and disbursements of counsel. In addition, Parent has agreed to indemnify Bear Stearns and certain related persons against certain liabilities and expenses in connection with its services, including certain liabilities under the federal securities laws. In the ordinary course of its business, Bear Stearns engages in securities trading, market-making and brokerage activities and may, at any time, hold long or short positions and may trade or otherwise effect transactions in securities of the Company. As of June 9, 1997, Bear Stearns did not hold a long or a short position in the Shares for its own account. Purchaser has retained Georgeson & Company Inc. to act as the Information Agent and Continental Stock Transfer & Trust Company to act as the Depositary in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, telex, telegraph and personal interview and may request brokers, dealers and other nominees to forward the Offer materials to beneficial owners of the Shares. The Information Agent and the Depositary each will receive reasonable and customary compensation for their services, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities under the federal securities laws. Except as set forth above, Purchaser will not pay any fees or commissions to any broker or dealer or other person for soliciting tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust companies will be reimbursed by Purchaser for customary mailing and handling expenses incurred by them in forwarding the offering materials to their customers. 17. MISCELLANEOUS Purchaser is not aware of any jurisdiction where the making of the Offer is prohibited by any administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good faith effort to comply with any such state statute. If, after such good faith effort, Purchaser cannot comply with any such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser or by one or more registered brokers or dealers licensed under the laws of such jurisdiction. Parent and Purchaser have filed with the Commission a Tender Offer Statement on Schedule 14D-1 (including exhibits) pursuant to Rule 14d-3 under the Exchange Act containing certain additional information with respect to the Offer and may file amendments thereto. The Company has filed with the Commission the Schedule 14D-9 (including exhibits) containing the Company's recommendation with respect to the Offer and other information required to be disseminated to stockholders of the Company pursuant to Rule 14d-9. Such Statements and any amendments thereto, including exhibits, may be examined and copies may be obtained from the Commission in the manner set forth in Section 8 (except that they will not be available at the regional offices of the Commission). NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF PURCHASER NOT CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. Daylight Acquisition Corp. June 11, 1997 33 ANNEX I DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER AND PARENT A. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT The following information sets forth the name, age citizenship, business address, present principal occupation or employment, and the material occupation, positions, offices or employment for the past five years of each director and executive officer of Parent. Unless otherwise indicated below, the address of each director and executive officer is c/o Intermedia Communications Inc., 3625 Queen Palm Drive, Tampa, Florida 33619 and each director and executive officer is a citizen of the United States of America. David C. Ruberg, age 51, has been a director, President, and Chief Executive Officer of Parent since May 1993 and Chairman of the Board since March 1994. He was an independent consultant to the computer and telecommunications industries from September 1991 to May 1993. Mr. Ruberg was a Vice President and General Manager of Data General Corporation form 1989 until September 1991. John C. Baker, age 47, has been a director of Parent since February 1988. Mr. Baker has been the principal of Baker Capital Corp., a private equity investment firm, since October 1995. He was a Senior Vice President of Patricof & Co. Ventures, Inc., a multi-national venture capital firm from 1988 until September 1995. Mr. Baker is currently a director of Xpedite Systems, Inc., FORE Systems, Inc. and Resource Bancshares Mortgage Group, Inc., all of which are publicly traded corporations. George F. Knapp, age 65, has been a director of Parent since February 1988. He has been a principal of Communications Investment Group, an investment banking firm, since June 1990. From January 1988 until June 1990, Mr. Knapp was an associate at MBW Management, Inc., a venture capital firm. Prior to that time, he held various executive positions at ITT Corporation and its subsidiaries, most recently as Corporate Vice President of ITT Corporation. Mr. Knapp is currently a member of the Manhattan College Board of Trustees and Chairman of its Finance Committee. Philip A. Campbell, age 60, has been a director of Parent since September 1996. Mr. Campbell retired from Bell Atlantic Inc. as director, Vice Chairman and Chief Financial Officer in 1991. Previously, he was President of New Jersey Bell, Indiana Bell, and Bell Atlantic Network Services. Mr. Campbell is currently a director of Xpedite Systems, Inc., a publicly traded corporation. Robert A. Rouse, age 48, has served as Executive Vice President, Engineering, Operations and Systems of Parent since October 1996. Prior to joining Parent, Mr. Rouse was Senior Vice President of Concert, a joint venture company of British Telecommunications and MCI Communications Company where he managed the engineering and operations of the Concert Global Networks from 1991 to 1996. Mr. Rouse held various executive management positions at MCI from 1986 to 1991, with responsibilities including product and network design, network and systems development, network planning, operations, provisioning, and customer services. From 1969 to 1986, he managed several subsidiaries of Rochester Telephone, now a part of Frontier Corporation. James F. Geiger, age 38, has served as Senior Vice President, Sales of Parent since August 1995. Mr. Geiger served as the Vice President of Alternate Channel Sales from March 1995 through August 1995 and as the President of each of FiberNet USA, Inc. and FiberNet Telecommunications Cincinnati, Inc. (collectively, "FiberNet") since their inception. Mr. Geiger was one of the founding principals of FiberNet, initially serving as Vice President of Sales & Marketing and subsequently serving as President. From April 1989 to April 1990, Mr. Geiger served as Director of Marketing for Associated Communications, a cellular telephone company. 34 Robert M. Manning, age 37, has served as Senior Vice President, Chief Financial Officer of Parent since September 1996. Mr. Manning joined Parent from DMX Inc., a Los Angeles-based cable programmer, where he was Executive Vice President, Senior Financial Executive and a director of DMX-Europe from October 1991 to September 1996. Prior to his tenure at DMX, Mr. Manning spent ten years in the investment banking field in corporate finance and mergers and acquisitions, most recently with Oppenheimer and Co., Inc. as Vice President, Corporate Finance, managing their Entertainment/Leisure Time Group from October 1988 to October 1991. Robert A. Ruh, age 52, has served as Senior Vice President, Human Resources of Parent since March 1, 1996. From January 1991 through February 1996, Dr. Ruh was an independent consultant, specializing in executive and organization development. From 1975 to 1990, Dr. Ruh held executive positions in human resources with Baxter Healthcare Corporation and American Hospital Supply Corporation. From 1973 to 1975, Dr. Ruh served as a consulting psychologist for Medina and Thompson, specializing in executive assessment, selection, and development. From 1970 to 1972, Dr. Ruh was on the corporate organization development staff at Corning Glass Works. Dr. Ruh served as Assistant Professor of psychology at Michigan State University from 1970 to 1972. Barbara L. Samson, age 34, a co-founder of Parent, has served as a Vice President since June 1987, and as a Senior Vice President since October 1992. She served as President of Parent's predecessor from September 1986 to June 1987. Ms. Samson recently served two terms as Chairman of the Association of Local Telecommunications Services (ALTS), a national competitive access provider trade association.(/1/) Michael A. Viren, age 55, has served as Senior Vice President, Strategic Planning, Regulatory, and Industry Relations of Parent since October 1996. Prior to his present position, he was Senior Vice President, Engineering and Information Systems from January 1996 to October 1996 and served as Vice President, Product Development from December 1992 through January 1996. Dr. Viren joined Parent in February 1991 as Director of Product Development. Dr. Viren worked for GTE Corporation from August 1986 to February 1991 as a specialist in wide and local area networking ("WAN" and "LAN," respectively). Prior to that he operated his own consulting firm concentrating in WAN and LAN design; was Senior Vice President of Criterion, Inc., an Economic Consulting Firm in Dallas, Texas; and served as the Director of the Utility Division of the Missouri Public Service Commission. Dr. Viren taught economics for 10 years, most recently as an Associate Professor of Economics at the University of Missouri-Columbia and prior to that at the University of Kansas. Patricia A. Kurlin, age 42, has served as Vice President, General Counsel of Parent since June 1996. From September 1995 until June 1996, Ms. Kurlin served as Corporate Counsel and served as Director of Governmental and Legal Affairs for Parent from September 1993 to September 1995. Prior to joining Parent, Ms. Kurlin served as Senior Telecommunications Attorney at the Florida Public Service Commission from May 1990 to September 1993. Jeanne M. Walters, age 34, has served as Controller and Chief Accounting Officer of Parent since May 1993. From November 1992 until May 1993 she served as Assistant Controller. From June 1988 to November 1992, Ms. Walters was an auditor at Ernst & Young LLP, a certified public accounting firm in Tampa, Florida. She is licensed in the State of Florida as a certified public accountant. B. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER The following table sets forth the name, citizenship, age, business address, present principal occupation or employment, and the material occupation, positions, offices or employment for the past five years of each director and executive officer of Purchaser. Unless otherwise indicated below, the address of each director and executive officer is c/o Intermedia Communications Inc., 3625 Queen Palm Drive, Tampa, Florida 33619 and each director and executive officer is a citizen of the United States of America. - -------- (/1/) Commencing April 1, 1997, Ms. Samson has been on a sabbatical leave in order to chair the Florida NetDay 2000 program. 35 Robert M. Manning, age 37, has been the sole director, President, Secretary and Treasurer of Purchaser since May 30, 1997. Mr. Manning has served as Senior Vice President, Chief Financial Officer and Secretary of Parent since September 1996. Mr. Manning joined Parent from DMX Inc., a Los Angeles-based cable programmer, where he was Executive Vice President, Senior Financial Executive and a director of DMX-Europe from October 1991 to September 1996. Prior to his tenure at DMX, Mr. Manning spent ten years in the investment banking field in corporate finance and mergers and acquisitions, most recently with Oppenheimer and Co., Inc. as Vice President, Corporate Finance managing their Entertainment/Leisure Time Group from October 1988 to October 1991. G. Lawrence Sledge, age 30, has been Vice President and Assistant Secretary of Purchaser since May 30, 1997. Mr. Sledge has served as Senior Director, Corporate Planning & Development of Parent since March 1997. Prior to his present position, Mr. Sledge held managerial positions in Parent's corporate finance, strategic planning and treasury departments. Mr. Sledge joined Parent in November 1991. 36 Manually signed facsimile copies of the Letter of Transmittal will be accepted. The Letter of Transmittal, Certificates for Shares and any other required documents should be sent or delivered by each stockholder of the Company or such stockholder's broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of its addresses set forth below. The Depositary for the Offer is: CONTINENTAL STOCK TRANSFER & TRUST COMPANY By Mail: By Facsimile Transmission By Hand or Overnight (For Eligible Institutions Only): Courier: 2 Broadway 2 Broadway New York, NY 10004 New York, NY (212) 509-5150 Attn: Reorganization 10004 Dept. Attn: Confirm Receipt of Reorganization Notice of Guaranteed Delivery: Dept. (212) 509-4000 ext. 535 --------------- DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS TO A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. Questions and requests for assistance may be directed to the Information Agent and the Dealer Manager at the telephone numbers and locations listed below. Additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other tender offer documents may be obtained at Purchaser's expense from the Information Agent or from your broker, dealer, commercial bank or trust company or other nominee. The Information Agent for the Offer is: GEORGESON & COMPANY INC. -------------- Wall Street Plaza New York, NY 10005 Banks and Brokers Call Collect: (212) 440-9800 CALL TOLL-FREE: (800) 223-2064 The Dealer Manager for the Offer is: BEAR, STEARNS & CO. INC. 245 Park Avenue New York, NY 10167 CALL TOLL FREE: (888) 466-7234 EX-99.(A)(2) 3 LETTER OF TRANSMITTAL EXHIBIT 99(A)(2) LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF DIGEX, INCORPORATED PURSUANT TO THE OFFER TO PURCHASE DATED JUNE 11, 1997 BY DAYLIGHT ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF INTERMEDIA COMMUNICATIONS INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, JULY 9, 1997, UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: CONTINENTAL STOCK TRANSFER & TRUST COMPANY By Mail: By Facsimile By Hand or Overnight Transmission (For Courier: Eligible Institutions Only): 2 Broadway New York, NY 10004 2 Broadway Attn: Reorganization New York, NY 10004 Dept. (212) 509-5150 Attn: Reorganization Confirm Receipt of Dept. Notice of Guaranteed Delivery: (212) 509-4000 ext. 535 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN THE NUMBER LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be completed by holders (the "Stockholders") of Shares (as defined below) of DIGEX, Incorporated if certificates evidencing Shares ("Certificates") are to be forwarded herewith or if delivery of Shares is to be made by book-entry transfer to an account maintained by Continental Stock Transfer & Trust Company (the "Depositary") with The Depository Trust Company ( the "Book-Entry Transfer Facility") pursuant to the procedures set forth in Section 3 of the Offer to Purchase (as defined below). Stockholders whose Certificates are not immediately available or who cannot deliver either their Certificates for, or a Book-Entry Confirmation (as defined in Section 3 of the Offer to Purchase) with respect to, their Shares and all other required documents to the Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) must tender their Shares according to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. See Instruction 2 hereof. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Depositary. 1 DESCRIPTION OF SHARES TENDERED - --------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON THE SHARES TENDERED(2) CERTIFICATE(S) (ATTACH ADDITIONAL LIST IF NECESSARY) - ----------------------------------------------------------------------- NUMBER OF SHARES NUMBER CERTIFICATE REPRESENTED BY OF SHARES NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2) ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- TOTAL SHARES TENDERED
- -------------------------------------------------------------------------------- (1) Need not be completed by holders of Shares delivering Shares by Book- Entry Transfer. (2) Unless otherwise indicated, it will be assumed that all Shares represented by Certificates delivered to the Depositary are being tendered. See Instruction 4. [_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER FACILITY, AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER). Name of Tendering Institution: _____________________________________________ Account Number: ____________________________________________________________ Transaction Code Number: ___________________________________________________ [_]CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING. PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY. Name(s) of Registered Holder(s): ___________________________________________ Window Ticket Number (if any): _____________________________________________ Date of Execution of Notice of Guaranteed Delivery: ________________________ Name of Institution which Guaranteed Delivery: _____________________________ Account Number: ____________________________________________________________ Transaction Code Number: ___________________________________________________ 2 NOTE: SIGNATURE(S) MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY LADIES AND GENTLEMEN: The undersigned hereby tenders to Daylight Acquisition Corp., a Delaware corporation ("Purchaser") and a wholly owned subsidiary of Intermedia Communications Inc., a Delaware corporation ("Parent"), the above-described shares of common stock, $.01 par value (the "Shares"), of DIGEX, Incorporated, a Delaware corporation (the "Company"), for $13.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated June 11, 1997 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, together with any supplements of amendments thereto, collectively constitute the "Offer"). The undersigned understands that Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to Parent or one or more of Parent's subsidiaries, the right to purchase Shares tendered pursuant to the Offer; provided, however, that no such transfer or assignment will release Purchaser from its obligations under the Offer or prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. Subject to, and effective upon, acceptance for payment of, or payment for, Shares tendered herewith in accordance with the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms or conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to, or upon the order of, Purchaser all right, title and interest in and to all of the Shares that are being tendered hereby and any and all other Shares or other securities issued or issuable in respect of such Shares on or after June 4, 1997 (a "Distribution"), and irrevocably constitutes and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and any Distributions), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver Certificates evidencing such Shares (and any Distributions), or transfer ownership of such Shares (and any Distributions) on the account books maintained by the Book-Entry Transfer Facility together, in any such case, with all accompanying evidences of transfer and authenticity to, or upon the order of, Purchaser, upon receipt by the Depositary as the undersigned's agent, of the purchase price with respect to such Shares, (ii) present such Shares (and any Distributions) for transfer on the books of the Company and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and any Distributions), all in accordance with the terms and subject to the conditions of the Offer. The undersigned hereby irrevocably appoints the designees of Purchaser as the attorney-in-fact and proxy of the undersigned, each with full power of substitution, to the full extent of the undersigned's rights with respect to all Shares tendered hereby and accepted for payment and paid for by Purchaser (and any Distributions), including, without limitation, the right to vote such Shares (and any Distributions) in such manner as each such attorney and proxy or his substitute shall, in his or her sole discretion, deem proper. All such powers of attorney and proxies, being deemed to be irrevocable, shall be considered coupled with an interest in the Shares tendered herewith. Such appointment will be effective when, and only to the extent that, Purchaser accepts such Shares for payment. Upon such acceptance for payment, all prior powers of attorney and proxies given by the undersigned with respect to such Shares (and any Distributions) will be revoked, without further action, and no subsequent powers of attorneys and proxies may be given with respect thereto (and, if given, will be deemed ineffective). The designees of Purchaser will, with respect to the Shares (and any Distributions) for which such appointment is effective, be empowered to exercise all voting and other rights of the undersigned with respect to such Shares (and any Distributions) as they in their sole discretion may deem proper including, without limitation, in respect of any annual or special meeting of the Stockholders, or any adjournment or postponement thereof, or in connection with any action by written consent in lieu of such meeting or otherwise (including any such meeting or action by written consent to approve the Merger (as defined in the Offer to Purchase)). Purchaser reserves the absolute right to require that, in order for Shares to be deemed validly tendered, immediately upon the acceptance for payment of such Shares, Purchaser or its designees are able to exercise full voting rights with respect to such Shares (and any Distributions). 3 All authority conferred or agreed to be conferred in this Letter of Transmittal shall be binding upon the successors, assigns, heirs, executors, administrators and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby (and any Distributions) and that, when the same are accepted for payment and paid for by Purchaser, Purchaser will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances, and that the Shares tendered hereby (and any Distributions) will not be subject to any adverse claim. The undersigned, upon request, will execute and deliver any additional documents deemed by the Depositary or Purchaser to be necessary or desirable to complete the sale, assignment and transfer of Shares tendered hereby (and any Distributions). In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of Purchaser any and all Distributions issued to the undersigned on or after June 4, 1997, in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer; and pending such remittance and transfer or appropriate assurance thereof, Purchaser shall be entitled to all rights and privileges as owner of any such Distributions and may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by Purchaser in its sole discretion. The undersigned understands that the valid tender of Shares pursuant to any one of the procedures described in Section 3 of the Offer to Purchase and in the instructions hereto will constitute a binding agreement between the undersigned and Purchaser with respect to such Shares upon the terms and subject to the conditions of the Offer. The undersigned recognizes that, under certain circumstances set forth in the Offer to Purchase, Purchaser may not be required to accept for payment any of the Shares tendered hereby. Unless otherwise indicated herein under "Special Payment Instructions," please issue the check for the purchase price and/or return any Certificates evidencing Shares not tendered or not accepted for payment in the name(s) of the registered holder(s) appearing under "Description of Shares Tendered." Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price and/or return any Certificates evidencing Shares not tendered or not accepted for payment (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under "Description of Shares Tendered." In the event that both the "Special Payment Instructions" and the "Special Delivery Instructions" are completed, please issue the check for the purchase price and/or return any such Certificates evidencing Shares not tendered or not accepted for payment (and accompanying documents, as appropriate) in the name(s) of, and deliver such check and/or return such certificates (and accompanying documents, as appropriate) to, the person(s) so indicated. Unless otherwise indicated herein under "Special Payment Instructions," in the case of a book-entry delivery of Shares, please credit the account maintained at the Book-Entry Transfer Facility indicated above with respect to any Shares not accepted for payment. The undersigned recognizes that Purchaser has no obligation pursuant to the "Special Payment Instructions" to transfer any Shares from the name of the registered holder thereof if Purchaser does not accept for payment any of the Shares tendered hereby. 4 SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 5, 6 AND 7) (SEE INSTRUCTIONS 5, 6 AND 7) To be completed ONLY if Certif- To be completed ONLY if Certif- icates for Shares not tendered icates for Shares not tendered or not accepted for payment or not accepted for payment and/or the check for the pur- and/or the check for the pur- chase price of Shares accepted chase price of Shares accepted for payment are to be issued in for payment are to be sent to the name of someone other than someone other than the under- the undersigned, or if Shares signed, or to the undersigned at delivered by book-entry transfer an address other than that that are not accepted for pay- above. ment are to be returned by credit to an account maintained at the Book-Entry Transfer Fa- cility other than the account indicated above. Mail: (check appropriate box(es)) [_] Check to: [_] Certificate(s) to: Name_____________________________ Issue: [_] Check [_] Certificate(s) (PLEASE TYPE OR PRINT) to: Address _________________________ _________________________________ Name ____________________________ (INCLUDE ZIP CODE) (PLEASE TYPE OR PRINT) _________________________________ Address _________________________ (TAX IDENTIFICATION OR SOCIAL _________________________________ SECURITY NUMBER) (INCLUDE ZIP CODE) (SEE SUBSTITUTE FORM W-9) _________________________________ (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER) (SEE SUBSTITUTE FORM W-9) [_]Credit unpurchased Shares delivered by book-entry transfer to The Depository Trust Company. _________________________________ (ACCOUNT NUMBER) 5 STOCKHOLDER: SIGN HERE AND COMPLETE SUBSTITUTE FORM W-9 ON REVERSE _____________________________________________________________ _____________________________________________________________ (SIGNATURE(S) OF STOCKHOLDER(S)) Dated: _______________________________________________ , 1997 (Must be signed by registered holder(s) as name(s) appear(s) on the Certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by Certificates and documents transmitted herewith. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, please provide the following information. See Instruction 5.) Name(s)______________________________________________________ _____________________________________________________________ (PLEASE TYPE OR PRINT) Capacity (Full Title)________________________________________ (SEE INSTRUCTION 5) Address______________________________________________________ _____________________________________________________________ (INCLUDE ZIP CODE) Area Codes and Telephone Numbers: ___________________________ (HOME) --------------------------------- (BUSINESS) Tax Identification or Social Security No. _________________________________________ Also Complete Substitute Form W-9 on Reverse GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5) Authorized Signature_________________________________________ Name_________________________________________________________ _____________________________________________________________ (PLEASE TYPE OR PRINT) Name of Firm_________________________________________________ Address______________________________________________________ _____________________________________________________________ (INCLUDE ZIP CODE) Area Code and Telephone Number ______________________________ Dated: _______________________________________________ , 1997 6 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, signatures on this Letter of Transmittal must be guaranteed by a member in good standing of the Securities Transfer Association's Medallion Program, or by any other bank, broker, dealer, credit union, savings association or other entity that is an "eligible guarantor institution," as such term is defined in Rule 17Ad- 15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (each of the foregoing constituting an "Eligible Institution,") unless the Shares tendered hereby are tendered (i) by the registered holder (which term, for purposes of this document, shall include any participant in the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) of such Shares who has completed neither the box entitled "Special Payment Instructions" nor the box entitled "Special Delivery Instructions" hereby or (ii) for the account of an Eligible Institution. See Instruction 5. If the Certificates are registered in the name of a person other than the signer of this Letter of Transmittal, or if payment is to be made or delivered to, or Certificates evidencing unpurchased Shares are to be issued or returned to, a person other than the registered owner, then the tendered Certificates must be endorsed or accompanied by duly executed stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the Certificates, with the signatures on the Certificates or stock powers guaranteed by an Eligible Institution as provided herein. See Instruction 5. 2. REQUIREMENT OF TENDER. This Letter of Transmittal is to be completed by Stockholders if Certificates evidencing Shares are to be forwarded herewith or if delivery of Shares is to be made pursuant to the procedures for book-entry transfer set forth in Section 3 of the Offer to Purchase. For a Stockholder to validly tender Shares pursuant to the Offer, a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry delivery of Shares and any other required documents, must be received by the Depositary at its address set forth herein prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) and (i) Certificates for tendered Shares must be received by the Depositary at one of such addresses prior to the Expiration Date, (ii) Shares must be delivered pursuant to the procedures for book-entry transfer set forth in Section 3 of the Offer to Purchase and the Book-Entry Confirmation must be received by the Depositary on or prior to the Expiration Date or (iii) the tendering Stockholder must comply with the guaranteed delivery procedures set forth below and in Section 3 of the Offer to Purchase. Stockholders whose Certificates are not immediately available or who cannot deliver their Certificates and all other required documents to the Depositary or complete the procedures for book-entry transfer prior to the Expiration Date may tender their Shares by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution, (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by Purchaser, must be received by the Depositary prior to the Expiration Date, and (iii) the Certificates representing all tendered Shares in proper form for transfer, or a Book-Entry Confirmation with respect to all tendered Shares, in either case together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message), and any other documents required by this Letter of Transmittal, must be received by the Depositary within three New York Stock Exchange, Inc. trading days after the date of such Notice of Guaranteed Delivery. If Certificates are forwarded separately to the Depositary, a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) must accompany each such delivery. THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. 7 No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering Stockholders, by execution of this Letter of Transmittal (or a facsimile thereof), waive any right to receive any notice of the acceptance of their Shares for payment. 3. INADEQUATE SPACE. If the space provided herein is inadequate, the information required under "Description of Shares Tendered" should be listed on a separate signed schedule attached hereto. 4. PARTIAL TENDERS. If fewer than all of the Shares represented by any Certificates delivered to the Depositary herewith are to be tendered hereby, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered." In such case, if Purchaser accepts the tendered Shares for payment, a new Certificate for the remainder of the Shares that were evidenced by your old Certificate(s) will be sent, without expense, to the person(s) signing this Letter of Transmittal, unless otherwise provided in the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares represented by Certificate(s) delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL, INSTRUMENTS OF TRANSFER AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the Certificate(s) without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any of the tendered Shares are registered in different names on several Certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of Certificates. If this Letter of Transmittal or any Certificates or instruments of transfer are signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to Purchaser of such person's authority to so act must be submitted. If this Letter of Transmittal is signed by the registered holder(s) of the Shares listed and transmitted hereby, no endorsements of Certificates or separate instruments of transfer are required unless payment is to be made, or Certificates not tendered or not purchased are to be issued or returned, to a person other than the registered holder(s). Signatures on such Certificates or instruments of transfer must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares evidenced by the Certificate(s) listed and transmitted hereby, the Certificate(s) must be endorsed or accompanied by appropriate instruments of transfer, in either case signed exactly as the name(s) of the registered holder(s) appear on the Certificate(s). Signatures on such Certificate(s) or instruments of transfer must be guaranteed by an Eligible Institution. 6. TRANSFER TAXES. Except as set forth in this Instruction 6, Purchaser will pay or cause to be paid any transfer taxes with respect to the transfer and sale of Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or (in the circumstances permitted hereby) if Certificates for Shares not tendered or not purchased are to be registered in the name of, any person other than the registered holder(s), or if tendered Certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any transfer taxes (whether imposed on the registered holder(s) or such person) payable on account of the transfer to such person will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Certificate(s) listed in this Letter of Transmittal. 8 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check and/or Certificates for unpurchased Shares are to be issued in the name of a person other than the signer of this Letter of Transmittal or if a check is to be sent and/or such Certificates are to be returned to someone other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. If any tendered Shares are not purchased for any reason and such Shares are delivered by Book-Entry Transfer Facility, such Shares will be credited to an account maintained at the appropriate Book-Entry Transfer Facility. 8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers listed below. Additional copies of this Letter of Transmittal, the Offer to Purchase, the Notice of Guaranteed Delivery and other related materials may be obtained at Purchaser's expense from the Information Agent or from brokers, dealers, commercial banks or trust companies. 9. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by Purchaser, in whole or in part, at any time or from time to time, in Purchaser's sole discretion subject to the conditions described in the Offer to Purchase. 10. BACKUP WITHHOLDING TAX. Each tendering Stockholder is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN") on Substitute Form W-9, which is provided under "Important Tax Information" below, and to certify that the stockholder is not subject to backup withholding. Failure to provide the information on the Substitute Form W-9 may subject the tendering Stockholder to 31% federal income tax backup withholding on the payment of the purchase price for the Shares. The tendering Stockholder should indicate in the box in Part III of the Substitute Form W-9 if the tendering Stockholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the Stockholder has indicated in the box in Part III that a TIN has been applied for and the Depositary is not provided with a TIN by the time of payment, the Depositary will withhold 31% of all payments of the purchase price, if any, made thereafter pursuant to the Offer until a TIN is provided to the Depositary. 11. LOST OR DESTROYED CERTIFICATES. If any Certificate(s) representing Shares has been lost or destroyed, the holders should promptly notify the Company's transfer agent, American Stock Transfer Company. The holders will then be instructed as to the procedure to be followed in order to replace the Certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed Certificates have been followed. Lost or destroyed Certificates must be replaced prior to the Expiration Date to validly tender such Shares pursuant to the Offer. IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE THEREOF (TOGETHER WITH CERTIFICATES OR A BOOK-ENTRY CONFIRMATION FOR SHARES AND ANY OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY, OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, PRIOR TO THE EXPIRATION DATE. IMPORTANT TAX INFORMATION Under federal income tax law, a Stockholder whose tendered Shares are accepted for payment is required to provide the Depositary (as payor) with such Stockholder's correct TIN on Substitute Form W-9 below. If such Stockholder is an individual, the TIN is his or her social security number. If such Stockholder is a resident alien and does not have and is not eligible to get a social security number, the TIN is his or her IRS individual taxpayer identification number ("ITIN"). If the tendering Stockholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, such Stockholder should so indicate on the Substitute Form W- 9. See Instruction 10. If the Depositary is not provided with the correct TIN, the Stockholder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such Stockholders with respect to Shares purchased pursuant to the Offer may be subject to backup federal income tax withholding. 9 Certain Stockholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, such Stockholder must submit a statement, signed under penalties of perjury, attesting to that individual's exempt status. Forms for such statements can be obtained from the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If backup withholding applies, the Depositary is required to withhold 31% of any payments made to the Stockholder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup federal income tax withholding with respect to payment of the purchase price for Shares purchased pursuant to the Offer, a Stockholder must provide the Depositary with his correct TIN by completing the Substitute Form W-9 below, certifying that the TIN provided on Substitute Form W-9 is correct (or that such Stockholder is awaiting a TIN) and that (i) such Stockholder has not been notified by the Internal Revenue Service that he is subject to backup withholding as a result of failure to report all interest or dividends or (ii) the Internal Revenue Service has notified the Stockholder that he is no longer subject to backup withholding. WHAT NUMBER TO GIVE THE DEPOSITARY The Stockholder is required to give the Depositary the social security number or employer identification number of the record holder of the Shares tendered hereby. If the Shares are registered in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. 10 PAYOR'S NAME: CONTINENTAL STOCK TRANSFER & TRUST COMPANY - ------------------------------------------------------------------------------- PART 1--PLEASE PROVIDE YOUR TIN ------------------- SUBSTITUTE IN THE BOX AT RIGHT AND CERTIFY Social Security FORM W-9 BY SIGNING AND DATING BELOW. Number DEPARTMENT OF ------------------- THE TREASURY Employer INTERNAL Identification Number REVENUE SERVICE ---------------------------------------------------------- PART 2--CERTIFICATION--Under penalties of perjury, I certify that: (1) the number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me) and (2) I am not subject to backup withholding because (i) I am exempt from backup withholding, (ii) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (iii) the IRS has notified me that I am no longer subject to backup withholding. PAYER'S REQUEST FORTAXPAYER IDENTIFICATIONNUMBER ("TIN") PART III Certification Instructions--You must cross AwaitingTIN out item (2) in Part 2 above if you have been [_] notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out item (2). ---------------------------------------------------------- Signature: ____________________ Date: _, 1997 Name (Please Print): __________ NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER AND SOLICITATION. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I have not provided a taxpayer identification number, 31% of all reportable payments made to me will be withheld until I provide a number. Signature ________________________________ ___________________, 1997 Date Name (Please Print): _____________________ The Information Agent for the Offer is: GEORGESON & COMPANY INC. -------------- Wall Street Plaza New York, NY 10005 Bankers and Brokers call collect: (212) 440-9800 CALL TOLL FREE: (800) 223-2064 The Dealer Manager for the Offer is: BEAR, STEARNS & CO. INC. 245 Park Avenue New York, NY 10167 CALL TOLL-FREE (888) 466-7234 June 11, 1997 EX-99.(A)(3) 4 NOTICE OF GUARANTEED DELIVERY EXHIBIT 99(A)(3) NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK OF DIGEX, INCORPORATED This Notice of Guaranteed Delivery or one substantially equivalent hereto must be used to accept the Offer (as defined below) if certificates representing the common stock, par value $.01 per share (the "Shares"), of DIGEX, Incorporated, a Delaware corporation, are not immediately available or the procedures for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach Continental Stock Transfer & Trust Company (the "Depositary") prior to the Expiration Date (as defined in the Offer to Purchase). This Notice of Guaranteed Delivery may be delivered by hand or transmitted by facsimile transmission or mail to the Depositary. See Section 3 of the Offer to Purchase. The Depositary for the Offer is: CONTINENTAL STOCK TRANSFER & TRUST COMPANY By Mail: By Facsimile By Hand or Overnight Transmission Courier: 2 Broadway (For Eligible New York, NY 10004 Institutions Only): 2 Broadway New York, NY 10004 Attn: Reorganization Attn: Reorganization (212) 509-5150 Dept. Dept. Confirm Receipt of Notice of Guaranteed Delivery: (212) 509-4000 ext. 535 ---------------- DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal and certificates for Shares to the Depositary within the time period shown herein. Failure to do so could result in a financial loss to such Eligible Institution. THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED LADIES AND GENTLEMEN: The undersigned hereby tenders to Daylight Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Intermedia Communications Inc., upon the terms and subject to the conditions set forth in the Offer to Purchase, dated June 11, 1997 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, together with any supplements or amendments thereto, collectively constitute the "Offer"), receipt of each of which is hereby acknowledged, the number of shares indicated below pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. Number of Shares: __________________ Name(s) of Record Holder(s): ______ Certificate Nos. (if available): ___ ----------------------------------- (PLEASE TYPE OR PRINT) ------------------------------------ Address(es): ______________________ Check box if Shares will be tendered by book-entry transfer: ----------------------------------- (INCLUDE ZIP CODE) [_] The Depository Trust Company Area Code and Tel. No.: ___________ Account Number: ____________________ Signature(s): _____________________ Dated: _____________________________ Dated: ____________________________ GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEES) The undersigned, an Eligible Institution (as such term is defined in Section 3 of the Offer to Purchase), hereby guarantees to deliver to the Depositary the certificates representing the Shares tendered hereby, in proper form for transfer, or a Book-Entry Confirmation (as defined in Section 3 of the Offer to Purchase) with respect to such Shares, in either case together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message (as defined in Section 2 of the Offer to Purchase) and any other documents required by the Letter of Transmittal, all within three trading days (as defined in Section 3 of the Offer to Purchase) after the date hereof. Name of Firm: ______________________ -------------------------------------- (AUTHORIZED SIGNATURE) Address: ___________________________ Name: ________________________________ - ------------------------------------ (PLEASE TYPE OR PRINT) (INCLUDE ZIP CODE) Title: _______________________________ Area Code and Tel. No.: ____________ Dated: _______________________________ NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED DELIVERY. CERTIFICATES FOR SHARES SHOULD BE SENT ONLY TOGETHER WITH OUR LETTER OF TRANSMITTAL. 2 EX-99.(A)(4) 5 BROKER DEALER LETTER EXHIBIT 99(A)(4) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF DIGEX, INCORPORATED BY DAYLIGHT ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF INTERMEDIA COMMUNICATIONS INC. AT $13.00 NET PER SHARE THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, JULY 9, 1997, UNLESS THE OFFER IS EXTENDED. June 11, 1997 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by Daylight Acquisition Corp., a Delaware corporation ("Purchaser") and a wholly owned subsidiary of Intermedia Communications Inc., a Delaware corporation ("Parent"), to act as Dealer Manager in connection with Purchaser's offer to purchase for cash all of the outstanding shares of common stock, $.01 par value per share (the "Shares"), of DIGEX, Incorporated, a Delaware corporation (the "Company"), at $13.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated June 11, 1997 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, together with any supplements or amendments thereto, collectively constitute the "Offer") enclosed herewith. Please furnish copies of the enclosed materials to those of your clients for whom you hold Shares in your name or in the name of your nominee. Enclosed herewith for your information and forwarding to your clients are copies of the following documents: 1. The Offer to Purchase. 2. The Letter of Transmittal to tender Shares for your use and for the information of your clients. Facsimile copies of the Letter of Transmittal may be used to tender Shares. 3. A letter to stockholders of the Company from Christopher R. McCleary, Chairman of the Board, President and Chief Executive Officer of the Company, together with a Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission by the Company and mailed to the stockholders of the Company. 4. The Notice of Guaranteed Delivery for Shares to be used to accept the Offer if neither of the two procedures for tendering Shares set forth in Section 3 of the Offer to Purchase can be completed on a timely basis. 5. A printed form of letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer. 6. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9. 7. A return envelope addressed to Continental Stock Transfer & Trust Company of New York, the Depositary. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, JULY 9, 1997, UNLESS THE OFFER IS EXTENDED. In order to take advantage of the Offer, (i) a Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message (as defined in Section 2 of the Offer to Purchase) and any other required documents should be sent to the Depositary and (ii) certificates representing the tendered Shares or a timely Book-Entry Confirmation should be delivered to the Depositary in accordance with the instructions set forth in the Letter of Transmittal and the Offer to Purchase. In all cases, payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates evidencing such Shares (or a timely Book-Entry Confirmation (as defined in Section 3 of the Offer to Purchase) with respect to such Shares), (ii) the Letter of Transmittal (or a manually signed facsimile thereof) properly completed and duly executed, with all required signature guarantees or an Agent's Message, and (iii) all other documents required by the Letter of Transmittal. If holders of the Shares wish to tender, but it is impracticable for them to forward their certificates or other required documents or complete the procedures for book-entry transfer prior to the Expiration Date, a tender may be effected by following the guaranteed delivery procedures specified in Section 3 of the Offer to Purchase. Purchaser will not pay any fees or commission to any broker, dealer or other person (other than the Dealer Manager, the Depositary and the Information Agent, as described in the Offer to Purchase) for soliciting tenders of Shares pursuant to the Offer. Purchaser upon request, will, however, reimburse you for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. Purchaser will pay or will cause to be paid any transfer taxes payable on the transfer of Shares to it, except as otherwise provided in Instruction 6 of the Letter of Transmittal. Any inquiries you may have with respect to the Offer should be addressed to Georgeson & Company Inc., the Information Agent for the Offer, at Wall Street Plaza, New York, NY 10005, (212) 440-9800, Toll Free (800) 223-2064 or Bear, Stearns & Co. Inc., the Dealer Manager, 245 Park Avenue, New York, NY 10167, (888) 466-7234. Requests for copies of the enclosed materials may be directed to the Information Agent at the above address and telephone number. Very truly yours, Bear, Stearns & Co. Inc. as Dealer Manager 245 Park Avenue New York, New York 10167 Call Toll Free: (888) 466-7234 NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON THE AGENT OF PURCHASER, PARENT, THE COMPANY, THE DEPOSITARY, THE INFORMATION AGENT, THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF THEM OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. 2 EX-99.(A)(5) 6 LETTER TO OUR CLIENTS EXHIBIT 99(A)(5) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF DIGEX, INCORPORATED BY DAYLIGHT ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF INTERMEDIA COMMUNICATIONS INC. AT $13.00 NET PER SHARE THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, JULY 9, 1997, UNLESS THE OFFER IS EXTENDED. June 11, 1997 To Our Clients: Enclosed for your consideration are the Offer to Purchase, dated June 11, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with any supplements or amendments thereto, collectively constitute the "Offer"), relating to the offer by Daylight Acquisition Corp., a Delaware corporation ("Purchaser") and a wholly owned subsidiary of Intermedia Communications Inc., a Delaware corporation ("Parent"), to purchase all the outstanding shares of common stock, $.01 par value per share (the "Shares"), of DIGEX, Incorporated, a Delaware corporation (the "Company"), at a purchase price of $13.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer. Holders of Shares whose certificates for such Shares (the "Certificates") are not immediately available or who cannot deliver their Certificates and all other required documents to the depositary, Continental Stock Transfer & Trust Company (the "Depositary"), or complete the procedures for book-entry transfer prior to the Expiration Date (as defined in the Offer to Purchase), must tender their Shares according to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. WE ARE (OR OUR NOMINEE IS) THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. Accordingly, we request instructions as to whether you wish to have us tender on your behalf any or all Shares held by us for your account pursuant to the terms and conditions set forth in the Offer. Please note the following: 1. The tender price is $13.00 per Share, net to the seller in cash. 2. The Offer is being made for all the outstanding Shares. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of June 4, 1997 (the "Merger Agreement") among Purchaser, Parent and the Company. 3. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn at the expiration of the Offer a majority of the Shares on a fully diluted basis (including, without limitation, all Shares issuable upon the conversion of any convertible securities or upon the exercise of any options, warrants or rights). The Offer is also subject to certain other conditions contained in the Offer to Purchase. See Sections 1 and 14 of the Offer to Purchase. 4. THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. 5. The Offer and withdrawal rights will expire at 12:00 midnight, New York City time, on Wednesday, July 9, 1997, unless the Offer is extended. 6. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes with respect to the transfer and sale of Shares pursuant to the Offer. However, any tendering stockholder or other payee who fails to complete and sign the Substitute Form W-9 that is included in the Letter of Transmittal may be subject to a required backup federal income tax withholding of 31% of the gross proceeds payable to such holder or other payee pursuant to the Offer. See Sections 3 and 5 of the Offer to Purchase. 7. In all cases, payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of (i) Certificates evidencing such Shares (or a timely Book-Entry Confirmation (as defined in Section 3 of the Offer to Purchase) with respect to such Shares), (ii) the Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed with all required signature guarantees or an Agent's Message (as defined in Section 2 of the Offer to Purchase), and (iii) all other documents required by the Letter of Transmittal. If you wish to have us tender any or all of the Shares held by us for your account, please so instruct us by completing, executing, detaching and returning to us the instruction form set forth below. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified below. An envelope to return your instructions to us is enclosed. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER. The Offer is made solely by the Offer to Purchase and the related Letter of Transmittal. Purchaser is not aware of any jurisdiction where the making of the Offer is prohibited by administrative or judicial action or pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good faith effort to comply with any such state statute. If, after such good faith effort, Purchaser cannot comply with any such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser by Bear, Stearns & Co. Inc. or one or more registered brokers or dealers licensed under the laws of such jurisdiction. INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF DIGEX, INCORPORATED The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated June 11, 1997, and the related Letter of Transmittal, in connection with the offer by Daylight Acquisition Corp., a Delaware corporation ("Purchaser") and a wholly owned subsidiary of Intermedia Communications Inc., a Delaware corporation, to purchase all outstanding shares of common stock, par value $.01 per Share (the "Shares"), of DIGEX, Incorporated, a Delaware corporation. This will instruct you to tender to Purchaser the number of Shares indicated below (or if no number is indicated below, all Shares) which are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer to Purchase. Dated: , 1997 NUMBER OF SHARES TO BE TENDERED:* SHARES ------------------------------------- Signature(s) ------------------------------------- ------------------------------------- Print Name(s) ------------------------------------- ------------------------------------- Print Address(es) ------------------------------------- Area Code(s) and Telephone Number(s) ------------------------------------- Taxpayer Identification or Social Security Number(s) - -------- * Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. 2 EX-99.(A)(6) 7 SUMMARY ADVERTISEMENT PUBLISHED JUNE 11, 1997 EXHIBIT 99.(A)(6) This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares. The Offer is being made solely by the Offer to Purchase dated June 11, 1997 and the related Letter of Transmittal and is being made to all holders of Shares. Purchaser is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good faith effort to comply with such statute. If, after such good faith effort, Purchaser cannot comply with such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed made on behalf of Purchaser by Bear, Stearns & Co. Inc. ("Bear Stearns"), the Dealer Manager, or one or more registered brokers or dealers licensed under the laws of such jurisdiction. NOTICE OF OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF DIGEX, INCORPORATED AT $13.00 NET PER SHARE BY DAYLIGHT ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF INTERMEDIA COMMUNICATIONS INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, JULY 9, 1997, UNLESS THE OFFER IS EXTENDED. Daylight Acquisition Corp., a Delaware corporation ("Purchaser") and a wholly owned subsidiary of Intermedia Communications Inc., a Delaware corporation ("Parent"), is offering to purchase all outstanding shares of Common Stock, par value $.01 per share (the "Shares"), of DIGEX, Incorporated, a Delaware corporation (the "Company"), at a price of $13.00 per Share net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated June 11, 1997 (the "Offer to Purchase") and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). Following the Offer, Purchaser intends to effect the Merger (as defined below). The Board of Directors of the Company unanimously has determined that the Offer and the Merger are fair to, and in the best interests of, the Company and its stockholders, has approved and adopted the Merger Agreement (as defined below) and the transactions contemplated thereby, and recommends that the Company's stockholders accept the Offer and tender their Shares pursuant to the Offer. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN AT THE EXPIRATION OF THE OFFER A MAJORITY OF THE THEN OUTSTANDING SHARES ON A FULLY DILUTED BASIS (INCLUDING, WITHOUT LIMITATION, ALL SHARES ISSUABLE UPON THE CONVERSION OF ANY CONVERTIBLE SECURITIES OR UPON THE EXERCISE OF ANY OPTIONS, WARRANTS OR RIGHTS). SEE SECTION 14 OF THE OFFER TO PURCHASE FOR THE OTHER CONDITIONS OF THE OFFER. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of June 4, 1997 (the "Merger Agreement"), among Parent, Purchaser and the Company. The Merger Agreement provides that as soon as practicable after the purchase of Shares pursuant to the Offer and the satisfaction or waiver of certain conditions contained in the Merger Agreement, and in accordance with the relevant provisions of the General Corporation Law of the State of Delaware (the "DGCL"), Purchaser will be merged with and into the Company (the "Merger"). The Company will continue as the surviving corporation (the "Surviving Corporation") and as a wholly owned subsidiary of Parent following consummation of the Merger. At the effective time of the Merger, each outstanding Share (other than Shares owned by Parent or Purchaser or any of their subsidiaries or held in the treasury of the Company or by stockholders, if any, who are entitled to and who properly exercise appraisal rights under Delaware law) will be converted into, exchanged for and represent the right to receive $13.00 in cash or any greater amount per Share paid pursuant to the Offer, without interest. Concurrently with the execution of the Merger Agreement, and as a condition to Parent and Purchaser entering into the Merger Agreement, Parent entered into a Stock Purchase Agreement, dated as of June 4, 1997 (the "Stock Purchase Agreement"), with certain stockholders who own an aggregate of approximately 50.3% of the outstanding Shares (approximately 38.3% of the Shares on a fully diluted basis). Under the Stock Purchase Agreement, such stockholders have agreed to validly tender (and not withdraw) all of their Shares pursuant to the Offer and have granted Parent an option to purchase all of their Shares at a price of $13.00 per Share. For purposes of the Offer, Purchaser shall be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not withdrawn as, if and when Purchaser gives oral or written notice to Continental Stock Transfer & Trust Company (the "Depositary") of Purchaser's acceptance of such Shares for payment. In all cases, payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from Purchaser and transmitting payment to tendering stockholders whose Shares have theretofore been accepted for payment. Payment for Shares accepted for payment pursuant to the Offer in all cases will be made only after timely receipt by the Depositary of (i) certificates for (or a book-entry transfer with respect to) such Shares, (ii) a Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase), and (iii) all other documents required by the Letter of Transmittal. Under no circumstances will interest be paid by Purchaser on the purchase price of the Shares, regardless of any extension of the Offer or any delay in making such payment. The term "Expiration Date" means 12:00 Midnight, New York City time, on Wednesday, July 9, 1997, unless and until Purchaser shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall extended by Purchaser, shall expire. Subject to the limitations set forth in the Merger Agreement, Purchaser reserves the right (but will not be obligated), at any time or from time to time in its sole discretion, to extend the period of time during which the Offer is open by giving oral or written notice of such extension to the Depositary and by making a public announcement of such extension. There can be no assurance that Purchaser will exercise its right to extend the Offer. Any such extension will be followed by a public announcement thereof no later than 9:00 A.M., New York City time, on the next business day after the previously scheduled Expiration Date. If Purchaser extends the Offer, then without prejudice to the rights of Purchaser, tendered Shares may be retained by the Depositary on behalf of Purchaser and may not be withdrawn except to the extent that tendering stockholders are entitled to withdrawal rights, as set forth below. Except as otherwise provided below, tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by Purchaser pursuant to the Offer, may also be withdrawn at any time after August 9, 1997. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at its address as set forth on the back cover of the Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder, if different from the name of the person who tendered such Shares. If certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then prior to the physical release of such certificates, the tendering stockholder must also submit the serial numbers shown on such certificates, and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution (as defined in the Offer to Purchase), except in the case of Shares tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in Section 3 of the Offer to Purchase, any notice of withdrawal with respect to such Shares must specify the name and number of the account at the applicable Book-Entry Transfer Facility (as defined in the Offer to Purchase) to be credited with the withdrawn Shares. Any Shares properly withdrawn will be deemed not to have been validly tendered for purposes of the Offer, but may be retendered at any subsequent time prior to the Expiration Date by following any of the procedures described in Section 3 of the Offer to Purchase. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by Purchaser, in its sole discretion, whose determination shall be final and binding on all parties. The Offer to Purchase and the relevant materials will be mailed to record holders of Shares and furnished to brokers, dealers, banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholders lists or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. The information required to be disclosed by Rule 14d-6(e)(1)(vii) under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. THE OFFER TO PURCHASE AND LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. Questions and requests for assistance may be directed to the Information Agent and the Dealer Manager at the telephone numbers and locations listed below. Copies of the Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other tender offer documents may be obtained at Purchaser's expense from the Information Agent or from your broker, dealer, commercial bank or trust company or other nominee. No fees or commissions will be payable by Parent or Purchaser to brokers, dealers or other persons other than the Information Agent and the Dealer Manager for soliciting tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: [LOGO OF GEORGESON & COMPANY INC. APPEARS HERE] Wall Street Plaza New York, New York 10005 Banks and Brokers call collect (212) 440-9800 CALL TOLL FREE: (800) 223-2064 The Dealer Manager for the Offer is: BEAR, STEARNS & CO. INC. 245 Park Avenue New York, New York 10167 CALL TOLL FREE: (888) 466-7234 June 11, 1997 EX-99.(A)(7) 8 FORM W-9 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER. -- Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer. - -------------------------------------------------------------------------------
GIVE THE FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY NUMBER OF -- - -------------------------------------------------------------------------------- 1. An individual's account The individual 2. Two or more individuals (joint account) The actual owner of the account or, if combined funds, any one of the individuals(1) 3. Husband and wife (joint account) The actual owner of the account or, if joint funds, either person(1) 4. Custodian account of a minor (Uniform Gift to Minors Act) The minor(2) 5. Adult and minor (joint account) The adult or, if the minor is the only contributor, the minor(1) The ward, minor, 6. Account in the name of guardian or committee for a or incompetent designated ward, minor, or incompetent person person(3) 7. a The usual revocable savings trust account (grantor is The grantor- also trustee) trustee(1) b So-called trust account that is not a legal or valid The actual trust under State law owner(1) 8. Sole proprietorship account The owner(4)
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GIVE THE EMPLOYER FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF -- - ------------------------------------------------------------------------------ 9. A valid trust, estate, or pension trust The legal entity (Do not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(5) 10. Corporate account The corporation 11. Religious, charitable, or educational organization The organization account 12. Partnership account held in the name of the business The partnership 13. Association, club, or other tax-exempt organization The organization 14. A broker or registered nominee The broker or nominee 15. Account with the Department of Agriculture in the name The public of a public entity (such as a State or local government, entity school district, or prison) that receives agricultural program payments
- ------------------------------------------------------------------------------- (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your num- ber, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: . A corporation. . A financial institution. . An organization exempt from tax under section 501(a), or an individual retirement plan. . The United States or any agency or instrumentality thereof. . A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. . A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. . An international organization or any agency, or instrumentality thereof. . A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. . A real estate investment trust. . A common trust fund operated by a bank under section 584(a) . An exempt charitable remainder trust, or a non-exempt trust described in section 4947(a)(1). . An entity registered at all times under the Investment Company Act of 1940. . A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: . Payments to nonresident aliens subject to withholding under section 1441. . Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. . Payments of patronage dividends where the amount received is not paid in money. . Payments made by certain foreign organizations. . Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: . Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. . Payments of tax-exempt interest (including exempt-interest dividends under section 852). . Payments described in section 6049(b)(5) to non-resident aliens. . Payments on tax-free covenant bonds under section 1451. . Payments made by certain foreign organizations. . Payments made to a nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A. PRIVACY ACT NOTICE.-- Section 6109 requires most recipients of dividend, in- terest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are re- quired to file tax returns. Beginning January 1, 1993, payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Cer- tain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to a payer, you are sub- ject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to include any portion of an includible payment for interest, dividends, or pat- ronage dividends in gross income, such failure will be treated as being due to negligence and will be subject to a penalty of 5% on any portion of an under- payment attributable to that failure unless there is clear and convincing evi- dence to the contrary. (3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or im- prisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE EX-99.(A)(8) 9 PRESS RELEASE EXHIBIT 99.(a)8 [LETTERHEAD OF INTERMEDIA COMMUNICATIONS] NEWS RELEASE CONTACT: Robert M. Manning Chief Financial Officer (813) 829-2403 or Chris Brown Sr. Vice President, Investor Relations (813) 829-2408 INTERMEDIA COMMUNICATIONS TO ACQUIRE DIGEX INCORPORATED ---------------------------------------- COMBINATION EXTENDS INTERMEDIA'S LEADERSHIP POSITION IN FAST-GROWING BUSINESS DATA COMMUNICATIONS MARKET TAMPA, FLORIDA (June 5, 1997) -- Intermedia Communications (ICIX: Nasdaq/NM) and DIGEX Incorporated (DIGEX) (DIGX: Nasdaq/NM) today announced that they have executed a definitive agreement for the acquisition of DIGEX by Intermedia for $13 per share or approximately $150 million. The acquisition will be consummated through a tender offer for all outstanding DIGEX shares, which will begin next week and will be followed by a cash merger. Management and other DIGEX option holders will receive Intermedia stock options for their DIGEX stock options, in lieu of receiving cash. The acquisition was unanimously approved by the Board of Directors of both companies, and shareholders owning a majority of the outstanding shares of DIGEX have agreed to sell their shares to Intermedia for $13 per share. Intermedia will hold a conference call at 9:00 AM EDT to discuss this transaction. To participate in this conference, call (800) 236-9153. A 24-hour replay will be available by calling (800) 633-8284, ID 2832850. DIGEX is among the limited number of national First Tier Internet service providers which positions the company to be a strong participant in the fastest growing sector of the Internet market--business connectivity. It is also a market leader in Web hosting and management and operates the world's largest Microsoft NT Web site management facility. DIGEX has over 2,000 customers and a staff of 450 people, including approximately 150 in sales and marketing. Monthly annualized revenue was approximately $40 million for March 1997. The combined company would have had annualized monthly revenue of $241 million for the same month, with 37% of that total from enhanced data services. The combined company will have over 18,000 business and government customers, and over 1,500 employees. EXCELLENT STRATEGIC FIT "A fundamental element of Intermedia's mission and a key to its success in acquiring business telecom market share is the continued expansion of our strong leadership position in enhanced data -MORE- ICIX Announces Definitive Agreement To Acquire DIGEX Incorporated Page 2 June 5, 1997 services," commented David C. Ruberg, Intermedia's Chairman, President, and Chief Executive Officer. "This acquisition meets all of our criteria for strategic acquisitions. Intermedia is acquiring an established quality customer base, accelerating its time to market with new services, expanding and increasing network density, and adding high quality employees. With this acquisition, Intermedia becomes a provider with one of the broadest portfolios of high value-added data services integrated with traditional local and long distance voice services. The combined company will have a strong base of Internet connectivity services. These will enable Intermedia to expand delivery of a wide range of hosted business applications including multimedia applications, supporting the needs of electronics commerce." SIGNIFICANT FINANCIAL SYNERGIES "Significant financial and operational synergies will be realized upon integrating the two companies," added Robert M. Manning, Intermedia's Chief Financial Officer. "We expect to realize minimum cost savings of approximately $4 million in the second half of 1997, $12 million in 1998, $14 million 1999, and increasing savings in subsequent years." Approximately 75% of DIGEX's backbone network overlaps existing or planned Intermedia network routes. Additional savings should result from substantially greater purchasing power for leased backbone circuits, from CLEC interconnection agreements, and from Intermedia's owned local network facilities. Lastly, the most significant benefit should come from combining the sales efforts and cross- selling services to the 18,000 business customers of the combined company. These opportunities were not included in Intermedia's estimate of synergies. Manning reported that Intermedia expects the transaction to close in the third quarter of 1997. The resulting third quarter EBITDA for the combined company is expected to be within the current range of analysts' expectations for Intermedia. "With the synergies we expect, and the continued rapid growth in DIGEX's business, this acquisition should accelerate our progression toward positive free cash flow and adds meaningfully to EBITDA beginning in 1998," he added. "After elimination of the duplicate network facility costs, Intermedia will have acquired a rapidly growing revenue stream with attractive margins that provide significant incremental return on its already invested capital infrastructure," Manning concluded. DIGEX's current network deployment and customer base are concentrated in the large city markets in the eastern U.S., with service also provided in major west coast markets. Over 80% of the cities served are covered today by both Intermedia and DIGEX, increasing the density of Intermedia's already robust network in the eastern U.S. MCCLEARY TO CONTINUE LEADING THE DIGEX ORGANIZATION Chris McCleary, DIGEX's current Chairman, President, and Chief Executive Officer, and his management team will continue to manage the DIGEX operation. "Chris has done an excellent job -MORE- ICIX Announces Definitive Agreement To Acquire DIGEX Incorporated Page 3 June 5, 1997 of building a team and a business," commented Ruberg. "We will maintain the focus he has developed by supporting all of his team's efforts with Intermedia's resources throughout our service territory. "DIGEX's consultative selling approach matches Intermedia's; and the DIGEX customer base and target markets reinforce Intermedia's, allowing us access to more cross-selling opportunities in these markets," added Ruberg. "The skills needed to effectively sell DIGEX's current services provide an excellent foundation for the DIGEX staff to sell Intermedia's full suite of integrated voice and data telecom services." Headquartered in suburban Washington, DC, DIGEX is a leading independent national Internet carrier focusing exclusively on business customers. DIGEX offers a comprehensive range of Internet solutions, including high-speed dedicated business Internet connectivity, corporate Web site management services and private network capacity. The DIGEX Gold Ring/SM/ national fault-tolerant fiber optic Internet network, engineered utilizing Cisco Systems (NASDAQ: CSCO) Internet Operating System technology, provides highly reliable service for mission-critical Internet applications. Company news, product, and service information are available at www.digex.net. Intermedia Communications is one of the nation's fastest growing telecommunications companies. Intermedia provides integrated telecommunications solutions to business and government customers. These solutions include voice, data, and video; local and long distance services; and advanced access services in cities throughout the eastern U.S. Its enhanced data offerings, including frame relay, ATM, and Internet services offers seamless end-to-end service virtually anywhere in the world. Intermedia is headquartered in Tampa, Florida, and is traded on the Nasdaq National Market under the symbol ICIX. Intermedia can be found on the World Wide Web at http://www.icix.net. Bear, Stearns & Co., Inc. acted as exclusive financial advisor to Intermedia Communications for this transaction. Friedman, Billings, Ramsey & Co., Inc. was the financial advisor for DIGEX Incorporated. Statements contained in this news release regarding expected revenues and other planned events are forward-looking statements, subject to uncertainties and risks, including, but not limited to, the demand for Intermedia's products and services, and the ability of the Company to successfully implement its expanded and accelerated capital deployment plan, each of which may be impacted, among other things, by economic, competitive or regulatory conditions. These and other applicable risks are summarized under the caption "Risk Factors" in the Company's Form 10-K Annual Report for its fiscal year ended December 31, 1996. ### EX-99.(A)(9) 10 PRESS RELEASE DATED 06/11/97 [LETTERHEAD OF GEORGESON & COMPANY INC.] NEWS RELEASE Wall Street Plaza New York, NY 10005 212-440-9800 FAX 212-440-9009 ________________________________________________________________________________ From: INTERMEDIA COMMUNICATIONS INC. For Release: IMMEDIATELY 3625 QUEEN PALM DRIVE TAMPA, FLORIDA 33619 Contact: Chris Brown Sr. Vice President Investor Relations (813) 829-2408 Tampa, Florida (June 11, 1997) -- Intermedia Communications Inc. ("Intermedia") announced that Daylight Acquisition Corp. (the "Purchaser"), a wholly-owned subsidiary of Intermedia, today commenced its cash tender offer for all the outstanding shares of common stock of DIGEX Incorporated, pursuant to the previously announced merger agreement with DIGEX. Under the tender offer, stockholders who tender their shares will be entitled to receive $13 in cash per share. The offer and withdrawal rights will expire at 12:00 midnight, New York City Time, on Wednesday, July 9, 1997, unless extended. Following completion of the tender offer, the Purchaser will be merged into DIGEX and any remaining stockholders will receive $13 per share in cash. The offer is conditioned upon, among other things, there being validly tendered and not withdrawn at the expiration of the offer a majority of the then outstanding shares of DIGEX common stock on a fully diluted basis. Bear, Stearns & Co. Inc. is the Dealer-Manager for the Offer. Georgeson & Company Inc. is the Information Agent for the Offer. Headquartered in suburban Washington, D.C., DIGEX is a leading independent national Internet carrier focusing exclusively on business customers. DIGEX offers a comprehensive range of Internet solutions, including high-speed dedicated business Internet connectivity, corporate Web site management services and private network capacity. The DIGEX Gold Ring(SM) national fault-tolerant fiber optic Internet network, engineered utilizing Cisco Systems (NASDAQ: CSCO) Internet Operating System technology, provides highly reliable service for mission-critical Internet applications. Company news, product, and service information are available at www.digex.net. Intermedia Communications is one of the nations fastest growing telecommunications companies. Intermedia provides integrated telecommunications solutions to business and government customers. These solutions include voice, data, and video; local and long distance services; and advanced access services in cities throughout the eastern U.S. Its enhanced data offerings, including frame relay, ATM, and Internet services offer seamless end-to-end service virtually anywhere in the world. Intermedia Communications is headquartered in Tampa, Florida and is traded on the NASDAQ Market under the symbol ICIX. Intermedia Communications can be found on the worldwide web at http://www.icix.net. 2 EX-99.(C)(1) 11 AGREEMENT AND PLAN OF MERGER EXHIBIT 99.(c)1 EXECUTION COPY ================================================================================ AGREEMENT AND PLAN OF MERGER ---------------------------- Among INTERMEDIA COMMUNICATIONS INC., DAYLIGHT ACQUISITION CORP. and DIGEX, INCORPORATED Dated June 4, 1997 ================================================================================ TABLE OF CONTENTS -----------------
