-----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, SH7wfaJsQHNP2RGpoVXa8P6gqNQzQQsUrzwQL/eM0tPIIBCPsCKcXWcTW9B8qtI7 +8Cwsl/VdmyCVnU1RAhl1w== /in/edgar/work/0000950123-00-009368/0000950123-00-009368.txt : 20001016 0000950123-00-009368.hdr.sgml : 20001016 ACCESSION NUMBER: 0000950123-00-009368 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20001002 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20001013 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERMEDIA COMMUNICATIONS INC CENTRAL INDEX KEY: 0000885067 STANDARD INDUSTRIAL CLASSIFICATION: [4813 ] IRS NUMBER: 592913586 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-20135 FILM NUMBER: 739790 BUSINESS ADDRESS: STREET 1: 3625 QUEEN PALM DR STREET 2: STE 720 CITY: TAMPA STATE: FL ZIP: 33619 BUSINESS PHONE: 8138290011 MAIL ADDRESS: STREET 1: ONE INTERMEDIA WAY CITY: TAMPA STATE: FL ZIP: 33647 FORMER COMPANY: FORMER CONFORMED NAME: INTERMEDIA COMMUNICATIONS OF FLORIDA INC DATE OF NAME CHANGE: 19930328 8-K 1 y41333e8-k.txt INTERMEDIA COMMUNICATIONS INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ----------------------- Date of Report (Date of earliest event reported): October 2, 2000 - ------------------------------------------------------------------------------- Intermedia Communications Inc. (Exact name of registrant as specified in its charter) - ------------------------------------------------------------------------------- Delaware 59-2913586 -------- ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number)
0-20135 ------- (Commission File Number) One Intermedia Way Tampa, FL 33647 (Address of principal executive offices) (813) 829-0011 (Telephone Number) 2 ITEM 5. Other Events On September 1, 2000, Intermedia Communications Inc. entered into a Merger Agreement (the "Merger Agreement") with WorldCom, Inc. The following complaints, attached hereto as Exhibits 99.1 through 99.5, have been filed in connection with the Merger Agreement and are incorporated herein. ITEM 7. Financial Statements and Exhibits Exhibit 99.1 Turberg v. Intermedia Communications Inc., et al., 18322-NC 99.2 TCW Technology Ltd. Partnership v. Intermedia Communications 18336-NC 99.3 Kansas Public Employees Retirement System v. Intermedia Communications Inc., et al., 18390-NC 99.4 Taam Associates v. Intermedia Communications Inc., et al., 18291-NC 99.5 Amrita Sinha v. Ruberg, et al., 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: October 12, 2000 INTERMEDIA COMMUNICATIONS, INC. (Registrant) /s/ ROBERT M. MANNING ------------------------------------- Senior Vice President and Chief Financial Officer EX-99.1 2 y41333ex99-1.txt TURBERG CLASS ACTION COMPLAINT 1 IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - --------------------------------------x x THOMAS TURBERG, x x Plaintiff, x x -against- x Civil Action No. 18322 x INTERMEDIA COMMUNICATIONS INC., x DAVID C. RUBERG, PHILIP A. CAMPBELL, x JOHN C. BAKER, GEORGE F. KNAPP, x JACK E. REICH, MARK K. SHULL, x ROBERT M. MANNING, RICHARD A. JALKUT, x DIGEX, INC., AND WORLDCOM, INC. x x x Defendants. x x - --------------------------------------x CLASS ACTION COMPLAINT Plaintiff, by his attorneys, alleges upon information and belief, except as to paragraph 1 which plaintiff alleges upon knowledge, as follows: 1. Plaintiff Thomas Turberg is a shareholder of defendant Digex, Inc. ("Digex"). 2. Defendant Digex is a Delaware corporation with principal executive offices located at One Digex Plaza, Beltsville, Maryland 20705. Digex provides website hosting services to business and organizations implementing complex, interactive websites and web-based applications. 3. Defendant Intermedia Communications Inc. ("Intermedia" or the "Company") is a Delaware corporation with principal executive offices located at One Intermedia Way, Tampa, 2 Florida 33647. Intermedia provides integrated communications services, including local, long distance, high-speed date and Internet services, to business and government customers. Intermedia owns approximately 62.0% of Digex's outstanding shares and controls approximately 94.2% of the voting interest in Digex. 4. Defendant WorldCom, Inc. ("WorldCom") is a Georgia corporation with principal executive offices located at 500 Clinton Center Drive, Clinton, Mississippi 39056. WorldCom provides a broad range of communications, outsourcing, and managed network services world wide. WorldCom regularly conducts business in the State of Delaware. 5. Defendant David C. Ruberg is the Chairman of Intermedia's Board of Directors and Intermedia's President and Chief Executive Officer. Ruberg is also the Chairman of Digex's Board of Directors. 6. Defendant Philip A. Campbell is a Director of Intermedia and a Director of Digex. 7. Defendant John C. Baker is a Director of Intermedia and a Director of Digex. 8. Defendant George F. Knapp is a Director of Intermedia and a Director of Digex. 9. Defendant Jack E. Reich is Director of Digex. 10. Defendant Mark K. Shull is a Director of Digex and the President and Chief Executive Officer of Digex. 11. Defendant Robert M. Manning is a Director of Digex and the Chief Financial Officer of Intermedia. 2 3 12. Defendant Richard A. Jalkut is a Director of Digex. 13. The individual defendants, as officers and/or directors of Digex, and Intermedia, as controlling shareholder of Digex, have a fiduciary relationship and responsibility to plaintiff and the other public shareholders of Digex and owe to them the highest obligations of good faith, loyalty, fair dealing, due care and candor. CLASS ACTION ALLEGATIONS 14. Plaintiff brings this action on his own behalf and as a class action, pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of all common shareholders of Digex, or their successors in interest, who are being and will be harmed by defendants' actions described below (the "Class"). Excluded from the Class are defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated with any of defendants. 15. This action is properly maintainable as a class action because: a. The Class is so numerous that joinder of all members is impracticable. There are hundreds of Digex shareholders of record and many more beneficial owners who are located throughout the United States. b. There are questions of law and fact which are common to the Class, including: whether Intermedia has acted in a manner calculated to benefit itself at the expense of Digex's 3 4 public shareholders; and whether plaintiff and the other members of the Class would be irreparably damaged if Intermedia is not enjoined from committing the wrongs complained of herein. c. Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. The claims of plaintiff are typical of the claims of the other members of the Class and plaintiff has the same interests as the other members of the Class. Accordingly, plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class. d. Defendants have acted or refused to act on grounds generally applicable to the Class, thereby making appropriate final injunctive relief with respect to the Class as a whole; and e. The prosecution of separate actions by individual members of the Class would create the risk of inconsistent or varying adjudications with respect to individual members of the Class which would establish incompatible standards of conduct for defendants, or adjudications with respect to individual members of the Class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests. CLAIM FOR RELIEF 16. Digex provides storage for corporate websites, and its clients include Ford Motor Co., J.P. Morgan & Co., and Martha 4 5 Stewart Living Omnimedia Inc. Intermedia sells basic phone and Internet services, and faces stiff competition from BellSouth Corp. in its primary markets. 17. In July, 1997, Intermedia bought Digex for approximately $150 million cash, and thereafter sold Digex stock to the investing public in July, 1999 and again in February, 2000. Intermedia currently owns approximately 62.0% of Digex's outstanding shares and controls approximately 94.2% of the voting interest in Digex. 18. Digex stock has significantly outperformed Intermedia. As recently as August 3, 2000, Digex stock jumped 13% after Digex raised revenue projections for 2000 and 2001. Specifically, Digex announced that second quarter 2000 sales more than tripled, and Digex raised its 2000 sales projections by 10% to $165 million for 2000 and $300 million for 2001, compared to less than $60 million in 1999 sales. Intermedia stock, by contrast has dropped 41 percent this year, and it recently announced that its 2000 sales would be 10 to 15 percent lower than analyst expectations. 19. As result of the decline in the market price of Intermedia's stock and the upswing in the market price of Digex stock, as well as Intermedia's approximately $2.4 billion in debt, the market capitalization of Intermedia as whole ($1.2 billion), was significantly less than Intermedia's stake in Digex ($3.3 billion). 5 6 20. Intermedia hired investment bankers at Bear, Stearns & Co. to explore options for Digex, including a sale. Intermedia received several offers for Digex, including one from Exodus Communications Inc. ("Exodus") at $120 per Digex share, representing a significant premium for Digex stock, which had traded recently in the mid-$80 range. 21. To rescue Intermedia from its financial woes, however, defendants refused to sell Digex alone and instead insisted that buyers acquire Intermedia instead. 22. On September 5, 2000, Intermedia and WorldCom jointly announced that the Boards of Intermedia, WorldCom and Digex had each approved a definitive merger agreement whereby WorldCom would acquire all of the outstanding shares of Intermedia common stock for $39 of WorldCom common stock, subject to a collar (the "Merger"). The Merger represents a 70% premium for Intermedia shares based on the closing price before the announcement. 23. Following the announcement of the merger agreement with WorldCom - -- which the Digex Board had approved -- the media reported that Intermedia had rejected Exodus' $120 per share offer for Digex alone. 24. The Merger offers no benefit for Digex or its shareholders. 25. Intermedia, acting through and/or with the support of the individual defendants, has appropriated for itself the benefits of a transaction that, in reality, represents WorldCom's 6 7 acquisition of control over Digex. The only reason for WorldCom to do the Merger at all is to acquire Digex. 