<PAGE> 1
Exhibit 99.1
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 000-26873
----------------
DIGEX, INCORPORATED
-------------------
(Exact name of registrant as specified in its charter)
Delaware 59-3582217
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One Digex Plaza
Beltsville, MD 20705
--------------------
(Address of principal executive offices)
(240) 264-2000
--------------
Telephone Number
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes [X] No [ ]
As of July 31, 2000, there were 24,175,000 and 39,350,000 shares of
the Registrant's Class A and Class B Common Stock outstanding, respectively.
===============================================================================
<PAGE> 2
DIGEX, INCORPORATED
INDEX
<TABLE>
<CAPTION>
Page
No.
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited):
Condensed Statements of Operations--Three and six months ended
June 30, 2000 and 1999......................................... 3
Condensed Balance Sheets--June 30, 2000 and December 31, 1999.. 4
Condensed Statements of Cash Flows--Six months ended June 30,
2000 and 1999.................................................. 5
Notes to Condensed Financial Statements........................ 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 9
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk..... 17
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.............................................. 18
ITEM 2. Changes in Securities and Use of Proceeds...................... 18
ITEM 3. Defaults Upon Senior Securities................................ 18
ITEM 4. Submission of Matters to a Vote of Security Holders............ 18
ITEM 5. Other Information.............................................. 19
ITEM 6. Exhibits and Reports on Form 8-K............................... 19
SIGNATURES.............................................................. 20
</TABLE>
2
<PAGE> 3
PART 1: FINANCIAL INFORMATION
Item 1. Financial Statements
DIGEX, INCORPORATED
CONDENSED STATEMENTS OF OPERATIONS
Unaudited (Amounts in thousands, except share and per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
--------------------------- ---------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues ................. $ 42,222 $ 12,629 $ 70,196 $ 22,021
Costs and expenses:
Cost of operations ..... 9,098 2,694 13,038 4,346
Cost of services ....... 16,828 3,478 28,224 7,430
Selling, general and
administrative ........ 35,216 18,658 62,992 26,727
Deferred compensation .. 996 -- 1,990 --
Depreciation and
amortization .......... 17,981 5,652 30,552 9,966
------------ ------------ ------------ ------------
Total costs and expenses . 80,119 30,482 136,796 48,469
------------ ------------ ------------ ------------
Loss from operations ..... (37,897) (17,853) (66,600) (26,448)
Other income (expense):
Interest expense ....... (429) (239) (872) (239)
Interest and other
income ................ 3,901 -- 7,401 --
------------ ------------ ------------ ------------
Net loss before income tax
benefit ................. (34,425) (18,092) (60,071) (26,687)
Income tax benefit ....... -- 4,839 -- 4,839
------------ ------------ ------------ ------------
Net loss ................. $ (34,425) $ (13,253) $ (60,071) $ (21,848)
============ ============ ============ ============
Net loss per common
share--basic and
diluted ................. $ (0.54) $ (0.27) $ (0.95) $ (0.44)
============ ============ ============ ============
Shares used in computing
basic and diluted net
loss per share .......... 63,503,516 50,000,000 63,062,198 50,000,000
============ ============ ============ ============
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE> 4
DIGEX, INCORPORATED
CONDENSED BALANCE SHEETS
(Amounts in thousands, except share information)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
--------- -----------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ......................... $ 206,112 $ 88,778
Accounts receivable, net of allowance of $3,780 and
$4,362 in 2000 and 1999, respectively ............ 31,602 17,271
Due from Intermedia ............................... 84 3,110
Prepaid expenses and other current assets ......... 5,363 1,496
--------- ---------
Total current assets ............................ 243,161 110,655
--------- ---------
Property and equipment, net ......................... 275,562 205,903
Intangible assets, net .............................. 25,217 27,213
Other assets ........................................ 855 538
--------- ---------
Total assets .................................... $ 544,795 $ 344,309
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ............. $ 33,430 $ 33,619
Deferred revenue .................................. -- 222
Current portion of note payable ................... 2,675 1,235
Current portion of capital lease obligations ...... 1,134 801
--------- ---------
Total current liabilities ....................... 37,239 35,877
Note payable ........................................ 1,376 2,477
Capital lease obligations ........................... 15,174 15,766
--------- ---------
Total liabilities ............................... 53,789 54,120
--------- ---------
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares
authorized; 100,000 designated as Series A
Convertible; 100,000 shares issued and outstanding
in 2000 .......................................... 1 --
Class A common stock, $.01 par value; 100,000,000
shares authorized; 24,175,000 and 11,500,000
shares issued and outstanding in 2000 and 1999,
respectively ..................................... 242 115
Class B common stock, $.01 par value; 50,000,000
shares authorized; 39,350,000 and 50,000,000
shares issued and outstanding in 2000 and 1999,
respectively ..................................... 393 500
Additional paid-in capital ........................ 616,775 354,553
Accumulated deficit ............................... (112,839) (52,768)
Deferred compensation ............................. (13,566) (12,211)
--------- ---------
Total stockholders' equity ...................... 491,006 290,189
--------- ---------
Total liabilities and stockholders' equity ...... $ 544,795 $ 344,309
========= =========
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE> 5
DIGEX, INCORPORATED
CONDENSED STATEMENTS OF CASH FLOWS
Unaudited (Amounts in thousands)
<TABLE>
<CAPTION>
Six months ended
June 30,
----------------------
2000 1999
--------- --------
<S> <C> <C>
Operating activities:
Net loss .......................................... $ (60,071) $(21,848)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization ................... 30,552 9,966
Provision for doubtful accounts ................. 2,953 2,045
Amortization of deferred compensation ........... 2,026 --
Loss on sale/disposals of telecommunications
equipment ...................................... 313 --
Deferred income taxes ........................... -- (4,839)
Accretion of interest on note payable and capital
lease obligations .............................. 312 --
Changes in operating assets and liabilities:
Accounts receivable ............................. (17,284) (6,612)
Prepaid expenses and other current assets ....... (3,867) (1,989)
Other assets .................................... (317) (17)
Accounts payable, accrued expenses and other
liabilities .................................... (28) 4,601
Due from Intermedia ............................. 3,026 8,749
Deferred revenue ................................ (222) --
--------- --------
Net cash used in operating activities ............. (42,607) (9,944)
Investing activities:
Purchases of property and equipment ............... (97,078) (77,332)
--------- --------
Net cash used in investing activities ............. (97,078) (77,332)
Financing activities:
Principal payments on long-term note payable and
capital leases ................................... (397) (96)
Proceeds from subsequent public offering, net of
issuance costs ................................... 171,641 --
Proceeds from issuance of preferred stock ......... 85,000 --
Proceeds from exercise of common stock options .... 775 --
Net contributions from Intermedia ................. -- 87,372
--------- --------
Net cash provided by financing activities ......... 257,019 87,276
Net increase in cash and cash equivalents ......... 117,334 --
Cash and cash equivalents at beginning of the
period ........................................... 88,778 --
--------- --------
Cash and cash equivalents at end of period ........ $ 206,112 $ --
========= ========
Supplemental disclosure of cash flow information:
Interest Paid ..................................... $ 872 $ 155
Assets purchased under capital lease obligations .. -- 17,032
</TABLE>
See accompanying notes to condensed financial statements.
5
<PAGE> 6
DIGEX, INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Organization
Digex, Incorporated ("Digex") was incorporated on April 26, 1999,
under the laws of the State of Delaware. Digex's business was operated as the
Web site hosting unit of Intermedia Communications Inc. ("Intermedia") since
its acquisition by Intermedia on July 7, 1997. On that date, Intermedia
acquired Business Internet, Inc. (previously known as DIGEX, Incorporated),
including the Web site hosting unit (the "Predecessor"), in a business
combination accounted for as a purchase. The Web site hosting unit presented in
the accompanying financial statements had no legal status or existence prior to
the incorporation of Digex on April 26, 1999. Prior to April 30, 1999, the
Registrant had no assets or liabilities.
Digex's operations began in January 1996 to provide managed Web
hosting services, principally to Fortune 2000 companies. Digex's services
include implementing and maintaining secure, scalable, high-performance Web
sites on the Internet 24 hours a day. In addition, Digex provides a
comprehensive suite of Web management services, including business process
solutions and value-added testing services directed toward improving its
customers' overall Internet performance.
2. Basis of Presentation
The accompanying condensed interim financial statements have been
prepared by Digex, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (the "Commission"). Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles ("GAAP") have been
omitted pursuant to such rules and regulations. The unaudited condensed interim
financial statements should be read in conjunction with the financial
statements, notes thereto and other information included in the Form 10-K of
Digex for the year ended December 31, 1999.
The accompanying unaudited condensed interim financial statements
reflect, in the opinion of management, all adjustments, which are of a normal
and recurring nature, necessary for a fair presentation of the financial
condition and results of operations and cash flows for the periods presented.
The preparation of financial statements in accordance with GAAP requires
management to make estimates and assumptions. Such estimates and assumptions
affect the reported amounts of assets and liabilities, as well as the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates. The results
of operations for the interim periods are not necessarily indicative of the
results for the entire year.
The financial statements for periods prior to April 30, 1999 represent
the carved-out operations of the managed Web site and application hosting unit
of Intermedia. Digex's accumulated deficit of $112.8 million arose after April
30, 1999. Accumulated losses and capital contributions from Intermedia were
included in owner's net investment prior to April 30, 1999 and were transferred
to additional paid-in capital upon the capitalization of Digex. Intermedia
contributed approximately $115.1 million in assets and certain liabilities on
April 30, 1999. Intermedia also contributed additional capital of $48.1 million
to Digex beginning May 1 through August 4, 1999, principally by way of
contributions of telecommunications assets. These contributions were accounted
for at Intermedia's underlying book values on the date of contribution.
6
<PAGE> 7
DIGEX, INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
3. Stockholders' Equity
On January 12, 2000, Digex sold 100,000 shares of its preferred stock,
designated as Series A Convertible Preferred Stock (the "Preferred Stock"),
with detachable warrants to purchase 1,065,000 shares of its Class A Common
Stock (the "Warrants"), for an aggregate of $100.0 million, of which $15.0
million was in the form of equipment purchase credits. Approximately $1.5
million was used for equipment purchases in the second quarter of 2000. The
remaining credit of $13.5 million is netted against equity as of June 30, 2000.
The Preferred Stock has an aggregate liquidation preference of $100.0 million,
and is convertible into approximately 1,462,000 shares of Class A Common Stock.
The Warrants can be exercised at any time over their three-year term at a price
of $57.00 per share (the fair value of Digex's Class A Common Stock on the
transaction commitment date). The proceeds from the offering were allocated
between the Preferred Stock and the Warrants based upon their relative fair
values.
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
Stock and received net proceeds of approximately $171.6 million. Intermedia
sold 10,650,000 shares of Class B Common Stock. The Class B Common Stock sold
by Intermedia automatically converted into Class A Common Stock at the closing
of the offering. Each share of Class B Common Stock is entitled to 10 votes
while each share of Class A Common Stock is entitled to one vote. As a result,
while Intermedia owns approximately 62.0% of Digex's equity interests, it
controls approximately 94.2% of Digex's voting interest.
4. Deferred Compensation
Since July 29, 1999, Digex granted options to purchase 1,442,500
shares of Class A Common Stock under the Digex Long-Term Incentive Plan to
certain employees of Digex at exercise prices below market value. During the
six months ended June 30, 2000, Digex also recorded $3.4 million of deferred
compensation, a separate component of stockholders' equity, to be expensed over
the four-year vesting period of the options. Deferred compensation expense of
approximately $1.0 million and $2.0 million was expensed during the three and
six month periods ended June 30, 2000, respectively.
5. Loss Per Share
The following table presents the computation of basic and diluted loss
per share of common stock:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
--------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net loss, as reported... $ (34,425) $ (13,253) $ (60,071) $ (21,848)
=========== =========== =========== ===========
Weighted average number
of common shares....... 63,503,516 50,000,000 63,062,198 50,000,000
=========== =========== =========== ===========
Loss per share:
Basic................. $ (0.54) $ (0.27) $ (0.95) $ (0.44)
=========== =========== =========== ===========
Diluted............... $ (0.54) $ (0.27) $ (0.95) $ (0.44)
=========== =========== =========== ===========
</TABLE>
Convertible securities were excluded in the computation of diluted
loss per share because assumed exercise or conversion would be anti-dilutive.
7
<PAGE> 8
DIGEX, INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
6. Related Party Agreements
On April 30, 1999, Digex entered into a General and Administrative
Services Agreement (the "G&A Agreement") with Intermedia. Under the terms of
the G&A Agreement, as amended to date, Intermedia provides Digex with back
office and administrative services such as human resources, finance and
accounting, tax services, investor relations, and information management
services. The initial term of the agreement is two years, and the charge for
these services was $4.0 million and $10.0 million for the three and six months
ended June 30, 2000, respectively.
Digex also entered into three two-year Network Services Agreements
with Intermedia. Under the terms of these agreements, Intermedia provides Digex
with east and west coast Internet transit, Internet access and managed firewall
services. The charges for these services amounted to $1.7 million and $3.6
million for the three and six months ended June 30, 2000, respectively.
On June 1, 2000, Digex entered into an Asset Migration Agreement with
Intermedia. Under the terms of the agreement, Digex purchased certain assets,
including certain licensed third-party software, machinery, and equipment from
Intermedia at cost to provide independent managed firewall services. Digex paid
a purchase price of $4.5 million for net book value of these assets and
services on June 30, 2000, the closing date of the agreement. Under the Asset
Migration Agreement, Digex will also be making equal monthly installments
amounting to a total of $0.9 million for Intermedia's support and consultation
for the six month period ending on December 31, 2000. In connection with the
purchase of firewall-related assets from Intermedia, the Managed Firewall
Services Agreement between Digex and Intermedia was terminated.
Digex entered into three agreements with Intermedia to sell to
Intermedia certain telecommunications related assets that are purchased by
Digex with the net proceeds of certain offerings of Digex securities. The
assets are sold to Intermedia at Digex's cost. The proceeds from the sale of
telecommunications related assets to Intermedia were approximately $8.5 million
and $35.7 million during the three and six months ended June 30, 2000,
respectively. These proceeds were unrestricted and were used to fund Digex's
operating expenses.
7. Subsequent Events
On July 11, 2000, Intermedia announced that it is exploring strategic
alternatives with regard to Digex, including, without limitation, the possible
sale of its ownership position in Digex.
8
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the
condensed financial statements and related notes herein, and with the
Management's Discussion and Analysis of Financial Condition and Results of
Operations and audited financial statements and related notes included in
Digex's Form 10-K, as filed with the Commission on March 10, 2000.
Overview
We are a leading provider of managed Web hosting services to
businesses operating mission-critical, multi-functional Web sites. In addition,
we provide Web hosting services to the rapidly growing number of application
service providers enabling them to more efficiently deliver their application
services to their customers over the Internet. We provide the computer
hardware, software, network technology, and systems management necessary to
provide our customers comprehensive, managed Web site hosting and application
hosting solutions. We also offer related value-added services such as firewall
management, stress testing and consulting services, including capacity and
migration planning and database optimization. We currently provide such
services to a diversified customer base consisting of over 670 customers. As of
June 30, 2000, we managed 3,647 Windows NT and UNIX-based servers in our state-
of-the-art data centers which are strategically positioned on the east and west
coasts of the United States and in Europe.We believe our singular focus on
delivering mission-critical Web site and application hosting solutions has been
the major contributor to our growth.
In May 2000, we created European operating entities to support our
international operations and opened our first data center outside of the United
States in Europe. Located in London, our European SmartCenter(SM) gives Digex
customers in Europe the superior level of technology, security, and support
services in Europe they have come to rely on in the United States. The data
center is a leased facility which became operational in July 2000.
We are among the first Web hosting providers to achieve the Statements
of Auditing Standards No. 70 (SAS 70) Type I certification, which focused on
our systems for providing the most reliable and secure environment for
conducting on line transactions to its customers.
On June 1, 2000, we entered into an Asset Migration Agreement with
Intermedia. Under the terms of the agreement, we purchased certain assets,
including certain licensed third-party software, machinery, and equipment from
Intermedia at cost to provide independent managed firewall services. We paid a
purchase price of $4.5 million for net book value of these assets and services
on June 30, 2000, the closing date of the agreement. Under the Asset Migration
Agreement, we will also be making equal monthly installments amounting to a
total of $0.9 million for Intermedia's support and consultation for the six
month period ending on December 31, 2000. In connection with the purchase of
firewall-related assets from Intermedia, the Managed Firewall Services
Agreement between Digex and Intermedia was terminated.
On June 29, 2000, we entered into a ten-year lease commencing in
September 2000 for our new corporate headquarters facility in Laurel, Maryland.
The lease agreement requires an initial security deposit of $2.0 million in the
form of a letter of credit. This letter of credit may be reduced at the
commencement of the seventh lease year to an amount equal to the then current
one month's base rent if certain conditions are met annually prior to the
seventh year of the lease.
Revenue. Our revenues consist primarily of monthly fees from our
managed Web site and application hosting services. Contracts for these services
are typically between one and three years in length. In addition to Web site
and application hosting, we also offer enterprise services and consulting
services and believe that we will begin to derive increasing amounts of
revenues from the sale of these services in the future.
9
<PAGE> 10
Costs and Expenses. Costs and expenses include:
o cost of operations;
o cost of services;
o selling, general and administrative expenses;
o deferred compensation; and
o depreciation and amortization expense.
Cost of operations consist primarily of the costs for our network
connectivity and firewall services. We expect our network connectivity
requirements to grow in conjunction with the growth of our overall business and
accordingly expect these costs to increase in the future. Expenses directly
attributed to the sale of third party equipment is also included.
Cost of services consist primarily of facilities administration
expenses including rent, maintenance and utilities to support our data centers
and salaries and related benefits for our technical operations. We expect our
cost of services to increase in dollar amount but to decline as a percentage of
revenue due to economies of scale and expected improvements in technology and
productivity.
Selling, general and administrative expenses consist primarily of
salaries and benefits for our marketing, sales and support personnel,
advertising costs, consultants' fees, provision for doubtful accounts and other
miscellaneous expenses. We expect selling, general and administrative expenses
to increase in dollar amount and to decline as a percentage of revenue over
time.
Deferred compensation expense is recorded to amortize the resulting
deferred compensation cost over the four-year vesting period of the options.
Stock options were granted by Digex to certain employees at exercise prices
below market value.