Page ---- I. THE OFFER 1.1. The Offer.................................................... 2 1.2. Company Action............................................... 3 II. THE MERGER 2.1. Merger; Surviving Corporation................................ 4 2.2. Certificate of Incorporation................................. 5 2.3. By-Laws...................................................... 5 2.4. Directors and Officers....................................... 5 2.5. Effective Time............................................... 5 2.6. Conversion of Shares......................................... 6 2.7. Purchaser Common Stock....................................... 7 2.8. Surrender of Shares.......................................... 7 2.9. Company Stock Options and Warrants........................... 9 III. REPRESENTATIONS AND WARRANTIES OF COMPANY 3.1. Organization and Authorization, etc.......................... 9 3.2. Subsidiaries................................................. 10 3.3. Non-Contravention............................................ 10 3.4. Approvals.................................................... 10 3.5. Capital Stock................................................ 11 3.6. Financial Statements......................................... 11 3.7. Periodic SEC Filings......................................... 12 3.8. Changes...................................................... 12 3.9. Taxes........................................................ 14 3.10. Material Contracts........................................... 15 3.11. Properties................................................... 15 3.12. Litigation................................................... 16 3.13. Permits...................................................... 16 3.14. Employee Plans............................................... 16 3.15. Patents, Trademarks, etc..................................... 18 3.16. Insurance.................................................... 18 3.17. No Brokers................................................... 19 3.18. Disclosure................................................... 19 3.19. Offer Documents; Schedule 14D-9; Proxy Statement; Other Information............................................ 19 IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER 4.1. Organization and Authorization, etc.......................... 20 4.2. Non-Contravention............................................ 20 4.3. Approvals.................................................... 21 4.4. No Brokers................................................... 21 4.5. Offer Documents; Proxy Statement; Other Information.......... 21 4.6. Solvency..................................................... 22
Page ---- V. COVENANTS OF COMPANY 5.1. Conduct of Business.......................................... 22 5.2. Access and Information....................................... 24 5.3. No Solicitation.............................................. 24 VI. ADDITIONAL AGREEMENTS 6.1. Stockholders' Meeting........................................ 25 6.2. Proxy Statement.............................................. 26 6.3. Compliance with Conditions Precedent, etc.................... 26 6.4. Certain Notifications........................................ 26 6.5. Adoption by Purchaser........................................ 26 6.6. Expenses..................................................... 27 6.7. Public Announcements......................................... 27 6.8. Company Board Representation; Section 14(f).................. 27 6.9. .......................................................... 28 VII. CONDITIONS 7.1. Conditions to the Merger..................................... 28 VIII. TERMINATION, AMENDMENT AND WAIVER 8.1. Termination.................................................. 29 8.2. Effect of Termination........................................ 31 8.3. Termination Payment.......................................... 31 8.4. Amendment.................................................... 32 8.5. Waiver....................................................... 32 IX. GENERAL PROVISIONS 9.1. Definitions.................................................. 32 9.2. Non-Survival of Representations, Warranties and Agreements................................................... 35 9.3. Notices...................................................... 35 9.4. Severability................................................. 36 9.5. Miscellaneous................................................ 36
AGREEMENT AND PLAN OF MERGER ---------------------------- AGREEMENT AND PLAN OF MERGER (the "Agreement") being made and entered --------- into as of this 4th day of June, 1997 by and among INTERMEDIA COMMUNICATIONS INC., a Delaware corporation ("Parent"), DAYLIGHT ACQUISITION CORP., a Delaware ------ corporation which is wholly owned by Parent ("Purchaser"), and DIGEX, --------- INCORPORATED, a Delaware corporation ("Company"). ------- WHEREAS, the Boards of Directors of Parent, Purchaser and Company have each determined that it is in the best interests of their respective stockholders for Parent to acquire Company upon the terms and subject to the conditions set forth herein; and WHEREAS, in furtherance of such acquisition, it is proposed that Purchaser shall make a cash tender offer (the "Offer") to acquire all the issued ----- and outstanding shares of Common Stock, par value $.01 per share, of Company ("Company Common Stock") (shares of Company Common Stock being hereinafter - ---------------------- collectively referred to as "Shares") for $13.00 per Share (such amount being ------ hereinafter referred to as the "Per Share Amount") net to the seller in cash, ---------------- upon the terms and subject to the conditions of this Agreement and the Offer; and WHEREAS, the Board of Directors of Company (the "Board") has ----- unanimously approved the making of the Offer and resolved and agreed to recommend that holders of Shares tender their Shares pursuant to the Offer; and WHEREAS, also in furtherance of such acquisition, the Boards of Directors of Parent, Purchaser and Company have each approved the merger (the "Merger") of Purchaser with and into Company in accordance with the General - ------- Corporation Law of the State of Delaware ("the GCL") following the consummation --- of the Offer and upon the terms and subject to the conditions set forth herein; and WHEREAS, as a condition to the willingness of Parent and Purchaser to consummate this Agreement, the holders of 5,877,582 Shares have entered into a Stock Purchase Agreement, dated as of the date hereof (the "Stock Purchase -------------- Agreement"), pursuant to which (i) such holders have granted an option to Parent - --------- to purchase all of the Shares held by such holders at $13.00 per Share and (ii) each of such holders has agreed to tender all of its Shares pursuant to the Offer, all upon the terms and subject to the conditions set forth in the Stock Purchase Agreement; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I. THE OFFER --------- SECTION 1.1. The Offer. (a) Provided that this Agreement shall --------- not have been terminated in accordance with Section 8.1 and none of the events set forth in Annex A hereto shall have occurred or be existing, Purchaser shall commence the Offer as promptly as reasonably practicable after the date hereof, but in no event later than five business days after the initial public announcement of Purchaser's intention to commence the Offer. The Offer shall, unless extended as provided below, expire 20 business days after the commencement of the Offer. The obligation of Purchaser to accept for payment and pay for Shares tendered pursuant to the Offer shall be subject to the condition (the "Minimum Condition") that at least a majority of the then ----------------- outstanding Shares on a fully diluted basis (including, without limitation, all Shares issuable upon the conversion of any convertible securities or upon the exercise of any options, warrants or rights) shall have been validly tendered and not withdrawn prior to the expiration of the Offer and also shall be subject to the satisfaction of the other conditions set forth in Annex A hereto. Purchaser expressly reserves the right to waive any such condition, to increase the price per Share payable in the Offer, and to make any other changes in the terms and conditions of the Offer; provided, however, that, without the consent -------- ------- of Company, no change may be made which decreases the price per Share payable in the Offer, which reduces the maximum number of Shares to be purchased in the Offer or which imposes conditions to the Offer in addition to those set forth in Annex A hereto or modifies such conditions, or which changes the form of consideration payable in the Offer. The Per Share Amount shall, subject to applicable withholding of taxes, be net to the seller in cash, upon the terms and subject to the conditions of the Offer. Subject to the terms and conditions of the Offer (including, without limitation, the Minimum Condition), Purchaser shall pay, as promptly as practicable after expiration of the Offer, for all Shares validly tendered and not withdrawn. The Offer may not be extended for more than 20 days beyond its original scheduled expiration date unless any of the conditions to the Offer shall not have been satisfied; provided, however, in -------- ------- the event Purchaser desires to extend the Offer beyond July 31, 1997, in the event the proposed length of the extension is, in the aggregate, more than three days Company shall have the right to consent to such longer extension. Parent agrees to cause Purchaser to, and Purchaser agrees to use its reasonable best efforts to, consummate the Offer as soon as legally permissible, subject to its right to extend for 20 additional days as provided above. 2 (b) As soon as reasonably practicable on the date of commencement of the Offer, Purchaser shall file with the Securities and Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 (together with all amendments --- and supplements thereto, the "Schedule 14D-1") with respect to the Offer. The -------------- Schedule 14D-1 shall contain or shall incorporate by reference an offer to purchase (the "Offer to Purchase") and forms of the related letter of ----------------- transmittal and any related summary advertisement (the Schedule 14D-1, the Offer to Purchase and such other documents, together with all supplements and amendments thereto, being referred to herein collectively as the "Offer ----- Documents"). Company and its counsel shall be given an opportunity to review - --------- the Offer Documents prior to their filing with the SEC. Parent, Purchaser and Company agree to correct promptly any information provided by any of them for use in the Offer Documents which shall have become false or misleading, and Parent and Purchaser further agree to take all steps necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC and the other Offer Documents as so corrected to be disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. SECTION 1.2. Company Action. (a) Company hereby approves of and -------------- consents to the Offer and represents that (i) the Board, at a meeting duly called and held on June 4, 1997, has unanimously (A) determined that this Agreement and the transactions contemplated hereby, including each of the Offer and the Merger, are fair to and in the best interests of the holders of Shares, (B) approved and adopted this Agreement and the transactions contemplated hereby and (C) recommended that the stockholders of Company accept the Offer and approve and adopt this Agreement and the transactions contemplated hereby, and (ii) Friedman, Billings, Ramsey & Co. Inc. has delivered to the Board its opinion that the consideration to be received by the holders of Shares pursuant to each of the Offer and the Merger is fair to the holders of Shares from a financial point of view, subject to the assumptions and qualifications contained in such opinion, and which shall be confirmed promptly in writing. Company hereby consents to the inclusion in the Offer Documents of the recommendation of the Board described in the immediately preceding sentence. Assuming that neither Parent nor Purchaser are Interested Stockholders (as such term is defined in Section 203 of the GCL) immediately prior to the Board taking the action described in this Section 1.2, the approval set forth in clause (a)(i) shall, among other things, satisfy the restrictions on business combinations contained in Section 203 of the GCL with respect to the transactions contemplated hereby. Company has been advised by each of its directors and executive officers that they intend either to tender all Shares beneficially owned by them to Purchaser pursuant to the Offer or to vote such Shares in 3 favor of the approval and adoption by the stockholders of Company of this Agreement and the transactions contemplated hereby. (b) As soon as reasonably practicable on or after the date of commencement of the Offer, Company shall file with the SEC a Solicitation/ Recommendation Statement on Schedule 14D-9 (together with all amendments and supplements thereto, the "Schedule 14D-9") containing the recommendation of the -------------- Board described in Section 1.2(a) and shall disseminate the Schedule 14D-9 to the extent required by Rule 14d-9 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any other applicable federal ------------ securities laws. Company, Parent and Purchaser agree to correct promptly any information provided by any of them for use in the Schedule 14D-9 which shall have become false or misleading, and Company further agrees to take all steps reasonably necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. (c) Company shall promptly furnish Purchaser with mailing labels containing the names and addresses of all record holders of Shares and with security position listings of Shares held in stock depositories, each as of a recent date, together with all other available listings and computer files containing names, addresses and security position listings of record holders and beneficial owners of Shares. Company shall furnish Purchaser with such additional information, including, without limitation, updated listings and computer files of stockholders, mailing labels and security position listings, and such other assistance as Parent, Purchaser or their agents may reasonably request. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer or the Merger, Parent and Purchaser shall hold in confidence the information contained in such labels, listings and files, shall use such information only in connection with the Offer and the Merger, and, if this Agreement shall be terminated in accordance with Section 8.1, shall deliver to Company all copies of such information then in their or their agents' possession. II. THE MERGER ---------- 2.1. Merger; Surviving Corporation. In accordance with the ----------------------------- provisions of this Agreement and the GCL, at the Effective Time (as such term and other capitalized terms used herein without definition are defined in Section 9.1), Purchaser shall be merged with and into Company, and Company shall be the surviving corporation (hereinafter sometimes called the "Surviving --------- Corporation") and shall continue its corporate - ----------- 4 existence under the laws of the State of Delaware. At the Effective Time the separate corporate existence of Purchaser shall cease. All properties, franchises and rights belonging to Company and Purchaser, by virtue of the Merger and without further act or deed, shall be deemed to be vested in the Surviving Corporation, which shall thenceforth be responsible for all the liabilities and obligations of each of Purchaser and Company. 2.2. Certificate of Incorporation. At the Effective Time, the ---------------------------- Certificate of Incorporation of Company shall be the Certificate of Incorporation of the Surviving Corporation; provided, however, that, at the -------- ------- Effective Time, the Certificate of Incorporation of the Surviving Corporation shall be amended in its entirety so that it will read as Purchaser's Certificate of Incorporation, except that the name of the Surviving Corporation shall be "DIGEX, INCORPORATED". As so amended, the Certificate of Incorporation of Company as in effect immediately prior to the Effective Time shall thereafter continue in full force and effect as the Certificate of Incorporation of the Surviving Corporation until further altered or amended as provided therein or by law. 2.3. By-Laws. The By-Laws of Purchaser in effect immediately prior ------- to the Effective Time shall be the By-Laws of the Surviving Corporation until altered, amended or repealed as provided therein and in the Certificate of Incorporation of the Surviving Corporation. 2.4. Directors and Officers. The Directors of Purchaser prior to the ---------------------- Effective Time shall be the directors of the Surviving Corporation. The officers of Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation. Each of such directors and officers shall hold office in accordance with the Certificate of Incorporation and By- Laws of the Surviving Corporation. 2.5. Effective Time. The Merger shall become effective at the time -------------- of filing of a certificate of merger with the Secretary of State of the State of Delaware in accordance with the provisions of Sections 251 or 253, as the case may be, of the GCL (the "Certificate of Merger"), or at a later time specified --------------------- as the effective time in the Certificate of Merger, which Certificate of Merger shall be so filed as soon as practicable after the meeting of stockholders contemplated in Section 6.1 and the satisfaction or, if permissible, waiver of the conditions set forth in Article VII. The date and time when the Merger shall become effective are referred to herein as the "Effective Time." Prior to -------------- such filing, a closing shall be held at the offices of Kronish, Lieb, Weiner & Hellman LLP, 1114 Avenue of the Americas, New York, New York 10036, or such other place as shall be agreed to by the parties, for the purpose of 5 confirming the satisfaction or waiver, as the case may be, of the conditions set forth in Article VII. 2.6. Conversion of Shares. (a) Each Share issued and outstanding -------------------- immediately prior to the Effective Time (other than shares of Company Common Stock to be cancelled as set forth in Section 2.6(b) and 2.6(c)) shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into, exchanged for and represent the right to receive an amount equal to the Per Share Amount in cash (the "Merger Consideration"), payable, -------------------- without interest, to the holder of such Share, upon surrender, in the manner described below, of the certificate that formerly evidenced such Share. (b) Each Share issued and outstanding immediately prior to the Effective Time which is then owned beneficially or of record by Parent or any Subsidiary of Parent shall, by virtue of the Merger and without any action on the part of the holder thereof, be cancelled and retired and cease to exist, without any conversion thereof. (c) Each Share held in Company's treasury immediately prior to the Effective Time shall, by virtue of the Merger, be cancelled and retired and cease to exist, without any conversion thereof. (d) Notwithstanding anything in this Section 2.6 to the contrary, shares of Company Common Stock which are issued and outstanding immediately prior to the Effective Time and which are held by stockholders of Company who have not voted such shares in favor of the Merger and who shall have properly exercised their rights of appraisal for such shares in the manner provided by the GCL (the "Dissenting Shares") shall not be converted into or be exchangeable ----------------- for the right to receive the Merger Consideration, unless and until such holder shall have failed to perfect or shall have effectively withdrawn or lost his right to appraisal and payment, as the case may be. If such holder shall have so failed to perfect or shall have effectively withdrawn or lost such right, his shares shall thereupon be deemed to have been converted into and to have become exchangeable for, at the Effective Time, the right to receive the Merger Consideration, without any interest thereon. Company shall give Parent prompt notice of any Dissenting Shares (and shall also give Parent prompt notice of any withdrawals of such demands for appraisal rights) and Parent shall have the right to direct all negotiations and proceedings with respect to any such demands. Neither Company nor the Surviving Corporation shall, except with the prior written consent of Parent, voluntarily make any payment with respect to, or settle or offer to settle, any such demand for appraisal rights. Stockholders of Company who shall have perfected their right of appraisal and not withdrawn or otherwise 6 lost such right of appraisal, shall be entitled to receive payment of the appraised value of the shares of Company Common Stock held by them in accordance with the provisions of Section 262 of the GCL. 2.7. Purchaser Common Stock. Each share of common stock of Purchaser ---------------------- issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of Purchaser or the holder thereof, be converted into and become one fully paid and nonassessable share of common stock of the Surviving Corporation. From and after the Effective Time, each outstanding certificate theretofore representing shares of Purchaser common stock shall be deemed for all purposes to evidence ownership of and to represent the number of shares of Surviving Corporation common stock into which such shares of Purchaser common stock shall have been converted. Promptly after the Effective Time, the Surviving Corporation shall issue to Parent a stock certificate or certificates representing 100 shares of Surviving Corporation common stock in exchange for the certificate or certificates that formerly represented shares of Purchaser common stock, which shall be surrendered by Parent and cancelled. 2.8. Surrender of Shares. (a) Prior to the Effective Time, Parent ------------------- shall make available, by transferring to the Exchange Agent for the benefit of the stockholders of Company, such amount of cash as shall be payable in exchange for outstanding Shares pursuant to Section 2.6 hereof. Such funds shall be invested by the Exchange Agent as directed by the Surviving Corporation, provided that such investments shall be in obligations of or guaranteed by the - -------- United States of America or of any agency thereof and backed by the full faith and credit of the United States of America, or in deposit accounts, certificates of deposit or banker's acceptances of, repurchase or reverse repurchase agreements with, or Eurodollar time deposits purchased from, commercial banks with capital, surplus and undivided profits aggregating in excess of $50 million (based on the most recent financial statements of such bank which are then publicly available at the SEC or otherwise). (b) As soon as practicable after the Effective Time, the Exchange Agent shall mail to each holder of record (other than to holders of Company Common Stock to be cancelled as set forth in Section 2.6(b) or 2.6(c) or Dissenting Shares) of a certificate or certificates that immediately prior to the Effective Time represented outstanding shares of Company Common Stock (the "Certificates") (i) a form letter of transmittal (which shall be in customary - ------------- - form and shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the 7 Exchange Agent) and (ii) instructions for effecting the surrender of the -- Certificates in exchange for the Merger Consideration. (c) Upon surrender of a Certificate for cancellation to the Exchange Agent, together with such letter of transmittal, duly executed, and such other agreements as the Exchange Agent shall reasonably request, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration, and the Certificate so surrendered shall forthwith be cancelled. Until surrendered as contemplated by this Section 2.8, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive the Merger Consideration with respect to the shares of Company Common Stock formerly represented thereby. No interest shall accrue or be paid on the Merger Consideration payable upon the surrender of any Certificate. (d) Any amounts of cash delivered or made available to the Exchange Agent pursuant to this Section 2.8 and not exchanged for Certificates within six months after the Effective Time pursuant to this Section 2.8 shall be returned by the Exchange Agent to Parent, which thereafter shall act as Exchange Agent subject to the rights of holders of unsurrendered Certificates under this Article II. Thereafter such holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat and other similar laws) only as general creditors thereof with respect to any Merger Consideration that may be payable upon due surrender of the Certificates held by them. Notwithstanding the foregoing, neither the Surviving Corporation nor the Exchange Agent shall be liable to any holder of a share of Company Common Stock for any Merger Consideration delivered in respect of such Share to a public official pursuant to any abandoned property, escheat or other similar law. (e) If any payment of the Merger Consideration is to be made to a person other than that in which the Certificate surrendered is registered, it shall be a condition of payment that the Certificate so surrendered shall be properly endorsed or otherwise in proper form for transfer and that the person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of the Certificate surrendered or establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable. (f) After the Effective Time, there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Company Common Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates representing such shares are presented to the Surviving Corporation, they shall be 8 cancelled and exchanged for the Merger Consideration as provided in this Article I. 2.9. Company Stock Options and Warrants. At the Effective Time, all ---------------------------------- options and warrants then outstanding under the 1995 Incentive Stock Option Plan and the 1996 Equity Participation Plan (collectively, the "Company Stock Option -------------------- Plans") shall be assumed by Parent in such manner that Parent is a corporation - ----- "assuming a stock option in a transaction to which section 424(a) applies" within the meaning of Section 424 of the Internal Revenue Code of 1986, as amended (the "Code"). The options and warrants assumed by Parent as provided ---- above and the warrants issued to WinStar Communications, Inc. and Electronic Press Services, Inc. shall be exercisable upon the same terms and conditions as under the Company Stock Option Plans and the option agreements and warrants issued thereunder and such warrants, except that each such option or warrant (A) shall be exercisable for that number of shares of Parent Common Stock equal to the product of (i) the number of shares of Company Common Stock subject to such option or warrant immediately prior to the Effective Time multiplied by (ii) a fraction, the numerator of which shall be the Per Share Amount and the denominator of which shall be $27 1/8 (with any fractional share of Parent Common Stock being disregarded) and (B) the exercise price per share of Parent Common Stock shall equal the exercise price per share of Company Common Stock theretofore in effect multiplied by a fraction, the numerator of which shall be $27 1/8 and the denominator of which shall be the Per Share Amount. From and after the Effective Time, no additional options or warrants shall be granted under Company Stock Option Plans. In connection with the assumption of the options outstanding under Company Stock Option Plans, Parent shall use its best efforts to effect such assumption in such a manner as to not affect the incentive stock option status of those options which are intended to be incentive stock options at the Effective Time. From the date hereof, Company shall not accelerate, or take any action which would cause the acceleration of, the vesting of any of the options outstanding under the Company Stock Option Plans by reason of the Offer or the Merger and any agreement providing for such acceleration shall be rescinded. III. REPRESENTATIONS AND WARRANTIES OF COMPANY ----------------------------------------- Company represents and warrants to Parent and Purchaser as follows (except as set forth in the Disclosure Letter delivered by Company to Parent and Purchaser on the date hereof): 3.1. Organization and Authorization, etc. Company is a corporation ----------------------------------- duly organized, validly existing and in good standing under the laws of the State of Delaware, has the 9 corporate power and authority to own, lease and operate all of its properties and assets and to carry on its business, and is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the nature of its business or the ownership of its properties or both makes such qualification necessary, except where failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. Company has delivered to Parent and Purchaser complete and correct copies of its Certificate of Incorporation and By-Laws, as amended and in effect on the date of this Agreement. Company has the corporate power to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by its Board of Directors and, except for the approval of its stockholders, no other corporate proceedings on the part of Company are necessary to authorize this Agreement and the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Company and, assuming this Agreement constitutes the legal, valid and binding Agreement of the other parties hereto, this Agreement constitutes the legal, valid and binding agreement of Company, enforceable against Company in accordance with its terms. The restrictions on business combinations contained in Section 203 of the GCL have been satisfied with respect to the transactions contemplated hereby. 