26. Defendants have clear and material conflicts of interest and are acting to further their own interests at the expense of Digex's public shareholders. 27. Intermedia, with the acquiescence of the individual defendants, is engaging in self-dealing and not acting in good faith toward plaintiff and the other members of the Class. By reason of the foregoing, Intermedia, Digex and the individual defendants have breached and are breaching their fiduciary duties to the irreparable harm of the members of the Class. 28. As a party to the Merger, WorldCom is aware of the breaches of fiduciary duty by Intermedia and the individual defendants, and has thereby aided and abetted in the wrongs complained of herein. 29. Plaintiff has no adequate remedy at law. WHEREFORE, plaintiff prays for judgment and relief as follows: A. Ordering that this action may be maintained as a class action and certifying plaintiff as the Class representative; B. Preliminarily and permanently enjoining Defendants and all persons acting in concert with them, from proceeding with, consummating or closing the contemplated transaction; 7 8 C. In the event the contemplated transaction is consummated, rescinding it and setting it aside or awarding rescissory damages to the Class; D. Directing defendants to account to Class members for their damages sustained as a result of the wrongs complained of herein; E. Awarding plaintiff the costs of this action, including a reasonable allowance for plaintiff's attorneys' and experts' fees; and F. Granting such other and further relief as to the Court may seem just and proper. ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A. By: /s/ NORMAN M. MONHAIT ---------------------------- 919 North Market Street Suite 1401, Mellon Bank Center Wilmington, Delaware 19899 (302) 656-4433 Attorneys for Plaintiff OF COUNSEL: GOODKIND LABATON RUDOFF & SUCHAROW 100 Park Avenue 12th Floor New York, NY 10017-5563 (212) 907-0700 8 EX-99.2 3 y41333ex99-2.txt TCW TECHNOLOGY LTD. PARTNERSHIP COMPLAINT 1 IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY TCW TECHNOLOGY LIMITED ) PARTNERSHIP, on behalf of itself and ) all others similarly situated, and ) Derivatively and on behalf of Digex, Inc. ) ) Plaintiffs, ) C. A. No. 18336NC ) v. ) ) INTERMEDIA COMMUNICATIONS, ) INC., JOHN C. BAKER, PHILLIP A. ) CAMPBELL, GEORGE F. KNAPP, ) ROBERT M. MANNING, DAVID C. ) RUDBERG, and MARK K. SHULL ) ) Defendants, ) ) and ) ) DIGEX, INC. ) ) Nominal Defendant. ) PLAINTIFF'S FIRST REQUEST FOR THE PRODUCTION OF DOCUMENTS DIRECTED TO DEFENDANTS INTERMEDIA COMMUNICATIONS, INC., JOHN C. BAKER, PHILLIP A. CAMPBELL, GEORGE F. KNAPP, ROBERT M. MANNING, DAVID C. RUDBERG, AND MARK K. SHULL AND NOMINAL DEFENDANT DIGEX, INC. Plaintiff TCW Technology Limited Partnership requests that defendants Intermedia Communications, Inc., John C. Baker, Phillip A. Campbell, George F. Knapp, Robert M. Manning, David C. Rudberg and Mark K. Shull, and nominal defendant Digex, Inc., produce the documents described below for inspection and copying at the offices of Grant & Eisenhofer, 1220 North Market Street, Suite 500, Wilmington, Delaware, or at such other place as is mutually agreed upon, on such 2 date contained in the Order Granting Expedited Proceedings, or, if such Order is not granted, no later than 30 days from the service hereof. DEFINITIONS 1. "Digex" shall mean Digex, Incorporated, its directors, officers, agents, attorneys and accountants. 2. "WorldCom" shall mean WorldCom, Inc., its directors, officers, agents, attorneys and accountants. 3. "ICI" shall mean Intermedia Communications, Inc., its directors, officers, agents, attorneys and accountants. 4. "Communications" means and refers to all inquiries, discussions, conversations, negotiations, agreements, understandings, meetings, telephone conversations, letters, notes, telegrams, e-mail, advertisements, and other forms of verbal exchange, whether oral or written. 5. "Document" and "documents" are used in the broadest sense possible under Chancery Court Rule 34 and mean and include all written or graphic matter of every kind and description however produced or reproduced, whether draft or final, original or reproduction, and all tangible things within the scope of Rules 34, whether such document or documents are currently in existence or no longer in existence. Any draft of a document or non-identical copy of a document is a separate "document." "Documents" includes any information retained on digital media, such as computer files and e-mail. 6. "Person" shall mean any natural person, corporation, association, partnership, government agency, or other entity and its officers, directors, partners, employees, agents, and representatives. 2 3 7. "Relate" or "relating" shall mean consisting of, referring to, reflecting, or being in any way legally, logically, or factually connected with the matter discussed. 8. "Or" shall mean and include "and" and "and" shall mean and include "or" whenever necessary to bring within the scope of these requests any and all documents which might otherwise be construed to be outside their scope. 9. "Individual Defendants" shall mean John C. Baker, Phillip A. Campbell, George F. Knapp, Robert M. Manning, David C. Rudberg, and Mark K. Shull, as well as their representatives, agents, and assigns. 10. "Special Committee" shall mean the Special Committee of the Digex Board of Directors composed of Directors Reich and Jalkut. 11. The singular form of a word means and includes the plural and the plural form of a word means and includes the singular whenever necessary to bring within the scope of these requests any and all documents which might otherwise be construed to be outside of their scope. 12. Except for the terms defined herein, and unless another meaning is obvious from the context, the terms used herein shall have the same meaning as they have in the Complaint. INSTRUCTIONS 1. You are each requested to produce all documents not subject to an objection that are known by, possessed by, controlled by, or available to you. This duty is not limited or affected by the fact that the same document is available through another source. 2. If any document is known to exist but cannot be produced, that document is to be specifically identified as precisely as possible and the reasons for the inability to produce that document stated. 3 4 3. The relevant time period for these requests, unless otherwise indicated, is January 1, 2000 to the present. 4. With respect to any document which is withheld on a claim of privilege, you are each requested to provide a statement signed by your attorney setting forth as to each such document the following information: (a) The name(s) of the sender(s) of the document; (b) The name(s) of the author(s) of the document; (c) The name(s) of the person(s) to whom the document and copies, if any, were sent; (d) The job title of each individual identified in (a), (b), and (c) above; (e) The date of the document; (f) A brief description of the nature and subject matter of the document; and (g) The nature of the privilege or the authority which is claimed to give rise to it. DOCUMENTS REQUESTED 1. All documents evidencing, reflecting or relating to the establishment of the Special Committee, including, but not limited to, its members, the selection of its advisors, and the scope of its authority. 2. All documents evidencing, reflecting or relating to any expression of interest in or offer to purchase Digex, its assets, its shares, or any portion or combination thereof. 4 \ 5 3. All documents evidencing, reflecting or relating to any communications among Digex, the Individual Defendants, ICI, the Special Committee, and/or any person expressing interest in or offer to purchase Digex, its assets, its shares, or any portion or combination thereof. 4. All documents evidencing or reflecting the Individual Defendants' positions with ICI, including, but not limited to, the Individual Defendants' ownership of ICI stock and all compensation paid by ICI to the Individual Defendants. 5. All documents presented to the Digex Board of Directors in connection with any expression of interest in or offer to purchase Digex, its assets, its shares, or any portion or combination thereof, including, but not limited to, any valuation of Digex, its assets or its shares. 6. All documents presented to the Special Committee in connection with any expression of interest in or offer to purchase Digex, its assets, its shares, or any portion or combination thereof, including, but not limited to, any reports or presentations made by the Special Committee's advisors. 7. Copies of all minutes from all Digex Board of Directors meetings. 8. Copies of all resolutions of the Digex Board of Directors. 9. All documents evidencing, reflecting or relating to the Special Committee's findings or recommendations, including, but not limited to, any report prepared by or on behalf of the Special Committee and any presentation by or on behalf of the Special Committee to the Digex Board of Directors. 10. All documents evidencing, reflecting or relating to the Digex Board of Directors' decision to waive the applicability of 8 Del. C. section 203 to business combinations involving Digex, ICI, and/or WorldCom. 5 6 11. All documents evidencing, reflecting or relating to the agreement between ICI and WorldCom for WorldCom to acquire ICI. 12. All documents evidencing, reflecting or relating to any insurance policy or other agreement which may provide coverage for any liability that may be incurred by the Individual Defendants in connection with their service as members of the Digex Board of Directors, including, but not limited to, any such insurance policies held by ICI, and any indemnification or related agreements. 13. All documents evidencing, reflecting or relating to any communications between the Individual Defendants and ICI regarding any expression of interest in or offer to purchase Digex, its assets, its shares and/or any combination thereof. 