Depreciation and amortization expense consists primarily of
depreciation of our data centers, servers and related equipment and
amortization of our intangible assets. We expect these expenses to increase due
to our plans to invest significant capital to continue to expand our data
center capacity.
Plan of Operation
We plan to expand our Web site and application hosting business by
focusing on large companies which are looking to develop a presence on the
Internet by both providing e-commerce business solutions to their customers and
outsourcing the management of their Web sites and web-enabled business
applications. In the fourth quarter of 1999, we opened our state-of-the-art
data centers on the east and west coasts of the United States. We anticipate
that these data centers, when operating at full capacity, will support servers
generating in excess of $800.0 million in annualized revenue. We believe that
the new data centers in the United States and Europe will place us in a
stronger competitive position to successfully provide outsourced solutions of
scalable Web site and application hosting solutions. We also offer value-added
services, such as firewall management, stress testing, and consulting services,
including capacity and migration planning and database optimization, and
believe that we will derive increasing amounts of revenue from these services
in the future.
10
<PAGE> 11
Results of Operations
The following table presents certain information derived from our
Unaudited Condensed Statements of Operations for the three and six months ended
June 30, 2000 and 1999, expressed as a percentage of revenue.
Six months
Three months ended ended
June 30, June 30,
---------------- ----------------
2000 1999 2000 1999
------ ------ ------ ------
Revenues ............................ 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of operations ................ 21.5 21.3 18.6 19.7
Cost of services .................. 39.9 27.5 40.2 33.7
Selling, general and administrative 83.4 147.8 89.7 121.4
Deferred compensation ............. 2.4 -- 2.8 --
Depreciation and amortization ..... 42.6 44.8 43.5 45.3
------ ------ ------ ------
Total costs and expenses ............ 189.8 241.4 194.9 220.1
------ ------ ------ ------
Loss from operations ................ (89.8) (141.4) (94.9) (120.1)
Other income (expense):
Interest expense .................. (1.0) (1.9) (1.2) (1.1)
Interest and other income ......... 9.2 -- 10.5 --
------ ------ ------ ------
Net loss before income tax benefit .. (81.6) (143.3) (85.6) (121.2)
Income tax benefit .................. -- 38.4 -- 22.0
------ ------ ------ ------
Net loss ............................ (81.6) (104.9) (85.6) (99.2)
====== ====== ====== ======
Three Months ended June 30, 2000 Compared to Three Months ended June 30, 1999
Revenue
Total revenue increased 234.3% to $42.2 million for the second quarter
of 2000 compared to $12.6 million for the same period in 1999. The increase in
revenue was due to new customer growth, a significant increase in the number of
managed servers per customer, and a rise of monthly revenue per server. Our
installed base of servers increased 139.2% to 3,647 at the end of the second
quarter of 2000 from 1,525 at the end of the second quarter of 1999. In
addition to revenue from managed Web site and application hosting services,
Digex recognized $5.0 million of third party equipment sales revenue in the
second quarter of 2000.
Cost of Operations
Cost of operations increased 237.7% to $9.1 million for the second
quarter of 2000 compared to $2.7 million for the same period in 1999. The
increase was due to additional network costs resulting from our expanded
customer base and increase in service offerings. As a percentage of revenue
excluding equipment sales, cost of operations excluding equipment cost
decreased to 14.1% for the second quarter of 2000 compared to 21.3% for the
same period in 1999 due to the net effect of improved network utilization
associated with the revenue improvement. Expenses directly attributed to the
sale of third party equipment is included in the cost of operations.
Cost of Services
Cost of services increased 383.8% to $16.8 million for the second
quarter of 2000 compared to $3.5 million for the same period in 1999. The
increase was primarily related to the increased level of operations and the
expansion of our new data centers including costs related to the hiring of
additional consultants and personnel in customer service, engineering, and
facilities administration supporting server growth. As a percentage of revenue,
total cost of services increased to 39.9% for the second quarter of 2000
compared to 27.5% for the same period in 1999.
11
<PAGE> 12
Selling, General and Administrative
Selling, general and administrative expenses increased 88.7% to $35.2
million for the second quarter of 2000 compared to $18.7 million for the same
period in 1999. Through 2000, as part of our growth strategy, we continue to
build up our infrastructure and administrative requirements to operate as a
separate public company. Increases in selling, general and administrative
expenses for 2000 include the costs associated with an increased employee base,
advertising campaigns, back office support (including the G&A Agreement, as
amended, with Intermedia), an increased provision for doubtful accounts
receivable and the addition of key executive management to support the growth
of the business. We expect that our growth strategy will continue to require
significant sales and marketing activities, including an expansion of our sales
force and further development of brand name recognition. In addition, we will
continue to build our personnel base to support our growth strategy in the
managed Web site and application hosting industry. As a result, we believe that
our selling, general and administrative expenses will continue to increase in
the future. As a percentage of revenue, total selling, general and
administrative expenses decreased to 83.4% for the second quarter of 2000
compared to 147.8% for the same period in 1999 due primarily to the significant
revenue growth which decreases the expense as a percentage of revenue.
Deferred Compensation
Deferred compensation expense of approximately $1.0 million for the
second quarter of 2000 resulted from stock options granted to certain employees
at exercise prices below market value since July 29, 1999. We recorded
approximately $13.5 million of deferred compensation in 1999 and $0.8 million
in the second quarter of 2000 to be expensed over a four-year vesting period of
the options.
Depreciation and Amortization
Depreciation and amortization expenses increased 218.1% to $18.0
million for the second quarter of 2000 compared to $5.7 million for the same
period in 1999. The increase was principally due to additional servers and
other facilities and equipment placed in service since June 30, 1999. We have
electronics, computer hardware, and computer software with useful lives ranging
from three years to five years. As a percentage of revenue, depreciation and
amortization expenses decreased to 42.6% for the second quarter of 2000
compared to 44.8% for the same period in 1999 due primarily to the significant
revenue growth which decreases the expense as a percentage of revenue. We
expect increases in depreciation charges though 2000 due to the continued
expansion of our new data centers and due to future increased server
installations.
Interest Expense
Interest expense increased 79.5% to $0.4 million for the second
quarter of 2000 compared to $0.2 million for the same period in 1999. The
increase resulted from the capital leases assigned to us by Intermedia during
the second quarter of 1999. Additionally, a note payable was issued by us to a
third party during the third quarter of 1999. As a percentage of revenue,
interest expense decreased to 1% for the second quarter of 2000 compared to
1.9% for the same period in 1999 due primarily to the significant revenue
growth which decreases the expense as a percentage of revenue.
Interest and Other Income
Interest and other income of $3.9 million for the three months ended
June 30, 2000 resulted principally from interest earned on the cash proceeds
from the investment in Digex by Microsoft and a subsidiary of Compaq, and an
initial and subsequent public equity offering.
12
<PAGE> 13
EBITDA
EBITDA, as defined below, decreased 55.1% to $(18.9) million in the
second quarter of 2000 compared to $(12.2) million for the same period in 1999.
The change is primarily attributable to costs associated with our growth
strategy. Costs associated with the administration and maintenance of our
expanded data centers and increased selling, general and administrative costs
will continue to represent a large portion of expenses during our planned
expansion. In addition, we expect to continue to experience rapid growth in
marketing and selling expenses as new customers are acquired.
EBITDA consists of earnings (loss) before interest expense, interest
and other income, income tax benefit, deferred compensation, and depreciation
and amortization. EBITDA does not represent funds available for management's
discretionary use and is not intended to represent cash flow from operations.
EBITDA should also not be construed as a substitute for operating income or a
better measure of liquidity than cash flow from operating activities, which are
determined in accordance with generally accepted accounting principles. This
caption excludes components that are significant in understanding and assessing
our results of operations and cash flows. In addition, EBITDA is not a term
defined by generally accepted accounting principles and as a result our measure
of EBITDA might not be comparable to similarly titled measures used by other
companies. However, we believe that EBITDA is relevant and useful information
which is often reported and widely used by analysts, investors and other
interested parties in the Web site and application hosting industry.
Accordingly, we are disclosing this information to permit a more comprehensive
analysis of our operating performance, as an additional meaningful measure of
performance and liquidity, and to provide additional information with respect
to our ability to meet future debt service, capital expenditure and working
capital requirements. See the unaudited condensed financial statements and
notes thereto contained elsewhere in this report for more detailed information.
Six Months ended June 30, 2000 Compared to Six Months ended June 30, 1999
Revenue
Total revenue increased 218.8% to $70.2 million for the six months
ended June 30, 2000 compared to $22.0 million for the same period in 1999. The
increase in revenue was due to new customer growth, a significant increase in
the number of managed servers per customer, and a rise of monthly revenue per
server. Our installed base of servers increased 139.2% to 3,647 at the end of
the six months ended June 30, 2000 from 1,525 at the end of the six months
ended June 30, 1999. In addition to revenue from managed Web site and
application hosting services, Digex recognized $5.0 million of third party
equipment sales revenue in the second quarter of 2000.
Cost of Operations
Cost of operations increased 200.0% to $13.0 million for the six
months ended June 30, 2000 compared to $4.3 million for the same period in
1999. The increase was due to additional network costs resulting from our
expanded customer base and increase in service offerings. As a percentage of
revenue excluding equipment sales, cost of operations excluding the cost of
third party equipment decreased to 13.1% for the six months ended June 30, 2000
compared to 19.7% for the same period in 1999 due to the net effect of improved
network utilization associated with the revenue improvement. Expenses directly
attributed to the sale of third party equipment is included in the cost of
operations.
Cost of Services
Cost of services increased 279.9% to $28.2 million for the six months
ended June 30, 2000 compared to $7.4 million for the same period in 1999. The
increase was primarily related to the increased level of operations and the
expansion of our new data centers including costs related to the hiring of
additional personnel in customer service, engineering, and facilities
administration supporting server growth. As a percentage of revenue, total cost
of services increased to 40.2% for the six months ended June 30, 2000 compared
to 33.7% for the same period in 1999.
13
<PAGE> 14
Selling, General and Administrative
Selling, general and administrative expenses increased 135.7% to $63.0
million for the six months ended June 30, 2000 compared to $26.7 million for
the same period in 1999. Through 2000, as part of our growth strategy, we
continue to build up our infrastructure and administrative requirements to
operate as a separate public company. Increases in selling, general and
administrative expenses for 2000 include the costs associated with an increased
employee base, advertising campaigns, back office support (including the G&A
Agreement, as amended, with Intermedia), an increased provision for doubtful
accounts receivable and the addition of key executive management to support the
growth of the business. We expect that our growth strategy will continue to
require significant sales and marketing activities, including an expansion of
our sales force and further development of brand name recognition. In addition,
we will continue to build our personnel base to support our growth strategy in
the managed Web site and application hosting industry. As a result, we believe
that our selling, general and administrative expenses will continue to increase
in the future. As a percentage of revenue, total selling, general and
administrative expenses decreased to 89.7% for the six months ended June 30,
2000 compared to 121.4% for the same period in 1999 due primarily to the
significant revenue growth which decreases the expense as a percentage of
revenue.
Deferred Compensation
Deferred compensation expense of approximately $2.0 million for the
six months ended June 30, 2000 resulted from stock options granted to certain
employees at exercise prices below market value since July 29, 1999. We
recorded approximately $13.5 million of deferred compensation in 1999 and $2.1
million in the six months ended June 30, 2000 to be expensed over a four-year
vesting period of the options.
Depreciation and Amortization
Depreciation and amortization expenses increased 206.6% to $30.6
million for the six months ended June 30, 2000 compared to $10.0 million for
the same period in 1999. The increase was principally due to additional servers
and other facilities and equipment placed in service since June 30, 1999. We
have electronics, computer hardware, and computer software with useful lives
ranging from three years to five years. As a percentage of revenue,
depreciation and amortization expenses decreased to 43.5% for the six months
ended June 30, 2000 compared to 45.3% for the same period in 1999 due primarily
to the significant revenue growth which decreases the expense as a percentage
of revenue. We expect increases in depreciation charges though 2000 due to the
continued expansion of our new data centers and due to future increased server
installations.
Interest Expense
Interest expense increased 264.9% to $0.9 million for the six months
ended June 30, 2000 compared to $0.2 million for the same period in 1999. As a
percentage of revenue, interest expense increased to 1.2% for the six months
ended June 30, 2000 compared to 1.1% for the same period in 1999. The increase
resulted from the capital leases assigned to us by Intermedia during the second
quarter of 1999. Additionally, a note payable was issued by us to a third party
during the third quarter of 1999.
Interest and Other Income
Interest and other income of $7.4 million for the six months ended
June 30, 2000 resulted principally from interest earned on the cash proceeds
from the investment in Digex by Microsoft and a subsidiary of Compaq, and an
initial and subsequent public equity offering.
14
<PAGE> 15
EBITDA
EBITDA, as defined below, decreased 106.6% to $(34.1) million in the
six months ended June 30, 2000 compared to $(16.5) million for the same period
in 1999. The change is primarily attributable to costs associated with our
growth strategy. Costs associated with the administration and maintenance of
our expanded data centers and increased selling, general and administrative
costs will continue to represent a large portion of expenses during our planned
expansion. In addition, we expect to continue to experience rapid growth in
marketing and selling expenses as new customers are acquired.
EBITDA consists of earnings (loss) before interest expense, interest
and other income, income tax benefit, deferred compensation, and depreciation
and amortization. EBITDA does not represent funds available for management's
discretionary use and is not intended to represent cash flow from operations.
EBITDA should also not be construed as a substitute for operating income or a
better measure of liquidity than cash flow from operating activities, which are
determined in accordance with generally accepted accounting principles. This
caption excludes components that are significant in understanding and assessing
our results of operations and cash flows. In addition, EBITDA is not a term
defined by generally accepted accounting principles and as a result our measure
of EBITDA might not be comparable to similarly titled measures used by other
companies. However, we believe that EBITDA is relevant and useful information
which is often reported and widely used by analysts, investors and other
interested parties in the Web site and application hosting industry.
Accordingly, we are disclosing this information to permit a more comprehensive
analysis of our operating performance, as an additional meaningful measure of
performance and liquidity, and to provide additional information with respect
to our ability to meet future debt service, capital expenditure and working
capital requirements. See the unaudited condensed financial statements and
notes thereto contained elsewhere in this report for more detailed information.
Liquidity and Capital Resources
Net cash used in operating activities was $42.6 million and $9.9
million during the six months ended June 30, 2000 and 1999, respectively. Net
cash used for operating activities in each of these periods was primarily the
result of operating losses and changes in working capital.
Net cash used for investing activities during the six months ended
June 30, 2000 and 1999 was $97.1 million and $77.3 million, respectively. Net
cash used for investing activities in each of these periods was primarily the
result of capital expenditures for data center infrastructure, as well as
leasehold improvements, furniture and fixtures, computers, and other equipment.
Although we have plans to invest significantly in property and equipment, we
have no material commitments for such items at this time.
On January 12, 2000, we sold 100,000 shares of our Preferred Stock and
Warrants to purchase 1,065,000 shares of Class A Common Stock to Microsoft and
a subsidiary of Compaq for aggregate gross proceeds of $100.0 million, of which
$85.0 million was paid in cash and $15.0 million was paid in the form of
equipment credits from Compaq. The Preferred Stock has an aggregate liquidation
preference of $100.0 million and is convertible into approximately 1,462,000
shares of Class A Common Stock. The Warrants can be exercised at any time over
their three-year term at a price of $57.00 per share (the fair value of our
Class A Common Stock on the transaction commitment date). The proceeds from the
offering were allocated between the Preferred Stock and the Warrants based upon
their relative fair values.
To the extent necessary to perform our obligations under our agreement
with Compaq, the proceeds from the investment by a subsidiary of Compaq will be
used toward the development of a platform for the delivery of high-performance
application hosting services, which will include capital expenditures and
research and development expenditures. Therefore, we do not expect the proceeds
of the investment by a subsidiary of Compaq to be available for general
corporate purposes. We also intend to use the proceeds of the investment by
Microsoft to fund this development project.
15
<PAGE> 16
On February 16, 2000, Digex completed a public offering of 12,650,000
shares of Class A Common Stock. We sold 2,000,000 shares of Class A Common
Stock and received net proceeds of approximately $171.6 million. Intermedia
sold 10,650,000 shares of Class B Common Stock. The Class B Common Stock sold
by Intermedia automatically converted into Class A Common Stock at the closing
of the offering.
The net proceeds of our public offerings and the cash proceeds of the
investments by Microsoft and a subsidiary of Compaq must be used to purchase
telecommunications related assets due to restrictions in Intermedia's debt
instruments. Therefore, to provide for the funding of our operating expenses,
we have made arrangements with Intermedia to sell to Intermedia certain
telecommunications related assets that are purchased by Digex with the net
proceeds of these offerings. The assets are sold to Intermedia for cash at our
cost. For the six months ended June 30, 2000, we had received approximately
$35.7 million from Intermedia related to the sale of telecommunications related
assets. These proceeds were unrestricted and were used to fund our operating
expenses. Cash payments for capital assets for the six months ended June 30,
2000 were approximately $97.1 million.
In June 2000, the Department of Business and Economic Development of
Maryland received approval from the Maryland General Assembly Legislative
Policy Committee to provide $3.0 million in funding to Digex for the
development of a Web hosting facility in Prince George's County, Maryland under
the Sunny Day Fund initiative. The funds will initially be provided to Digex in
the form of a conditional loan which will accrue deferred interest at 5%. If
certain conditions are met, the conditional loan and accrued interest will
convert to a grant. The Committee also approved Digex's eligibility to seek an
additional $1.0 million in such funding.
We anticipate we will have significant cash requirements for several
years as we expand our data center capacity, increase servers under management,
increase our employee base, acquire additional office space to support our
expanding operations and invest in our marketing organization. In addition, we
expect to invest significantly in the purchase of property and equipment and
for research and development, including funding the expenses associated with
our research and development alliance with Microsoft and a subsidiary of
Compaq. We expect our capital expenditures to increase due to the growth of
servers under management and our continuing data center expansion in the United
States and abroad. Subject to the limitations discussed under the caption
"Market for Registrant's Common Equity and Related Stockholder Matters -- Use
of Proceeds from a Sale of Registered Securities" on our Form 10-K for the
period ended December 31, 1999 as filed with the Commission on March 10, 2000,
we believe we have sufficient capital to sustain our current operations and
capital expenditure plans into early 2001. We intend to continue to seek
funding from external sources to meet our cash needs subsequent to that time
period. There can be no assurance that such funding will be available on terms
satisfactory to us.