3.2. Subsidiaries. Company has no Subsidiaries. ------------ 3.3. Non-Contravention. The execution and delivery of this Agreement ----------------- and, subject to the approval of this Agreement by Company's stockholders and compliance with the applicable regulatory requirements set forth in Section 3.4, the consummation of the transactions contemplated hereby will not (a) violate - any provision of the Amended and Restated Certificate of Incorporation or Amended and Restated By-Laws of Company, (b) violate any material provision of - or result in the breach or the acceleration of or entitle any party to accelerate (whether after the giving of notice or lapse of time or both) any material obligation under, any material mortgage, lien, lease, agreement, license, instrument, order, arbitration award, judgment or decree to which Company is a party or by which it is bound, (c) result in the creation or - imposition of any material lien, charge, pledge, security interest or other encumbrance upon any material property of Company or (d) violate or conflict - with any law, ordinance or rule to which Company, or the property of Company, is subject. 3.4. Approvals. No consent, approval, order or authorization of, or --------- registration, declaration or filing with, any Governmental Authority is required in connection with the 10 execution and delivery of this Agreement by Company or the consummation by Company of the transactions contemplated hereby, except for (a) the filing of a - Notification and Report Form by Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (b) the filing of the ------- - Schedule 14D-9 with the SEC and the filing of the Proxy Statement with the SEC, (c) filings and approvals required by the securities or blue sky laws of the - various states, (d) the filings and approvals with the FCC and state public - utility commissions or other Governmental Authorities identified on Schedule 3.4 hereto and (e) the filing of a Certificate of Merger with the Secretary of State - of the State of Delaware. Company has delivered to Parent correct and complete copies of all licenses and the applications related thereto of Company together with any pending applications filed by Company for other licenses, certificates, permits and similar authorizations. 3.5. Capital Stock. The authorized capital stock of Company consists ------------- of 47,000,000 shares of Common Stock, par value $.01 per share, of which 11,674,261 shares are issued and outstanding, and of 3,000,000 shares of Preferred Stock, par value $1.00 per share, none of which are issued and outstanding. All outstanding shares of Company Common Stock are duly authorized, validly issued, fully paid and nonassessable. As of the date hereof, Company had reserved (a) 2,900,480 shares of Company Common Stock for issuance upon the - exercise of outstanding stock options granted to employees or directors of Company, (b) 415,000 shares of Company Common Stock for issuance upon exercise - of currently outstanding warrants and (c) 350,000 shares of Company Common Stock - for issuance to employees pursuant to the Amended and Restated 1997 Employee Stock Purchase Plan. Except as set forth herein or in the reports and other filings referred to in Section 3.7 and except for the warrants issued to WinStar Communications, Inc. on June 10, 1996 and to Electronic Press Services, Inc. on January 3, 1997, there are not outstanding any offers, subscriptions, options, warrants, rights or other agreements or commitments obligating Company to issue or sell, or cause to be issued or sold, any shares of the capital stock of Company or any securities or obligations convertible into or exchangeable for or giving any Person any right to acquire any shares of such capital stock, or obligating Company to enter into any such agreement or commitment. 3.6. Financial Statements. (a) The balance sheet as of December 31, -------------------- 1996 of Company, and the related statements of income, stockholders' equity and changes in financial position for each of the three years then ended, examined and reported upon by Ernst & Young, LLP, certified public accountants, complete copies of which have previously been delivered to 11 Parent, have been prepared in conformity with generally accepted accounting principles applied on a consistent basis, and fairly present the financial position of Company at such date and the results of its operations and changes in its financial position for such periods. Except as disclosed or provided for in such financial statements (including the notes thereto), as of December 31, 1996, Company had no liabilities or obligations material to the business or condition (financial or otherwise) of Company, whether accrued, absolute, contingent or otherwise, and whether due or to become due and which were required to be disclosed or provided for in such financial statements in accordance with generally accepted accounting principles. (b) The unaudited financial statements of Company as of March 31, 1997 and for the three months then ended, complete copies of which have previously been delivered to Parent (the "Company Interim Financials"), fairly -------------------------- present the financial position of Company at such date and the results of its operations for such period and, except as otherwise disclosed therein, have been prepared in accordance with generally accepted accounting principles applied on a basis consistent with the audited financial statements referred to in the preceding paragraph, and reflect all adjustments (subject to normal and recurring year end adjustments that are not expected to be material in amount) which are necessary to a fair presentation of the results of the interim period therein described. 3.7. Periodic SEC Filings. Company has heretofore delivered to -------------------- Parent its (a) Annual Report on Form 10-KSB for the year ended December 31, 1996 - as filed with the SEC; (b) a Quarterly Report on Form 10-QSB for the period - ended March 31, 1997; (c) proxy statements relating to Company's meetings of - stockholders (whether annual or special) during calendar year 1997; and (d) all - other reports or registration statements filed by Company with the SEC since October 16, 1996. As of their respective dates, such reports and statements were prepared in accordance with the requirements of the Securities Act of 1933, as amended, and the Exchange Act, as the case may be, and the rules and regulations thereunder and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 3.8. Changes. Except as has been otherwise disclosed by Company to ------- Parent and Purchaser in writing prior to the date hereof, or as has been disclosed in the Company Interim Financials or in the filings with the SEC set forth in Section 3.7, since December 31, 1996 through the date of this Agreement there have not been any changes in the condition (financial or otherwise), assets, liabilities, properties, business, operations 12 or prospects of Company having, individually or in the aggregate, a Material Adverse Effect and, except as aforesaid, Company has not: (a) issued or sold any stock, notes, bonds or other securities other than pursuant to the exercise or conversion of outstanding securities, or any option to purchase the same other than in the ordinary course of business consistent with past practice, or entered into any agreement with respect thereto, except to or with Parent or Purchaser; (b) declared, set aside or made any dividend or other distribution on capital stock or redeemed, purchased or acquired any shares thereof or entered into any agreement in respect of the foregoing; (c) amended its Certificate of Incorporation or By-Laws; (d) other than in the ordinary course of business, (i) purchased, - sold, assigned or transferred any material tangible assets or any material patent, trademark, trade name, copyright, license, franchise, design or other intangible assets or property, (ii) mortgaged, pledged or granted or -- suffered to exist any lien or other encumbrance or charge on any material assets or properties, tangible or intangible, except for liens for taxes not yet delinquent and such other liens, encumbrances or charges which do not, individually or in the aggregate, have a Material Adverse Effect, or (iii) to the best knowledge of Company, waived any rights of material value ---- or cancelled any material debts or claims; (e) incurred any material obligation or liability (absolute or contingent), except current liabilities and obligations incurred in the ordinary course of business consistent with past practice, or paid any material liability or obligation (absolute or contingent) other than current liabilities and obligations incurred in the ordinary course of business consistent with past practice; (f) increased the compensation payable to any officer or director of Company, or become obligated to increase any such compensation, other than in the ordinary course of business consistent with past practice; (g) entered into any employment agreement (except that agreements with employees that are solely confidentiality agreements shall not be considered employment agreements) or adopted, or amended in any material respect, any collective 13 bargaining agreement or Company Plan, other than in the ordinary course of business consistent with past practice; (h) incurred any damage, destruction or similar loss, whether or not covered by insurance, materially affecting the businesses or properties of Company; (i) entered into any transaction of a material nature other than in the ordinary course of business consistent with past practice; or (j) changed its accounting methods, principles or practices. 3.9. Taxes. (a) Company has prepared and timely filed or will ----- timely file with the appropriate Governmental Authorities all franchise, income and all other material Tax returns and reports required to be filed for any period ending on or before the Effective Time, taking into account any extension of time to file granted to or obtained on behalf of Company; (b) all material Taxes of Company in respect of the pre-Merger period have been paid in full to the proper authorities, other than such Taxes as are being contested in good faith by appropriate proceedings and/or are adequately reserved for in accordance with generally accepted accounting principles; (c) to the best knowledge of Company, no deficiency has been asserted or assessed against Company, and no examination of Company is pending or threatened for any material amount of Tax by any taxing authority; (d) no extension of the period for assessment or collection of any material Tax is currently in effect and no extension of time within which to file any material Tax return has been requested, which Tax return has not since been filed; (e) no material Tax liens have been filed with respect to any Taxes; (f) Company will not make any voluntary adjustment by reason of a change in their accounting methods for any pre-Merger period that would affect the taxable income or deductions of Company for any period ending after the Effective Date; (g) Company has made timely payments of the Taxes required to be deducted and withheld from the wages paid to their employees; (h) to the best knowledge of Company, there are no foreign losses as defined in Section 904(f)(2) of the Code; and 14 (i) to the best knowledge of Company, there are no transfer pricing agreements made with any taxation authority involving Company. 3.10. Material Contracts. Company has heretofore furnished to Parent ------------------ and Purchaser a complete and correct list as of the date hereof of all agreements, contracts and commitments of the following types, written or oral, to which Company is a party or by which any of its properties is bound as of the date hereof: (a) mortgages, indentures, security agreements and other - agreements and instruments relating to the borrowing of money by or extension of credit to Company; (b) employment and consulting agreements; (c) Company Plans; - - (d) collective bargaining agreements; (e) material sales agency, manufacturer's - - representatives or distributorship agreements; (f) agreements, orders or - commitments for the purchase by Company of raw materials, supplies or finished products exceeding $100,000; (g) agreements, orders or commitments for the sale - by Company of its products exceeding $250,000; (h) licenses of patent, trademark - and other intellectual property rights; (i) agreements or commitments for - capital expenditures in excess of $100,000 for any single project (it being warranted that the commitment for all undisclosed contracts for such agreements or commitments does not exceed $500,000 in the aggregate for all projects); (j) - brokerage or finder's agreements; (k) surety bonds for any single project, - foreign exchange contracts and letters of credit, in each case in excess of $250,000; and (l) agreements, contracts and commitments of a type other than - those described in the foregoing clauses (a) through (k) which in any case involve payments or receipts of more than $100,000. Other than for documents that are included in Company's SEC filings, Company has delivered or made available to Parent and Purchaser complete and correct copies of all written agreements, contracts and commitments, together with all amendments thereto, and accurate descriptions of all oral agreements, set forth on such list. Such agreements, contracts and commitments are in full force and effect and, to the best knowledge of Company, all parties thereto have performed all obligations required to be performed by them to date and are not in default in any material respect thereunder. No claim of default by any party has been made or is now pending under any such agreement, contract or commitment, and, to the best knowledge of Company, no event has occurred and is continuing that with notice or the passing of time or both would constitute a material default thereunder or would excuse performance by any party thereto. 3.11. Properties. Company owns and has good and marketable title in ---------- fee to all its assets and properties, tangible or intangible reflected in the Company Interim Financials as owned by it, and valid leasehold interests in all properties reflected in the Company Interim Financials as leased 15 or licensed by it, in each case free and clear of any mortgage, lien, pledge, charge, claim, conditional sales or other agreement, right, easement or encumbrance except (i) to the extent stated or reserved against in the Company - Interim Financials, (ii) for changes occurring in the ordinary course of -- business consistent with past practice after the date thereof, which do not have, individually or in the aggregate, a Material Adverse Effect, and (iii) for --- liens for taxes not yet delinquent and such other exceptions which do not materially detract from the value or interfere with the use of the property affected thereby. Company has delivered or made available to Parent and Purchaser complete and correct copies of all leases of real property and material personal property to which it is a party. All such leases are valid, subsisting and effective in accordance with their terms and, to the knowledge of Company, there does not exist thereunder any material default or event or condition which, after notice or lapse of time or both, would constitute a material default thereunder. To the knowledge of Company, all physical properties owned or used by Company and all equipment necessary for the operation of its businesses are in good operating condition. 3.12. Litigation. Except as disclosed in the reports and other ---------- filings referred to in Section 3.7 and except as has been otherwise disclosed by Company to Parent and Purchaser prior to the date hereof, there are no material actions, suits or proceedings or investigations pending or, to the knowledge of Company, threatened against or affecting Company or any property or assets of Company before or by any Governmental Authority. Company is not in default in respect of any judgment, order, writ, injunction or decree of any Governmental Authority. 3.13. Permits. Company has all material permits, licenses, orders ------- and approvals of all Governmental Authorities required for it to conduct its business as presently conducted. All such material permits, licenses, orders and approvals are in full force and effect and, to the knowledge of Company, no suspension or cancellation of any of them is threatened. Subject to obtaining the consents referred to in Section 3.4, none of such permits, licenses, orders or approvals will be adversely affected by the consummation of the transactions contemplated by this Agreement. Company has complied in all material respects with all laws and with the rules and regulations of all Governmental Authorities having authority over it, including, without limitation, agencies concerned with occupational safety, environmental protection and employment practices, and Company has not received notice of violation of any such rules or regulations, corrected or not, within the last three years. 3.14. Employee Plans. (a) Schedule 3.14 contains a true and complete -------------- list of all bonus, deferred compensation, 16 pension, profit-sharing, retirement, insurance, stock purchase, stock option, welfare, severance, hospitalization, insurance or other employee benefit plan (as defined in Section 3(3) of ERISA), whether formal or informal, presently maintained by Company or maintained by it since 1992, or under which Company has, or has had since 1992, any obligation to contribute (collectively, the "Company Plans"). - -------------- (b) For each of the Company Plans, Company has delivered or made available to Parent true and complete copies of (i) the plan document, (ii) any related trust agreements, insurance contracts and other funding agreements, (iii) the summary plan descriptions, (iv) the most recent Internal Revenue Service determination letter, if any, (v) the most recently filed annual report (Form 5500 Series) and accompanying schedules filed with the Department of Labor or Internal Revenue Service, and (vi) the most recent financial statements, if any. (c) Except where the failure of any of the following representations would not result in a Material Adverse Effect: (i) Each such Company Plan which is intended to be a "qualified plan" under Section 401(a) of the Code, has received, within the last three years, a favorable determination letter from the IRS. With respect to any Company Plan which has received a currently applicable determination letter, nothing has occurred since the date of such determination letter that would adversely affect the qualification of the Company Plan under Section 401(a) of the Code. (ii) Company has performed and complied with all of its obligations under or with respect to the Company Plans, and the Company Plans have operated in accordance with their respective terms. All Company Plans have operated in accordance with the applicable requirements of ERISA and the Code and other applicable laws, rules and regulations, and all reports required by any governmental agency with respect to a Company Plan have been timely filed. (iii) Neither any of the Company Plans nor any employee benefit plan (as defined in Section 3(3) of ERISA) maintained or contributed to by an ERISA Affiliate (the Company Plans and the employee benefit plans of ERISA Affiliates are collectively referred to as the "Company Group Plans") is ------------------- covered by Title IV of ERISA. (iv) No prohibited transaction (as defined in Section 406 of ERISA or Section 4975 of the Code) has 17 occurred with respect to any of the Company Group Plans. (v) Each Company Plan which constitutes a welfare benefit plan within the meaning of Section 3(1) of ERISA has complied and continues to comply with the health care continuation coverage requirements of section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA. Other than the coverage referred to in the immediately preceding sentence, there are no benefits to be provided to current retirees under any of the Company Plans which constitutes a welfare benefit plan. (vi) No action, suit or proceeding, hearing, or investigation with respect to the administration or investment of the assets of any Company Group Plan is pending or threatened. None of the senior executive officers of Company has any knowledge of any basis for any such action, suit, proceeding, hearing or investigation. (vii) No amount paid or payable (or which may become payable) pursuant to any Company Plan to or for the benefit of any officer, director or employee of Company was or will constitute any excess parachute payment (within the meaning of Section 280G of the Code) as a consequence, direct or indirect, in whole or in part, of the consummation of the transaction contemplated under the Agreement. (viii) Company does not have any commitment, whether formal or informal and whether legally binding or not, to create or amend any Company Plan. 3.15. Patents, Trademarks, etc. Company owns, or possess adequate ------------------------ rights to use, all material patents, trade names, trademarks, copyrights, inventions, processes, designs, formulae, trade secrets, knowhow and other intellectual property rights necessary for the conduct of its business, with, to the knowledge of Company, no conflict with or infringement of the asserted rights of others. Company has no knowledge of any infringement by any third party upon any patent, trade name, trademark or copyright owned by Company, and Company has not taken or omitted to take any action which would have the effect of waiving any of its rights thereunder, in each case except where such infringement or waiver would not have a Material Adverse Effect. 3.16. Insurance. Company has heretofore furnished to Parent and --------- Purchaser a complete and correct list as of the date 18 hereof of all material insurance policies maintained by Company, and has made available to Parent and Purchaser complete and correct copies of all such policies, together with all riders and amendments thereto. All such policies are in full force and effect and all premiums due thereon have been paid to the date hereof. Company has complied in all material respects with the provisions of all such policies. 3.17. No Brokers. All negotiations relating to this Agreement and ---------- the transactions contemplated hereby have been carried on without the intervention of any person (other than Friedman, Billings, Ramsey & Co., Inc.) acting on behalf of Company in such manner as to give rise to any valid claim against Company or Parent or any of Parent's Subsidiaries for any broker's or finder's fee or similar compensation. 3.18. Disclosure. The certificates, statements, and other ---------- information furnished to Parent or Purchaser in writing by or on behalf of Company in connection with the transactions contemplated herein, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Except for facts or conditions affecting the Internet access industry or the website hosting industry generally, Company knows of no fact or condition which materially adversely affects, or in the future may (so far as Company can now reasonably foresee) materially adversely affect the condition (financial or otherwise), properties, assets, liabilities, business, operations or prospects of Company which has not been set forth herein or disclosed in writing to Parent and Purchaser with reference to this Agreement. 3.19. Offer Documents; Schedule 14D-9; Proxy Statement; Other ------------------------------------------------------- Information. Neither the Schedule 14D-9 nor any information supplied by Company - ----------- for inclusion in the Offer Documents shall, at the respective times the Schedule 14D-9, the Offer Documents or any amendments or supplements thereto are filed with the SEC or are first published, sent or given to stockholders of Company, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading. Neither the proxy statement to be sent to the stockholders of Company in connection with the Stockholders' Meeting (as hereinafter defined) or the information statement to be sent to such stockholders, as appropriate (such proxy statement or information statement, as amended or supplemented, being referred to herein as the "Proxy Statement"), --------------- shall, at the date the Proxy Statement (or any amendment or supplement thereto) is first mailed to stockholders of Company, at the time of the Stockholders' Meeting and at the 19 Effective Time, be false or misleading with respect to any material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Stockholders' Meeting which shall have become false or misleading. The Schedule 14D-9 and the Proxy Statement shall comply in all material respects as to form with the requirements of the Exchange Act and the rules and regulations thereunder. IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER ------------------------------------------------------ Parent and Purchaser each represent to Company as follows: 4.1. Organization and Authorization, etc. Each of Parent and ----------------------------------- Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, has the corporate power and authority to own, lease and operate all of its properties and assets and to carry on its business, and is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the nature of its business or the ownership of its properties or both makes such qualification necessary, except where failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. Each of Parent and Purchaser has the corporate power to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of each of Parent and Purchaser and no other corporate proceedings on the part of Parent or Purchaser are necessary to authorize this Agreement and the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by each of Parent and Purchaser and, assuming this Agreement constitutes the legal, valid and binding Agreement of the other parties hereto, this Agreement constitutes the legal, valid and binding agreement of each of Parent and Purchaser, enforceable against each in accordance with its terms. 