14. All documents evidencing, reflecting or relating to any communications between the Individual Defendants and the Special Committee regarding any expression of interest in or offer to purchase Digex, its assets, its shares and/or any combination thereof. Date: October 2, 2000 /s/ Stuart M. Grant ________________________________ Stuart M. Grant Jay W. Eisenhofer GRANT & EISENHOFER, P.A. 1220 North Market Street Suite 500 Wilmington, Delaware 19801 (302) 622-7000 Attorneys for Plaintiff 7 CERTIFICATE OF SERVICE I hereby certify that on October 2, 2000 I caused two copies of the foregoing Plaintiff's First Request For The Production Of Documents Directed To Defendants Intermedia Communications, Inc., John C. Baker, Phillip A. Campbell, George F. Knapp, Robert M. Manning, David C. Rudberg, And Mark K. Shull And Nominal Defendant Digex, Inc. to be served by hand to the following: William O. LaMotte, III, Esquire Morris, Nichols, Arsht & Tunnell 1201 Market Street Wilmington, Delaware 19801 Stephen C. Norman Potter Anderson & Corroon LLP Hercules Plaza 1313 North Market Street P.O. Box 951 Wilmington, Delaware 19899 /s/ Stuart M. Grant ------------------------------ Stuart M. Grant GRANT & EISENHOFER, P.A. EX-99.3 4 y41333ex99-3.txt KANSAS PUBLIC EMPLOYEES RETIREMENT SYS. COMPLAINT 1 ================================================================================ IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY KANSAS PUBLIC EMPLOYEES ) RETIREMENT SYSTEM, on behalf of ) itself and all others similarly situated, and ) derivatively on behalf of Digex, Inc., ) ) Plaintiffs, ) ) v. ) C.A. NO. 18390 ) INTERMEDIA COMMUNICATIONS, ) INC., JOHN C. BAKER, PHILLIP A. ) CAMPBELL, GEORGE F. KNAPP, ) CLASS ACTION AND DERIVATIVE ROBERT M. MANNING, DAVID C. ) COMPLAINT RUBERG, AND MARK K. SHULL, ) ) Defendants, ) ) and ) ) DIGEX, INC., ) ) Nominal Defendant. ) - ---------------------------------------------- COMPLAINT Plaintiff Kansas Public Employees Retirement System ("KPERS"), for its complaint against the Defendants, makes the following allegations upon information and belief, except as to allegations relating to itself, which it makes upon personal knowledge. SUMMARY OF THE ACTION 1. This is a class and shareholder derivative action brought on behalf of Digex, Incorporated ("Digex") and its minority shareholders against Intermedia Communications, Inc. ("ICI"), the majority shareholder of Digex, and six (6) members of Digex's Board of Directors 1 2 (the "Individual Defendants") who have favored the interests of ICI over the interests of Digex and its minority shareholders in connection with a proposed merger between ICI and WorldCom, Inc. ("WorldCom"). Collectively ICI and the Individual Defendants are referred to as "Defendants." 2. On September 1, 2000, ICI entered into a merger agreement with WorldCom (the "Transaction"). The purpose of the Transaction from the perspective of WorldCom is not to acquire ICI, but to acquire Digex. The ICI and Digex Boards approved the Transaction, even though there reportedly were several bids outstanding for Digex, one of which is reported to value Digex at $120 per share, or more than double the stock price on September 19, 2000, the day immediately preceding the filing of this Complaint. The public shareholders of Digex receive nothing in the Transaction. 3. By entering into the transaction, the Defendants breached their fiduciary duty to the non-ICI Digex shareholders and caused ICI to usurp a corporate opportunity properly belonging to Digex. Further, the Board of Directors of Digex improperly waived the protections afforded Digex's minority shareholders by Section 203 of the DGCL, even though a Special Committee of the Digex Board had voted not to waive Section 203. Unless the Transaction is enjoined, Digex's non-ICI shareholders will be deprived of the substantial premium that a sale of Digex would provide and, instead, ICI and its shareholders will improperly appropriate the premium properly belonging to Digex's shareholders. Further, WorldCom will effectively acquire Digex at a steeply discounted price. THE PARTIES 4. Plaintiff KPERS owns, and owned at all relevant times (including the time of the actions of which KPERS complains), shares of Class A common stock of Digex. KPERS is an 2 3 umbrella organization for three pension groups providing retirement, disability, and survivor benefits for Kansas public servants and their beneficiaries: the Kansas Public Employees Retirement System, the Kansas Police and Firemen's Retirement System, and the Kansas Retirement System for Judges. 5. Defendant ICI, a Delaware corporation, was founded in 1987, and provides an array of integrated communications services, including voice and data services such as local and long distance, Internet connectivity, and advanced network access services. ICI's principal executive offices are located at One Intermedia Way, Tampa, Florida 33647-1752. ICI owns approximately 54 percent of Digex's equity interest and 94 percent of Digex's voting interest. 6. Nominal Defendant Digex is a Delaware corporation with its principal offices at One Digex Plaza, Beltsville, Maryland 20705. Digex provides Web and application hosting solutions designed exclusively for businesses that have Internet requirements tied to critical business objectives. Digex provides Web and application hosting solutions for hundreds of e-businesses, from W.W. Grainger (distributor extranet) to Forbes (online publishing). 7. Defendant David C. Ruberg ("Ruberg") is the Chairman of ICI's Board of Directors and is ICI's President and Chief Executive Officer. Ruberg also is the Chairman of Digex's Board of Directors. 8. Defendant John C. Baker ("Baker") is a Director of ICI and a Director of Digex. 9. Defendant Phillip A. Campbell ("Campbell") is a Director of ICI and a Director of Digex. 10. Defendant George F. Knapp ("Knapp") is a Director of ICI and a Director of Digex. 3 4 11. Defendant Robert M. Manning ("Manning") is a Director of Digex and the Chief Financial Officer of ICI. 12. Defendant Mark K. Shull ("Shull") is a Director, President, and Chief Executive Officer of Digex. Shull, Manning, Knapp, Campbell, Baker, and Ruberg collectively are referred to herein as the "Individual Defendants." 13. Non-defendant co-conspirator WorldCom is a Georgia corporation with its executive offices located at 500 Clinton Center Drive, Clinton, Mississippi 39056. 14. Non-defendants Jack Reich ("Reich") and Richard Jalkut ("Jalkut") are members of the Board of Directors of Digex. Jalkut and Reich are the only two members of the Digex Board who are not Officers or Directors of ICI or Officers of Digex. As such, they were named to a special committee of the Board of Digex ("Special Committee") to protect the rights of Digex's minority shareholders. In furtherance of their fiduciary duty to the minority shareholders, Jalkut and Reich voted against a key portion of the proposed Transaction. After the Special Committee rejected the key portion of the Transaction, the other Digex Directors, in violation of their fiduciary duty to the minority shareholders of Digex, overruled the Special Committee and voted to approve all aspects of the Transaction. CLASS ACTION ALLEGATIONS 15. KPERS brings this action pursuant to Rule 23 of the Rules of the Court of Chancery on behalf of itself and all other persons owning Digex Class A common stock (the "Class"). Excluded from the Class are the Defendants, as well as their affiliates and assigns. 16. This action is properly maintainable as a class action. 17. The class is so numerous that joinder of all members is impracticable. As of April 6, 2000, there were more than 24 million shares of Digex Class A shares of common stock 4 5 that are held by individuals and entities too numerous to bring separate actions. It is reasonable to assume that holders of the Class A stock are geographically dispersed throughout the United States. 18. There are questions of law and fact that are common to the Class and that predominate over questions affecting any individual class member. The common questions include, inter alia, the following: i. whether Defendants breached their fiduciary and other common law duties owed by them to Digex and to the members of the Class in voting to waive the application of Section 203 of the DGCL to any future combination of Digex and WorldCom; ii. whether Defendants breached their fiduciary and other common law duties owed by them to Digex and to the members of the Class by appropriating for ICI a corporate business opportunity properly belonging to Digex, i.e., the opportunity to sell Digex's shares at a premium in a merger or other transaction with WorldCom or another entity. iii. whether Plaintiff and the other members of the Class will be irreparably damaged if the merger between WorldCom and ICI is consummated. 19. KPERS is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. KPERS's claims are typical of the claims of the other members of the Class. Accordingly, KPERS is an adequate representative of the Class and will fairly and adequately protect the interests of the Class. 20. KPERS anticipates that there will be no difficulty in the management of this litigation as a class action. 21. Defendants have acted on grounds generally applicable to the Class with respect to the matters complained of herein, thereby making appropriate the relief sought herein with respect to the Class as a whole. 22. The prosecution of separate actions would create the risk of: 5 6 a. inconsistent or varying adjudications which would establish incompatible standards for conduct of the Defendants; and/or b. adjudications which would as a practical matter be dispositive of the interests of other members of the Class. FACTUAL BACKGROUND A. BACKGROUND ON ICI AND DIGEX 23. Digex was founded in 1996, and ICI acquired a controlling interest in Digex in July 1997. On August 4, 1999, Digex sold 11,500,000 shares of Class A common stock in its initial public offering. On February 16, 2000, Digex completed a public offering of 12,650,000 shares of Class A common stock. Digex sold 2,000,000 shares of Class A common and ICI sold 10,650,000 shares of Digex Class B common stock, which converted to Class A common at the closing of the offering. 