Recent Accounting Pronouncements
In December 1999, the Commission issued Staff Accounting Bulletin No.
101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101
summarizes certain of the staff's views in applying generally accepted
accounting principles to revenue recognition in financial statements. On June
26, 2000, the Commission deferred the effective date of SAB 101 to require
adoption of SAB 101 by the fourth quarter of the first fiscal year beginning
after December 15, 1999. Digex is currently awaiting additional guidance
related to the implementation of SAB 101 to determine the impact on its various
revenue recognition policies, including those pertaining to nonrefundable
installation fees which Digex currently recognizes as revenue upon completion
of the service.
16
<PAGE> 17
In June 2000, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards ("Statement") No. 138, "Accounting
for Certain Derivative Instruments and Certain Hedging Activities", an
amendment of FASB Statement No. 133, which is effective for fiscal years
beginning after June 15, 2000. Digex does not anticipate that the adoption of
this Standard will have a significant effect on its results of operations or
financial position.
Information Regarding Forward-Looking Statements
The information set forth above in "Management's Discussion and
Analysis of Financial Conditions and Results of Operations" includes
forward-looking statements that involve numerous risks and uncertainties.
Forward-looking statements can be identified by the use of forward-looking
terminology such as "estimates," "projects," "anticipates," "expects,"
"intends," "believes," or the negative thereof or other variations thereon or
comparable terminology or by discussions of strategy that involve risks and
uncertainties. This report includes forward-looking statements, which could
differ from actual results. See "Risk Factors" in our Form 10-K for the year
ended December 31, 1999 as filed with the Commission on March 10, 2000.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Beginning in the third quarter of 2000, we expect to recognize revenue
from international sales denominated in foreign currency. As a global concern,
we could face exposure to adverse movements in foreign currency exchange rates
on the financial results of foreign subsidiaries that are translated into U.S.
dollars upon consolidation. These exposures may change over time as business
practices evolve and could affect our financial results. Currently, we do not
hedge against any foreign currency risk and, as a result, could incur gains or
losses.
17
<PAGE> 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We do not believe that there are any pending or threatened legal
proceedings that, if adversely determined, would have a material adverse effect
on us.
Item 2. Changes in Securities and Use of Proceeds
Recent Sales of Unregistered Securities
None.
Use of Proceeds from a Sale of Registered Securities
For the six months ended June 30, 2000, we used $52.0 million of the
net proceeds of our initial public offering to purchase telecommunications
related assets held by us and $35.7 million for the purchase of
telecommunications related assets subsequently sold to Intermedia. The proceeds
of the sales of assets to Intermedia were unrestricted and were used to fund
our operating expenses. All proceeds of our initial public offering have been
used as of June 30, 2000.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
Matters submitted to a vote at the Annual Meeting of Stockholders held
on June 1, 2000 and the results of such meeting are as follows:
<TABLE>
<CAPTION>
Votes Votes Votes Votes
For Against Withheld Abstained
----------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
1. Election of directors to serve
until the 2001 Annual Meeting
of Stockholders
John C. Baker ................ 406,838,006 -- 7,221 --
Philip A. Campbell ........... 406,838,006 -- 7,221 --
Richard A. Jalkut ............ 406,838,006 -- 7,221 --
George F. Knapp .............. 406,837,492 -- 7,735 --
Robert M. Manning ............ 406,729,417 -- 115,810 --
Jack E. Reich ................ 406,837,810 -- 7,417 --
David C. Ruberg .............. 403,482,588 -- 3,362,639 --
Mark K. Shull ................ 406,729,289 -- 115,938 --
2. Approval of the proposal to
ratify the Company's Long-
Term Incentive Plan .......... 400,694,318 2,781,769 -- 281,735
3. Approval to increase the
number of shares of Common
Stock authorized for issuance
under the Company's Long-Term
Incentive Plan from 9,000,000
to 15,000,000 shares ......... 397,909,044 5,566,915 -- 281,863
4. Approval of Ernst & Young LLP
as independent auditors of
the Company for the year
ending December 31, 2000 ..... 406,837,007 2,058 -- 6,162
</TABLE>
18
<PAGE> 19
A majority of the votes present, in person or by proxy, and entitled
to vote at the meeting, were cast in favor of the four proposals.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Exhibit
------ -------
3.1 -- Certificate of Incorporation of Digex, as amended.
Incorporated herein by reference to Digex's Form 10-Q (File
No. 000-26873) filed with the Commission on September 13,
1999.
3.2 -- By-laws of Digex. Incorporated herein by reference to
Digex's Form 10-Q (File No. 000-26873) filed with the
Commission on May 12, 2000.
3.3 -- Certificate of Designation for the Series A Preferred Stock.
Incorporated herein by reference to Digex's registration
statement on Form S-1 (File No. 333-94879) filed with the
Commission on January 18, 2000.
10.1 -- Amendment No. 2, dated as of June 29, 2000, to General and
Administrative Services Agreement between Digex and
Intermedia.
10.2 -- Asset Migration Agreement, dated as of June 1, 2000, between
Digex and Intermedia.
10.3 -- Lease by and between Digex and Riggs & Company, dated as of
June 29, 2000. (2)
10.4 -- Employment Letter dated March 22, 2000 between Digex and
Thomas Davidsson. (1)
10.5 -- Employment Letter dated July 5, 2000 between Digex and Todd
Carlson. (1)
10.6 -- Employment Letter dated July 6, 2000 between Digex and Bruce
F. Metge. (1)
27.1 -- Financial Data Schedule (For SEC Use Only).
---------------
(1) Management contract or compensatory plan or arrangement.
(2) Confidential treatment of certain provisions of this exhibit was
requested from the Commission as of the filing date of this Form 10-Q.
(b) Reports on Form 8-K
The following report on Form 8-K of Digex was filed during the second
quarter of 2000:
Digex filed a Current Report on Form 8-K, dated May 4, 2000, reporting
under Item 5 the issuance of press releases discussing Digex's first quarter
results and the establishment of its London SmartCenter(SM). Digex also reported
under Item 7 the filing of the press releases as exhibits to the Form 8-K.
19
<PAGE> 20
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.
Digex, Incorporated
(Registrant)
By: /s/ Timothy M. Adams
----------------------------------
Timothy M. Adams
Chief Financial Officer
By: /s/ T. Scott Zimmerman
----------------------------------
T. Scott Zimmerman
Vice President and Controller
Dated: August 14, 2000
20
<PAGE> 21
EXHIBIT 10.1
AMENDMENT NO. 2 TO
GENERAL AND ADMINISTRATIVE SERVICES AGREEMENT
AMENDMENT, dated as of June 29, 2000 to General and Administrative
Services Agreement dated as of April 30, 1999 (as heretofore amended, the
"Agreement"), between Digex Incorporated, a Delaware corporation ("Digex") and
Intermedia Communications Inc., a Delaware corporation ("Intermedia").
WHEREAS, pursuant to a resolution of the Board of Directors of Digex
adopted on January 17, 2000, representatives of Digex and Intermedia were
instructed to develop a transition plan (the "Plan") for services to be
provided by Intermedia pursuant to the Agreement, and the compensation to be
paid to Intermedia for such services, during the second, third and fourth
quarters of fiscal 2000; and
WHEREAS, representatives of Digex and Intermedia have agreed upon the
Plan and the compensation to be paid to Intermedia during such period.
NOW, THEREFORE, the parties hereto agree as follows:
1. Section 1 of the Agreement is hereby amended to read as
follows: "Section 1. Services by Intermedia. Services to be rendered
by Intermedia from March 31, 2000 through December 31, 2000 shall be
rendered in accordance with the Transition Plan developed between
Digex and Intermedia ."
2. Section 5.1(b) of the Agreement is hereby amended to read as
follows: "(b) With respect to each calendar month during the period
commencing on April 1, 2000 and ending on March 31, 2001, the monthly
Service Fee shall be as set forth on the schedule to the amendment
dated June 29, 2000 to the Agreement."
1
<PAGE> 22
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed as of the 29th day of June, 2000 by their duly authorized
representatives.
DIGEX, INCORPORATED
By: /s/ TIMOTHY M. ADAMS
-------------------------------------
INTERMEDIA COMMUNICATIONS INC.
By: /s/ ROBERT M. MANNING
-------------------------------------
2
<PAGE> 23
Schedule
--------
Monthly Management Fee
April 2000 $1,333,333
May 2000 $1,333,333
June 2000 $1,333,334
July 2000 $1,000,000
August 2000 $1,000,000
September 2000 $1,000,000
October 2000 $666,666
November 2000 $666,667
December 2000 $666,667
January 2001 To be negotiated
February 2001 To be negotiated
March 2001 To be negotiated
3
<PAGE> 24
EXHIBIT 10.2
Asset Migration Agreement
THIS ASSET MIGRATION AGREEMENT (the "Agreement"), dated as of the 1/st/ day of
June, 2000, is entered into by and between Intermedia Communications, Inc., a
Delaware corporation (hereinafter referred to as "Intermedia"), and Digex,
Inc., a Delaware corporation (hereinafter referred to as "Digex"). Intermedia
and Digex may be referred to individually as a "Party" and collectively as the
"Parties."
W I T N E S S E T H:
WHEREAS, Intermedia is engaged in the business of remotely managing
firewall products for customers of Digex pursuant to the July Agreement (as
defined herein);
WHEREAS, Digex desires to provide firewall services independent of
Intermedia for all of its customers, including those referred to in the
preceding paragraph, and the Parties have agreed on a transfer of assets from
Intermedia to Digex and on a termination of the July Agreement; and,
WHEREAS, accordingly, Intermedia desires to sell, assign, transfer and
migrate certain assets, including certain licensed software, and equipment to
Digex, and Digex desires to acquire such assets upon the terms and conditions
set forth below.
NOW, THEREFORE, in consideration of the above promises, the mutual
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Parties hereto
agree as follows:
ARTICLE 1 -- PURCHASE AND SALE OF ASSETS
1.1 Sale of Assets by Intermedia. On the Closing Date (as
hereinafter defined) and subject to and on the terms and conditions of this
Agreement, Digex will purchase and accept from Intermedia, and Intermedia will
sell, transfer, convey and deliver to Digex, as the same shall exist on the
Closing Date, all of the properties and assets (tangible and intangible),
including all of the licensed software and equipment specified in Exhibit A,
which is attached hereto and made a part hereof by this reference (the
"Assets"), including without limitation, certain licensed third-party software,
machinery, equipment, and other tangible personal property as specified in
Exhibit A, including all of Intermedia's rights, title and interest in such
Assets.
Pg. 1
<PAGE> 25
1.2 No Assumption of Liabilities. Except as set forth in Section
1.3 immediately following, Digex does not assume and shall not be responsible
for any liabilities and obligations of Intermedia with respect to the Assets,
and Intermedia agrees to pay and discharge all of its liabilities and
obligations incurred in such operations up to the Closing Date, including,
without limitation, costs for utilities, insurance, taxes, operating licenses
and other similar operational costs (the "Operational Costs"). In this regard,
Intermedia shall pay the pro rata portion of any Operational Costs that may be
invoiced to Digex after the Closing Date but that relate to time periods prior
to the Closing Date.
1.3 Description of Assumed Liabilities. From and after the
Closing Date, Digex agrees to assume and pay all Operational Costs incurred.
1.4 Purchase Price. In consideration of the sale, transfer,
conveyance, assignment and delivery of the Assets by Intermedia to Digex, and
subject to the conditions set forth in this Agreement, Digex shall pay to
Intermedia on the Closing Date, $4,526,357.00, in cash or by wire transfer of
funds to an account designated by Intermedia (the "Purchase Price"). The
Purchase Price is expressly agreed upon by the Parties in accordance with the
Asset values set forth in Exhibit A,.
1.5 Support Payments. In addition to the foregoing, and in
exchange for Intermedia's support and consultation during the six (6) months
commencing on July 1, 2000 and ending on December 31, 2000, Digex shall pay
Intermedia $900,000.00 payable in installments of $150,000.00 each. The first
such installment payment is due and payable as of July 31, 2000, and each
successive installment shall be due and payable as of the last day of each
successive month thereafter through and including December 31, 2000. The
provision and availability of such support and consultation shall be at the
mutual agreement of the parties.
1.6 Scripts. Scripts developed by Intermedia for the purpose of
automating the management and maintenance of firewalls are excluded from the
Assets. Digex has developed and/or acquired certain scripts for the purpose of
automating the management and maintenance of firewalls. The Parties agree and
acknowledge that any similarity between the Intermedia and Digex scripts are
purely coincidental.
1.7 Termination of Prior Agreement. The parties had entered into
a prior agreement titled "Managed Firewall Existing Customers" and including
the document titled "Addendum to Intermedia Secure Managed Firewall Terms and
Conditions," each of which are dated July 13, 1999, and pursuant to which
Intermedia has performed certain managed firewall services for customers of
Digex (hereafter the "July Agreement"). By the terms of the July Agreement,
Intermedia has invoiced Digex, and Digex has paid Intermedia, all due sums for
Intermedia's performance of such services. Upon execution of this Agreement,
and since Intermedia shall no longer be responsible for providing managed
firewall services for Digex customers, the July Agreement shall be terminated
and shall be of no further force or effect. Accordingly, neither Digex nor
Intermedia shall have any further liability whatsoever under the July
Agreement.
Pg. 2
<PAGE> 26
ARTICLE 2 -- REPRESENTATIONS AND WARRANTIES OF INTERMEDIA
2.1 Representations and Warranties. Intermedia represents and
warrants to, and agrees with, Digex that:
2.2 Corporate Organization; Good Standing. Intermedia is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has been duly qualified as a foreign
corporation and is in good standing under the laws of each jurisdiction in
which it conducts its business or owns or leases its assets.
2.3 Authority. Intermedia has all requisite power and authority
to execute, deliver and perform this Agreement and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement
and to consummate the transactions contemplated hereby in accordance with the
provisions hereof.
2.4 Binding Obligation. This Agreement constitutes the valid and
binding obligation of Intermedia, enforceable in accordance with its terms.
2.5 Marketable Title. Intermedia has good and marketable title to
the Assets, free and clear of any liens, charges and encumbrances. Upon
Closing, there shall be vested in Digex good and marketable title to all
tangible and intangible property constituting the Assets, free and clear of any
liens, security interests, encumbrances or restrictions.
2.6 Disclaimer. Except as otherwise provided in this Agreement,
the foregoing sets forth the entire warranty provided hereunder by Intermedia,
and Intermedia expressly disclaims any other warranty, express or implied,
including, without limitation, any implied warranties of merchantability or
fitness for purpose. Notwithstanding anything to the contrary elsewhere in this
Agreement, Intermedia does not warrant or represent that any of the Assets
shall perform in compliance with any specifications, or that the Assets are
functional or defect free, materially or otherwise; provided, however, that the
Assets shall be in working condition as of the date of Closing. Intermedia
shall assign to Digex at Closing, all assignable warranty coverage it possesses
in the Assets as provided by any manufacturer or seller thereof. Digex shall be
solely responsible, at its sole expense, for conducting its due diligence
review of the Assets in accordance with the terms hereof. Nothing herein shall
be construed as to require that Intermedia repair or replace any Assets based
on any inspection or testing conducted prior to Closing, or based on any
failure of, or defect in, any Assets, patent or latent, discovered after the
Closing Date.
ARTICLE 3 -- REPRESENTATIONS AND WARRANTIES OF DIGEX
3.1 Representations and Warranties. Digex hereby represents and
warrants to, and agrees with, Intermedia that:
Pg. 3
<PAGE> 27
3.2 Corporate Organization; Good Standing. Digex is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has been duly qualified as a foreign corporation and is
in good standing under the laws of each jurisdiction in which it conducts its
business or owns or leases its assets.
3.3 Authority. Digex has all requisite power and authority to
execute, deliver and perform this Agreement, to consummate the transactions
contemplated hereby, and be bound, in accordance with the provisions hereof.
3.4 Binding Obligation. This Agreement constitutes the valid and
binding obligation of Digex, and is enforceable in accordance with its terms.
ARTICLE 4 -- CONDITIONS TO CLOSING
4.1 Conditions Precedent to Closing By the Parties. The
obligations of Intermedia and Digex to consummate the transactions contemplated
hereby are conditioned on and subject to the fulfillment of the following
conditions on or before the Closing Date:
4.1.1 The representations and warranties of Intermedia contained in
Article 2 of this Agreement shall be true and correct in all material respects
as of the Closing Date. The representations and warranties of Digex contained
in Article 3 of this Agreement shall be true and correct in all material
respects as of the Closing Date.
4.1.2 Intermedia shall have performed and complied in all material
respects with its obligations under this Agreement to be performed prior to the
Closing Date. Digex shall have performed and complied in all material respects
with its obligations under this Agreement to be performed prior to the Closing
Date.
4.2 Due Diligence. As of the Closing Date, Digex shall have
completed all inspections and/or testing of the Assets it shall have reasonably
deemed necessary in order to verify the working condition and acceptability
thereof.
ARTICLE 5 -- THE CLOSING
5.1 Closing Date; Final Inventory Date. The closing of the
transactions provided for herein (the "Closing") shall take place at a mutually
agreed location on a date that is on or before June 1, 2000 (the "Closing
Date"). Closing shall be complete upon conveyance of the Purchase Price from
Digex to Intermedia in accordance with Section 5.3 below. Upon Closing, all
existing Assets shall become the property of Digex, and all title and risk of
loss in such Assets shall transfer to Digex in accordance with Section 5.2
below.
5.2 Intermedia's Obligations on the Closing Date. At the Closing,
Intermedia shall deliver to Digex any bills of sale, duly executed by
Intermedia and any other reasonable documentation as may be reasonably required
by Digex, if any, to vest in Digex good and marketable title to the Assets.
Pg. 4
<PAGE> 28
5.3 Digex's Obligations on the Closing Date. At the Closing,
Digex shall pay to Intermedia the Purchase Price, in cash, by wire transfer or
in other certified funds.
ARTICLE 6 - INDEMNIFICATION AND LIMITATION OF LIABILITY
6.1 Indemnification of Intermedia by Digex. Digex agrees to and
does hereby indemnify and hold Intermedia, its officers, directors,
shareholders, employees and agents, harmless, from and against any and all
liability, loss, damage or injury and all reasonable costs and expenses
relating thereto, including reasonable legal expenses, arising out of or
resulting from (i) any breach of any covenants, representations and/or
warranties made by Digex pursuant to this Agreement and/or (ii) causes of
action or claims of any kind asserted by unrelated third parties arising from
acts or omissions of Digex relating to the Assets.