4.2. Non-Contravention. The execution and delivery of this Agreement ----------------- and the consummation of the transactions contemplated hereby will not (a) - violate any provision of the Certificate of Incorporation or By-Laws of Parent or any of its Subsidiaries, (b) after giving effect to the to the transactions - contemplated by Section 6.9, violate any material provision of or result in the breach or the acceleration of or entitle any party to accelerate (whether after the giving of notice or lapse of time or both) any material obligation under, any material 20 mortgage, lien, lease, agreement, license, instrument, order, arbitration award, judgment or decree to which Parent or any of its Subsidiaries is a party or by which any of them is bound, (c) result in the creation or imposition of any - material lien, charge, pledge, security interest or other encumbrance upon any material property of Parent or any of its Subsidiaries or (d) violate or - conflict with any other material restriction or any law, ordinance or rule to which Parent or any of its Subsidiaries, or the property of Parent or any of its Subsidiaries, is subject. 4.3. Approvals. No consent, approval, order or authorization of, or --------- registration, declaration or filing with, any Governmental Authority is required in connection with the execution and delivery of this Agreement by Parent and Purchaser or the consummation by Parent and Purchaser of the transactions contemplated hereby, except for (a) the filing of a Notification and Report Form - by Parent under the HSR Act, (b) the filing of the Schedule 14D-1 with the SEC - and the filing of the Proxy Statement with the SEC, (c) filings and approvals - with the SEC or as required by the securities or blue sky laws of the various states, (d) any necessary filings with and approvals of the FCC and state public - utility commissions or other Governmental Authorities where the operations of Company are subject to their jurisdiction and (e) the filing of a Certificate of - Merger with the Secretary of State of the State of Delaware. 4.4. No Brokers. All negotiations relating to this Agreement and the ---------- transactions contemplated hereby have been carried on without the intervention of any person acting on behalf of Parent in such manner as to give rise to any valid claim against Parent or Company or any of Parent's Subsidiaries for any broker's or finder's fee or similar compensation other than Bear, Stearns & Co. Inc., whose fees shall be paid by Parent. 4.5. Offer Documents; Proxy Statement; Other Information. The Offer --------------------------------------------------- Documents will not, at the time the Offer Documents are filed with the SEC or are first published, sent or given to stockholders of Company, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading. The information supplied by Parent for inclusion in the Proxy Statement will not, on the date the Proxy Statement (or any amendment or supplement thereto) is first mailed to stockholders of Company, at the time of the Stockholders' Meeting and at the Effective Time, contain any statement which, at such time and in light of the circumstances under which it is made, is false or misleading with respect to any material fact, or omits to state any material fact 21 required to be stated therein or necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Stockholders' Meeting which shall have become false or misleading. Notwithstanding the foregoing, Parent and Purchaser make no representation or warranty with respect to any information supplied by Company or any of its representatives which is contained in any of the foregoing documents or the Offer Documents. The Offer Documents shall comply in all material respects as to form with the requirements of the Exchange Act and the rules and regulations thereunder. 4.6. Solvency. Parent is not currently insolvent, as such term is -------- defined in Title 11 of the United States Bankruptcy Code or any state statute relating to insolvency, and none of the execution and delivery of this Agreement by Parent, the performance of its obligations hereunder or the consummation by Parent of the transactions contemplated hereby will render Parent insolvent or result in Parent being unable to pay its debts as they become due. V. COVENANTS OF COMPANY -------------------- 5.1. Conduct of Business. From the date hereof to the Effective ------------------- Time, except with the prior written consent of Parent and Purchaser, Company will: (a) carry on its business in, and only in, the ordinary course in substantially the same manner as heretofore and, to the extent consistent with such business, use all reasonable efforts to preserve intact its present business organization, keep available the services of its present officers and employees, and preserve its relationships with customers, suppliers and others having business dealings with it; (b) maintain all of its material structures, equipment and other tangible personal property in good repair, order and condition, except for depletion, depreciation, ordinary wear and tear and damage by unavoidable casualty; (c) keep in full force and effect insurance comparable in amount and scope of coverage to insurance now carried by it; (d) perform in all material respects all of its obligations under agreements, contracts and instruments relating to or affecting its properties, assets and business; 22 (e) maintain its books of account and records in the usual, regular and ordinary manner; (f) comply in all material respects with all statutes, laws, ordinances, rules and regulations applicable to it and to the conduct of its business; (g) not amend its Certificate of Incorporation or By-Laws; (h) not enter into, assume or amend in any material respect any agreement, contract or commitment of the character referred to in clauses (a) through (c) of Section 3.10 (except that agreements with employees that are solely confidentiality agreements shall not be considered employment agreements) or, except in the ordinary course of business consistent with past practice, clauses (d) through (l) of such Section; (i) not enter into any additional contracts or agreements for network capacity or local transport services which are not terminable by Company, without penalty or other adverse consequence, on not more than 60 days notice; (j) not enter into any additional customer contracts or agreements containing rates which are materially different from the rates charged by Company to current customers of similar creditworthiness, ordering similar amounts of services and over a similar term; (k) not merge or consolidate with, or agree to merge or consolidate with, or purchase substantially all the assets of, or otherwise acquire any business or any corporation, partnership, association or other business organization or division thereof; (l) not purchase for cash and cancel any options outstanding under Company Stock Option Plans or otherwise amend such Plans; (m) promptly advise Parent and Purchaser in writing of any materially adverse change in the consolidated financial condition, operations or business of Company; (n) not declare or pay dividends (cash or otherwise) or make any distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of its outstanding capital stock; (o) not effect any stock split or other reclassification; 23 (p) not authorize the creation or issuance of or issue, sell or dispose of, or create any obligation to issue, sell or dispose of, any shares of its capital stock or any securities or obligations convertible into or exchangeable for, any shares of its capital stock (other than pursuant to stock options or warrants heretofore outstanding); (q) not issue any press releases without first consulting with Parent regarding any such press release; (r) not create, incur, assume, guarantee or otherwise become directly or indirectly liable with respect to any indebtedness for borrowed money other than in the ordinary course of business consistent with past practice under agreements existing on the date hereof and identified in writing to Parent and Purchaser; and (s) not enter into any agreement or understanding to do or engage in any of the foregoing. Notwithstanding anything to the contrary in this Section 5.1, Company shall be permitted to make payment in full of the automobile loans relating to the two Chevrolet trucks owned by Company and to purchase the 1997 BMW 528I automobile, the Ford Explorer and the two vans, each of which is currently being leased by Company. 5.2. Access and Information. From the date hereof to the Effective ---------------------- Time, Company shall give to Parent and Purchaser and their representatives reasonable access during normal business hours to the personnel, properties, books, records, contracts and commitments of Company and will furnish all such information and documents relating to the properties and business of Company as Parent and Purchaser may reasonably request. In the event this Agreement is terminated and the Merger abandoned, Parent and Purchaser will keep confidential any information (unless readily ascertainable from public information or sources or otherwise required by law to be disclosed) obtained from Company in connection with the Merger, will not utilize such information for any purpose and will return to Company all documents, work papers and other written material obtained by Parent and Purchaser from Company. 5.3. No Solicitation. From the date hereof to the Effective Time, --------------- Company shall not, directly or indirectly, through any officer, director, agent or otherwise, (a) solicit, initiate or encourage the submission of any proposal or offer from any person relating to any acquisition or purchase of all or (other than in the ordinary course of business) any portion of the assets of, or any equity interest in, Company or any business 24 combination (other than private network agreements entered into by Company in the ordinary course of business) with Company (a "Company takeover proposal") or (b) except to the extent required by fiduciary obligations under applicable law as advised in writing by independent counsel, participate in any negotiations regarding, or furnish to any other person any information with respect to, or otherwise cooperate in any way with, or assist or participate in, facilitate or encourage, any effort or attempt by any other person to do or seek any of the foregoing. Company immediately shall cease and cause to be terminated all existing discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. Company shall notify Parent promptly of any Company takeover proposal or any inquiry or contact with any person with respect thereto, that is made and shall, in any such notice to Parent, indicate in reasonable detail the identity of the person making such Company takeover proposal or related inquiry or contact and the terms and conditions of such Company takeover proposal or related inquiry or contact. Company shall not release any third party from, or waive any provision of, any confidentiality or standstill agreement to which Company is a party. VI. ADDITIONAL AGREEMENTS --------------------- 6.1. Stockholders' Meeting. (a) If required by applicable law in --------------------- order to consummate the Merger, Company, acting through the Board, shall, in accordance with applicable law and Company's Certificate of Incorporation and By-laws, (i) duly call, give notice of, convene and hold an annual or special meeting of its stockholders as soon as practicable following consummation of the Offer for the purpose of considering and taking action on this Agreement and the transactions contemplated hereby (the "Stockholders' Meeting") and (ii) (A) --------------------- include in the Proxy Statement the unanimous recommendation of the Board that the stockholders of Company approve and adopt this Agreement and the transactions contemplated hereby and (B) use its reasonable best efforts to obtain such approval and adoption. At the Stockholders' Meeting, Parent and Purchaser shall cause all Shares then owned by them and their Subsidiaries to be voted in favor of the approval and adoption of this Agreement and the transactions contemplated hereby. (b) Notwithstanding the foregoing, in the event that Purchaser shall acquire at least 90 percent of the then outstanding Shares, the parties hereto agree, at the request of Purchaser, subject to Article VII, to take all necessary and appropriate action to cause the Merger to become effective, in accordance with Section 253 of Delaware Law, as soon as reasonably practicable after such acquisition, without a meeting of the stockholders of Company. 25 6.2. Proxy Statement. If required by applicable law as soon as --------------- practicable following consummation of the Offer, Company shall file the Proxy Statement with the SEC under the Exchange Act, and shall use its reasonable best efforts to have the Proxy Statement cleared by the SEC. Parent, Purchaser and Company shall cooperate with each other in the preparation of the Proxy Statement, and Company shall notify Parent of the receipt of any comments of the SEC with respect to the Proxy Statement and of any requests by the SEC for any amendment or supplement thereto or for additional information and shall provide to Parent promptly copies of all correspondence between Company or any representative of Company and the SEC. Company shall give Parent and its counsel the opportunity to review the Proxy Statement prior to its being filed with the SEC and shall give Parent and its counsel the opportunity to review all amendments and supplements to the Proxy Statement and all responses to requests for additional information and replies to comments prior to their being filed with, or sent to, the SEC. Each of Company, Parent and Purchaser agrees to use its reasonable best efforts, after consultation with the other parties hereto, to respond promptly to all such comments of and requests by the SEC and to cause the Proxy Statement and all required amendments and supplements thereto to be mailed to the holders of Shares entitled to vote at the Stockholders' Meeting at the earliest practicable time. 6.3. Compliance with Conditions Precedent, etc. Parent, Purchaser and ----------------------------------------- Company will each use commercially reasonable efforts to cause the conditions precedent to the Offer and the Merger set forth in Annex A and in Article VII hereof to be fulfilled and, subject to the terms and conditions herein provided, to take, or cause to be taken, all action, and to do or cause to be done all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement and the Merger, including without limitation to lift any injunction or remove any other impediment to the consummation of such transactions or the Merger. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and/or directors of Company, Parent or Purchaser, as the case may be, shall take all such necessary action. 6.4. Certain Notifications. At all times from the date hereof until --------------------- the Effective Time, each party shall promptly notify the others in writing of the occurrence of any event which will or may result in the failure to satisfy the conditions specified in Annex A or in Article VII. 6.5. Adoption by Purchaser. Parent, as the sole stockholder of --------------------- Purchaser, by executing this Agreement, consents to the adoption of this Agreement by Purchaser and agrees that 26 such consent shall be treated for all purposes as a vote duly adopted at a meeting of the stockholders of Purchaser held for this purpose. 6.6. Expenses. Whether or not the Merger is consummated, all costs -------- and expenses incurred in connection with this Agreement and the transactions contemplated hereby and thereby shall be paid by the party incurring such expense, except that the parties agree that Parent and Company shall share evenly any filing fees required by the HSR Act. 6.7. Public Announcements. Parent and Company shall consult with -------------------- each other before issuing any press release or otherwise making any public statements with respect to this Agreement or any transaction contemplated herein and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by law or any listing agreement with a national securities exchange or the Nasdaq National Market to which Parent or Company is a party. 6.8. Company Board Representation; Section 14(f). (a) Promptly upon ------------------------------------------- the purchase by Purchaser of Shares pursuant to the Offer or the Stock Purchase Agreement, and from time to time thereafter, Purchaser shall be entitled to designate up to such number of directors, rounded up to the next whole number, on the Board as shall give Purchaser representation on the Board equal to the product of the total number of directors on the Board (giving effect to the directors elected pursuant to this sentence) multiplied by the percentage that the aggregate number of Shares beneficially owned by Purchaser or any affiliate of Purchaser following such purchase bears to the total number of Shares then outstanding, and Company shall, at such time, promptly take all actions necessary to cause Purchaser's designees to be elected as directors of Company, including increasing the size of the Board or securing the resignations of incumbent directors or both. At such time, Company shall use its reasonable best efforts to cause persons designated by Purchaser to constitute the same percentage as persons designated by Purchaser shall constitute of the Board of each committee of the Board. Notwithstanding the foregoing, until the earlier of (i) the time Purchaser acquires a majority of the then outstanding Shares on a fully diluted basis and (ii) the Effective Time, Company shall use its reasonable best efforts to ensure that all the members of the Board and each committee of the Board as of the date hereof who are not employees of the Company shall remain members of the Board and of such committees. (b) Company shall promptly take all actions required pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to fulfill its obligations under this Section 6.8 and shall include in the Schedule 14D-9 such 27 information with respect to Company and its officers and directors as is required under Section 14(f) and Rule 14f-1 to fulfill such obligations. Parent or Purchaser shall supply to Company and be solely responsible for any information with respect to either of them and their nominees, officers, directors and affiliates required by such Section 14(f) and Rule 14f-1. 6.9. Indebtedness of Company. Prior to the consummation of the Offer ----------------------- by Purchaser (and as a condition thereto), Company shall, if Parent shall have made available a Parent Loan as described below, repay all Indebtedness (as defined in the Parent Indenture) of Company other than Vendor Indebtedness (as defined in the Parent Indenture), it being expressly understood that if Parent shall not have made available to Company a Parent Loan, then the repayment of such Indebtedness shall not be a condition to the consummation of the Offer. To the extent requested by Company, Parent shall make a loan to Company in principal amount sufficient to pay in full (including principal, accrued interest, fees, penalties and other charges) all Indebtedness required to be repaid by Company pursuant to this Section 6.9 (the "Parent Loan"). The Parent ----------- Loan shall (i) have a maturity of 180 days, (ii) bear interest at a rate to be negotiated in good faith by the parties taking into account the interest rate that could be obtained by Company on any bank or other financial institution financing and (iii) have such other terms as shall be mutually agreed to by Company and Parent, acting in good faith and a commercially reasonably manner. VII. CONDITIONS ---------- 7.1. Conditions to the Merger. The obligations of each party to ------------------------ effect the Merger shall be subject to the satisfaction, at or prior to the Effective Time, of each of the following conditions: (a) the Merger and this Agreement shall have been validly approved and adopted by the affirmative votes of the holders of a majority of the outstanding shares of Company Common Stock entitled to vote thereon; (b) all permits, approvals and consents of any Governmental Authority or any other third party necessary or appropriate for consummation of the Merger shall have been obtained, other than consents the failure to obtain which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or a material adverse effect on the consummation of the transactions contemplated hereby; 28 (c) Purchaser or a permitted assignee shall have purchased all Shares validly tendered and not withdrawn pursuant to the Offer; provided, -------- however, that this condition shall not be applicable to the obligations of ------- Parent and Purchaser if, in breach of this Agreement or the terms of the Offer, Purchaser fails to purchase any Shares validly tendered and not withdrawn pursuant to the Offer; (d) no preliminary or permanent injunction or other order of a court or Governmental Authority shall have been issued and be in effect, and no United States federal or state statute, rule or regulation shall have been enacted or promulgated after the date hereof and be in effect, that (i) - prohibits the consummation of the Merger or (ii) imposes material -- limitations on the ability of Parent to exercise full rights of ownership of Company's assets or business; (e) there shall not be any action or proceeding commenced by or before any Governmental Authority in the United States, or threatened by any Governmental Authority in the United States, that challenges the consummation of the Merger or seeks to impose material limitations on the ability of Parent to exercise full rights of ownership of Company's assets or business, other than any such action or proceeding commenced by a stockholder or stockholders of Parent or Company, either derivatively on behalf of Parent or Company, respectively, or on behalf of such stockholder or stockholders, alleging that the directors or officers of Parent or Company, respectively, have breached their fiduciary duties to stockholders under Delaware law or Parent or Company has failed to make disclosures required to be made under applicable state or federal securities laws, in each case in connection with the transactions contemplated by this Agreement, or making any similar claim; and (f) any waiting period applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated. VIII. TERMINATION, AMENDMENT AND WAIVER --------------------------------- 8.1. Termination. This Agreement may be terminated at any time prior ----------- to the Effective Time, whether before or after approval by the stockholders of Company: (a) by consent of the Boards of Directors of Company, Parent and Purchaser, except that in the case of termination after the consummation of the Offer, the termination must be consented to by a majority of the independent directors of Company; 29 (b) by Parent and Purchaser upon notice to Company if any material default under or material breach of any covenant or agreement in this Agreement by Company shall have occurred and shall not have been cured within ten days after receipt of such notice, or any representation or warranty contained herein on the part of Company shall not have been true and correct in any material respect at and as of the date made; (c) by Company upon notice to Parent and Purchaser if any material default under or material breach of any covenant or agreement in this Agreement by Parent or Purchaser shall have occurred and shall not have been cured within ten days after receipt of such notice, or any representation or warranty contained herein on the part of Parent or Purchaser shall not have been true and correct in any material respect at and as of the date made; or (d) by Parent and Purchaser, on the one hand, or Company, on the other, upon notice to the other if the Merger shall not have become effective on or before October 31, 1997, unless such date is extended by the consent of the Boards of Directors of Company, Parent and Purchaser evidenced by appropriate resolutions; provided, however, that the right to -------- ------- terminate this Agreement under this Section 8.1(d) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date; (e) by Parent if due solely to an occurrence or circumstance that would result in a failure to satisfy any condition set forth in Annex A hereto, Purchaser shall have (i) failed to commence the Offer within 60 days following the date of this Agreement, (ii) terminated the Offer without having accepted any Shares for payment thereunder or (iii) failed to pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer, unless such failure to pay for Shares shall have been caused by or resulted from the failure of Parent or Purchaser to perform in any material respect any material covenant or agreement of either of them contained in this Agreement or the material breach by Parent or Purchaser of any material representation or warranty of either of them contained in this Agreement; (f) by Company, upon approval of the Board, if due to an occurrence or circumstance that would result in a failure to satisfy any of the conditions set forth in Annex A hereto, Purchaser shall have (i) failed to commence the Offer within 60 days following the date of 30 this Agreement, (ii) terminated the Offer without having accepted any Shares for payment thereunder or (iii) failed to pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer, unless such failure to pay for Shares shall have been caused by or resulted from the failure of Company to perform in any material respect any material covenant or agreement of it contained in this Agreement or the material breach by Company of any material representation or warranty of it contained in this Agreement; (g) by any of Parent, Purchaser and Company if the approval of the stockholders of Company required for consummation of the Merger shall not have been obtained by reason of the failure to obtain the required vote at a duly held meeting of stockholders or any adjournment thereof; (h) by Parent or Purchaser if Company breaches the provisions of Section 5.3; or (i) by Parent or Purchaser if, at any time, Company shall have withdrawn or modified in any manner adverse to Parent or Purchaser its approval or recommendation of the Offer, this Agreement or the Merger. 