24. Since 1996, Digex stock has significantly outperformed ICI. Digex grew at an annual compound rate of 177 percent between 1996 and 1999. Its stock performance has mirrored its economic performance. Over the last year, Digex stock price increased by more than two and one-half times, rising from $32.50 per share on September 1, 1999 to more than $84 per share on September 1, 2000. ICI stock by contrast, fell more than 13 percent over the same period, from $26.50 per share on September 1, 1999, to just under $23 per share on September 1, 2000. B. POTENTIAL SALE OF DIGEX 25. In July 2000, ICI announced that it had retained Bear, Stearns & Co. to explore strategic options, including a sale of Digex. 26. By the end of August 2000, published reports indicate that ICI had received a number of bids for Digex. The Wall Street Journal reported on September 8, 2000, that, 6 7 according to people close to ICI and Digex, Exodus Communications, Inc. ("Exodus") offered $120 a share for Digex. This represents a premium of nearly 50 percent over Digex's share price on September 1, 2000, and over a 100 percent premium to today's share price. It was reported that two or three other opportunities for a sale of Digex or both Digex and ICI were presented to ICI. C. THE TRANSACTION 27. WorldCom approached the Individual Defendants about a possible transaction which included the purchase of Digex. The Individual Defendants rejected WorldCom's offer but suggested that WorldCom should buy ICI and thereby gain control of Digex. ICI and the Individual Defendants usurped a corporate opportunity belonging to Digex, which came to the Individual Defendants' attention solely because of their position as directors of Digex. 28. Despite the existence of highly valuable offers for Digex, the Individual Defendants, in derogation of their fiduciary duties to Digex, rejected the pending offers for Digex and, instead, chose to pursue a sale of ICI alone to WorldCom. Pursuant to the Transaction, each share of ICI stock will be exchanged for $39 of WorldCom common stock, subject to a collar. In addition, each share of ICI preferred stock will be exchanged for WorldCom preferred shares that will have terms essentially identical to the ICI preferred shares, except that the issuer will be WorldCom. WorldCom also will acquire ICI's debt. The total value of the Transaction is approximately $6 billion ($3 billion in equity and $3 billion in debt and preferred stock). 29. ICI, acting through and/or with the support of the Individual Defendants, has appropriated for itself the benefits of a transaction that, in reality, represents WorldCom's acquisition of control over Digex. The only reason for Worldcom to enter into the Transaction is to acquire Digex. 7 8 30. According to WorldCom's Chief Executive, Bernard Ebbers ("Ebbers"), as reported in the September 6, 2000 Wall Street Journal, WorldCom plans to sell non-Digex assets of ICI in order to pay down ICI debt WorldCom is assuming under the Transaction. Ebbers stated that controlling Digex would accelerate WorldCom's capability by 12 to 18 months to participate in the lucrative managed web hosting market. 31. Digex is particularly attractive to WorldCom because WorldCom can, by driving Digex traffic to the UUNET fiber-optic system that WorldCom owns, capture a higher share of the revenue with attractive pricing plans. If the Transaction were completed, WorldCom may have an advantage over pure hosting companies like Exodus and IBM, which must purchase their communications services from others. 32. In announcing the Transaction, WorldCom explicitly stated that its purpose in consummating the Transaction was to acquire Digex. Thus, it entitled its press release: "WorldCom Gains Control Of Digex Through Merger With Intermedia." 33. The Wall Street Journal reports that persons close to the transaction have stated that from Digex's perspective "[w]hen you rank the three or four opportunities that were on the table, the WorldCom offer for Intermedia was dead last by a bunch...." 34. WorldCom, as part of the proposed ICI transaction, wanted the Digex Board to waive the minority shareholder protections set forth in Section 203 of the DGCL. That provision would preclude WorldCom from undertaking certain transactions with Digex for three years, including combining assets. 35. The Digex Board referred WorldCom's request to waive Section 203 of the DGCL to the Special Committee composed of Jalkut and Reich. Jalkut and Reich, in recognition of their duties to the minority shareholders, voted not to waive the protections of Section 203. 8 9 The Digex Board, controlled by five (5) directors affiliated with ICI and the President of Digex, overruled the Special Committee and voted to waive the protections of Section 203 in connection with the Transaction. Prior to the waiver vote, Reich and Jalkut made a recommendation to the Digex Board that any sale be delayed and that Digex solicit bids from other companies. Their recommendation was rejected. 36. On September 5, 2000, ICI and WorldCom jointly announced that the Board of ICI, WorldCom and Digex had each approved the Transaction. The Transaction represents a 70 percent premium for ICI shares based on the closing price before the announcement. 37. In reaction to the announcement of the Transaction on September 5, 2000, the Digex stock price plummeted, losing nearly 20 percent of its value over the next day, closing at $67.875 per share -- far below the $120 per share offered by Exodus. ICI shares, however, rose 38 percent in response to the announcement. 38. The Wall Street Journal reported that analysts downgraded Digex stock on the announcement since the Transaction would provide immediate benefit only to ICI shareholders, but not to Digex shareholders. 39. Currently, Digex stock trades at less than $50 a share or less than one-half the price per share offered by Exodus. DERIVATIVE ALLEGATIONS 40. Plaintiff brings this action, in part, derivatively for the benefit of Digex to redress injuries suffered and to be suffered by Digex as a direct result of the breach of fiduciary duties by Defendants. 9 10 41. Plaintiff has owned Digex common stock during the wrongful course of conduct by Defendants alleged herein and continues to own Digex common stock. 42. Plaintiff will adequately and fairly represent the interests of Digex and its shareholders in enforcing and prosecuting their rights and have retained counsel competent and experienced in stockholder's derivative litigation. DEMAND ON THE DIGEX BOARD IS EXCUSED AS FUTILE 43. Plaintiff has not made demand on the Digex Board to bring suit asserting the claims set forth herein because a majority of Digex's directors suffer from conflicts of interest and divided loyalties which preclude them from exercising independent business judgment. Four of Digex's directors -- defendants Ruberg, Campbell, Baker and Knapp -- are also directors of ICI. Defendant Ruberg is Chairman of both ICI's Board and Digex's Board. Further, a fifth director, defendant Shull, is a director of Digex and the Chief Financial Officer of ICI. ICI controls the Board of Digex and has obtained the benefit of the improper conduct alleged herein. 44. Demand on the Digex Board would be futile and useless because the Digex Board approved the WorldCom merger, permitting their loyalty to ICI to supersede their fiduciary duty of loyalty to Digex. Further, the Digex Board appointed the Special Committee to decide issues regarding the waiver of Section 203 and when the Special Committee refused to adopt the position desired by the Digex Board, the Board overruled the decision of the Special Committee. Finally, the Digex Board, after being approached by WorldCom regarding a potential acquisition of Digex, violated their fiduciary duties to Digex and its shareholders and diverted the corporate opportunity regarding the sale of Digex to ICI. Such actions, motivated by conflict of interest and divided loyalty, were not the product of sound or independent business judgment and are not 10 11 protected from judicial scrutiny. Under these circumstances, the Digex Board could not be expected to sue ICI. 45. Furthermore, at least defendants Baker, Knapp, Manning, Ruberg, and Shull, who all approved the foregoing actions, had a material financial interest in WorldCom's acquisition of ICI. Thus, those actions were not approved by a disinterested majority of the Digex Board. Set forth below is a table showing (1) the amounts of Digex Class A common stock and ICI common stock these directors beneficially owned as of March 31, 2000, including stock options exercisable as of that date or within 60 days thereafter; (2) the gross consideration (i.e., before deducting costs of exercising any stock options) the directors could have received for their beneficial holdings of Digex stock in the Exodus transaction they rejected; and (3) the gross consideration the directors could receive for their beneficial holdings of ICI stock in the WorldCom transaction they approved.
Defendant Digex stock Gross consideration ICI stock Gross consideration beneficially from Exodus beneficially from WorldCom owned as of transaction owned as of transaction March 31, 2000 (@ $120) March 31, 2000 (@ $39) - --------------------------------------------------------------------------------------------------- John Baker 13,334 $1,600,080 81,820 $ 3,190,980 - --------------------------------------------------------------------------------------------------- George Knapp 13,334 $1,600,080 57,100 $ 2,226,900 - --------------------------------------------------------------------------------------------------- Robert Manning 0 0 255,731 $ 9,973,509 - --------------------------------------------------------------------------------------------------- David Ruberg 0 0 1,057,839 $41,255,721 - --------------------------------------------------------------------------------------------------- Mark Shull 0 0 16,667 $ 650,013 - ---------------------------------------------------------------------------------------------------