6.2 Indemnification of Digex by Intermedia. Intermedia agrees to
and does hereby indemnify and hold Digex, its officers, directors,
shareholders, employees and agents, harmless, from and against any and all
liability, loss, damage or injury, and all reasonable costs and expenses
relating thereto, including reasonable legal expenses, arising out of or
resulting from (i) any breach of any covenants, representations and/or
warranties made by Intermedia pursuant to this Agreement, and/or (ii) causes of
action or claims of any kind asserted by unrelated third parties arising from
acts or omissions of Intermedia relating to the Assets.
6.3 Limitation of Liability. Notwithstanding anything to the
contrary herein, neither Party shall be liable to the other for special,
indirect, incidental, consequential, exemplary or punitive damages howsoever
arising, and whether or not either Party was apprised or knew of the
possibility or likelihood of the occurrence of events giving rise to such
damages. The foregoing precludes, without limitation, any liability on the part
of either Party to the other, for lost profits, lost revenue, lost business,
cost of cover or of substitute goods or services, or damage to goodwill.
ARTICLE 7 - MISCELLANEOUS
7.1 Expenses. Each of the Parties hereto shall bear their
respective expenses incurred in the negotiation and consummation of this
Agreement and the transaction contemplated hereby.
7.2 Waivers. The failure of any Party hereto at any time or from
time to time to require performance of any other Party's obligations under this
Agreement shall in no manner affect the right of such Party to require
performance of any provision of this Agreement at a subsequent time, and the
waiver by any Party of any right arising out of any breach of any provision of
this Agreement shall not be construed as a waiver of any continuing or
succeeding breach of such provision, a waiver of the provision itself, or a
waiver of any right arising out of any subsequent breach.
Pg. 5
<PAGE> 29
7.3 Successors and Assigns. This Agreement shall be binding on
and shall inure to the benefit of the Parties hereto and their respective
successors, heirs, representatives and permitted assigns. Nothing contained
herein shall inure to the benefit of any other third party. This Agreement may
not be assigned by either Party hereto without the other Party's prior written
consent.
7.4 Severability. The invalidity or illegality of any provision,
term or agreement contained in or made a part of this Agreement shall not
affect the validity of the remainder of this Agreement.
7.5 Headings. The headings of the sections and subsections
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
7.6 Entire Agreement. This Agreement, and any schedule appended
hereto, contains all of the terms agreed to by the Parties with respect to the
subject matter hereof and supersede all prior oral or written agreements,
understandings, negotiations and representations made by and between the
Parties. This Agreement may not be amended or modified in any way except by a
written amendment to this Agreement duly executed by the Parties.
7.7 Counterparts. This Agreement may be executed in counterparts
by the Parties hereto, each of which when so executed shall be an original, but
all of which together shall constitute one and the same instrument.
7.8 Applicable Law. This Agreement shall be governed by, and
construed (both as to validity and performance) and enforced in accordance
with, the laws of the State of Maryland applicable to contracts made and to be
performed wholly within said State.
7.9 Survivability. All provisions hereof shall survive the
Closing Date.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be executed as of the date first above written.
Intermedia Communications, Inc. Digex, Inc.
By: /s/ ROBERT M. MANNING By: /s/ TIMOTHY M. ADAMS
--------------------------------- -------------------------------
Name: Robert M. Manning Name: Timothy M. Adams
------------------------------ ----------------------------
Title: Senior Vice President Title: Chief Financial Officer
and Chief Financial Officer ----------------------------
------------------------------
Pg. 6
<PAGE> 30
EXHIBIT A
Digex/Intermedia
Firewall Migration Cost Summary Statement
<TABLE>
<CAPTION>
Q3/2000 Q4/2000 Q1/2000 Q2/2000 Total
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Asset Transfer Costs:
Depreciated Hardware Value .. $ 533,920 $ 533,920 $ 533,920 $ 533,920 $2,135,679
Depreciated Software Cost ... 13,242 13,242 13,242 13,242 52,966
---------- ---------- ---------- ---------- ----------
Total Asset Transfer Costs $ 547,161 $ 547,161 $ 547,161 $ 547,161 $2,188,645
---------- ---------- ---------- ---------- ----------
Service Charge Costs:
Monthly Recurring Costs ..... $1,309,998 $1,027,714 $2,337,712
Start-Up Costs .............. --
---------- ---------- ---------- ---------- ----------
Total Service Charge Costs $ -- $ -- $1,309,998 $1,027,714 $2,337,712
========== ========== ========== ========== ==========
Total Migration Costs: ........ $ 547,161 $ 547,161 $1,857,159 $1,574,875 $4,526,357
========== ========== ========== ========== ==========
</TABLE>
Assumptions
-------------------------------------------
Depreciation is straight line over 5 years.
All costs are calculated on a daily basis.
All prices are at cost.
<PAGE> 31
EXHIBIT 10.3
DEED OF LEASE
THIS DEED OF LEASE (this "Lease") is made as of June 29, 2000, by and
between
"Landlord" RIGGS & COMPANY, a division of Riggs Bank N.A., as Trustee of
---------- the Multi-Employer Property Trust, a trust organized under 12
C.F.R. Section 9.18
and
"Tenant" DIGEX, INC., a Delaware corporation
--------
Table of Contents
-----------------
<TABLE>
<S> <C> <C>
SECTION 1: DEFINITIONS................................................................................. 5
1.1 Definitions...................................................................................... 5
1.2 Access Laws...................................................................................... 5
1.3 Above Standard Tenant Improvement Allowance...................................................... 5
1.4 Additional Rent.................................................................................. 5
1.5 Base Amount of the Base Rent Operating Cost Component............................................ 5
1.6 Base Amount of the Base Rent Tax Component....................................................... 6
1.7 Base Rent........................................................................................ 6
1.8 Base Rent Net Component.......................................................................... 6
1.9 Base Rent Operating Cost Component............................................................... 7
1.10 Base Rent Tax Component.......................................................................... 7
1.11 Brokers.......................................................................................... 7
1.12 Building......................................................................................... 7
1.13 Business Day..................................................................................... 7
1.14 Claims........................................................................................... 7
1.15 Commencement Dates............................................................................... 7
1.16 Common Areas..................................................................................... 7
1.17 Estimated Operating Costs for the Premises....................................................... 7
1.18 Estimated Property Taxes for the Premises........................................................ 8
1.19 Events Of Default................................................................................ 8
1.20 Governmental Agency.............................................................................. 8
1.21 Governmental Requirements........................................................................ 8
1.22 Hazardous Substance(s)........................................................................... 8
1.23 Land............................................................................................. 8
1.24 Landlord......................................................................................... 8
1.25 Landlord's Agents................................................................................ 8
1.26 Lease Term....................................................................................... 8
1.27 Lease Termination Fee............................................................................ 8
1.27A Lease Year....................................................................................... 8
1.27B Long Lead Item(s)................................................................................ 8
1.28 Manager.......................................................................................... 9
1.29 Manager's Address................................................................................ 9
1.29a Normal Business Hours............................................................................ 9
</TABLE>
<PAGE> 32
<TABLE>
<S> <C> <C>
1.30 Operating Costs................................................................................. 9
1.31 Operating Costs For The Premises................................................................ 9
1.32 Parking Ratio................................................................................... 9
1.33 Permitted Use................................................................................... 9
1.34 Phases.......................................................................................... 9
1.35 Plans And Specifications........................................................................ 9
1.36 Prepaid Rent.................................................................................... 9
1.37 Premises........................................................................................ 9
1.38 Prime Rate...................................................................................... 9
1.39 Property Taxes.................................................................................. 9
1.40 Punch List Work................................................................................. 10
1.41 Security Deposit................................................................................ 10
1.42 Substantial Completion.......................................................................... 10
1.43 Tenant.......................................................................................... 11
1.44 Tenant Alterations.............................................................................. 11
1.44A Tenant Delays................................................................................... 11
1.45 Tenant Improvement Allowance.................................................................... 11
1.46 Tenant Improvements............................................................................. 11
1.47 Tenant's Agents................................................................................. 12
1.48 Year............................................................................................ 12
SECTION 2: PREMISES AND TERM.......................................................................... 12
2.1 Leases Of Premises.............................................................................. 12
2.2 Lease Term...................................................................................... 12
2.3 Plans and Specifications........................................................................ 12
2.4 Commencement Dates.............................................................................. 12
2.5 Tenant Improvement Construction................................................................. 15
2.6 Tenant's Contribution to Tenant Improvement Costs............................................... 15
2.7 Memorandum of Commencement Date................................................................. 16
2.8 Use and Conduct of Business..................................................................... 16
2.9 Compliance with Governmental Requirements and Rules and Regulations............................. 17
SECTION 3: BASE RENT, ADDITIONAL RENT AND OTHER SUMS PAYABLE UNDER LEASE.............................. 17
3.1 Payment of Rental............................................................................... 17
3.2 Base Rent....................................................................................... 18
3.3 Security........................................................................................ 18
3.4 Additional Rent................................................................................. 21
3.5 Utilities....................................................................................... 27
3.6 Holdover........................................................................................ 28
3.7 Late Charge..................................................................................... 28
3.8 Default Rate.................................................................................... 28
SECTION 4: GENERAL PROVISIONS......................................................................... 29
4.1 Maintenance and Repair by Landlord; Hvac; Other Utilities and Services, Service Interruption.... 29
4.2 Maintenance and Repair by Tenant................................................................ 30
4.3 Common Areas/security........................................................................... 31
4.4 Tenant Alterations.............................................................................. 31
4.5 Tenant's Work Performance....................................................................... 33
4.6 Surrender of Possession......................................................................... 34
4.7 Removal of Property............................................................................. 34
4.8 Access.......................................................................................... 35
4.9 Damage or Destruction........................................................................... 36
4.10 Condemnation.................................................................................... 37
4.11 Parking......................................................................................... 38
</TABLE>
2
<PAGE> 33
<TABLE>
<S> <C> <C>
4.12 Indemnification................................................................................. 38
4.13 Tenant Insurance................................................................................ 38
4.14 Landlord's Insurance............................................................................ 40
4.15 Waiver of Subrogation........................................................................... 40
4.16 Assignment and Subletting by Tenant............................................................. 40
4.17 Assignment by Landlord.......................................................................... 45
4.18 Estoppel Certificates and Financial Statements.................................................. 46
4.19 Modification for Lenders........................................................................ 46
4.20 Hazardous Substances............................................................................ 47
4.21 Access Laws..................................................................................... 48
4.22 Quiet Enjoyment................................................................................. 49
4.23 Signs........................................................................................... 49
4.24 Subordination................................................................................... 50
4.25 Workers Compensation Immunity................................................................... 51
4.26 Brokers......................................................................................... 51
4.27 Exculpation and Limitation of Liability......................................................... 52
4.28 Intentionally Omitted........................................................................... 53
4.29 Mechanic's Liens And Tenant's Personal Property Taxes........................................... 53
4.30 Landlord's Security Interest.................................................................... 53
4.31 Recording....................................................................................... 53
4.32 Cabling/connectivity Rights..................................................................... 53
4.33 Backup Generator................................................................................ 54
SECTION 5: DEFAULT AND REMEDIES....................................................................... 56
5.1 Events of Default............................................................................... 56
5.2 Remedies........................................................................................ 57
5.3 Right to Perform................................................................................ 59
5.4 Landlord's Default.............................................................................. 60
SECTION 6: MISCELLANEOUS PROVISIONS................................................................... 60
6.1 Notices......................................................................................... 60
6.2 Attorney's Fees and Expenses.................................................................... 60
6.3 No Accord and Satisfaction...................................................................... 61
6.4 Successors, Joint and Several Liability......................................................... 61
6.5 Choice of Law................................................................................... 61
6.6 No Waiver of Remedies........................................................................... 61
6.7 Offer to Lease.................................................................................. 62
6.8 Force Majeure................................................................................... 62
6.9 Landlord's Consent.............................................................................. 62
6.10 Severability; Captions.......................................................................... 62
6.11 Interpretation.................................................................................. 62
6.12 Incorporation of Prior Agreement; Amendments.................................................... 63
6.13 Authority....................................................................................... 63
6.14 Time of Essence................................................................................. 63
6.15 Survival of Obligations......................................................................... 63
6.16 Consent to Service.............................................................................. 63
6.17 Landlord's Authorized Agents.................................................................... 63
6.18 Waiver of Jury Trial............................................................................ 64
6.19 Option to Extend Term........................................................................... 64
6.20 First Right of Offer............................................................................ 66
6.21 Termination Option.............................................................................. 66
</TABLE>
3
<PAGE> 34
EXHIBIT A LEGAL DESCRIPTION OF LAND
EXHIBIT B LISTING OF PLANS AND SPECIFICATIONS FOR TENANT IMPROVEMENTS
EXHIBIT C WORK LETTER AND CONSTRUCTION AGREEMENT
EXHIBIT D FORM OF MEMORANDUM OF COMMENCEMENT DATE
EXHIBIT E RULES AND REGULATIONS
EXHIBIT F FORM OF LETTER OF CREDIT
EXHIBIT G SCHEDULE OF CLEANING SERVICES
EXHIBIT H BUILDING DESCRIPTION
4
<PAGE> 35
SECTION 1: DEFINITIONS
----------------------
1.1 Definitions: Each underlined term in this section shall have
the meaning set forth next to that underlined term.
1.2 Access Laws: The Americans With Disabilities Act of 1990
(including the Americans with Disabilities Act Accessibility Guidelines for
Building and Facilities) and all other Governmental Requirements relating to
the foregoing.
1.3 Above Standard Tenant Improvement Allowance: In addition to
the Tenant Improvement Allowance described herein, Landlord will provide
Tenant, at Tenant's option,
*** Request for confidential treatment has been submitted to the SEC for the
amount of the Above Standard Tenant Improvement Allowance.***
comprising the Premises after the size of the Premises has been conclusively
established pursuant to the section captioned "Definitions--Premises" to be
used for: (i) above standard tenant improvements; (ii) design and construction
documents for such above standard improvements; (iii) architectural and MEP
plans for such above standard improvements; and (iv) a four percent (4%)
Landlord's construction management fee. In the event Tenant elects to use some
or all of the Above Standard Tenant Improvement Allowance, the Base Rent Net
Component shall be increased to the sum of (i) the Base Rent Net Component
(expressed on a per rentable square foot basis), plus (ii) the product of (A)
the Above Standard Tenant Improvement Allowance used by Tenant (expressed on a
per rentable square foot basis) multiplied by (B).1654. In addition, if Tenant
elects to draw on some or all of the Above Standard Tenant Improvement
Allowance, then Tenant shall increase (i) the amount of Tenant's Security
Deposit in an amount equal to the aggregate amount of the drawn portion of the
Above Standard Tenant Improvement Allowance and such additional amount of the
Security Deposit shall be added to the amounts set forth in the section
captioned "Definitions - Security Deposit", and (ii) the amount of the Lease
Termination Fee in an amount equal to the unamortized portion (assuming a
straight line amortization over the Lease Term) as of the Termination Option
Date of the aggregate amount of the drawn portion of the Above Standard Tenant
Improvement Allowance and such additional amount of the Lease Termination Fee
shall be added to the amounts set forth in the section captioned "Definitions -
Lease Termination Fee."
1.4 Additional Rent: Defined in section captioned "Additional
Rent".
1.5 Base Amount of the Base Rent Operating Cost Component: ***
Request for confidential treatment has been submitted to the SEC for this
sentence.*** Landlord represents to Tenant that to Landlord's best knowledge and
belief, such amount constitutes the currently anticipated Operating Costs for
the Premises as if the Building were 2 years old and 100% occupied.
Notwithstanding the foregoing, Landlord reserves the right to adjust the Base
Amount of the Base Rent Operating Cost
5
<PAGE> 36
Component if, in Landlord's reasonable judgment, Operating Costs for the
Premises for the first full year will increase or were increased due to the
Tenant's use of the Premises beyond that of a normal office tenant utilizing
similar space during Normal Business Hours. Landlord shall notify Tenant in
writing if Landlord exercises its right to so modify the Base Amount of the
Base Rent Operating Cost Component.
1.6 Base Amount of the Base Rent Tax Component: *** Request for
confidential treatment has been submitted to the SEC for this sentence. ***
1.7 Base Rent: Base Rent shall be equal to the sum of the Base
Rent Net Component, the Base Rent Operating Cost Component, and the Base Rent
Tax Component as follows:
Lease Year* Rent For Rentable Square Foot***
----------- --------------------------------
1 $**.**
2 $**.**
3 $**.**
4 $**.**
5 $**.**
6 $**.**
7 $**.**
8 $**.**
9 $**.**
10 $**.**
11 $**.**
* For the purposes of this Lease, a "Lease Year" shall refer to each twelve
(12) month period during the Lease Term. The first Lease Year shall begin
on the month after the Phase I Commencement Date. Each subsequent Lease
Year shall commence on the date immediately following the last day of the
preceding Lease Year and shall continue for a period of twelve (12)
calendar months, except that the last Lease Year of the Lease Term shall
terminate on the date this Lease expires or is otherwise terminated.
*** Request for Confidential treatment has been submitted to the SEC for the
rent per rentable square foot.***
Notwithstanding the foregoing, in the event Tenant elects to use any
of the Above Standard Tenant Improvement Allowance, the rates for Base Rent set
forth above shall be adjusted and increased pursuant to the provisions of
Section 1.3 of this Lease.
1.8 Base Rent Net Component: The rental component of the Base
Rent Calculating for the Premises as adjusted pursuant to Section 1.3.
6
<PAGE> 37
1.9 Base Rent Operating Cost Component: The Operating Cost
component of the Base Rent for the Premises.
1.10 Base Rent Tax Component: The Property Tax component of the
Base Rent for the Premises.
1.11 Brokers: Tenant was represented in this transaction by McShea
& Company, Inc. ("McShea"), a licensed real estate broker.
Landlord was represented in this transaction by TC MidAtlantic, Inc.
("TCMI"), a licensed real estate broker.
McShea, TCMI, and TC MidAtlantic Development, Inc. ("TCMD") are
hereinafter referred to collectively as the "Brokers" and each, individually,
as a "Broker".