8.2. Effect of Termination. In the event of the termination of this --------------------- Agreement pursuant to the provisions of Section 8.1, the provisions of this Agreement (other than the second sentence of Sections 5.2 and Sections 6.6, 8.2 and 8.3 hereof) shall become void and have no effect, with no liability on the part of any party hereto or its stockholders or directors or officers in respect thereof, except as set forth in Section 8.3, provided that nothing contained -------- herein shall be deemed to relieve any party of any liability it may have to any other party with respect to a willful breach of its obligations under this Agreement. 8.3. Termination Payment. As compensation for entering into this ------------------- Agreement, taking action to consummate the transactions hereunder and incurring the costs and expenses related thereto and other losses and damages, including the foregoing of other opportunities, Company and Parent agree as follows: (a) Company shall pay to Parent the sum of $3,794,135 plus all reasonably documented out-of-pocket expenses (including, but not limited to, the reasonable fees and expenses of counsel and its other advisers) of Parent and 31 Purchaser incurred in connection with the transactions contemplated by this Agreement (including the preparation and negotiation of this Agreement) ("Parent Expenses") promptly after, but in no event later than two days ---------------- following, whichever of the following first occurs: (i) Parent or Purchaser shall have exercised its right to terminate this Agreement pursuant to Sections 8.1(b), 8.1(g), 8.1(h) or 8.1(i) hereof. (ii) Parent or Purchaser shall have exercised its right to terminate this Agreement pursuant to Section 8.1(e) hereof, but only because of the failure of one or more of the conditions specified in paragraphs (c), (e), (f), (g) or (j) of Annex A; (iii) Company shall have exercised its right to terminate this Agreement pursuant to Section 8.1(g). (iv) Any person or group other than Parent or an affiliate thereof, shall have acquired at least 50% of the outstanding shares of Company Common Stock. (b) Company shall not be obligated to make any payment pursuant to this Section 8.3, if at the time such payment becomes due Parent or Purchaser is in material breach of its obligations under this Agreement. 8.4. Amendment. This Agreement may be amended by the parties hereto --------- only in a writing signed on behalf of each of them, at any time before or after approval of the Agreement by the stockholders of Company, but after such approval no amendment shall be made which alters the rate at which shares of Company Common Stock shall be converted into Merger Consideration pursuant to Section 1.6 without the further approval of the stockholders of Company other than Parent. 8.5. Waiver. Any term or provision of this Agreement (other than the ------ requirements for approval by the stockholders of Company) may be waived in writing at any time by the party which is, or whose stockholders are, entitled to the benefits thereof. IX. GENERAL PROVISIONS ------------------ 9.1. Definitions. As used in the Agreement, the following terms ----------- have the following respective meanings: Board: as defined in the recitals. ----- Certificate of Merger: as defined in Section 2.5. --------------------- 32 Certificates: as defined in Section 2.8(b). ------------ Code: as defined in Section 2.9. ---- Company: as defined in the first paragraph of this Agreement. ------- Company Common Stock: as defined in the recitals. -------------------- Company Group Plans: as defined in Section 3.14. ------------------- Company Interim Financials: as defined in Section 3.6(b). -------------------------- Company Plans: as defined in Section 3.14. ------------- Company Stock Option Plans: as defined in Section 2.9. -------------------------- Dissenting Shares: as defined in Section 2.6(d). ----------------- Effective Time: as defined in Section 2.5. -------------- ERISA: the Employee Retirement Income Security Act of 1974, as ----- amended. ERISA Affiliate: means an organization that is a member of a --------------- controlled group of organizations within the meaning of Sections 414(b), (c), (m) or (o) of the Code which includes a particular entity. Exchange Act: as defined in Section 1.2(b). ------------ Exchange Agent: Continental Stock Transfer & Trust Company or such -------------- other a bank or trust company to be designated by Parent prior to the Effective Time to act as exchange agent. FCC: the Federal Communications Commission. --- GCL: as defined in the recitals. --- Governmental Authority: means any United States federal, state or ---------------------- local or any foreign government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal or judicial or arbitral body. HSR Act: as defined in Section 3.4. ------- Material Adverse Effect: any change or effect that, individually or in ----------------------- the aggregate with all other changes or effects, is or is reasonably likely to be materially adverse to the business, operations, properties, condition (financial or 33 otherwise), assets, liabilities or prospects of Company, when used with respect to Company, or of Parent and its Subsidiaries, taken as a whole, when used with respect to Parent. Merger: as defined in the recitals. ------ Merger Consideration: as defined in Section 2.6(a). -------------------- Minimum Condition: as defined in Section 1.1(a). ----------------- Offer: as defined in the recitals. ----- Offer Documents: as defined in Section 1.1(b). --------------- Offer to Purchase: as defined in Section 1.1(b). ----------------- Parent: as defined in the first paragraph of this Agreement. ------ Parent Common Stock: the Common Stock of Parent, par value $.01 per ------------------- share. Parent Indenture: The Indenture, dated as of June 2, 1995 and amended ---------------- and restated as of April 26, 1996, between Parent and SunTrust Bank, Central Florida, National Association (as trustee), relating to the 13 1/2% Senior Notes Due 2005 of Parent. Per Share Amount: as defined in the recitals. ---------------- Person: an individual, partnership, joint venture, corporation, ------ trust, unincorporated organization and a government or any department or agency thereof. Proxy Statement: as defined in Section 3.20. --------------- Purchaser: as defined in the first paragraph of this Agreement. --------- SEC: as defined in Section 1.1(b). --- Shares: as defined in the recitals. ------ Schedule 14D-1: as defined in Section 1.1(b). -------------- Schedule 14D-9: as defined in Section 1.2(b). -------------- Stockholders' Meeting: as defined in Section 6.1. --------------------- Stock Purchase Agreement: as defined in the recitals. ------------------------ 34 Subsidiary: with respect to any Person, any corporation or other ---------- business entity, a majority (by number of votes) of the shares of capital stock (or other voting interests) of which at the time outstanding is owned by such Person directly or indirectly through Subsidiaries. Surviving Corporation: as defined in Section 2.1. --------------------- Tax or Taxes: means all federal, state, local and foreign taxes, --- ----- duties, levies, governmental charges and assessments of any nature, including employment taxes and deductibles relating to wages, salaries and benefits and payments to subcontractors (to the extent required under applicable Tax law), and also including all interest, penalties and additions imposed with respect to such amounts. 9.2. Non-Survival of Representations, Warranties and Agreements. No ---------------------------------------------------------- representations, warranties or agreements in this Agreement or in any instrument delivered by Parent, Purchaser or Company pursuant to this Agreement shall survive the Merger. 9.3. Notices. All notices, requests, claims, demands and other ------- communications hereunder shall be in writing and shall be deemed given if delivered personally or by fax or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): if to Parent or Purchaser, a copy to: Intermedia Communications Inc. 3625 Queen Palm Drive Tampa, Florida 33619 Attention: Chief Financial Officer Telecopy: (813) 829-2470 and Kronish, Lieb, Weiner & Hellman LLP 1114 Avenue of the Americas New York, NY 10036 Attention: Ralph J. Sutcliffe, Esq. Telecopy: (212) 479-6275 if to Company, a copy to: Digex, Incorporated One Digex Plaza Beltsville, Maryland 20705 Attention: Chief Executive Officer Telecopy: (301) 847-5017 35 and Latham & Watkins 1001 Pennsylvania Avenue, N.W. Suite 1300 Washington, D.C. 20004 Attention: James F. Rogers, Esq. Telecopy: (202) 637-2201 9.4. Severability. If any term or other provision of this Agreement ------------ is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated thereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement including the Merger, be consummated as originally contemplated to the fullest extent possible. 9.5. Miscellaneous. This Agreement (including the exhibits, ------------- documents and instruments referred to herein or therein) (a) constitute the - entire agreement and supersede all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof and thereof; (b) are not intended to confer upon any other - person other than the parties hereto any rights or remedies hereunder; (c) shall - not be assigned by operation of law or otherwise, except that each of Parent and Purchaser may assign its rights and obligations hereunder without the consent of Company to one or more direct or indirect Subsidiaries of Parent (it being recognized that such an assignment shall not release or discharge the assignor from its obligations under this Agreement); and (d) shall be governed in all - respects, including validity, interpretation and effect, by the laws of the State of Delaware. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. This Agreement may be executed in two or more counterparts which together shall constitute a single instrument. 9.6. Specific Performance. The parties agree that due to the unique -------------------- subject matter of this transaction, monetary damages will be insufficient to compensate the non-breaching party in the event of a breach of any part of this Agreement. Accordingly, the parties agree that the non-breaching party shall be entitled (without prejudice to any other right or remedy to 36 which it may be entitled) to an appropriate decree of specific performance, or an injunction restraining any violation of this Agreement or other equitable remedies to enforce this Agreement (without establishing the likelihood of irreparable injury or posting bond or other security), and the breaching party waives in any action or proceeding brought to enforce this Agreement the defense that there exists an adequate remedy at law. 9.7. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES --------------------- TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY OR AGAINST IT ON ANY MATTERS WHATSOEVER, IN CONTRACT OR IN TORT, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT. [Remainder of Page Intentionally Left Blank] 37 IN WITNESS WHEREOF, Parent, Purchaser and Company have caused this Agreement to be executed by their respective duly authorized officers on the date first above written. INTERMEDIA COMMUNICATIONS INC. By: /s/ Robert M. Manning --------------------------------- Name: Robert M. Manning Title: Senior Vice President and Chief Financial Officer DAYLIGHT ACQUISITION CORP. By: /s/ Robert M. Manning -------------------------------- Name: Robert M. Manning Title: President DIGEX, INCORPORATED By: /s/ Christopher R. McCleary --------------------------------- Name: Christopher R. McCleary Title: President and Chief Executive Officer ANNEX A ------- Conditions to the Offer ----------------------- Notwithstanding any other provision of the Offer, Purchaser shall not be required to accept for payment or pay for any Shares tendered pursuant to the Offer, and may terminate or amend the Offer and may postpone the acceptance for payment of and payment for Shares tendered, if (i) the Minimum Condition shall not have been satisfied, (ii) any applicable waiting period under the HSR Act shall not have expired or been terminated prior to the expiration of the Offer, or (iii) at any time on or after the date of this Agreement, and prior to the acceptance for payment of Shares, any of the following conditions shall exist: (a) there shall have been instituted or be pending any action or proceeding before any court or governmental, administrative or regulatory authority or agency, domestic or foreign, (i) that would reasonably be expected to make illegal, materially delay or otherwise directly or indirectly restrain or prohibit the making of the Offer, the acceptance for payment of, or payment for, any Shares by Parent, Purchaser or any other affiliate of Parent, the purchase of Shares pursuant to the Stock Purchase Agreement, or the consummation of any other transaction contemplated by the Agreement, or that would reasonably be expected to result in material damages in connection with any transaction contemplated by the Agreement; (ii) that would reasonably be expected to prohibit or limit materially the ownership or operation by Company, Parent or any of their subsidiaries of all or any material portion of the business or assets of Company, or to compel Company, Parent or any of their subsidiaries to dispose of or hold separate all or any material portion of the business or assets of Company, Parent or any of their subsidiaries, as a result of the transactions contemplated by the Agreement; (iii) that would reasonably be expected to impose or confirm limitations on the ability of Parent, Purchaser or any other affiliate of Parent to exercise effectively full rights of ownership of any Shares, including, without limitation, the right to vote any Shares acquired by Purchaser pursuant to the Offer, the Stock Purchase Agreement or otherwise on all matters properly presented to Company's stockholders, including, without limitation, the approval and adoption of this Agreement and the transactions contemplated hereby; (iv) that would reasonably be expected to require divestiture by Parent, Purchaser or any other affiliate of Parent of any Shares; or (v) which otherwise is a Material Adverse Change (as defined below); (b) there shall have been any action taken, or any statute, rule, regulation, legislation, interpretation, judgment, order or injunction enacted, entered, enforced, promulgated, amended, issued or deemed applicable to (i) Parent, Company or any subsidiary or affiliate of Parent or Company or (ii) any transaction contemplated by the Agreement, by any legislative body, court, government or governmental, administrative or regulatory authority or agency, domestic or foreign, other than the routine application of the waiting period provisions of the HSR Act to the Offer, the Stock Purchase Agreement or the Merger, which is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; (c) there shall have occurred any change, condition, event or development that is a Material Adverse Change. For purposes of this Annex A, "Material Adverse Change" means any change or effect that, individually or in the aggregate with all other changes or effects, is or is reasonably likely to be materially adverse to the business, operations, properties, condition (financial or otherwise), assets, liabilities or prospects of Company, except for changes or effects that result primarily from the Offer, the contemplated Merger or the contemplated control of Company by Parent, including any action or inaction by any employee (other than a senior executive officer or director) of Company or any other third party primarily due to the Offer, the contemplated Merger or the contemplated control of Company by Parent; (d) there shall have occurred (i) any general suspension of, or limitation on prices for, trading in securities on the Nasdaq Stock Market for more than one trading day, (ii) any decline, measured from the date hereof, in the Standard & Poor's 500 Index by an amount in excess of 25%, (iii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iv) any direct material limitation (whether or not mandatory) by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, on the extension of credit by banks or other lending institutions, (v) a commencement of a war or armed hostilities or other national or international calamity directly or 2 indirectly involving the United States or (vi) in the case of any of the foregoing existing on the date hereof, a material acceleration or worsening thereof; (e) (i) it shall have been publicly disclosed or Purchaser shall have otherwise learned that beneficial ownership (determined for the purposes of this paragraph as set forth in Rule 13d-3 promulgated under the Exchange Act) of 30% or more of the then outstanding Shares has been acquired by any person other than Parent or any of its affiliates or other than those persons executing the Stock Purchase Agreement or (ii) (A) the Board or any committee thereof shall have withdrawn or modified in a manner adverse to Parent or Purchaser the approval or recommendation of the Offer, the Merger or the Merger Agreement, or approved or recommended any takeover proposal or any other acquisition of Shares other than the Offer and the Merger, (B) any corporation, partnership, person or other entity or group shall have entered into a definitive agreement or an agreement in principle with Company with respect to a tender offer or exchange offer for any Shares or a merger, consolidation or other business combination with or involving Company or (C) the Board or any committee thereof shall have resolved to do any of the foregoing; (f) any representation or warranty of Company in the Merger Agreement which is qualified as to materiality shall not be true and correct or any such representation or warranty that is not so qualified shall not be true and correct in any material respect, in each case as if such representation or warranty was made as of such time on or after the date of this Agreement (other than representations or warranties made as of a specific date, which shall only be made as of such date); provided, that for purposes of this -------- paragraph (f), the term "Material Adverse Change" shall be substituted for the term "Material Adverse Effect" in all representations and warranties containing such term which are deemed to be made after the date of this Agreement by virtue of this paragraph (f), and Company shall not have delivered to Parent a certificate of Company to such effect signed by a duly authorized officer thereof and dated as of the date on which Parent shall first accept Shares for payment; (g) Company shall have failed to perform in any material respect any obligation or to comply in any material respect with any agreement or covenant of Company to be performed or complied with by it under 3 the Merger Agreement and, in the case of failures to perform any agreement or covenant of Company pursuant to Sections 5.1 (b), (c), (d) and (f) of the Merger Agreement, such failure to perform would reasonably be expected to have a Material Adverse Change; (h) the Merger Agreement shall have been terminated in accordance with its terms; (i) Purchaser and Company shall have agreed that Purchaser shall terminate the Offer or postpone the acceptance for payment of or payment for Shares thereunder; (j) any holder of options to purchase shares of Company Common Stock (other than Clyde Heintzelman) whose options vest on a change of control shall have failed to waive the vesting of such options upon a change of control of Company; which, in the reasonable judgment of Purchaser in any such case, and regardless of the circumstances (including any action or inaction by Parent or any of its affiliates) giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of Purchaser and Parent and may be asserted by Purchaser or Parent regardless of the circumstances giving rise to any such condition or may be waived by Purchaser or Parent in whole or in part at any time and from time to time in their sole discretion. The failure by Parent or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right; the waiver of any such right with respect to particular facts and other circumstances shall not be deemed a waiver with respect to any other facts and circumstances; and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. 4 EX-99.(C)(2) 12 STOCK PURCHASE AGREEMENT EXHIBIT 99.(c)2 EXECUTION COPY STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT, dated as of June 4, 1997 (this "Agreement"), among INTERMEDIA COMMUNICATIONS INC., a Delaware corporation ("Purchaser"), and --------- the individuals and entities whose names and addresses are set forth at the foot of this Agreement (collectively, the "Stockholders", and each, individually, a ------------ "Stockholder"), it being understood that the Stockholders are executing this - ------------ Agreement in their capacity as stockholders of the Company (as defined below) and not in their capacity as directors and officers of the Company. WHEREAS, Purchaser and its wholly owned subsidiary, Daylight Acquisition Corp. (the "Subsidiary"), propose to enter into an Agreement and Plan of Merger, ---------- dated as of the date hereof (the "Merger Agreement"), with DIGEX, Incorporated, ---------------- a Delaware corporation (the "Company"), which Merger Agreement provides, among ------- other things, for the acquisition of the Company by Subsidiary through (i) a tender offer (the "Offer") for any and all shares of Common Stock of the ----- Company, par value $.01 per share ("Company Common Stock") for $13.00 per share -------------------- (the "Per Share Amount") and (ii) the second step merger pursuant to which ---------------- Subsidiary will merge with and into the Company (the "Merger") and all ------ outstanding shares of Company Common Stock other than shares held by Purchaser and Subsidiary will be converted into the right to receive not less than the Per Share Amount in cash; and WHEREAS, as of the date hereof, the Stockholders own (both beneficially and of record) the number of shares of Company Common Stock set forth opposite their respective names at the foot of this Agreement; and WHEREAS, as a condition to the willingness of Purchaser and the Subsidiary to enter into the Merger Agreement, Purchaser and the Subsidiary have required that the Stockholders agree, and in order to induce Purchaser and the Subsidiary to enter into the Merger Agreement, the Stockholders have agreed, to enter into this Agreement governing the voting and disposition of the shares of Company Common Stock now owned and which may hereafter be acquired by any of the Stockholders (the "Shares"). ------ NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereto hereby agree as follows: 1. Tender of Shares Pursuant to the Offer. Each Stockholder hereby -------------------------------------- irrevocably agrees to tender and sell (and not withdraw), pursuant to and in accordance with the terms of the Offer as amended from time to time, all of such Stockholder's Shares (provided, that the consideration offered in any -------- such amendment is in cash and in an amount equal to the Per Share Amount). 2. Grant of Option. Each Stockholder hereby grants to Purchaser an exclusive --------------- and irrevocable option (each an "Option", and together the "Options") to ------ ------- purchase from such Stockholder any and all Shares held by such Stockholder (the "Option Shares") at a price equal to the Per Share Amount per Option ------------- Share. Purchaser may assign to any subsidiary or affiliate of Purchaser (including Subsidiary) the right to exercise the Option. Each Option may be exercised individually from each Stockholder, in whole or in part, at any time or from time to time, on or after the date hereof and prior to the Termination Date (as defined below). No Stockholder shall, prior to the termination of the Option, take, or refrain from taking, any action which would have the effect of preventing or disabling such Stockholder from delivering the Option Shares or otherwise performing its obligations under this Agreement. In the event Purchaser wishes to purchase any Option Shares from any Stockholder, the following procedures shall be followed: (a) Purchaser shall send a written notice to such Stockholder specifying the number of Option Shares Purchaser will purchase and the place and date (on or before the later of ten business days from the date such notice is mailed and the date of expiration or termination of any applicable waiting period under Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act")) of closing of such ------- purchase. If such closing is to occur sooner than two business days from the date such notice is mailed, notice shall also be given at the time such written notice is given by telephone or telecopy. (b) At the closing of such purchase, (i) Purchaser (or any affiliate or subsidiary of Purchaser) shall pay to such Stockholder the aggregate price for the Option Shares so purchased by certified or cashier's check or wire transfer of immediately available funds and (ii) such Stockholder shall deliver to Purchaser (or, at the option of Purchaser, an affiliate or subsidiary of 2 Purchaser) a certificate or certificates, duly endorsed in blank or accompanied by stock powers duly executed in blank, representing the number of Option Shares purchased. 3. Voting of Shares. Each Stockholder shall, until the Termination Date, cause ---------------- the Shares owned by such Stockholder to be voted at any meeting of the stockholders of the Company or in any consent in lieu of such a meeting in favor of the consummation of the transactions contemplated by the Merger Agreement, against any transactions inconsistent therewith, and as otherwise reasonably requested by Purchaser in order to carry out the purposes of the Merger Agreement. For the purposes of this Agreement, "Termination Date" ---------------- shall mean the earlier of (i) the termination of the Merger Agreement in accordance with its terms, (ii) the Effective Time (as defined in the Merger Agreement), and (iii) the termination of this Agreement by the mutual written agreement of the parties hereto or pursuant to the terms of Section 10 of this Agreement. 4. Irrevocable Proxy. Each Stockholder hereby irrevocably appoints Purchaser, ----------------- until the Termination Date, as its attorney and proxy pursuant to the provisions of Section 212 of the General Corporation Law of the State of Delaware, with full power of substitution, to vote and take other actions (by written consent or otherwise) in favor of the consummation of the transactions contemplated by the Merger Agreement, against any transactions inconsistent therewith, and as otherwise reasonably required in order to carry out the purposes of the Merger Agreement, with respect to the Shares (and all other securities issued to the Stockholder in respect of the Shares) which each Stockholder is entitled to vote at any meeting of stockholders of the Company (whether annual or special and whether or not an adjourned or postponed meeting) or in respect of any consent in lieu of any such meeting or otherwise. This proxy and power of attorney is irrevocable and coupled with an interest in favor of Purchaser. Each Stockholder hereby revokes all other proxies and powers of attorney with respect to the Shares (and all other securities issued to the Stockholder in respect of the Shares) which it may have heretofore appointed or granted, and no subsequent proxy or power of attorney shall be given or written consent executed (and if given or executed, shall not be effective) by the Stockholder with respect thereto. 