46. As shown by the foregoing table, at least defendants Baker, Knapp, Manning, Ruberg and Shull could obtain a substantially greater personal financial benefit from WorldCom's acquisition of ICI than from Exodus's acquisition of Digex. Indeed, defendants 11 12 Manning, Ruberg, and Shull could not obtain any personal financial benefit at all from the Exodus transaction, but can obtain a significant one from the WorldCom deal. For instance, had Exodus acquired Digex, defendant Ruberg would have received nothing for his holdings of Digex stock, for he had none. On the other hand, in WorldCom's acquisition of ICI, Ruberg can receive over $40 million in consideration for his beneficial holdings of ICI stock. Under these circumstances, the Digex Board could not be expected to bring the claims asserted herein, and the actions of the Board challenged herein are not protected from judicial scrutiny. COUNT I (BREACH OF FIDUCIARY DUTY UNDER REVLON) (AGAINST INDIVIDUAL DEFENDANTS) 47. Plaintiff realleges the preceding paragraphs as set forth above and incorporates them herein by reference. 48. The Individual Defendants, as officers and directors of Digex, are fiduciaries of the Company's Class A shareholders. As such they owe the Class A shareholders the highest duties of good faith, fair dealing, due care, and loyalty. 49. As a result of the decision by ICI to hire Bear, Stearns and Co. to explore the possible sale of Digex and the subsequent receipt of offers for Digex, the Individual Defendant's have fiduciary duties to Digex's shareholders under the principles established in Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., Del. Supr., 506 A.2d 173, 182 (1986) and its progeny. Revlon duties also are implicated because the Transaction would effect a transfer of control over Digex to WorldCom. 50. The Individual Defendants have breached their Revlon duties by acting to further a transaction in which there was no effort to maximize Digex's value at a sale for the 12 13 Stockholder's benefit. In fact, far from maximizing the value of Digex for the benefit of its shareholders, the Transaction provides no benefit to Digex's minority shareholders. 51. In contemplating, planning and/or effecting the foregoing conduct and in pursuing and structuring the transaction, Individual Defendants are not acting in good faith toward Plaintiff and the Class and are breaching their fiduciary duties to Plaintiff and the Class. 52. Because the Individual Defendants dominate and control the business and corporate affairs of Digex and because they are in possession of private information concerning Digex's business and future prospects, there exists an imbalance and disparity of knowledge and economic power between the Individual Defendants and the public shareholders of Digex. 53. As a result of the actions of the Individual Defendants, Plaintiff and the Class have been and will be damaged. 54. Unless enjoined by this Court, the Individual Defendants will continue to breach their fiduciary duties owed to Plaintiff and the Class, all to the irreparable harm of the Class. 55. Plaintiff has no adequate remedy at law. COUNT II (AIDING AND ABETTING BREACH OF FIDUCIARY DUTY UNDER REVLON) (AGAINST ICI) 56. Plaintiff realleges the previous paragraphs as set forth above and incorporates them herein by reference. 57. Defendant ICI was aware of the Individual Defendants' fiduciary duties under Revlon to Digex and its minority shareholders. 58. ICI is a party to the Transaction, which constitutes a clear breach of the Individual Defendants' fiduciary duty under Revlon. 13 14 59. ICI aided and abetted the Individual Defendants' breach of their fiduciary duty under Revlon. 60. ICI had knowledge of this breach, knowingly participated in the breach, and offered substantial assistance to the breaching parties. 61. Plaintiff has no adequate remedy at law. COUNT III (BREACH OF FIDUCIARY DUTY UNDER REVLON - RESPONDEAT SUPERIOR) (AGAINST ICI) 62. Plaintiff realleges the previous paragraphs as set forth above and incorporates them herein by reference. 63. The Individual Defendants were agents of Defendant ICI in connection with their actions as members of the Digex Board. The Individual Defendants took actions as members of the Digex Board at the behest of ICI and such actions were within the scope of their agency. 64. The Individual Defendants' breach of their fiduciary duty under Revlon was undertaken as agents of ICI and at the behest of ICI. 65. ICI is responsible for the actions of its agents, the Individual Defendants, in breaching the fiduciary duty under Revlon. 66. Plaintiff has no adequate remedy at law. COUNT IV (USURPATION OF CORPORATE OPPORTUNITY) (AGAINST ALL DEFENDANTS) (DERIVATIVELY ON BEHALF OF DIGEX) 67. Plaintiff realleges the previous paragraphs as set forth above and incorporates them herein by reference. 14 15 68. WorldCom approached the Individual Defendants with an offer for Digex. 69. The Individual Defendants turned down that offer and suggested a purchase of ICI. 70. ICI and the Individual Defendants usurped a corporate opportunity belonging to Digex, which came to the Individual Defendants' attention solely because of their position as directors of Digex. 71. The Transaction that the Defendants agreed to offers no benefit for Digex or its shareholders. 72. ICI, acting through and/or with the support of the Individual Defendants, has appropriated for itself the benefits of a transaction that, in reality, represents WorldCom's acquisition of control over Digex. 73. In usurping that Digex's corporate opportunity, ICI and the Individual Defendants have breached and are breaching their fiduciary duties to Digex. 74. Plaintiff has no adequate remedy at law. COUNT V (BREACH OF FIDUCIARY DUTY -- USURPATION OF CORPORATE OPPORTUNITY) (AGAINST ALL DEFENDANTS) 75. Plaintiff realleges the previous paragraphs as set forth above and incorporates them herein by reference. 76. The Individual Defendants, as officers and directors of Digex, are fiduciaries of the Company's Class A shareholders. As such they owe the Class A shareholders the highest duties of good faith, fair dealing, due care, and loyalty. 15 16 77. ICI, as the majority shareholder of Digex, owes fiduciary duties to Digex's minority shareholders. As such, ICI owes the Class A shareholders the highest duties of good faith, fair dealing, due care, and loyalty. 78. WorldCom approached the Individual Defendants with an offer for Digex. 79. The Individual Defendants turned down that offer and suggested a purchase of ICI. 80. The Transaction offers no benefit for Digex's shareholders. 81. ICI acting through and/or with the support of the Individual Defendants, has appropriated for itself the benefits of a transaction that, in reality, represents WorldCom's acquisition of control over Digex. The only reason for WorldCom to enter into the Transaction is to acquire Digex. 82. Defendants have clear and material conflicts of interest and are acting to further their own interests at the expense of Digex's public shareholders. 83. ICI, with the acquiescence of the Individual Defendants, is engaging in self-dealing and not acting in good faith toward Plaintiff and the other members of the Class. 84. By reason of the foregoing usurpation of a corporate opportunity, ICI and the Individual Defendants have breached and are breaching their fiduciary duties to the irreparable harm of Plaintiff and the members of the Class. 85. Plaintiff has no adequate remedy at law. 16 17 COUNT VI (BREACH OF FIDUCIARY DUTY -- WAIVER OF SECTION 203) (AGAINST INDIVIDUAL DEFENDANTS) 86. Plaintiff realleges the preceding paragraphs as set forth above and incorporates them herein by reference. 87. The Individual Defendants, as officers and directors of Digex, are fiduciaries of the Company's Class A shareholders. As such they owe the Class A shareholders the highest duties of good faith, fair dealing, due care, and loyalty. 88. The Individual Defendants have the obligation to ensure that any transactions involving Digex are entirely fair to Digex and its minority shareholders. The Individual Defendants' vote to waive the protections that Section 203 of the DGCL affords to minority investors, in derogation of the decision of the Special Committee not to waive Section 203, were undertaken at the behest and for the benefit of ICI, and at the expense of the minority shareholders of Digex. The conduct is unfair to the minority shareholders of Digex. 89. In contemplating, planning and/or effecting the foregoing conduct and in pursuing and structuring the Transaction, Individual Defendants are not acting in good faith toward Plaintiff and the Class and are breaching their fiduciary duties to Plaintiff and the Class. 90. Because the Individual Defendants dominate and control the business and corporate affairs of Digex and because they are in possession of private information concerning Digex's business and future prospects, there exists an imbalance and disparity of knowledge and economic power between the Individual Defendants and the public shareholders of Digex. 91. As a result of the actions of the Individual Defendants, Plaintiff and the Class have been and will be damaged. 17 18 92. Unless enjoined by this Court, the Individual Defendants will continue to breach their fiduciary duties owed to Plaintiff and the Class, all to the irreparable harm of the Class. 93. Plaintiff has no adequate remedy at law. COUNT VII (AIDING AND ABETTING BREACH OF FIDUCIARY DUTY - WAIVER OF SECTION 203) (AGAINST ICI) 94. Plaintiff realleges the previous paragraphs as set forth above and incorporates them herein by reference. 95. Defendant ICI was aware of the Individual Defendants' fiduciary duties to Digex and its minority shareholders. 96. ICI is a party to the Transaction, which as a prerequisite to WorldCom's agreeing to enter into the Transaction, required the Individual Defendants to violate their fiduciary duties to Digex and its minority shareholders by waiving the protections of Section 203. 97. ICI aided and abetted the Individual Defendants' breach of their fiduciary duty regarding the waiver of the protections of Section 203. 98. ICI had knowledge of this breach, knowingly participated in the breach, and offered substantial assistance to the breaching parties. 99. Plaintiff has no adequate remedy at law. COUNT VIII (BREACH OF FIDUCIARY DUTY - WAIVER OF SECTION 203 - RESPONDEAT SUPERIOR) (AGAINST ICI) 100. Plaintiff realleges the previous paragraphs as set forth above and incorporates them herein by reference. 18 19 101. The Individual Defendants were agents of defendant ICI in connection with their actions as members of the Digex Board. The Individual Defendants took actions as members of the Digex Board at the behest of ICI and such actions were within the scope of their agency. 