1.12 Building: The building located on the Land at 14400 Sweitzer
Lane, Laurel, Maryland, commonly known as The Maryland 95 Executive Center and
containing a total of approximately one hundred twenty thousand nine hundred
four (120,904) rentable square feet. The Building shall have those
characteristics described in Exhibit H attached to this Lease. ---------
1.13 Business Day: Calendar days, except for Saturdays and Sundays
and holidays when banks are closed in Prince George's County, Maryland. Any
reference to "days" with respect to the calculation of time under this Lease
shall mean calendar days unless otherwise specified to be Business Days.
1.14 Claims: An individual and collective reference to any and all
claims, demands, damages, injuries, losses, liens, liabilities, penalties,
fines, lawsuits, actions, other proceedings and expenses (including attorneys'
fees and expenses incurred in connection with the proceeding whether at trial
or on appeal).
1.15 Commencement Dates: The Lease for the Premises shall commence
in two (2) Phases as follows: (i) the "Phase I Commencement Date" shall be on
or about September 15, 2000, provided that the Phase I Commencement Date shall
not occur until Substantial Completion of Phase I of the Tenant Improvements;
and (ii) the "Phase II Commencement Date" shall be on or before ninety (90)
days after the Phase I Commencement Date, provided that the Phase II
Commencement Date shall not occur until Substantial Completion of Phase II of
the Tenant Improvements.
1.16 Common Areas: Those areas outside the Building which Landlord
from time to time makes available to the public such as the parking area,
sidewalks, entrance drives, loading docks and landscaped areas.
1.17 Estimated Operating Costs for the Premises: Defined in the
section captioned "Additional Rent".
7
<PAGE> 38
1.18 Estimated Property Taxes for the Premises: Defined in the
section captioned "Additional Rent".
1.19 Events of Default: One or more of those events or states of
facts defined in the section captioned "Events of Default".
1.20 Governmental Agency: The United States of America, the state
in which the Land is located, any county, city, district, municipality or other
governmental subdivision, court or agency or quasi-governmental agency having
jurisdiction over the Land and any board, agency or authority associated with
any such governmental entity, including the fire department having jurisdiction
over the Land.
1.21 Governmental Requirements: Any and all statutes, ordinances,
codes, laws, rules, regulations, orders and directives of any Governmental
Agency as now or later amended.
1.22 Hazardous Substance(s): Asbestos, PCBs, petroleum or
petroleum based chemicals or substances, urea formaldehyde or any chemical,
material, element, compound, solution, mixture, substance or other matter of
any kind whatsoever which is now or later defined, classified, listed,
designated or regulated as hazardous, toxic or radioactive by any Governmental
Agency.
1.23 Land: The land upon which the Building is located in Prince
George's County, Maryland, as legally described in Exhibit A attached to this
Lease.
1.24 Landlord: The trust named on the first page of this Lease, or
its successors and assigns as provided in the section captioned "Assignment by
Landlord".
1.25 Landlord's Agents: Any and all partners, officers, agents,
employees, trustees, investment advisors and consultants of Landlord.
1.26 Lease Term: Commencing on the Phase I Commencement Date, and
ending one hundred and twenty (120) months after the Phase II Commencement
Date, provided that, if the Phase II Commencement Date is a date other than the
first day of a calendar month, the Lease Term shall be extended by the number
of days remaining in the month in which the Phase II Commencement Date occurs.
1.27 Lease Termination Fee: *** Request for confidential treatment
has been submitted to the SEC for this sentence. ***
1.27A Lease Year: As defined in Section 1.3.
1.27B Long Lead Item(s): As defined in Section 1.42.
8
<PAGE> 39
1.28 Manager: TC MidAtlantic, Inc., or its replacement as
specified by written notice from Landlord to Tenant.
1.29 Manager's Address: TC MidAtlantic, Inc., c/o Trammell Crow
Company, 7315 Wisconsin Avenue, Suite 300 West, Bethesda, Maryland 20814, Attn:
Dan Hudson, which address may be changed by written notice from Landlord to
Tenant.
1.29A Normal Business Hours: As defined in Subparagraph 3.4.7.
1.30 Operating Costs: Defined in the section captioned "Additional
Rent".
1.31 Operating Costs for the Premises: Defined in the section
captioned "Additional Rent".
1.32 Parking Ratio: Approximately 4.0 stalls per one thousand
(1,000) rentable square feet of the Premises.
1.33 Permitted Use: General office use, so long as such use is
consistent with Governmental Requirements and with first-class buildings of the
same or similar use as the Building located in the metropolitan area in which
the Building is located.
1.34 Phases: The Premises shall be occupied in Phases as follows:
(i) "Phase I" shall be the initial two (2) floors of the Premises occupied by
the Tenant; (ii) "Phase II" shall be the third and fourth floors of the
Premises occupied by the Tenant.
1.35 Plans and Specifications: (a) Those certain plans and
specifications for the Tenant Improvements as listed in Exhibit B and any
modifications to them approved in writing by Landlord and Tenant; or (b) if
Exhibit B does not include a listing of such plans and specifications, then
such plans and specifications shall be prepared in accordance with the Work
Letter attached hereto as Exhibit C.
1.36 Prepaid Rent: *** Request for confidential treatment has been
submitted to the SEC for this sentence. ***
1.37 Premises: The Premises are the entire Building and, based on
a certification issued by Landlord's architect, consists of approximately one
hundred twenty thousand nine hundred and four (120,904) rentable square feet.
1.38 Prime Rate: Defined in the Section captioned "Default Rate".
1.39 Property Taxes: (a) Any form of ad valorem real or personal
property tax or assessment imposed by any Governmental Agency on the Land,
Building, related improvements or any personal property owned by Landlord
associated with such Land, Building or improvements; (b) any other form of tax
or assessment, license fee, license tax, tax or excise on rent or any other
levy, charge, expense or imposition made or required by any Governmental Agency
on any interest of Landlord in such Land,
9
<PAGE> 40
Building, related improvements or personal property; (c) any fee for services
charged by any Governmental Agency for any services such as fire protection,
street, sidewalk and road maintenance, refuse collection, school systems or
other services provided or formerly provided to property owners and residents
within the general area of the Land; (d) any governmental impositions allocable
to or measured by the area of any or all of such Land, Building, related
improvements or personal property or the amount of any base rent, additional
rent or other sums payable under any lease for any or all of such Land,
Building, related improvements or personal property, including any tax on gross
receipts or any excise tax or other charges levied by any Governmental Agency
with respect to the possession, leasing, operation, maintenance, alteration,
repair, use or occupancy of any or all of such Land, Building, related
improvements, personal property or the rent earned by any part of or interest
in such Land, Building, related improvements or personal property; (e) any
impositions by any Governmental Agency on any transaction evidenced by a lease
of any or all of such Land, Building, related improvements or personal property
or charge with respect to any document to which Landlord is a party creating or
transferring an interest or an estate in any or all of such Land, Building,
related improvements or personal property; (f) any increase in any of the
foregoing based upon construction of improvements or change of ownership of any
or all of such Land, Building, relate improvements or personal property, and
(g) reasonable expenses (including, but not limited to, attorneys' fees,
disbursements, consultant fees and expenses) incurred in obtaining or
attempting to obtain, a reduction of such taxes, rates or assessments,
including appeals. Property Taxes shall not include taxes on Landlord's net
income or any inheritance, estate or gift taxes.
1.40 Punch List Work: Minor items of repair, correction,
adjustment or completion as such phrase is commonly understood in the
construction industry in the metropolitan area in which the Land is located.
1.41 Security Deposit: Two Million and No/100 Dollars
($2,000,000.00), in the form of a Letter of Credit, in accordance with the
terms of the section 3.3 captioned "Security".
1.42 Substantial Completion: The date that the applicable Phase of
the Tenant Improvements have been completed substantially in accordance with
the applicable Plans and Specifications, subject to Punch List Work. The Tenant
Improvements shall be deemed to be substantially complete upon the issuance of
a temporary or permanent certificate of occupancy by the proper governmental
authority. Notwithstanding the above, the applicable Phase of the Premises
shall be considered substantially complete even though (a) there remains to be
completed Punch List items, the lack of which will not materially interfere
with Tenant's permitted use of the Premises including, without limit, minor or
insubstantial details of construction, decoration or mechanical adjustment, or
(b) there is a delay in substantial completion due to Tenant's failure to meet
its obligations under this Lease or "Tenant Delay" as such term is defined in
this Lease, including Exhibit C or (c) there are any undelivered or uninstalled
Long Lead Items previously identified as such or (d) the Certificate of
10
<PAGE> 41
Occupancy is not issued due to Tenant's failure to complete Tenant's
installation of furniture, fixtures or equipment or other items to be installed
or constructed by Tenant pursuant to this Lease including the provision of
Exhibit C entitled "Tenant Access" and in accordance with scheduling ---------
requirements established by the Tenant Improvements General Contractor
designated pursuant to Exhibit C.
As used herein, the phrase "Long Lead Item" shall mean any item of
Tenant's Work or material element thereof which Landlord reasonably identifies
as unavailable at the Premises in time to be completed and installed prior to
the anticipated Commencement Date. Landlord shall so notify Tenant of such Long
Lead Items at the time Landlord provides Tenant with the Initial Tenant
Improvements Pricing Letter pursuant to Paragraph 4.1.B of Exhibit C.
Notwithstanding the foregoing, Landlord will endeavor to provide information
regarding Long Lead Items as soon as reasonably available to Landlord. With
respect to long-lead items, Tenant (acting through Tenant's Representative
appointed pursuant to Paragraph 6.2 of Exhibit C) shall during the period
provided in Exhibit C for Tenant's response to the Initial Tenant Improvements
Pricing Letter elect to (x) omit such long-lead item(s) from the Plans, (y)
substitute such item(s) for another item(s) that does not constitute a Long
Lead Item, or (z) retain such long-lead item(s) in the Plans to be installed
when delivered. In the event Tenant fails timely to affirmatively elect (x),
(y), or (z) above, Tenant shall be deemed to have elected (z). If Tenant elects
(z) or is deemed to have elected (z), any delays in completion of the
construction as a result thereof shall be Tenant Delay. Landlord shall promptly
identify for Tenant, after the time of submission by Tenant of a proposed
substitution, the reasonably estimated delay which will be caused by said
substitution, if any. The actual delay, if any, caused by such substitution
shall be Tenant Delay. Any delay in the completion and installation of the
long-lead item or arising from Tenant's election to substitute any long-lead
item or retain an identified long-lead item shall be a Tenant Delay.
1.43 Tenant: Digex, Inc., a Delaware corporation.
1.44 Tenant Alterations: Defined in the section captioned "Tenant
Alterations".
1.44A Tenant Delay(s): As defined in Paragraph 5.3 of Exhibit C.
1.45 Tenant Improvement Allowance: *** Request for confidential
treatment has been submitted to the SEC for this sentence. ***
1.46 Tenant Improvements: Those alterations or improvements for
each of the Phases of the Premises as appear and are depicted in the Plans and
Specifications.
11
<PAGE> 42
1.47 Tenant's Agents: Any and all officers, partners, contractors,
subcontractors, consultants, licensees, agents, concessionaires, subtenants,
servants, employees, customers, guests, invitees or visitors of Tenant.
1.48 Year: A calendar year commencing January 1 and ending
December 31.
SECTION 2: PREMISES AND TERM
-----------------------------
2.1 Leases of Premises: Landlord leases the Premises to Tenant,
and Tenant leases the Premises from Landlord, upon the terms and conditions set
forth in this Lease.
2.2 Lease Term: The Lease Term shall be for the period stated in
the definition of that term, unless earlier terminated as provided in this
Lease.
2.3 Plans and Specifications: To the extent clause (b) of the
definition of Plans and Specifications is applicable, then Exhibit C shall
apply. In any event, Tenant shall make no changes to the Plans and
Specifications or the work reflected in the Plans and Specifications without
the consent of Landlord. Terms used in Exhibit C but not defined therein shall
have the meaning given in this Lease.
2.4 Commencement Dates:
2.4.1 Establishment of Commencement Date: Landlord shall notify
Tenant in writing of Substantial Completion of each Phase. Tenant acknowledges
that no representations as to the condition of the Premises have been made by
Landlord, unless such are expressly set forth in this Lease. If Tenant believes
that Substantial Completion of such Phase has not occurred, Tenant shall notify
Landlord in writing of its objections within five (5) Business Days after its
receipt of the Landlord's notice described in the preceding sentence. Landlord
shall have a reasonable time after its receipt of Tenant's notice in which to
take such action as may be necessary to achieve Substantial Completion of such
Phase, and shall notify Tenant in writing when such has been completed. Taking
of possession by Tenant of a Phase shall establish the respective Commencement
Date thereof and the establishment of such fact upon the taking of possession
shall occur even if Tenant disputes whether Substantial Completion of such has
occurred or attempts to condition or qualify the taking of possession. Such
taking of possession shall further establish that the Premises are in good and
satisfactory condition when possession was so taken (subject to Punch List Work
as provided in Subsection 2.4.2 and in Section 1.42) and the relevant
Commencement Date has occurred. Notwithstanding anything to the contrary
contained herein, Tenant shall be given access to the space comprising each of
the Phases of the Premises subject to the provision of Exhibit C entitled
"Tenant Access" in order to install telephone equipment, a security system and
cable and data lines to the Premises.
12
<PAGE> 43
2.4.2 Punch List Work: If on the Commencement Date of a particular
Phase, Punch List Work remains to be completed, Landlord and Tenant shall agree
on such Punch List Work prior to occupancy by Tenant and Landlord will promptly
complete it after the Commencement Date of such Phase. In no event shall
Tenant's refusal or failure to agree on the nature and extent of Punch List
Work or the existence of items of Punch List Work delay or postpone the
occurrence of the Commencement Date for a particular Phase.
2.4.3 Disputes Regarding Commencement Date : In the event of any
dispute as to whether Substantial Completion of a particular Phase has
occurred, the certificate of Greenwell Goetz Architects shall be conclusive.
2.4.4 Effect of Delay in Commencement Date:
A. As provided in Sections 1.1 5 and 1.42, the
Commencement Date of the relevant Phase of the Premises shall be deemed to
commence upon Substantial Completion of the Tenant Improvements for such Phase.
As provided in Section 1.42, the applicable Phase shall be considered
substantially complete even though (i) there are punch list items remaining to
be completed, the lack of which will not materially interfere with Tenant's
permitted use of the Premises; (ii) Substantial Completion has been delayed due
to Tenant Delay as such term has been defined in Paragraph 5.3 of Exhibit C;
(iii) there are any undelivered or uninstalled Long Lead Items previously
identified as such or (iv) the Certificate of Occupancy has not been issued due
to Tenant's failure to complete Tenant's installation of furniture, fixtures or
equipment or other items to be installed by Tenant pursuant to Exhibit C.
B. Landlord agrees to use reasonable and diligent
efforts to achieve Substantial Completion for each Phase within the times
provided in this Lease. To the extent that any item of Landlord's Tenant
Improvement Work or base building work to be performed by Landlord is not
completed as of such date as will permit the Commencement Date with respect to
any Phase to occur within the timeframe set forth in Section 1.15, after
adjustment for the effect of Tenant Delays and Force Majeure, the following
provisions will apply:
i) If and to the extent that the applicable
Phase of the Premises is Substantially Completed and
delivered to Tenant within 30 days after the anticipated
Commencement Date provided in Section 1.15 of this Lease
(after adjustment on a day-for-day basis as a result of
Tenant Delay and events of "Construction Force Majeure" as
defined below); such delay shall not constitute a default by
Landlord hereunder or give rise to any damages or penalties
by Landlord to Tenant in connection with such delay. For the
purposes of this Section 2.4.4, "Construction Force Majeure"
shall mean those perils and events set forth in the
definition of Force Majeure in Section 6.8 except for
strikes, lockouts, labor
13
<PAGE> 44
troubles or disputes involving the Tenant Improvements
General Contractor which prevent such entity from performing
its services in connection with the Premises as provided in
this Lease and which could reasonably have been avoided by
the Tenant Improvements General Contractor, except for such
events precipitated by an act or omission of Tenant or any of
Tenant's Agents.
ii) If and to the extent the applicable Phase
of the Premises is not Substantially Completed and delivered
to Tenant within 30 days after the anticipated Commencement
Date for such Phase (after such adjustment for the effect of
Tenant Delay and events of Construction Force Majeure) then
the validity of this Lease shall not be in any way affected,
the Commencement Date for such Phase shall coincide with the
date on which such Phase is Substantially Completed and
delivered as provided in Section 2.4 (subject to adjustment
for the effect of Tenant Delay and Construction Force
Majeure) but Tenant shall thereafter be entitled to an
abatement of all Rent payable under this Lease with respect
to the applicable Phase in an amount equal to one day's Rent
for each such late day (as so adjusted) over thirty (30) days
beyond the anticipated Commencement Date which occurred with
respect to the applicable Phase.
iii) In the event Substantial Completion of the
entirety of the Premises (i.e., Phases I and II) is not
achieved by June 1, 2001, as such date may be extended on a
day-for-day basis as a result of Tenant Delay and
Construction Force Majeure), then upon thirty (30) days
written notice to Landlord, during which time (the
"Termination Cure Period") the Commencement Date for both
Phases has not occurred, Tenant shall have the right to
terminate this Lease by a subsequent writing (the
"Termination Notice") delivered to Landlord within ten (10)
days after the end of the Termination Cure Period and
thereafter this Lease shall terminate. In such event,
Landlord shall return any prepaid rent no later than twenty
(20) Business Days after the Termination Notice has been
delivered to Landlord. Except as specifically set forth in
this Subsection 2.4.4.B, the foregoing shall constitute
Tenant's sole and exclusive remedy in the event of any delay
in the Commencement Date not due to Tenant Delay or
Construction Force Majeure.
iv) In the event Substantial Completion of any
Phase is not achieved due to Tenant Delay, Landlord shall be
entitled to those rights and remedies stated in Paragraph 5.4
of Exhibit C entitled "Effect of Tenant Delay."
14
<PAGE> 45
2.5 Tenant Improvement Construction. Landlord shall construct the
Tenant Improvements pursuant to the Work Letter attached as Exhibit C.