3 5. No Disposition or Encumbrance of Shares. Each Stockholder hereby covenants ------------------------------------- and agrees that, until the expiration of the Options as provided in Section 2 of this Agreement, except as contemplated by this Agreement, the Stockholder shall not, and shall not offer or agree to, sell, transfer, tender, assign, hypothecate or otherwise dispose of, or create or permit to exist any security interest, lien, claim, pledge, option, right of first refusal, agreement, limitation on the Stockholder's voting rights, charge or other encumbrance of any nature whatsoever with respect to the Shares. 6. No Solicitation of Transactions. Each Stockholder shall not, directly or ------------------------------- indirectly, through any agent or representative or otherwise, (i) solicit, initiate or encourage the submission of any proposal or offer from any individual, corporation, partnership, limited partnership, syndicate, person (including, without limitation, a "person" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934 as amended), trust, association or entity or government, political subdivision, agency or instrumentality of a government (collectively, other than Purchaser and any affiliate of Purchaser, a "Person") relating to (a) any acquisition or purchase of all or ------ any of the Shares or (b) any acquisition or purchase of all or any portion of the assets of, or any equity interest in, the Company or any subsidiary of the Company or any business combination with the Company or any subsidiary of the Company or (ii) participate in any negotiations regarding, or furnish to any Person any information with respect to, or otherwise cooperate in any way with, or assist or participate or facilitate or encourage, any effort or attempt by any Person to do or seek any of the foregoing. Each Stockholder immediately shall cease and cause to be terminated all existing discussions or negotiations of the Stockholder and its agents or other representatives with any Person conducted heretofore with respect to any of the foregoing. Each Stockholder shall notify Purchaser promptly if any such proposal or offer, or any inquiry or contact with any Person with respect thereto, is made and shall, in any such notice to Purchaser, indicate in reasonable detail the identity of the Person making such proposal, offer, inquiry or contact and the terms and conditions of such proposal, offer, inquiry or contact. The provisions of this Section 4 shall not apply to or restrict any action that may be taken by the Stockholder in its capacity as an officer or director of the Company. 4 7. Legend on Certificates. The certificate(s) evidencing the Shares shall be ---------------------- endorsed with a restrictive legend substantially as follows: The shares evidenced by this certificate are subject to a stock purchase agreement dated as of June 4, 1997 between the registered holder hereof and Intermedia Communications Inc., a copy of which is on file at the principal office of the Company. The holder of this certificate, by his acceptance hereof, agrees to be bound by all the terms of such agreement, as the same is in effect from time to time. 8. Representations and Warranties of the Stockholders. Each Stockholder hereby -------------------------------------------------- severally represents and warrants with respect to itself and its ownership of the Shares to Purchaser and the Subsidiary as follows: (a) Authority Relative to this Agreement. The Stockholder has all ------------------------------------ necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Stockholder and the consummation by the Stockholder of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of the Stockholder. This Agreement has been duly and validly executed and delivered by the Stockholder and, assuming the due authorization, execution and delivery by Purchaser, constitutes a legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, except that such enforceability may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally. (b) No Conflict. The execution and delivery of this Agreement by the ----------- Stockholder does not, and the performance of this Agreement by the Stockholder will not, (i) require any consent, approval, authorization or permit of, or filing with or notification to (other than pursuant to the HSR Act and the Securities Exchange Act of 1934, as amended), any governmental or regulatory authority, domestic or foreign, (ii) conflict with or violate the Certificate of Incorporation or By-laws of the Stockholder, (iii) conflict with or violate any law, rule, regulation, order, judgment 5 or decree applicable to the Stockholder or by which any property or asset of the Stockholder is bound, or (iv) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance of any nature whatsoever on any property or asset of the Stockholder pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Stockholder is a party or by which the Stockholder or any property or asset of the Stockholder is bound. (c) Title to the Shares. The Shares owned by the Stockholder (as set ------------------- forth on the signature pages hereto) are all the equity securities of the Company owned, either of record or beneficially, by the Stockholder. The Stockholder owns all such Shares free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on the Stockholder's voting rights, charges and other encumbrances of any nature whatsoever, and, except as provided in this Agreement, the Stockholder has not appointed or granted any proxy, which appointment or grant is still effective, with respect to the Shares. (d) Brokers. Other than Friedman, Billings, Ramsey & Co., Inc., no ------- broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Stockholder. 9. Representations and Warranties of Purchaser. Purchaser hereby represents ------------------------------------------- and warrants to the Stockholders as follows: (a) Purchaser has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by Purchaser and the consummation of the transactions contemplated hereby have been duly authorized by 6 all necessary action on the part of Purchaser. This Agreement has been duly and validly executed and delivered by Purchaser and, assuming the due authorization, execution and delivery by the Stockholders, constitutes a legal, valid and binding obligation of Purchaser, enforceable against the Purchaser in accordance with its terms, except that such enforceability may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally. (b) No Conflict. The execution and delivery of this Agreement by ----------- Purchaser does not, and the performance of this Agreement by Purchaser will not, (i) require any consent, approval, authorization or permit of, or filing with or notification to (other than pursuant to the HSR Act and the Securities Exchange Act of 1934, as amended), any governmental or regulatory authority, domestic or foreign, (ii) conflict with or violate the Certificate of Incorporation or By-laws of Purchaser, (iii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to Purchaser or by which any property or asset of Purchaser is bound, or (iv) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance of any nature whatsoever on any property or asset of Purchaser pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Purchaser is a party or by which Purchaser or any property or asset of Purchaser is bound. (c) Brokers. Other than Bear, Stearns & Co., Inc., no broker, finder or ------- investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of Purchaser. 10. Termination of Agreement. Purchaser reserves the right in its sole ------------------------ discretion at any time hereafter to terminate this Agreement, the Options and all irrevocable proxies granted to it hereunder. 7 11. Miscellaneous. ------------- (a) Expenses. Except as otherwise provided herein or in the Merger -------- Agreement, all costs and expenses incurred in connection with the transactions contemplated by this Agreement shall be paid by the party incurring such expenses. (b) Further Assurances. Purchaser and the Stockholders will execute and ------------------ deliver all such further documents and instruments and take all such further action as may be necessary in order to consummate the transactions contemplated hereby. (c) Specific Performance. The parties hereto agree that irreparable -------------------- damage would occur in the event any of the provisions of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy to which they may be entitled at law or in equity. (d) Entire Agreement. This Agreement constitutes the entire agreement ---------------- between Purchaser and the Stockholders with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, between Purchaser and the Stockholders with respect to the subject matter hereof. (e) Assignment. This Agreement shall not be assigned by operation of law ---------- or otherwise, except that Purchaser may assign all or any of its rights and obligations hereunder to any affiliate of Purchaser, provided that no such assignment shall relieve Purchaser of its obligations hereunder if such assignee does not perform such obligations. (f) Obligations of Successors; Parties in Interest. This Agreement shall ---------------------------------------------- be binding upon, inure solely to the benefit of, and be enforceable by, the successors and permitted assigns of the parties hereto. Nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement. 8 (g) Amendment; Waiver. This Agreement may not be amended or changed ----------------- except by an instrument in writing signed by the parties hereto. Any party hereto may (i) extend the time for the performance of any obligation or other act of the other party hereto, (ii) waive any inaccuracy in the representations and warranties contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any agreement or condition contained herein. Any such extension or waiver shall be valid if set forth in an instrument in writing signed by the party or parties to be bound thereby. (h) Severability. The invalidity or unenforceability of any provision of ------------ this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. (i) Notices. All notices, requests, claims, demands and other ------- communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, telecopy, telegram or telex or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 8(i)): 9 if to Purchaser: Intermedia Communications Inc. 3625 Queen Palm Drive Tampa, FL 33619 Attention: Chief Financial Officer Telecopy: (813) 829-2470 with a copy to: Kronish, Lieb, Weiner & Hellman LLP 1114 Avenue of the Americas New York, New York 10036 Attention: Ralph J. Sutcliffe, Esq. Telecopy: (212) 997-3527 if to any Stockholder: at the respective addresses of such Stockholder set forth at the foot of this Agreement (j) Governing Law. This Agreement shall be governed by, and construed in ------------- accordance with, the laws of the State of Delaware applicable to contracts executed in and to be performed in that State. (k) Headings. The descriptive headings contained in this Agreement are -------- included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. (l) Parties in Interest. This Agreement shall be binding upon and inure ------------------- solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement. (m) Counterparts. This Agreement may be executed in one or more ------------ counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. (n) WAIVER OF JURY TRIAL. EACH PARTY HERETO WAIVES ANY RIGHT IT MIGHT -------------------- HAVE TO A JURY TRIAL OF ANY DISPUTE ARISING IN CONNECTION WITH THIS AGREEMENT. 10 IN WITNESS WHEREOF, Purchaser has caused this Agreement to be executed by its officers thereunto duly authorized and the Stockholders have duly executed this Agreement, as of the date first written above. PURCHASER: - --------- INTERMEDIA COMMUNICATIONS INC. By: /s/ Robert M. Manning ------------------------- Name: Robert M. Manning Title: Senior Vice President and Chief Financial Officer
SHAREHOLDERS: NUMBER OF SHARES OWNED: - ------------ ----------------------- GROTECH PARTNERS IV, L.P. 1,438,361 ------------- By: GROTECH CAPITAL GROUP IV, LLC General Partner By: /s/ Frank A. Adams ------------------------------- Name: Frank A. Adams Title: President & CEO Address: 9690 Deereco Road Timonium, MD 21093 Telecopy: 410-560-1910 GROTECH PARTNERS III, L.P. 229,050 ------------- By: Grotech Capital Group, Inc. General Partner By: /s/ Frank A. Adams ------------------------------- Name: Frank A. Adams Title: President & CEO Address: 9690 Deereco Road Timonium, MD 21093 Telecopy: 410-560-1910
[Signature Pages Continue on Next Page] GROTECH III COMPANION FUND, L.P. 24,952 ------------- By: Grotech Capital Group, Inc. General Partner By: /s/ Frank A. Adams ------------------------------- Name: Frank A. Adams Title: President & CEO Address: 9690 Deereco Road Timonium, MD 21093 Telecopy: 410-560-1910 GROTECH III PENNSYLVANIA FUND, L.P. 14,228 ------------- By: Grotech Capital Group, Inc. General Partner By: /s/ Frank A. Adams ------------------------------- Name: Frank A. Adams Title: President & CEO Address: 9690 Deereco Road Timonium, MD 21093 Telecopy: 410-560-1910 VENROCK ASSOCIATES 794,229 ------------- By: /s/ Ray A. Rothrock ------------------------------- Name: Ray A. Rothrock Title: General Partner Address: 30 Rockefeller Plaza, Room 5508 New York, New York 10112 Telecopy: 212-649-5788 (F) 212-649-5786 (P)
[Signature Pages Continue on Next Page] VENROCK ASSOCIATES II, L.P. 382,051 ------------- By: /s/ Ray A. Rothrock ------------------------------- Name: Ray A. Rothrock Title: General Partner Address: 30 Rockefeller Plaza, Room 5508 New York, New York 10112 Telecopy: 212-649-5788 (F) 212-649-5786 (P) SOUTHERN VENTURE FUND II, L.P. 840,198 ------------- By: /s/ William F. Earthman III ------------------------------- Name: William F. Earthman III Title: General Partner Address: 310 25th Avenue N. Nashville, TN 37205 Telecopy: 615-329-9237 BLUE CHIP CAPITAL FUND LIMITED 429,285 PARTNERSHIP ------------- By: BLUE CHIP VENTURE COMPANY General Partner By: /s/ John H. Wyant ------------------------------- Name: John H. Wyant Title: President Address: 2000 PNC Court Cincinatti, OH 45208 Telecopy: 513-723-2306 DIGEX INVESTORS, LTD. 107,321 ------------- By: /s/ Stephen E. Kaufman ------------------------------- Name: Stephen E. Kaufman Title: President Address: 441 Vine Street, Suite 3900 Cincinatti, OH 45202 Telecopy: 513-381-8808
[Signature Pages Continue on Next Page] DOUGLAS E. HUMPHREY 970,744 ------------- /s/ Douglas E. Humphrey ------------------------------- Address: 308 Montgomery Street Laurel, MD 20707 Telecopy: 410-792-2985 (F) 301-598-8723 (P) MICHAEL T. DOUGHNEY 647,163 ------------- /s/ Michael T. Doughney ------------------------------- Address: One Digex Plaza Beltsville, MD 20705 Telecopy: 301-419-5017 EX-99.(C)(3) 13 CONFIDENTIALITY AGREEMENT DATED MARCH 27, 1997 EXHIBIT 99.(c)(3) March 27, 1997 Christopher R. McCleary Digex Inc. 6800 Virginia Manor Road Beltsville, Maryland 20705 Personal and Confidential - ------------------------- Dear Mr. McCleary: The undersigned (the "Company") and you ("Digex") are about to engage in exploratory discussions regarding a possible acquisition by the Company of, or Investment by the company in Digex or a similar transaction (any of the foregoing, a "Transaction"). The Company and Digex have each requested the right to review various non-public information regarding the other (any such information, written or oral, regarding the Company, including any of its direct or indirect subsidiaries, "Company Evaluation Material" and any such information, written or oral, regarding Digex, including any of its direct or indirect subsidiaries ("Digex Evaluation Material"). The Company hereby undertakes with respect to the Digex Evaluation Material, and Digex hereby undertakes with respect to the Company Evaluation Material, and each of the Company and Digex otherwise agrees as follows: 1. The Evaluation Material will be used solely for the purpose of evaluating a possible Transaction, and until two (2) years from the data hereof, such Evaluation Material will be kept strictly confidential by the Company or Digex, as the case may be, and their respective affiliates, directors, officers, employees, advisors (including Bear, Stearns & Co. Inc. who has been retained by the Company to act on its behalf), agents or controlling persons (such affiliates and other persons being herein referred to collectively as "Representatives", except that the Evaluation Material or portions thereof may be disclosed to Representatives who need to know such information for the purpose of evaluating a possible Transaction (it being understood that prior to such disclosure Representatives will be informed of the confidential nature of the Evaluation Material and shall agree to be bound by this Agreement). The Company and Digex agree to be responsible for any breach of this Agreement by their respective Representatives. 2. The term "Evaluation Material" does not include any information which (i) at the time of disclosure or thereafter is generally known by the public (other than as a result of its disclosure by the Company or Digex or their respective Representatives) or (ii) was or becomes available to the Company or Digex, as the case may be, on a non-confidential basis from a person not to the knowledge of the Company or Digex, as the case may be, otherwise bound by a confidentiality agreement with the other and who is not, to the knowledge of the Company or Digex, as the case may be, otherwise prohibited from transmitting the information to the Company or Digex, as the case may be, or (iii) is independently developed by the Company or Digex, as the case may be, or their respective Representatives. As used in this Agreement, the term "person" shall be broadly interpreted to include, without limitation, any corporation, company, joint venture, partnership or individual and the term "affiliate" shall have the meaning set forth in Rule 144 issued under the securities Act of 1933. 3. In the event the Company, Digex or their respective Representatives are required by applicable law or regulation or by legal process to disclose any Evaluation Material, each agrees to (i) immediately notify the other of the existence, terms and circumstances surrounding such a request, and (ii) consult with the other on the advisability of taking legally available steps to resist or narrow such request. 4. Prior to the earlier of two (2) years from the date hereof or the completion of a Transaction, unless otherwise required by law in the opinion of outside counsel, neither the Company nor Digex will, without the prior written consent of the other, disclose to any person either the fact that discussions or negotiations are taking place concerning a possible Transaction, or any of the terms, conditions or other facts with respect to any such possible Transaction, including the status thereof and the fact that the Evaluation Material has been made available to the Company or Digex. 5. The Company and Digex each herby acknowledges that it is aware, and that it will advise its Representatives who receive the Evaluation Material, that the United States securities laws prohibit any person who has material, non-public information concerning the matters which are the subject of this Agreement from purchasing or selling securities of the other (and options, warrants and rights relating thereto) or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person including, without limitation any of its Representatives, is likely to purchase or sell such securities. 6. Neither the Company nor any or its Representatives, on the one hand, nor Digex or any of its Representatives, on the other hand, is making any representation or warranty hereunder, express or implied, as to the 2 accuracy or completeness of the Company Evaluation Material or Digex Evaluation Material, respectively, or any other information provided pursuant hereto. Neither party, nor any of their respective affiliates, Representatives, officers, director, employees, agents or controlling persons (within the meaning of the 1934 Act) shall have any liability hereunder to the other or any other person (including, without limitation, any of its Representatives) resulting from use of the Evaluation Material. 7. The Company and Digex agree that unless and until a definitive agreement with respect to any Transaction has been executed and delivered, neither party will be under any legal obligation of any king whatsoever with respect to such a Transaction by virtue of (i) this Agreement or (ii) any written or oral expression with respect to such a Transaction except, in the case of this Agreement, for the matters specifically agreed to herein. 8. Neither party has granted the other any license, copyright, or similar right with respect to any of the Evaluation Material or any other information provided pursuant hereto. 9. Upon determining not to proceed with a Transaction, the Company or Digex, as the case may be, will promptly advise the other of that determination in writing. In that event or at any time requested by either the Company or Digex, all Evaluation Material, including all copies, reproductions, summaries extracts therefor or based thereon, previously provided to the other shall be returned or be certified in writing to have been destroyed. 10. In consideration of the due diligence effort to be performed by the Company and the expenses to be incurred by the Company in connection therewith, Digex hereby agrees that for the period from the date of this letter through April 30, 1997 and, if a definitive agreement for a Transaction is executed prior thereto, through the date such definitive agreement is consummated or abandoned in accordance with its terms without default by Digex, neither Digex nor any of its officers, directors or shareholders on behalf of Digex will solicit any offer for a sale of Digex all or any substantial part of its business or assets or any equity securities issued by Digex or any subsidiary of Digex nor engage in any negotiations or permit exploratory due diligence regarding any such offer, other than with the Company. 11. The Company and Digex shall be entitled to equitable relief by way of injunction for any breach or threatened breach of any of the provisions of this Agreement by the other. 3 12. The validity and interpretation of this Agreement shall be governed by and construed and enforced in accordance with, the laws of the State of New York applicable to agreements made and to be fully performed therein (excluding the conflicts of laws rules). The Company and Digex irrevocably submit to the jurisdiction of any court of the State of New York or the United States District Court of the Southern District of the State of New York for the purpose of any suit, action, or other proceeding arising out of this Agreement, or any of the agreements or transactions contemplated hereby, which is brought by or against it and (i) hereby irrevocably agree that all claims in respect of any such suit, action or proceeding may be heard and determined in any such court, (ii) to the extent that either the Company or Digex has acquired, or hereafter may acquire, any immunity from jurisdiction of any such court or from any legal process therein, it hereby waives to the fullest extent permitted by law, such immunity and (iii) agrees not to commence any action, suit or proceeding relating to this Agreement or any Transaction except in such court. Each of the Company and Digex herby waives, and agrees not to assert in any such suit, action or proceeding, in each case, to the fullest extent permitted by applicable law, any claim that (a) it is not personally subject to the jurisdiction of any such court, (b) it is immune from any legal process (whether through service or notice, attachment prior to judgment attachment in aid of execution, execution or otherwise) with respect to it or its property or (c) any such suit, action or proceeding is brought in an inconvenient forum. 13. The benefits of this Agreement shall inure to the respective successors and assigns of the parties and the obligations and liabilities assumed in this Agreement by the parties hereto shall be binding upon their respective successors and assigns. 14. If it is found in a final judgement by a court of competent jurisdiction (not subject to further appeal) that any term or provison hereof is invalid or unenforceable, (i) the remaining terms and provisions hereof shall be unimpaired and shall remain in full force and effect and (ii) the invalid or unenforceable provision or term shall be replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of such invalid or unenforceable term or provison. 15. This Agreement embodies the entire agreement and understanding of the parties hereto and supersedes any and all prior agreements, arrangements and understandings relating to the matters provided for herein. No alteration, waiver, amendment, change or supplement hereto shall be binding or effective unless the same is set forth in a writing 4 by a duly authorized Representative of each party. 16. For the convenience of the parties, any number of counterparts of this Agreement may be executed by the parties hereto. Each such counterpart shall be, and shall be deemed to be, an original instrument, but all such counterparts taken together shall constitute one and the same Agreement. 5 This Agreement is being delivered to you in duplicate. Kindly execute and return one copy of this letter which will constitute our Agreement with respect to the subject matter of this letter. Very truly yours, INTERMEDIA COMMUNICATIONS INC. By: /s/ Robert M. Manning ------------------------------------ Robert M. Manning, Senior President Chief Financial Officer Confirmed and agreed to this 31 day of March, 1997 ---- DIGEX By: /s/ Brian Dedrald ------------------------------------ 6 EX-99.(C)(4) 14 LETTER FROM PARENT TO THE CO. DATED JUNE 4, 1997 EXHIBIT 99.(c)(4) [LOGO OF INTERMEDIA COMMUNICATIONS] INTERMEDIA COMMUNICATIONS David C. Ruberg President & CEO June 4, 1997 Mr. Christopher R. McCleary President and Chief Executive Officer DIGEX, Incorporated 6800 Virginia Manor Road Beltsville, Maryland 20705 Dear Chris: This will confirm our agreement that Intermedia Communications Inc. will consent under the provisions of the agreement and plan of merger executed by our companies tonight to the grant by DIGEX of options to purchase up to two hundred thousand shares of DIGEX common stock at an exercise price of $3.00 per share to members of the DIGEX management team in amounts to be determined by mutual agreement between us prior to the consummation of the contemplated tender offer. The options to be granted will have a five year vesting schedule. Sincerely, /s/ David C. Ruberg David C. Ruberg Chairman, President & CEO DCR/bps 3625 Queen Palm Drive Tampa, Florida 33619 (813) 744-2401 -----END PRIVACY-ENHANCED MESSAGE-----