102. The Individual Defendants' breach of their fiduciary duty by voting to waive the protections afforded minority investors under Section 203 of the DGCL, which waiver was rejected by the Special Committee, was undertaken as agents of ICI and at the behest of ICI. 103. ICI is responsible for the actions of its agents, the Individual Defendants, in breaching their fiduciary duty regarding the waiver of Section 203. 104. Plaintiff has no adequate remedy at law. WHEREFORE, Plaintiff Kansas Public Employees Retirement System prays that the Court: (a) Declare that this action may be maintained as a class action; (b) Declare that the Transaction is unfair, unjust, and inequitable to Plaintiff and the other members of the Class; (c) Declare that the waiver by the Digex Board of the application of Section 203 of the DGCL to WorldCom is unfair, unjust, and inequitable to Plaintiff and the other members of the Class, and a breach of the Individual Defendants' fiduciary duty; (d) Enjoin preliminarily and permanently the waiver by the Digex Board of the application of Section 203 of the DGCL to WorldCom; (e) Enjoin preliminarily and permanently the Defendants from taking any steps to accomplish or implement the Transaction; 19 20 (f) Require Defendants to compensate Plaintiff and the members of the Class for all losses and damages suffered and to be suffered by them as a result of the acts and Transaction complained of herein, together with prejudgment and postjudgment interest; (g) Award Plaintiff the costs and disbursements of this action, including reasonable attorneys' fees; and (h) Grant such other and further relief as may be just and proper. DATED: October 4, 2000 /s/ Megan D. McIntyre ---------------------------------- Stuart M. Grant Megan D. McIntyre GRANT & EISENHOFER, P.A. 1220 N. Market Street, Suite 500 Wilmington, DE 19801 (302) 622-7000 (302) 622-7100 (facsimile) Daniel C. Girard Anthony K. Lee GIRARD & GREEN, LLP 160 Sansome Street, Suite 300 San Francisco, CA 94104 (415) 981-4800 (415) 981-4846 (facsimile) Attorneys for Plaintiff Kansas Public Employees Retirement System 20 21 IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY KANSAS PUBLIC EMPLOYEES ) RETIREMENT SYSTEM, on behalf ) of itself and all others similarly situated, ) and derivatively on behalf of Digex, Inc., ) ) Plaintiffs, ) C.A. NO. 18390 ) v. ) ) INTERMEDIA COMMUNICATIONS, ) INC., JOHN C. BAKER, PHILLIP A. ) CAMPBELL, GEORGE F. KNAPP, ) ROBERT M. MANNING, DAVID C. ) RUDBERG, AND MARK K. SHULL ) ) Defendants, ) ) and ) ) DIGEX, INC. ) ) Nominal Defendant. ) MOTION FOR APPOINTMENT OF SPECIAL PROCESS SERVERS Plaintiff moves this Court for an Order in the form attached hereto appointing: 1. MARSHAL MANLOVE, CAREY SHEA, SHAWN DUGAN, ROBERT RHINE, IRIZ COLON, MICHAEL WARREN, FRANK JOYCE, JOHN LAFAZIA, VITO DIMAIO, DAVID ARENA, BRIAN JOHNSON and/or SEAN KENNEDY, of Parcels, Inc., a messenger service, as special process servers to serve process upon: 22 a. Defendants John C. Baker, Phillip A. Campbell, George F. Knapp, David C. Rudberg, Robert M. Manning and Mark K. Shull pursuant to 10 Del. C. Section 3114, by serving United States Corporation Company, the registered agent for Digex, Incorporated at 1013 Centre Road, Wilmington, Delaware 19805; b. Defendant Intermedia Communications, Inc., by serving The Corporation Service Company, the registered agent for Intermedia Communications, Inc., at 1013 Centre Road, Wilmington, DE 19805; and c. Nominal Defendant Digex, Incorporated, by serving United States Corporation Company, the registered agent for Digex, Incorporated, at 1013 Centre Road, Wilmington, DE 19805. 2. The ground for this Motion is that the appointment of special process servers will permit expeditious service of process upon defendants. DATED: October 4, 2000 /s/ Megan D. McIntyre ----------------------------------- Stuart M. Grant Megan D. McIntyre GRANT & EISENHOFER, P.A. 1220 N. Market Street, Suite 500 Wilmington, DE 19801 (302) 622-7000 (302) 622-7100 (facsimile) Daniel C. Girard Anthony K. Lee GIRARD & GREEN, LLP 160 Sansome Street, Suite 300 San Francisco, CA 94104 (415) 981-4800 (415) 981-4846 (facsimile) Attorneys for Plaintiff Kansas Public Employees 23 IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY KANSAS PUBLIC EMPLOYEES ) RETIREMENT SYSTEM, on behalf ) of itself and all other similarly situated, ) and derivatively on behalf of Digex, Inc., ) ) Plaintiffs, ) C.A. No.____________ ) v. ) ) INTERMEDIA COMMUNICATIONS, ) INC., JOHN C. BAKER, PHILLIP A. ) CAMPBELL, GEORGE F. KNAPP, ) ROBERT M. MANNING, DAVID C. ) RUDBERG, and MARK K. SHULL ) ) Defendants, ) ) and ) ) DIGEX, INC. ) ) Nominal Defendant. ) ORDER Plaintiff having moved for an Order appointing special process servers, and the Court having considered Plaintiff's Motion, it is hereby ordered this __ day of October, 2000 as follows: 1. Summons are to be issued forthwith in the above-captioned action to serve defendants listed below. 2. MARSHAL MANLOVE, CAREY SHEA, SHAWN DUGAN, ROBERT RHINE, IRIS COLON, MICHAEL WARREN, FRANK JOYCE, JOHN LAFAZIA, VITO DIMAIO, DAVID ARENA, BRIAN JOHNSON and/or SEAN KENNEDY, of 24 Parcels, Inc., a messenger service, are appointed special process servers to serve process upon: a. Defendants John C. Baker, Phillip A. Campbell, George F. Knapp, David C. Rudberg, Robert M. Manning and Mark K. Shull and pursuant to 10 Del. C. Section 3114, by serving United States Corporation Company, the registered agent for Digex, Incorporated, at 1013 Centre Road, Wilmington, Delaware 19805; b. Defendant Intermedia Communications, Inc., by serving The Corporation Service Company, the registered agent for Intermedia Communications, Inc., at 1013 Centre Road, Wilmington, DE 19805; and c. Nominal Defendant Digex, Incorporated, by serving United States Corporation Company, the registered agent for Digex, Incorporated, at 1013 Centre Road, Wilmington, DE 19805. 3. A copy of this Order shall be served together with a copy of the Summons and the Complaint. ---------------------------------- Master EX-99.4 5 y41333ex99-4.txt TAAM ASSOCIATES CLASS ACTION COMPLAINT 1 IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - ----------------------------------------x TAAM ASSOCIATES, : : Plaintiff, : : -against- : Civil Action No. 18291NC : INTERMEDIA COMMUNICATIONS : INC., DAVID C. RUBERG, PHILIP : A. CAMPBELL, JOHN C. BAKER, : GEORGE F. KNAPP, JACK E. : REICH, MARK K. SHULL, ROBERT : M. MANNING, RICHARD A. : JALKUT, DIGEX, INC. and : WORLDCOM, INC. : : Defendants. : - ----------------------------------------x CLASS ACTION COMPLAINT Plaintiff, by its attorneys, alleges upon information and belief, except at to paragraph 1 which plaintiff alleges upon knowledge, as follows: 1. Plaintiff Taam Associates is a shareholder of defendant Digex, Inc. ("Digex"). 2. Defendant Digex is a Delaware corporation with principal executive offices located at One Digex Plaza, Beltsville, Maryland 20705. Digex provides website hosting services to business and organizations implementing complex, interactive websites and web-based applications. 3. Defendant Intermedia Communications Inc. ("Intermedia" or the "Company") is a Delaware corporation with 2 principal executive offices located at One Intermedia Way, Tampa, Florida 33647. Intermedia provides integrated communications services, including local, long distance, high-speed date and Internet services, to business and government customers. Intermedia owns approximately 62.0% of Digex's outstanding shares and controls approximately 94.2% of the voting interest in Digex. 4. Defendant WorldCom, Inc. ("WorldCom") is a Georgia corporation with principal executive offices located at 500 Clinton Center Drive, Clinton, Mississippi 39056. WorldCom provides a broad range of communications, outsourcing, and managed network services world wide. WorldCom regularly conducts business in the State of Delaware. 5. Defendant David C. Ruberg is the Chairman of Intermedia's Board of Directors and Intermedia's President and Chief Executive Officer. Ruberg is also the Chairman of Digex's Board of Directors. 6. Defendant Philip A. Campbell is a Director of Intermedia and a Director of Digex. 7. Defendant John C. Baker is a Director of Intermedia and a Director of Digex. 8. Defendant George F. Knapp is a Director of Intermedia and a Director of Digex. 9. Defendant Jack E. Reich is a Director of Digex. 2 3 10. Defendant Mark K. Shull is a Director of Digex and the President and Chief Executive Officer of Digex. 11. Defendant Robert M. Manning is a Director of Digex and the Chief Financial Officer of Intermedia. 12. Defendant Richard A. Jalkut is a Director of Digex. 13. The individual defendants, as officers and/or directors of Digex, and Intermedia, as controlling shareholder of Digex, have a fiduciary relationship and responsibility to plaintiff and the other public shareholders of Digex and owe to them the highest obligations of good faith, loyalty, fair dealing, due care and candor. CLASS ACTION ALLEGATIONS 14. Plaintiff brings this action on its own behalf and as a class action, pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of all common shareholders of Digex, or their successors in interest, who are being and will be harmed by defendants' actions described below (the "Class"). Excluded from the Class are defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated with any of defendants. 15. This action is properly maintainable as a class action because: a. The Class is so numerous that joinder of all members is impracticable. There are hundreds of Digex shareholders 3 4 of record and many more beneficial owners who are located throughout the United States. b. There are questions of law and fact which are common to the Class, including: whether Intermedia has acted in a manner calculated to benefit itself at the expense of Digex's public shareholders; and whether plaintiff and the other members of the Class would be irreparably damaged if Intermedia is not enjoined from committing the wrongs complained of herein. c. Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. The claims of plaintiff are typical of the claims of the other members of the Class and plaintiff has the same interests as the other members of the Class. Accordingly, plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class. d. Defendants have acted or refused to act on grounds generally applicable to the Class, thereby making appropriate final injunctive relief with respect to the Class as a whole; and e. The prosecution of separate actions by individual members of the Class would create the risk of inconsistent or varying adjudications with respect to individual members of the Class which would establish incompatible standards of conduct for defendants, or adjudications with respect to 4 5 individual members of the Class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests. CLAIM FOR RELIEF 16. Digex provides storage for corporate websites, and its clients include Ford Motor Co., J.P. Morgan & Co., and Martha Stewart Living Omnimedia Inc. Intermedia sells basic phone and Internet services, and faces stiff competition from BellSouth Corp. in its primary markets. 17. In July, 1997, Intermedia bought Digex for approximately $150 million cash, and thereafter sold Digex stock to the investing public in July, 1999 and again in February, 2000. Intermedia currently owns approximately 62.0% of Digex's outstanding shares and controls approximately 94.2% of the voting interest in Digex. 18. Digex stock has significantly outperformed Intermedia. As recently as August 3, 2000, Digex stock jumped 13% after Digex raised revenue projections for 2000 and 2001. Specifically, Digex announced that second quarter 2000 sales more than tripled, and Digex raised its 2000 sales projections by 10% to $165 million for 2000 and $300 million for 2001, compared to less than $60 million in 1999 sales. Intermedia stock, by contrast has dropped 41 percent this year, and it recently announced that its 5 6 2000 sales would be 10 to 15 percent lower than analyst expectations. 19. As result of the decline in the market price of Intermedia's stock and the upswing in the market price of Digex stock, as well as Intermedia's approximately $2.4 billion in debt, the market capitalization of Intermedia as whole ($1.2 billion), was significantly less than Intermedia's stake in Digex ($3.3 billion). 20. Intermedia hired investment bankers at Bear, Stearns & Co. to explore options for Digex, including a sale. Intermedia put Digex up for sale in July, 2000, and received several offers for Digex, including one from Exodus Communications Inc. ("Exodus") at $120 per Digex share, representing a significant premium for Digex stock, which had traded recently in the mid-$80 range. 21. To rescue Intermedia from its financial woes, however, defendants refused to sell Digex alone and instead insisted that buyers acquire Intermedia instead. 22. On September 5, 2000, Intermedia and WorldCom jointly announced that the Boards of Intermedia, WorldCom and Digex had each approved a definitive merger agreement whereby WorldCom would acquire all of the outstanding shares of Intermedia common stock for $39 of WorldCom common stock, subject to a collar (the "Merger"). The Merger represents a 70% premium for Intermedia shares based on the closing price before the announcement. 6 7 23. Following the announcement of the merger agreement with WorldCom -- which the Digex Board had approved -- the media reported that Intermedia had rejected Exodus' $120 per share offer for Digex alone. 24. In reaction to the announcement of the Merger, the Digex stock price plummeted, losing nearly 20% of its value over the next day, closing at $67.875 per share -- far below the $120 per share offered by Exodus. Intermedia shares, however, rose 38% in response to the announcement. 25. The Wall Street Journal reported that analysts downgraded Digex stock on the announcement, since the Merger would provide immediate benefit only to Intermedia shareholders, but not to Digex shareholders. 26. The Merger offers no benefit for Digex or its shareholders. 27. Intermedia, acting through and/or with the support of the individual defendants, has appropriated for itself the benefits of a transaction that, in reality, represents WorldCom's acquisition of control over Digex. The only reason for WorldCom to do the Merger at all is to acquire Digex. 28. According to Worldcom's Chief Executive, Bernard Ellers, ("Ellers"), as reported in the September 6, 2000 Wall Street Journal, Worldcom plans to sell non-Digex assets of 7 8 Intermedia in order to pay down Intermedia debt Worldcom is assuming under the Merger. 29. Ellers stated that controlling Digex would accelerate Worldcom's capability by 12 to 18 months to be in the lucrative managed web hosting market. 30. Defendants have clear and material conflicts of interest and are acting to further their own interests at the expense of Digex's public shareholders. 31. Intermedia, with the acquiescence of the individual defendants, is engaging in self-dealing and not acting in good faith toward plaintiff and the other members of the Class. By reason of the foregoing, Intermedia, Digex and the individual defendants have breached and are breaching their fiduciary duties to the irreparable harm of the members of the Class. 32. As a party to the Merger, WorldCom is aware of the breaches of fiduciary duty by Intermedia and the individual defendants, and has thereby aided and abetted in the wrongs complained of herein. 33. Plaintiff has no adequate remedy at law. WHEREFORE, plaintiff prays for judgment and relief as follows: A. Ordering that this action may be maintained as a class action and certifying plaintiff as the Class representative; 8 9 B. Preliminarily and permanently enjoining Defendants and all persons acting in concert with them, from proceeding with, consummating or closing the contemplated transaction; C. In the event the contemplated transaction is consummated, rescinding it and setting it aside or awarding rescissory damages to the Class; D. Directing defendants to account to Class members for their damages sustained as a result of the wrongs complained of herein; E. Awarding plaintiff the costs of this action, including a reasonable allowance for plaintiff's attorneys' and experts' fees; and F. Granting such other and further relief as to the Court may seem just and proper. ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A. By: /s/ Norman M. Monhait --------------------------- 919 North Market Street Suite 1401, Mellon Bank Center Wilmington, Delaware 19899 (302) 656-4433 Attorneys for Plaintiff OF COUNSEL: BERNSTEIN LIEBHARD & LIFSHITZ, LLP 10 East 40th Street New York, NY 10016 (212) 779-1414 9 EX-99.5 6 y41333ex99-5.txt AMRITA SINHA DERIVATIVE COMPLAINT 1 IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - -------------------------------------------------X AMRITA SINHA, Derivatively and on behalf of : Digex, Inc., : : Plaintiff, : CIVIL ACTION NO. 18391-NC : v. : : DAVID C. RUBERG, PHILIP A. CAMPBELL, : JOHN C. BAKER, GEORGE F. KNAPP, : MARK K. SHULL, ROBERT M. : MANNING, AND INTERMEDIA : COMMUNICATIONS, INC., : : Defendants, : : and : : DIGEX, INC.; : Nominal Defendant. : - -------------------------------------------------x DERIVATIVE COMPLAINT Plaintiff, by her attorneys, allege upon personal knowledge as to her own acts and upon information and belief as to all other matters, as follows: 1. Plaintiff brings this action derivatively on behalf of Digex, Inc. ("Digex" or the "Company") for injunctive and other relief. Plaintiff seeks injunctive relief herein, inter alia, to enjoin the implementation of a transaction whereby WorldCom Inc. ("WorldCom") has agreed to buy defendant Intermedia Communications, Inc. ("Intermedia"), the 54% owner of Digex, for approximately $6 billion in stock and debt in order to gain control of Digex and to enjoin the agreement to waive Section 203 of Delaware General Corporation Law. Intermedia had put Digex up for sale and had received several offers, including one offer from Exodus Communications, Inc. 2 ("Exodus") to purchase Digex for $120 per share, representing a significant premium for Digex stock, which had been trading in the mid-$80 range. However, Intermedia refused to sell Digex alone and insisted that buyers acquire Intermedia instead, thereby usurping Digex's corporate opportunity for itself. Intermedia and Digex's Board of Directors, half of whom are also Intermedia Board members, suffer from a conflict of interest and divided loyalties and have breached their fiduciary duty of loyalty to Digex by permitting Intermedia to usurp Digex's corporate opportunity, approving the WorldCom transaction and approving a waiver of Section 203 of the Delaware General Corporation Law against the recommendation of Digex's special committee. PARTIES 2. Plaintiff is a shareholder of Digex and has been a shareholder during the period when defendants breached their duties and committed the acts alleged herein. 3. Nominal Defendant Digex is a Delaware corporation with principal executive offices located at One Digex Plaza, Beltsville, Maryland 20705. Digex provides website hosting services to businesses and organizations implementing complex, interactive websites and web-based applications. 4. Defendant Intermedia is a Delaware corporation with principal executive offices located at One Intermedia Way, Tampa, Florida 33647. Intermedia provides integrated communications services, including local, long distance, high-speed data and Internet services, to business and government customers. Intermedia owns approximately 54% of Digex's outstanding shares and controls approximately 94.2% of the voting interest in Digex. Intermedia also controls the Digex Board of Directors through its ownership and voting interest. 2 3 5. Defendant David C. Ruberg is the Chairman of Digex's Board of Directors. He is also Chairman of Intermedia's Board of Directors and Intermedia's President and Chief Executive Officer. 6. Defendant Philip A. Campbell is a Director of Digex and a Director of Intermedia. 7. Defendant John C. Baker is a Director of Digex and a Director of Intermedia. 8. Defendant George F. Knapp is a Director of Digex and a Director of Intermedia. 9. Defendant Mark K. Shull is a Director of Digex and the President and Chief Executive Officer of Digex. 10. Defendant Robert M. Manning is a Director of Digex and the Chief Financial Officer of Intermedia. SUBSTANTIVE ALLEGATIONS 11. Digex provides storage for corporate websites, and its clients include Ford Motor Co., J.P. Morgan & Co., and Martha Stewart Living Omnimedia Inc. Intermedia sells basic phone and Internet services, and faces stiff competition from BellSouth Corp. in its primary markets. 