2.6 Tenant's Contribution to Tenant Improvement Costs.
2.6.1 Tenant's Obligations: If the cost of the Tenant Improvements
exceeds the Tenant Improvement Allowance and the Above Standard Tenant
Improvement Allowance, to the extent the Tenant elects to use the same, Tenant
shall pay to Landlord such excess within ten (10) Business Days after demand by
Landlord. If Tenant fails to pay to Landlord the cost of any such excess Tenant
Improvements as and when due, Landlord may elect to suspend work on the Tenant
Improvements pending such timely payment, and the Commencement Date of the
applicable Phase shall be deemed to have occurred on the date that the Tenant
Improvements would have achieved Substantial Completion for such Phase absent
such suspension of work.
2.6.2 Removal of Tenant Improvements: All Tenant Improvements,
regardless of which party constructed them, shall become the property of
Landlord and shall remain upon and be surrendered with the Premises upon the
expiration or earlier termination of this Lease. Notwithstanding the foregoing,
and subject to the provisions of Subsection 2.6.3, at Landlord's election and
upon notice to Tenant to be given at the time Landlord consents to the
construction of Tenant Improvements, Tenant shall be required to remove all or
any portion of the Tenant Improvements upon the expiration or earlier
termination of this Lease (and repair any damage caused by such removal or
restore the affected portion of the Building) if in Landlord's reasonable
judgment such Tenant Improvements are not customarily found in Class A office
buildings in the Laurel, Maryland submarket and the removal of such items would
subject Landlord to unreasonable expense.
2.6.3 Tenant's Obligation to Remove Certain Equipment:
Notwithstanding the provisions of Subsection 2.6.2, unless Landlord agrees
otherwise in writing delivered to Tenant prior to the expiration of this Lease,
Tenant shall, prior to the expiration of this Lease, remove all of the
following items (whether such items are considered Tenant Improvements or
Tenant Alterations) at Tenant's sole cost and expense and repair any damage
caused by such removal and restore the affected portion of the Building to its
condition prior to the installation of such item, subject to ordinary wear and
tear:
a. Cafeteria equipment or supplemental mechanical
systems (e.g. grease duct, roof mounted fans, etc.)
b. Uninterrupted Power Source ("ups") equipment
c. Any special fire suppression system(s) (Tenant's
obligation to restore the affected portion of the
Building as required pursuant to this Subsection
2.6.3 shall, with respect to this
15
<PAGE> 46
item, include restoration of the fire suppression
system in the affected area so that it is consistent
with the Building's wet pipe system).
d. Laboratory and telecommunications rooms, air
conditioning units and roof mounted condenser units
e. Laboratory and telecommunications switches, racks
and associated cabling (to the extent not referred
to in Section 4.32).
f. Security system cameras, associated monitors and
control systems installed by Tenant
g. Security room door from main lobby
In the event this Lease should terminate prior to the expiration date
for any reason, Landlord may within thirty (30) days after such termination
elect to retain any of the foregoing items as permitted pursuant to this
Subsection 2.6.3 and shall deliver written notice of such election to Tenant of
such election within that time. In the absence of such notice, and after the
expiration of such 30-day period following such termination, Tenant shall
promptly remove all of the above items which Landlord has not elected to
retain, which removal shall be at Tenant's sole cost and expense and Tenant
shall repair any damage caused by such removal and restore the affected portion
of the Building to its condition prior to the installation of such items,
subject to ordinary wear and tear. If Tenant does not promptly remove such
items as required by this paragraph, Landlord may do so after written notice to
Tenant which removal, repair and restoration shall be paid for promptly by
Tenant upon Landlord's demand. Landlord's rights pursuant to this paragraph
shall be in addition to any other rights and remedies in which Landlord may
have in the event of the termination of this Lease for any reason prior to the
expiration date and Tenant's obligation under this paragraph shall survive the
termination of this Lease.
2.6.4 Failure to Remove. If Tenant fails to remove any Tenant
Improvement as required by Landlord pursuant to this Section 2.4, Landlord may
do so and Tenant shall pay the entire cost thereof within twenty (20) Business
Days after Tenant's receipt of Landlord's written demand therefor.
2.7 Memorandum of Commencement Date. At Landlord's election and
request, Tenant shall execute a Memorandum of Commencement Date for each of the
Commencement Dates in the form attached to this Lease as Exhibit D. In no event
shall Tenant record this Lease or the Memorandum of Commencement Date.
2.8 Use and Conduct of Business. The Premises are to be used only
for the Permitted Uses, and for no other business or purpose without the prior
consent of Landlord. Landlord makes no representation or warranty as to the
suitability of the
16
<PAGE> 47
Premises for Tenant's intended use. Tenant shall, at its own cost and expense,
obtain and maintain any and all licenses, permits, and approvals necessary or
appropriate for its use, occupation and operation of the Premises. Tenant's
inability to obtain or maintain any such license, permit or approval necessary
or appropriate for its use, occupation or operation of the Premises shall not
relieve it of its obligations under this Lease, including the obligation to pay
Base Rent and Additional Rent. No act shall be done in or about the Premises
that is unlawful or that will increase the existing rate of insurance on any or
all of the Land or Building. Tenant shall not commit or allow to be committed
or exist: (a) any waste upon the Premises, (b) any public or private nuisance,
or (c) any act or condition which disturbs the quiet enjoyment of any other
tenant in the Building, violates any of Landlord's contracts affecting any or
all of the Land or Building, creates or contributes to any work stoppage,
strike, picketing, labor disruption or dispute, interferes in any way with the
business of Landlord or any other tenant in the Building or with the rights or
privileges of any contractors, subcontractors, licensees, agents,
concessionaires, subtenants, servants, employees, customers, guests, invitees
or visitors or any other persons lawfully in and upon the Land or Building, or
causes any impairment or reduction of the good will or reputation of the Land
or Building. Tenant shall not, without the prior consent of Landlord, use any
apparatus, machinery, device or equipment in or about the Premises that will
cause any substantial noise or vibration or any increase in the normal
consumption level of electric power. If any of Tenant's apparatus, machinery,
devices or equipment should disturb the quiet enjoyment of any other tenant in
the Building, then Tenant shall provide, at its sole cost and expense, adequate
insulation or take other such action, including removing such apparatus,
machinery, devices or equipment, as may be necessary to eliminate the
disturbance. No food or beverage dispensing machines shall be installed by
Tenant in the Premises without the prior written consent of Landlord.
2.9 Compliance with Governmental Requirements and Rules and
Regulations. Tenant shall comply with all Governmental Requirements relating to
its use, occupancy and operation of the Premises and shall observe such
reasonable rules and regulations as may be adopted and published by Landlord
from time to time for the safety, care and cleanliness of the Premises and the
Building, and for the preservation of good order in the Building, including the
Rules and Regulations attached to this Lease as Exhibit E: ---------
SECTION 3: BASE RENT, ADDITIONAL RENT AND OTHER SUMS PAYABLE UNDER LEASE
------------------------------------------------------------------------
3.1 Payment of Rental. Tenant agrees to pay Base Rent, Additional
Rent and any other sum due under this Lease to Landlord without demand,
deduction, credit, adjustment or offset of any kind or nature, in lawful money
of the United States when due under this Lease, at the offices of Manager at
Manager's Address, or to such other party or at such other place as Landlord
may from time to time designate in writing.
17
<PAGE> 48
3.2 Base Rent. On execution of this Lease, Tenant shall pay to
Landlord the amount specified in the definition of Prepaid Rent for the month
specified in the definition of that term. Tenant agrees to pay Base Rent to
Landlord without demand, in advance on or before the first day of each calendar
month of the Lease Term. Base Rent for any partial month at the beginning or
end of the Lease Term shall be prorated. Base Rent for any partial month at the
beginning of the Lease Term shall be paid by Tenant on the Commencement Date
for the respective Phase. Notwithstanding anything to the contrary contained
herein, Base Rent for each of the Phases of the Premises shall commence fifteen
(15) days after Substantial Completion of such Phase.
3.3 Security. Tenant shall secure its performance under this
Lease as follows:
3.3.1 Letter of Credit: Concurrently with the execution of this
Lease as security for the full and faithful payment of all sums due under this
Lease and the full and faithful performance of every covenant and condition of
this Lease to be performed by Tenant, Tenant shall deliver to Landlord a Letter
of Credit in the initial amount of Two Million Dollars ($2,000,000.00). The
Letter of Credit shall be unconditional, irrevocable, transferable and issued
by a financial institution reasonably acceptable to Landlord and provide for
presentation to and draws through a financial institution in Washington, D.C.,
which is federally insured, has a net worth of at least One Hundred Million
Dollars ($100,000,000.00) and is otherwise reasonably acceptable to Landlord.
The initial Letter of Credit shall expire not less than twelve (12) months
after the delivery thereof to Landlord and shall provide that it will be
automatically renewed for successive twelve (12) month periods through a date
which is not earlier than thirty (30) days after the expiration date of this
Lease, or any renewal or extension thereof, unless written notice of nonrenewal
has been given by the issuing bank to Landlord by registered or certified mail,
return receipt requested, not less than sixty (60) days prior to the expiration
of the then current period. If the issuing bank does not renew the Letter of
Credit and if Tenant does not deliver a substitute Letter of Credit at least
thirty (30) days prior to the expiration of the then current period, then, in
addition to its rights under Section 3.3.4 of this Lease, Landlord shall have
the right to draw on the existing Letter of Credit. The Letter of Credit shall
be substantially in the form attached hereto as Exhibit F and shall be
maintained for the benefit of Landlord for the Term of this Lease. The Letter
of Credit and any renewal or replacement thereof (collectively, the "Letter of
Credit") shall be held by Landlord as security for the payment of Base Rent,
Additional Rent and any other sums payable by Tenant under this Lease and for
the faithful performance by Tenant of all of Tenant's obligations, covenants,
conditions and agreements hereunder. The Letter of Credit and any cash or other
property held by Landlord as security for Tenant's performance of this Lease
may be referred to as the "Security Deposit."
3.3.2 Modification of Letter of Credit. Within ninety (90) days
before the end of the second Lease Year, and within ninety (90) days before the
end of each Lease Year thereafter, Tenant shall provide Landlord with a copy of
the Tenant's most recent
18
<PAGE> 49
quarterly financial statement issued prior to the 90-day period preceding the
end of the relevant Lease Year. Such statement shall be certified as correct by
Tenant's Chief Financial Officer or a certified public accountant acceptable to
Landlord. If, during the preceding Lease Year (i) Tenant has not been late in
making any payments of rent beyond applicable cure periods, (ii) no other Event
of Default has occurred during the preceding Lease Year (iii) as of such time
no event has occurred or condition exists which with the passage of time or the
giving of notice would become an Event of Default if not timely cured and (iv)
Tenant's net worth as set forth in the quarterly financial statement provided
to Landlord is Four Hundred Million Dollars ($400,000,000.00) or more
(collectively, items (i) through (v) are referred to as the "Financial
Compliance Conditions"), the then current amount of the Letter of Credit may be
reduced by Four Hundred Thousand Dollars ($400,000.00) provided that Tenant
delivers to Landlord a replacement Letter of Credit which is otherwise in
compliance with this Lease in such reduced amount to be held subject to the
terms of this Section 3.3 and in such event, Landlord shall promptly return to
Tenant the Letter of Credit which was so replaced. If, however, the Financial
Compliance Conditions have not been satisfied as of the end of the relevant
Lease Year, then the Letter of Credit shall not thereafter be subject to a
reduction as provided in this Section 3.3.2, for the next two (2) Lease Years
following the Lease Year in which Tenant failed to satisfy the Financial
Compliance Conditions and the Letter of Credit shall be maintained at its then
level and shall not be eligible for reduction as set forth above until the
expiration of two Lease Years, at the end of which period Tenant may apply for
such a reduction only if Tenant then meets the Financial Compliance Conditions.
Tenant's failure to qualify for a reduction of the Letter of Credit at any one
time shall not preclude Tenant for applying for a subsequent reduction of the
Letter of Credit at such subsequent times as provided in this Section 3.3.2. If
all of the Financial Compliance Conditions have been satisfied throughout the
Lease Term, at the commencement of the seventh (7th) Lease Year, the Letter of
Credit shall be reduced in value to an amount equal to one month's Base Rent as
such Rent is determined as of that date and the Letter of Credit shall remain
at such amount for the remainder of the Lease Term, including any extensions or
renewals.
3.3.3 Use of Letter of Credit: If any Monthly Base Rent, Additional
Rent or any other sum payable by Tenant to Landlord pursuant to this Lease
shall be overdue and unpaid after the expiration of the applicable cure period,
or should Landlord make payments on behalf of Tenant in accordance with this
Lease and Tenant fails to reimburse Landlord after expiration of the applicable
cure period, or if Tenant shall default under any of its other obligations
under this Lease after the expiration of applicable cure periods, then Landlord
may, from time to time at its option and without prejudice to any other remedy
which Landlord may have on account thereof, draw upon all or any portion of the
Letter of Credit and may appropriate and apply the sums so drawn, or any
portion thereof, as may be necessary to compensate Landlord on account of Base
Rent, Additional Rent or any other sums due Landlord pursuant to this Lease or
any loss or damage sustained by Landlord due to any breach of this Lease on the
part of Tenant. In the event Landlord draws on the Letter of Credit for any
reason, Landlord shall report to Tenant regarding the
19
<PAGE> 50
use of the proceeds of such drawing and Tenant shall thereafter promptly
restore the Letter of Credit to its original amount or deposit with Landlord in
cash an amount equal to the amount drawn on the Letter of Credit which amount,
together with any cash drawn on the Letter of Credit which was not applied by
Landlord to compensate for Tenant's breach, shall be held by Landlord, in a
segregated account, with interest thereon at the money market rate as
determined from time to time and published in The Wall Street Journal. Such
cash deposit shall be held by Landlord as part of the Security Deposit to be
retained, expended or disbursed by Landlord for any amounts or sums due under
this Lease to which the proceeds of the Letter of Credit could have been
applied pursuant to this Lease.
3.3.4 Renewal of Letter of Credit: Tenant shall, not later than
thirty (30) days prior to the expiration date of any Letter of Credit provided
by Tenant pursuant to this Section 3.3, either initially or as a replacement or
extension of such Letter of Credit, cause the expiration date thereof to be
extended or provide a replacement Letter of Credit complying with the terms of
this Section 3.3, such that a Letter of Credit remains in existence in the
amount and for the time required under this Lease. Landlord shall have the
right to draw upon the Letter of Credit in the event Tenant fails to provide
Landlord with an extension of such Letter of Credit or a replacement Letter of
Credit substantially in the form attached as Exhibit F not less than thirty
(30) days prior to the expiration date thereof. In the event such Letter of
Credit is drawn upon due solely to the failure of Tenant to provide Landlord
with such amendment or replacement Letter of Credit as aforesaid, the amount
drawn shall be held by Landlord, as part of the Security Deposit in a
segregated account with interest thereon at the money market rate as determined
from time to time and published in The Wall Street Journal. Such funds shall be
retained, expended or disbursed by Landlord for any amounts or sums due under
this Lease to which the proceeds of the Letter of Credit could have been
applied pursuant to this Lease provided that in the event Tenant delivers to
Landlord a replacement Letter of Credit in the amount and in the form required
by this Lease, Landlord will substitute such Letter of Credit for such cash and
return the cash to Tenant together with any interest accrued thereon.
3.3.5 Transfer of Security: In the event of a sale or transfer of
Landlord's estate or interest in the Land and Building, Landlord shall have the
right to transfer the Security Deposit (including the Letter of Credit and any
cash held as security) to the vendee or the transferee, and Landlord shall,
after such transfer, be considered released by Tenant from all liability for
the return of the Security Deposit (including the Letter of Credit). Tenant
shall look solely to the transferee for the return of the Security Deposit, and
it is agreed that all of the foregoing shall apply to every transfer or
assignment made of the Security Deposit to a new transferee. No mortgagee or
purchaser of any or all of the Building at any foreclosure proceeding brought
under the provisions of any mortgage shall (regardless of whether the Lease is
at the time in question subordinated to the lien of any mortgage) be liable to
Tenant or any other person for any or all of the Security Deposit (or any other
or additional security deposit or other payment made by Tenant under the
provisions of this Lease), unless Landlord has actually delivered the Security
Deposit to such mortgagee or
20
<PAGE> 51
purchaser, as the case may be. In the event of any rightful and permitted
assignment of Tenant's interest in this Lease, the Security Deposit shall be
deemed to be held by Landlord as a deposit made by the assignee, and Landlord
shall have no further liability to the assignor with respect to the return of
the Security Deposit.
3.3.6 Return of Security: If Tenant shall have fully complied with
all of the covenants and conditions of this Lease, the remaining Security
Deposit (including the Letter of Credit) shall be repaid or (in the case of the
Letter of Credit) returned to Tenant, with interest with respect to any cash so
returned as provided in Subparagraph 3.3.3, within thirty (30) Business Days
after the expiration of this Lease. Tenant may not mortgage, assign, transfer
or encumber the Security Deposit and any such act on the part of Tenant shall
be without force or effect. In the event any bankruptcy, insolvency,
reorganization or other creditor-debtor proceedings shall be instituted by or
against Tenant, the Security Deposit and the proceeds of the Letter of Credit
shall be deemed to be applied first to the payment of Base Rent, Additional
Rent and all other sums payable under this Lease to Landlord for all periods
prior to the institution of such proceedings and the balance, if any, may be
retained by Landlord and applied against Landlord's damages.
3.3.7 Rights of Security: No right or remedy available to Landlord
in this Lease shall preclude or extinguish any other right to which Landlord
may be entitled. It is understood that if Tenant fails to perform its
obligations and to take possession of the Premises as provided in this Lease,
the Prepaid Rent and the Security Deposit and the Letter of Credit shall not be
deemed liquidated damages. Landlord may apply such sums to reduce Landlord's
damages and such application of funds shall not preclude Landlord from
recovering from Tenant all additional damages incurred by Landlord.