12. In July, 1997, Intermedia bought Digex for approximately $150 million cash, and thereafter sold Digex stock to the investing public in July, 1999 and again in February, 2000. Intermedia currently owns approximately 54% of Digex's outstanding shares and controls approximately 94.2% of the voting interest in Digex. As the majority shareholder of Digex, Intermedia owes a fiduciary duty of loyalty to Digex and its minority shareholders. 13. Digex stock has significantly outperformed Intermedia. As recently as August 3, 2000, Digex stock jumped 13% after Digex raised revenue projections for 2000 and 2001. 3 4 Specifically, Digex announced that second quarter 2000 sales more than tripled, and Digex raised its 2000 sales projections by 10% to $165 million for 2000 and $300 million for 2001, compared to less than $60 million in 1999 sales. Intermedia stock, by contrast, has dropped 41% this year, and it announced in July that its 2000 sales would be 10% to 15% lower than analyst expectations. Intermedia stock dropped again after that announcement, trading in the high teens for most of August 2000. Intermedia was privately considering several options, including filing for bankruptcy. 14. As a result of the decline in the market price of Intermedia's stock and the upswing in the market price of Digex stock, as well as Intermedia's approximately $2.4 billion in debt, the market capitalization of Intermedia as a whole ($1.2 billion), was significantly less than Intermedia's stake in Digex ($3.3 billion). 15. Intermedia hired investment banker Bear, Stearns & Co. to explore options for Digex, including a sale, and thereafter put up Digex for sale. During the auction, Directors Reich and Jalkut were named to a special committee to protect the rights of Digex's minority shareholders. By late August 2000, Digex began receiving bids, at least one of which valued Digex at approximately $8.5 billion. Exodus offered about $120 per share and Global Crossing Ltd. made a three-way bid for Intermedia and Digex. Intermedia had sold stakes in itself to various entities, including Kohlberg Kravis Roberts & Co. which purchased a 12.7% stake in Intermedia. These outside investors in Intermedia stood to lose virtually all of the value of their investments if Intermedia sold Digex to a third party. 16. Intermedia's Board rejected all of the offers for Digex. To rescue Intermedia from its financial woes and to provide its investors with the benefit of the value of Digex, Intermedia refused to sell Digex alone and insisted that buyers acquire Intermedia instead. WorldCom wanted to buy Intermedia but needed Digex's Board to approve the transaction, including an agreement to 4 5 waive Section 203 of Delaware General Corporation Law -- "Business combinations with interested stockholders" ("Section 203"). Section 203 is intended to protect minority shareholders by discouraging acquisitions of control by anyone without the approval of the issuer's Board -- in this case, Digex's Board. Without this waiver, WorldCom would not be able to do certain transactions with Digex for a three-year period, including combining assets with Digex. Digex's special committee of Directors Reich and Jalkut recommended against and voted against granting the waiver of Section 203. Prior to the vote on the waiver, Directors Reich and Jalkut had made a recommendation to the Digex Board that any sale to WorldCom be delayed and that Digex solicit bids from other companies. Although the special committee's recommendation on whether to waive Section 203 is usually accepted because the special committee provides an independent and objective opinion, in a highly unusual move, the Digex Board went against the advice of the special committee and agreed to waive Section 203, clearing the way for WorldCom's acquisition of Intermedia and ending the chance of the sale of Digex and a takeover premium for Digex's minority shareholders. Digex's Board's rejection of the special committee's recommendation is an extremely rare occurrence and as a matter of practice, a special committee's recommendation is virtually always followed. 17. On September 5, 2000, Intermedia and WorldCom jointly announced that the Boards of Intermedia, WorldCom and Digex has each approved a definitive merger agreement whereby WorldCom would acquire all of the outstanding shares of Intermedia common stock for $39 in WorldCom common stock, subject to a collar (the "Merger"). The Merger represents a 70% premium for Intermedia shares based on the closing price before the announcement. 5 6 18. Following the announcement of the Merger agreement with WorldCom -- which the Digex Board had approved -- the media reported that Intermedia had rejected Exodus' $120 per share offer for Digex alone. 19. The Merger offers no benefit for Digex or its shareholders but strips Digex of its true value and corporate opportunity to sell itself for its true value. Digex's minority shareholders will remain minority shareholders of Digex. Upon the Merger announcement, Digex common stock fell from $84.50 per share to $67.875 per share on September 5, 2000. 20. Kohlberg Kravis Roberts & Co., which had a 12.7% interest in Intermedia acquired for a $200 million investment, which was convertible at $36 per share, will break even in the WorldCom acquisition of Intermedia. 21. Intermedia, acting through and/or with the support of the individual defendants, has appropriated for itself the true value of and corporate opportunity belonging to Digex and reaps the benefits of a transaction that, in reality, represents WorldCom's acquisition of control over Digex, all at the expense and to the detriment of Digex and its minority shareholders. The only reason for WorldCom to do the Merger at all is to acquire Digex. CLAIM FOR RELIEF 22. The individual defendants, as directors of Digex who hold their positions only at the pleasure of Intermedia, and Intermedia, as the majority shareholder of Digex, have a fiduciary duty of loyalty to Digex and are required to maintain and preserve Digex's corporate opportunities for the benefit of Digex alone. Defendants, however, suffering from disabling conflicts of interest and divided loyalties, have breached their fiduciary duty by (1) permitting Intermedia to usurp Digex's corporate opportunity by requiring WorldCom to buy Intermedia instead of Digex when 6 7 Digex was the acquisition target and was itself up for sale; and (2) by agreeing to waive Section 203 against the advice of Digex's special committee. DERIVATIVE ALLEGATIONS 23. Plaintiff brings this action derivatively for the benefit of Digex to redress injuries suffered and to be suffered by Digex as a direct result of the breach of fiduciary duty of loyalty by defendants. 24. Plaintiff has owned Digex common stock during the wrongful course of conduct by defendants alleged herein and continues to own Digex common stock. 25. Plaintiff will adequately and fairly represent the interests of Digex and its shareholders in enforcing and prosecuting their rights and have retained counsel competent and experienced in stockholders' derivative litigation. DEMAND ON THE DIGEX BOARD IS EXCUSED AS FUTILE 26. Plaintiff has not made demand on the Digex Board to bring suit asserting the claims set forth herein because Intermedia controls the Board of Digex whose members sit on the Board solely at the pleasure of Intermedia and Intermedia has obtained the benefit of the improper conduct alleged herein. In fact, in order for Intermedia's wrongful conduct to succeed Intermedia caused the Digex Board to agree to waive Section 203 against the advice of the special committee. A majority of Digex's directors suffer from conflicts of interest and dividend loyalties which preclude them from exercising independent business judgment. Four of Digex's directors -- defendants Ruberg, Campbell, Baker and Knapp -- are also directors of Intermedia. Defendant Ruberg is Chairman of both Intermedia's Board and Digex's Board. Defendant Shull is a director of Digex and the Chief Financial Officer of Intermedia. Demand on defendants would be futile and useless because the Digex Board approved the WorldCom merger and agreed to waive Section 203, 7 8 permitting their loyalty to Intermedia to supersede their fiduciary duty of loyalty to Digex. Such action, motivated by conflict of interest and divided loyalty was not the product of sound or independent business judgment and is not protected from judicial scrutiny. Under these circumstances, defendants could not be expected to sue Intermedia or themselves. WHEREFORE, plaintiff prays for judgment and relief as follows: A. Declaring that the individual defendants, as directors of Digex, and Intermedia, as majority shareholder, have breached their fiduciary duty of loyalty to Digex; B. Preliminarily and permanently enjoining defendants and their counsel, agents, employees, and all persons acting under, in concert with, or for them, from proceeding with or implementing the Merger; C. Rescinding the Digex Board's waiver of Section 203 and ordering the appointment of an independent Board of Directors for Digex; D. In the event the Merger is consummated, rescinding it and setting it aside and/or imposing a constructive trust upon the proceeds received by Intermedia; E. Awarding Digex its damages caused by defendants' breach of fiduciary duty and Intermedia's usurpation of Digex's corporate opportunity; F. Awarding Digex the benefits defendants received from their improper conduct; G. Awarding plaintiff her costs and disbursements and reasonable allowances for plaintiffs' counsel's and experts' fees and expenses; and 8 9 H. Granting such other and further relief as may be just and proper. Dated: October 4, 2000 CHIMICLES & TIKELLIS LLP /s/ PAMELA S. TIKELLIS ________________________________ Pamela S. Tikellis Robert J. Kriner, Jr. Timothy R. Dudderar One Rodney Square Wilmington, Delaware 19899 (302) 656-2500 Attorneys for Plaintiff OF COUNSEL: Wolf, Haldenstein, Adler, Freeman & Herz, LLP 270 Madison Avenue New York, NY 10016 (212) 545-4600 Law Offices of Bruce G. Murphy 265 Llwyds Lane Vero Beach, Florida 32963 (561) 231-4202 9 -----END PRIVACY-ENHANCED MESSAGE-----