3.4 Additional Rent. Definitions of certain terms used in this
section are set forth in subparagraph 3.4.5. Tenant agrees to pay to Landlord
additional rent as computed in this section (individually and collectively the
"Additional Rent"):
3.4.1 Rental Adjustment for Estimated Operating Costs and Estimated
Property Taxes: Landlord shall furnish Tenant a written statement of Estimated
Operating Costs for the Premises and Estimated Property Taxes for the Premises
for each Year and the amount payable monthly by Tenant for such Costs, which
shall be Additional Rent and shall be paid monthly by Tenant for each month
during such Year after the Commencement Date for each Phase, and shall be
computed as follows: one-twelfth (1/12) of the sum of (i) the amount, if any,
by which the Estimated Operating Costs for the Premises per rentable square
foot of the Premises for a particular Year exceeds the Base Amount of the Base
Rent Operating Cost Component (as such amount may be adjusted as provided in
Section 1.5), and (ii) the amount, if any, by which the Estimated Property
Taxes for the Premises per rentable square foot of the Premises for a
particular Year exceeds the Base Amount of the Base
21
<PAGE> 52
Rent Tax Component. If the Commencement Date for a particular Phase occurs on a
date other than the first day of the Year, the statements as provided by
Landlord to Tenant and the computation of the monthly payment amounts shall be
determined based on a proration of the excess amount over a 360-day year. If
such written statement (except the first statement, which shall be prorated
pursuant to the previous sentence) is furnished after the commencement of the
Year, Tenant shall also make a retroactive lump-sum payment to Landlord equal
to the monthly payment amount multiplied by the number of months during the
Year after the Commencement Date for a particular Phase for which no payment
was paid. Notwithstanding the foregoing, Landlord reserves the right to revise
the Estimated Operating Costs for the Premises and the Estimated Property Taxes
for the Premises once each year and upon notice to Tenant of such revision,
Tenant shall adjust its payments to Landlord under this section accordingly.
3.4.2 Actual Costs: Within 120 days after the close of each Year,
Landlord shall deliver to Tenant a written statement setting forth the actual
Operating Costs for the Premises and Property Taxes for the Premises during the
preceding Year. If such costs for any Year exceed the Estimated Operating Costs
for the Premises and the Estimated Property Taxes for the Premises paid by
Tenant to Landlord pursuant to subparagraph 3.4.1 for such Year, Tenant shall
pay the amount of such excess to Landlord within twenty (20) Business Days
after receipt of such statement by Tenant. If such statement shows the
Operating Costs for the Premises and the Property Taxes for the Premises to be
less than the Estimated Operating Costs for the Premises and the Estimated
Property Taxes for the Premises, as the case may be, paid by Tenant to Landlord
pursuant to subparagraph 3.4.1, then the amount of such overpayment shall be
paid by Landlord to Tenant within twenty (20) Business Days following the date
of such statement or, at Landlord's option, shall be credited towards the
installment(s) of Rent next coming due from Tenant.
3.4.3 Determination: The determination of Operating Costs for the
Premises and the Property Taxes for the Premises shall be made by Landlord. Any
sums payable under this Lease pursuant to this section shall be Additional Rent
and, in the event of nonpayment of such sums, Landlord shall have the same
rights and remedies with respect to such nonpayment as it has with respect to
nonpayment of Base Rent under this Lease.
3.4.4 Operating Cost Audit: Landlord shall maintain records
concerning estimated and actual Operating Costs for the Premises for no less
than twelve (12) months following the period covered by the statement or
statements furnished Tenant, after which time Landlord may dispose of such
records. Provided that Tenant is not then in default of its obligation to pay
Base Rent, Additional Rent or other payments required to be made by it under
this Lease or Tenant is not otherwise in material default under this Lease,
Tenant may, at Tenant's sole cost and expense, cause a Qualified Person
(defined below) to inspect Landlord's records. Such
22
<PAGE> 53
inspection, if any, shall be conducted no more than once each Year, during
Landlord's normal business hours within seventy-five (75) Business Days after
receipt of Landlord's written statement of Operating Costs for the Premises for
the previous year, upon first furnishing Landlord at least fifteen (15)
Business Days prior written notice. Any errors disclosed by the review shall be
promptly corrected by Landlord; provided, however, that if Landlord disagrees
with any such claimed errors, Landlord shall have the right to cause another
review to be made by an auditor of Landlord's choice. In the event the results
of the review of records (taking into account, if applicable, the results of
any additional review caused by Landlord) reveal that Tenant has overpaid
obligations for a preceding period, the amount of such overpayment shall be
credited against Tenant's subsequent installment of Base Rent, Additional Rent
or other payments due to Landlord under the Lease. In the event that such
results show that Tenant has underpaid its obligations for a preceding period,
the amount of such underpayment shall be paid by Tenant to Landlord with the
next succeeding installment obligation of estimated Operating Costs for the
Premises. If the actual Operating Costs for the Premises for any given Year
were improperly computed and if the actual Operating Costs for the Premises are
overstated by more than 2%, Landlord shall reimburse Tenant for the cost of its
audit provided that the cost of the audit shall not exceed $5,000. A "Qualified
Person" means an accountant or other person experienced in accounting for
income and expenses of office projects, who is engaged solely by Tenant on
terms which do not entail any compensation based or measured in any way upon
any savings in Additional Rent or reduction in Operating Costs for the Premises
achieved through the inspection process described in this subparagraph.
3.4.5 End of Term: Within one hundred twenty (120) days after the
close of the Year in which this Lease terminates, Landlord shall deliver to
Tenant a written statement setting forth the actual Operating Costs for the
Premises and Property Taxes for the Premises during the preceding Year and
Tenant's share of such expenses determined by multiplying such amount by a
fraction, the numerator of which is the number of days within the Lease Term in
such Year and the denominator of which is three hundred sixty (360). If such
prorated costs exceed the Estimated Operating Costs for the Premises together
with the Estimated Property Taxes for the Premises paid by Tenant to Landlord
for such Year, Tenant shall pay the amount of such excess to Landlord within
twenty (20) Business Days after receipt of such statement. If such statement
shows the Operating Costs for the Premises together with the Property Taxes for
the Premises to be less than the Estimated Operating Costs for the Premises
together with the Estimated Property Taxes for the Premises, as the case may
be, paid by Tenant to Landlord, then the amount of such overpayment shall be
paid by Landlord to Tenant within twenty (20) Business Days following the date
of such statement. Landlord's and Tenant's obligations under this subparagraph
shall survive the expiration or other termination of this Lease.
3.4.6 Definitions: Each underlined term in this subparagraph shall
have the meaning set forth next to that underlined term:
23
<PAGE> 54
Estimated Operating Costs for the Premises: Landlord's
estimate of Operating Costs for to the Premises for a Year to be given by
Landlord to Tenant pursuant to subparagraph 3.4.l.
Estimated Property Taxes for the Premises: Landlord's
estimate of Property Taxes for the Premises for a Year to be given by Landlord
to Tenant pursuant to subparagraph 3.4.1.
Operating Costs: All expenses paid or incurred by Landlord
for maintaining, operating, owning and repairing any or all of the Land,
Building, related improvements, and the personal property used in conjunction
with such Land, Building and related improvements, including all expenses paid
or incurred by Landlord for: (a) utilities, including electricity, water, gas,
sewers, fire sprinkler charges, refuse collection, telephone charges, cable
television or other electronic or microwave signal reception, steam, heat,
cooling or any other service which is now or in the future considered a utility
and which are not payable directly by tenants in the Building; (b) supplies;
(c) cleaning and janitorial services (including window washing), landscaping
and landscaping maintenance (including irrigating, trimming, mowing,
fertilizing, seeding and replacing plants), snow removal and other services;
(d) security services, if any; (e) insurance; (f) management fees; (g) services
of independent contractors; (h) compensation (including employment taxes and
fringe benefits) of all persons who perform duties in connection with any
service, repair, maintenance, replacement or improvement or other work included
in this subparagraph; (i) license, permit and inspection fees, (j) assessments
and special assessments due to deed restrictions, declarations or owners
associations or other means of allocating costs of a larger tract of which the
Land is a part; (k) rental of any machinery or equipment; (l) audit fees and
accounting services related to the Building, and charges for the computation of
the rents and charges payable by tenants in the Building (but only to the
extent the cost of such fees and services are in addition to the cost of the
management fee); (m) the cost of improvements, repairs or replacements; (n)
maintenance and service contracts; (o) legal fees and other expenses of legal
or other dispute resolution proceedings; (p) maintenance and repair of the roof
and roof membranes; (q) costs incurred by Landlord for compliance with Access
Laws, as set forth in the section captioned "Access Laws"; (r) elevator service
and repair, if any; (s) business taxes and license fees; and (t) any other
expense or charge which in accordance with generally accepted accounting and
management principles would be considered an expense of maintaining, operating,
owning or repairing the Building. Without limiting the foregoing, Operating
Costs shall include replacement of roofs and roof membranes, exterior painting,
parking area resurfacing, resealing and restriping parking areas and driveways;
upgrading of the HVAC systems in the Building, and other capital improvements
which are intended to reduce Operating Costs or are required by Governmental
Requirements; provided that, such capital improvements installed after the
Phase II Commencement Date shall be amortized with market interest over their
estimated useful lives as determined by
24
<PAGE> 55
Landlord and only the amortization installments and interest attributable to
the Lease Term shall be an Operating Cost under this Lease.
Operating Costs shall not include any of the following:
(i) ground rent or other rental payments made under any
ground lease or underlying lease;
(ii) interest and amortization of funds borrowed by
Landlord for items other than capital improvements;
(iii) leasing commissions and advertising and space
planning expenses incurred in procuring tenants;
(iv) salaries, wages, or other compensation paid to
officers or executives of Landlord in their capacities as officers and
executives;
(v) Costs incurred by Landlord for the original
construction and development of the Building, the original construction of
Tenant Improvements and nonrecurring costs and expenses incurred by Landlord in
curing, repairing or replacing any structural portion of the Building made
necessary as a result of defects in design, workmanship or materials ;
(vi) Salaries and all other compensation (including
fringe benefits and other direct and indirect personnel costs) of partners,
officers and executives above the grade of superintendent or building manager
of Landlord or the managing agent;
(vii) Cost of advertising and public relations and
promotional costs associated with the promotion or leasing of the Building;
(viii) Any costs, fines or penalties incurred due to the
violation by Landlord of any governmental rule or authority;
(ix) Any other expenses to the extent Landlord actually
receives reimbursement from insurance, condemnation awards, other tenants or
any other source;
(x) Costs and expenses incurred by Landlord in
connection with damage, casualty or condemnation of all or a portion of the
Building which expenses are otherwise covered by insurance as required by this
Lease or a condemnation award, as the case may be; provided, however, that with
respect to the cost to repair damage, Landlord may include in Operating Costs
the amount of a
25
<PAGE> 56
commercially reasonable deductible applied to each such occurrence if Landlord
actually makes such repair;
(xi) Costs incurred in connection with disputes with
tenants, other occupants, or prospective tenants;
(xii) Costs incurred in connection with the sale,
financing, refinancing, mortgaging, selling or change of ownership of the
Building;
(xiii) Costs, fines, interest, penalties, legal fees or
costs of litigation incurred due to the late payments of taxes, utility bills
and other costs incurred by Landlord's failure to make such payments when due;
(xiv) General overhead and general administrative expenses
and accounting, record-keeping and clerical support of Landlord or the
management agent that are not related to the operation, management or
maintenance of the Building;
(xv) That portion of any Operating Cost that is paid to
any entity affiliated with Landlord that is in excess of the amount that would
otherwise be paid to an entity that is not affiliated with Landlord for the
provision of the same service;
(xvi) Increased insurance premiums caused by Landlord's or
any other tenant's hazardous acts and insurance or leasehold improvements in
spaces leased or to be leased to other tenants;
(xvii) Cost incurred to correct violations by Landlord of
any law, rule, order or regulation which was in effect as of the date that the
Building's Certificate of Occupancy was validly issued;
(xviii) All costs and expenses attributable to any testing,
investigation, management, maintenance, remediation, or removal of Hazardous
Materials other than in connection with Hazardous Materials brought onto the
Premises or the Building by Tenant or Tenant's Agents or any testing or
monitoring customarily conducted by owners of similar office buildings in the
ordinary course of operating and managing a building; and
(xix) Costs incurred for any items to the extent Landlord
recovers under a manufacturer's, materialman's, vendor's or contractor's
warranty (a "Warranty").
The foregoing definition of Operating Costs is applicable to Tenant
only and Landlord is not prohibited from assessing other tenants for any and
all other costs and expenses incurred by Landlord in connection with the
operation, management,
26
<PAGE> 57
maintenance and repair of the Building, the land and all easements, rights and
appurtenances thereto.
If Digex is not the only tenant in the Building and if less than
ninety-five percent (95%) of the net rentable area of the Building is occupied
by tenants at all times during any Year, then Operating Costs for such Year
shall include all additional costs and expenses that Landlord reasonably
determines would have been incurred had ninety-five percent (95%) of the
Building been occupied at all times during such Year by tenants.
3.4.7 Tenant's Costs: Tenant agrees to reimburse or pay Landlord
within twenty (20) Business Days after invoice from Landlord for (a) any
cleaning expenses incurred by Landlord, including carpet cleaning, garbage and
trash removal expenses, over and above the normal cleaning provided by Landlord
on Business Days pursuant to Exhibit G, (b) any expense incurred by Landlord
for usage in the Premises of heating, ventilating and air conditioning
services, elevator services, electricity, water, janitorial services, or any
other services or utilities over and above the normal usage for the Premises
during Normal Business Hours and (c) any expense incurred by Landlord relating
to or arising out of the usage by Tenant or Tenant's Agents of the public or
common areas of the Building or Land, or any of the equipment contained
therein, which usage is over and above the normal usage for such public or
common areas or equipment during Normal Business Hours. Tenant shall reimburse
Landlord for Landlord's actual costs arising from HVAC usage after Normal
Business Hours. Tenant shall notify Landlord at least 24 hours prior to its
desire to use the HVAC system at other than Normal Business Hours. For the
purposes of this Lease, "Normal Business Hours" shall be 8:00 a.m. through 6:00
p.m. Monday through Friday and 9 a.m. to 1 p.m. on Saturdays, except for
holidays as defined in the Rules attached to this Lease as Exhibit E.
3.4.8 Nonpayment of Additional Rent: Any sums payable under this
Lease pursuant to this section or otherwise shall be Additional Rent and, in
the event of nonpayment of such sums, Landlord shall have the same rights and
remedies with respect to such nonpayment as it has with respect to nonpayment
of the Base Rent due under this Lease.
3.5 Utilities. Landlord shall have the right from time to time to
select the company or companies providing electricity, gas, fuel, local
telephone, telecommunication and any other utility services to the Building.
Tenant shall contract directly and pay for all telephone and telecommunications
utilities used on or from the Premises together with any taxes, penalties,
surcharges or similar charges relating to such utilities. If any such service
is not separately metered to the Premises, the cost therefor shall be an
Operating Cost under this Lease. If Tenant desires to use the services of a
provider of local telephone or telecommunication services whose equipment is
not then servicing the Building, no such provider shall be permitted to
27
<PAGE> 58
install its lines or other equipment within the Building without the prior
written consent of Landlord.
3.6 Holdover. If Tenant, without the prior consent of Landlord,
holds over after the expiration or earlier termination of the Lease Term,
Tenant shall be deemed to be occupying the Premises under a month-to-month
tenancy, which tenancy may be terminated as provided by the laws of the state
in which the Premises are located. During such tenancy, Tenant agrees(a) to pay
to Landlord one hundred fifty percent (150%) the rate of Base Rent in effect on
the expiration or termination of the Lease Term, plus all Additional Rent and
other sums payable under this Lease for the first one hundred and twenty (120)
days of such holdover, (b) to pay to Landlord two hundred percent (200%) of the
current rate of Base Rent in effect as of the expiration or termination of the
Lease Term plus all Additional Rent and other sums payable under this Lease for
any period beyond the initial one hundred and twenty (120) days, and (c) to be
bound by all of the other covenants and conditions specified in this Lease, so
far as applicable. The preceding provisions shall not be construed as consent
for Tenant to hold over.
3.7 Late Charge. If Tenant fails to make any payment of Base
Rent, Additional Rent or other amount after 5 Business Days following the date
when due under this Lease, a late charge is immediately due and payable by
Tenant equal to five percent (5%) of the amount of any such payment provided,
however, that Tenant shall not be entitled to such grace period more than once
in any consecutive 12 month period and that otherwise such late charge shall be
imposed in the event any amounts payable under this Lease are not paid when
due. Landlord and Tenant agree that this charge compensates Landlord for the
administrative costs caused by the delinquency. The parties agree that
Landlord's damage would be difficult to compute and the amount stated in this
section represents a reasonable estimate of such damage. Assessment or payment
of the late charge contemplated in this section shall not excuse or cure any
Event of Default or breach by Tenant under this Lease or impair any other right
or remedy provided under this Lease or under law.
3.8 Default Rate. Any Base Rent, Additional Rent or other sum
payable under this Lease which is not paid when due shall bear interest at a
rate equal to the lesser of: (a) the published prime rate of Riggs Bank N.A.,
or such other national banking institution designated by Landlord if such bank
ceases to publish a prime rate (the "Prime Rate"), then in effect, plus four
(4) percentage points, or (b) the maximum rate of interest per annum permitted
by applicable law (the "Default Rate"), but the payment of such interest shall
not excuse or cure any Event of Default or breach by Tenant under this Lease or
impair any other right or remedy provided under this Lease or under law.
28
<PAGE> 59
SECTION 4: GENERAL PROVISIONS
-----------------------------
4.1 Maintenance and Repair by Landlord; HVAC; Other Utilities and
Services; Service Interruption.
4.1.1 Maintenance and Repair by Landlord: Subject to the Sections
captioned "Damage or Destruction" and "Condemnation" and consistent with the
standards for the operation of Class A office buildings in the Laurel, Maryland
area and ordinary wear and tear, Landlord shall maintain the public and common
areas of the Building as well as the roof and all base building standard
mechanical, electrical, HVAC, plumbing, fire and life safety and structural
systems in reasonably good order and condition, and shall make such repairs
thereto as become necessary after obtaining actual knowledge of the need for
such repairs, all costs of which shall be included in Operating Costs,
provided, however, that expenses due to damage occasioned by the act or
omission of Tenant or Tenant's Agents shall be paid for entirely by Tenant
within ten (10) Business Days after demand by Landlord. In the event any or all
of the Building becomes in need of maintenance or repair which Landlord is
required to make under this Lease, Tenant shall promptly give written notice to
Landlord, and thereafter Landlord shall promptly commence such maintenance or
repairs.
4.1.2 HVAC. Landlord shall provide HVAC service to the Premises
during Normal Business Hours and consistent with the standards for the
operation of Class A buildings in the Laurel, Maryland area. Landlord will
provide Tenant with HVAC service at other times ("Overtime HVAC") provided
that, to the extent possible, Tenant gives Landlord at least twenty-four (24)
hours notice in advance of its requirement for such service. Tenant shall pay
Landlord for the cost of Overtime HVAC service (including, without limit,
Landlord's costs for engineer personnel engaged in providing such Overtime HVAC
service) which costs shall be considered Additional Rent.
4.1.3 Other Utilities and Services. Landlord shall provide hot and
cold water at all times to the lavatories, approved kitchens and janitorial
closets in the Premises, pest control service to the common areas, replacement
of light bulbs, maintenance of the parking areas and exterior and interior
window-cleaning and office cleaning services on Monday through Friday only,
excluding legal holidays, consistent with the standards for the operation of
Class A office buildings in the Laurel, Maryland area, and in accordance with
the specifications attached hereto as Exhibit G. Landlord will also provide
elevator service; provided, however, that Landlord shall have the right to
remove elevators from service as may be required for moving freight, or for
servicing or maintaining the elevators or the Building. At least one elevator
cab shall be available for use by Tenant at all times. The cost of all of the
foregoing services shall be deemed Operating Costs under Section 3.4.6.
If Tenant requires cleaning services, light bulb or fixture
replacement or other services on weekends or holidays, Landlord shall make
reasonably efforts to
29
<PAGE> 60
provide such services after reasonable notice from Tenant. Tenant shall
reimburse Landlord for the cost of such additional service within thirty (30)
days after receipt of Landlord's statement, which amount shall be considered
additional Rent.
4.1.4 Service Interruption. Notwithstanding anything contained in
the Lease to the contrary, if (i) the HVAC, water, elevator or cleaning
services described in Section 4 are interrupted for a period of more than five
(5) consecutive Business Days as a result of Landlord's (or its agents' or
employees') negligence or willful misconduct, and (ii) such interruption
renders all or a substantial portion of the Premises untenantable by Tenant and
Tenant does not in fact use the affected areas, then, as Tenant's sole and
exclusive remedy therefor, Tenant shall be entitled to a pro rata (based on
time and the amount of space affected) abatement of rent beginning on the sixth
(6th) consecutive Business Day that the Premises are unusable and continuing to
the extent that Tenant is unable to use such portion of the Premises for such
reason until the use of the Premises is restored to Tenant and, provided
further, in no event shall Landlord be liable to Tenant for claims of business
loss, business interruption or other consequential damages.
4.2 Maintenance and Repair by Tenant. Except as is expressly set
forth as Landlord's responsibility, Tenant shall at Tenant's sole cost and
expense keep and maintain the Premises in good condition and repair, including
the performance of maintenance and repair of Tenant's furniture, fixtures, and
equipment, including computers and telephone systems and the repair of damage
caused by the negligent or willfully wrongful acts of Tenant or Tenant's
Agents. If Tenant fails to maintain or repair the Premises or any other areas
under its control pursuant to this Lease, (e.g., the site of the generator
pursuant to Section 4.33) in accordance with this Section, then Landlord may,
but shall not be required to, enter the Premises upon two (2) Business Days
prior written notice to Tenant (or immediately without any notice in the case
of an emergency) to perform such maintenance or repair at Tenant's sole cost
and expense. Tenant shall pay to Landlord the commercially reasonable cost of
such maintenance or repair within ten (10) Business Days of written demand from
Landlord. Tenant shall, at its sole cost and expense, enter into a regularly
scheduled preventative maintenance/service contract with a maintenance
contractor for servicing all non-base building hot water, heating and air
conditioning systems and equipment dedicated solely to specific areas of the
Premises including, without limit, supplemental HVAC units servicing computer
rooms, conference or training rooms, or other specialty areas and other items
for which Tenant is responsible as provided in this Lease. The maintenance
contractors and contracts must be approved in advance by Landlord which
approval will not be unreasonably withheld, conditioned or delayed. The service
contracts shall become effective (and a copy of such contract or contracts
delivered to Landlord upon request) within thirty (30) days following the date
Tenant takes possession of the Premises.
30
<PAGE> 61
4.3 Common Areas/Security.
A. The Common Areas of the Building shall be subject to
Landlord's sole management and control except as otherwise provided in this
Lease including, without limit Section 4.21.3. Without limiting the generality
of the immediately preceding sentence, Landlord reserves the exclusive right as
it deems necessary or desirable to install, construct, remove, maintain and
operate lighting systems, facilities, improvements, equipment and signs on, in
or to all parts of the common areas; change the number, size, height, layout,
or locations of walks, driveways and truckways or parking areas now or later
forming a part of the Land or Building; make alterations or additions to the
Building or Common Areas; close temporarily all or any portion of the Common
Areas to make repairs, changes or to avoid public dedication; grant easements
to which the Land will be subject, replat, subdivide, or make other changes to
the Land; place, relocate and operate utility lines through, over or under the
Land and Building; and use or permit the use of all or any portion of the roofs
of the Building;
B. Landlord has no duty or obligation to provide any
security services in, on or around the Premises, Land or Building, and Tenant
recognizes that security services, if any, provided by Landlord will be for the
sole benefit of Landlord and the protection of Landlord's property and under no
circumstances shall Landlord be responsible for, and Tenant waives any rights
with respect to, Landlord providing security or other protection for Tenant or
Tenant's Agents or property in, on or about the Premises, Land or Building;
C. Subject to Landlord's prior approval, Tenant may, at
its sole cost and expense, install, establish and maintain security services
within the Premises; provided ,that such security services, including, without
limitation, any apparatus, facilities, equipment or people utilized in
connection with the provision of such security services, comply with the
Governmental Requirements and shall not cause the Building to be out of
compliance with the Governmental Requirements. Notwithstanding the foregoing,
any such security services installed, established or maintained by Tenant must
not affect or impact any portion of the Building or the Land other than the
Premises and shall not in any way limit or interfere with Landlord's ability to
exercise its rights as provided in the section captioned "Access". Tenant's
rights under this subparagraph are subject to all the obligations, limitations
and requirements as set forth in the sections captioned "Tenant Alterations"
and "Tenant's Work Performance"; and
D. Landlord reserves the right to relocate parking
areas and driveways and to build additional improvements in the common areas so
long as Tenant's Parking Ratio is maintained.
4.4 Tenant Alterations.
4.4.1 General Conditions. Tenant shall not make any alterations,
additions or improvements in or to the Premises, or make changes to locks on
doors, or add, disturb or in any way change any floor covering, wall covering,
fixtures, plumbing
31
<PAGE> 62
or wiring (individually and collectively "Tenant Alterations"), without first
obtaining the consent of Landlord which may be withheld in Landlord's absolute
discretion provided that Landlord shall not unreasonably withhold, condition or
delay its consent to Tenant Alterations to the interior of the Premises that
(i) are not readily visible to the exterior of the Building or the common and
public areas thereof, (ii) are not structural, (iii) do not adversely affect
the electrical, mechanical, fire or life safety systems within the Building,
and (iv) are otherwise in conformance with all applicable building, zoning and
other codes or regulations affecting the Building. Notwithstanding the
foregoing, after providing at least ten (10) days prior written notice to
Landlord (which notice shall include a reasonable description of the proposed
work) Tenant shall have the right to recarpet, repaint, or to make other purely
cosmetic or decorative nonstructural Tenant Alterations in and to the Premises
that (A) meet the requirements of clauses (i)-(iv) above, (B) do not require
the issuance of a building permit, and (C) do not cost in the aggregate more
than Seventy Five Thousand Dollars ($75,000) in a twelve (12) month period (a
"Decorative Tenant Alteration"). In the event Landlord does not respond to
Tenant's written notice of Tenant's intent to perform such Decorative Tenant
Alterations within such 10 day period, Landlord shall be deemed to have
consented to the requested Decorative Tenant Alteration. In all cases of Tenant
Alterations, other than Decorative Tenant Alterations, Tenant shall deliver to
Landlord full and complete plans and specifications for any proposed Tenant
Alterations. If consent to any Tenant Alteration by Landlord is given, all such
work which involves structural, electrical, mechanical or plumbing work, the
heating, ventilation and air conditioning system of the Premises or the
Building or the roof of the Building shall be performed at Tenant's expense by
Landlord (provided Tenant shall agree in writing to the costs of such work
before the commencement of such work) or, at Landlord's election, by Tenant.
Where Landlord's consent is required, Tenant shall pay to Landlord all
reasonable out-of-pocket costs incurred by Landlord paid to third parties for
any architecture, engineering, supervisory and legal services in connection
with any Tenant Alterations, including, without limitation, Landlord's review
of the Plans and Specifications. Without limiting the generality of the
foregoing, Landlord may require Tenant (if Tenant is performing the Tenant
Alterations), at Tenant's sole cost and expense, to obtain and provide Landlord
with a certificate proving insurance coverage and a payment and performance
bond, in forms, amounts and by companies acceptable to Landlord. Should Tenant
make any alterations without Landlord's prior written consent, when such
consent is required or without satisfaction of any conditions established by
Landlord, and if Tenant fails to obtain such consent or satisfy any previously
unsatisfied conditions within five (5) Business Days after written notice from
Landlord, Landlord shall have the right, in addition to and without limitation
of any right or remedy Landlord may have under this Lease, at law or in equity,
to require Tenant to remove some or all of Tenant Alterations, or at Landlord's
election, Landlord may remove such Tenant Alterations and restore the Premises
at Tenant's expense.
4.4.2 Removal of Tenant Alterations. All Tenant Alterations to the
Premises, regardless of which party constructed them or paid for them, shall
become the property
32
<PAGE> 63
of Landlord and shall remain upon and be surrendered with the Premises upon the
expiration or earlier termination of this Lease. Notwithstanding the foregoing,
at Landlord's election to be made at or before the time Tenant's plans for such
Tenant Alterations are approved, Tenant shall be obligated, at Tenant's sole
cost and expense, to remove all (or such portion as Landlord may designate) of
the Tenant Alterations upon the expiration or earlier termination of this Lease
and repair any damage resulting from such removal and return the area to the
same condition existing prior to the undertaking; provided, however, that
Landlord may only require such removal if in Landlord's reasonable professional
judgment such Tenant Alterations (1) are not customarily found in Class A
office buildings in the Laurel, Maryland submarket and (11) in Landlord's
reasonable judgment would, as a result of the unique nature of such items or
the anticipated difficulty or expense required to remove such items, expose
Landlord to unreasonable expense and effort in order to remove such items.
4.4.3 Failure to Remove. If Tenant fails to remove any Tenant
Alterations as required by Landlord pursuant to this Section 4.4., Landlord may
do so and Tenant shall pay the entire cost thereof to Landlord within twenty
(20) Business Days after Tenant's receipt of Landlord's written demand
therefor.
4.4.4 No Waiver. Nothing contained in this Section or the Section
captioned "Tenant's Work Performance" shall be deemed a waiver of the
provisions of the Section captioned "Mechanic's Liens".
4.5 Tenant's Work Performance. If Landlord elects to require
Tenant to perform the Tenant Alterations, Landlord may, in its absolute
discretion, require that Tenant provide a payment and performance bond to cover
the entire work to be performed, which bond must be in form, amount and by a
company acceptable to Landlord. A ny Tenant Alterations to be performed by
Tenant under this section shall be performed by contractors employed by Tenant
under one or more construction contracts, in form and content approved in
advance in writing by Landlord. So long as the present Landlord, or any
affiliated entity, is the owner of the Building, such construction contracts,
shall, in Landlord's discretion, include a requirement that the prime
contractor and the respective subcontractors of any tier: (a) be parties to,
and bound by, a collective bargaining agreement with a labor organization
affiliated with the Building and Construction Trades Council of the AFL-CIO;
and (b) employ only members of such labor organizations to perform work within
their respective jurisdictions provided, however, that Tenant shall have the
right to engage specialty contractors who are not subject to the requirements
of clauses (a) or (b) of this sentence for the sole purpose of completing
Tenant Alterations in the Premises related to Tenant's furniture, fixtures and
equipment or to perform Decorative Tenant Alterations, as defined in Section
4.4.1. Tenant's contractors, workers and suppliers shall work in harmony with
and not interfere with workers or contractors of Landlord or other tenants of
Landlord. If Tenant's contractors, workers or suppliers do, in the opinion of
Landlord, cause such disharmony or interference, Landlord's consent to the
continuation of such work may be withdrawn upon written notice to Tenant. All
Tenant
33
<PAGE> 64
Alterations shall be (1) completed in accordance with the plans and
specifications approved by Landlord; (2) completed in accordance with all
Governmental Requirements; (3) carried out promptly in a good and workmanlike
manner; (4) of all new materials; and (5) free of defect in materials and
workmanship. Tenant shall pay for all damage to the Premises, Building and Land
caused by Tenant or Tenant's Agents. Tenant shall indemnify, defend and hold
harmless Landlord and Landlord's Agents from any Claims arising as a result of
the Tenant Alterations or any defect in design, material or workmanship of any
Tenant Alterations.
4.6 Surrender of Possession. Subject to the last subparagraph of
the section captioned "Insurance", Tenant shall, at the expiration or earlier
termination of this Lease, surrender and deliver the Premises to Landlord in as
good condition as when received by Tenant from Landlord or as later improved,
reasonable use and wear excepted, and free from all tenancies or occupancies by
any person.
4.7 Removal of Property. Unless otherwise agreed to in writing by
Landlord, Tenant agrees that there are and shall be no trade fixtures in the
Premises owned by Tenant. Upon expiration or earlier termination of this Lease,
Tenant may remove its personal property, office supplies and office furniture
and equipment: if (a) such items are readily moveable and are not attached to
the Premises; (b) such removal is completed prior to the expiration or earlier
termination of this Lease; (c) Tenant is not in monetary or other material
default of any covenant or condition of this Lease at the time of such removal;
and (d) Tenant immediately repairs all damage caused by or resulting from such
removal. All other property in the Premises and any Tenant Alterations
(including, wall-to-wall carpeting, paneling, wall covering or lighting
fixtures and apparatus) or any other article affixed to the floor, walls,
ceiling or any other part of the Premises or Building, shall become the
property of Landlord and shall remain upon and be surrendered with the
Premises; provided, however, subject to the provisions of Section 4.4, at
Landlord's election, Tenant shall be obligated, at its sole cost and expense,
to remove all (or such portion as Landlord shall designate) of the Tenant
Alterations and repair any damages resulting from such removal. Tenant waives
all rights to any payment or compensation for such Tenant Alterations. If
Tenant shall fail to remove any of its property from the Premises, Building or
Land at the expiration or earlier termination of this Lease or when Landlord
has the right of re-entry, Landlord may, at its option, remove and store such
property without liability for loss of or damage to such property, such storage
to be for the account and at the expense of Tenant. If Tenant fails to pay the
cost of storing any such property, Landlord may, at its option, after it has
been stored for a period of twenty (20) Business Days or more, sell or permit
to be sold, any or all such property at public or private sale (and Landlord
may become a purchaser at such sale), in such manner and at such times and
places as Landlord in its sole discretion may deem proper, without notice to
Tenant, and Landlord shall apply the proceeds of such sale: first, to the cost
and expense of such sale, including reasonable attorney's fees actually
incurred; second, to the payment of the costs or charges for storing any such
property; third, to the payment of any other sums of money
34
<PAGE> 65
which may then be or later become due Landlord from Tenant under this Lease;
and, fourth, the balance, if any, to Tenant.
4.8 Access. Tenant shall permit Landlord and Landlord's Agents to
enter into the Premises at any time on at least one (1) Business Day's notice
(except in case of emergency in which case no notice shall be required), for
the purpose of inspecting the same, showing the Premises to a prospective
purchaser or lender or repairing, altering or improving the Premises or the
Building. Nothing contained in this section shall be deemed to impose any
obligation upon Landlord not expressly stated elsewhere in this Lease. Landlord
shall have the right to enter the Premises at any time during the last 18
months of the Lease Term after advance notice of at least 24 hours for the
purpose of showing the Premises to prospective tenants and to erect on the
Premises a suitable sign indicating the Premises are available provided,
however, that if Landlord elects to exercise this right during the seventeenth
(17/th/) and eighteenth (18/th/) months prior to the end of the Lease Term,
such visits for the purpose of showing the Premises to prospective tenants
shall not be conducted during Normal Business Hours; shall, if required by
Tenant, be conducted with an escort provided by Tenant; and shall not be made
for the purpose of showing the Premises to a recognized competitor of Tenant.
For the purpose of implementing the preceding sentence, at Landlord's request,
prior to the end of the eighth (8/th/) Lease Year Tenant shall notify Landlord
in writing of those entities which it considers to be competitors for the
purpose of determining those entities which may not be shown the Premises
during the seventeenth (17/th/) and eighteenth (18/th/) months prior to the end
of the Lease Term as provided in such sentence which list may be amended in
writing by Tenant from time to time as necessary. Tenant shall give written
notice to Landlord at least twenty (20) Business Days prior to vacating the
Premises and shall arrange to meet with Landlord for a joint inspection of the
Premises prior to vacating. In the event of Tenant's failure to give such
notice or arrange such joint inspection, Landlord's inspection at or after
Tenant's vacating the Premises shall be conclusively deemed correct for
purposes of determining Tenant's responsibility for repairs and restoration.
Landlord shall not be liable for the consequences of admitting by passkey, or
refusing to admit to the Premises, Tenant or any of Tenant's Agents, or other
persons claiming the right of admittance.
When reasonably necessary, Landlord may temporarily close Building or
Land entrances, Building doors or other facilities, without liability to Tenant
by reason of such closure and without such action by Landlord being construed
as an eviction of Tenant or as relieving Tenant from the duty of observing or
performing any of the provisions of this Lease. Except as otherwise provided in
the preceding sentence, Tenant shall have access to the Building on a
twenty-four (24) hour per day, seven (7) day per week basis through the
Building's card key access system, subject to such reasonable regulations
and/or security systems which Landlord may impose for security purposes.
35
<PAGE> 66
4.9 Damage or Destruction.
4.9.1 If the Premises are damaged by fire, earthquake or other
casualty, Tenant shall give immediate written notice thereof to Landlord.
Landlord shall, within forty-five (45) days after the date the Landlord is
notified of the casualty, provide Tenant with Landlord's good faith estimate of
how long it will take to repair or restore the Premises. If Landlord estimates
that the damage can be repaired in accordance with the then-existing
Governmental Requirements within two hundred twenty-five (225) Calendar Days
after Landlord is notified by Tenant of such damage and if there are sufficient
insurance proceeds available to repair such damage, then Landlord shall proceed
with reasonable diligence to restore the Premises to substantially the
condition which existed prior to the damage and this Lease shall not terminate.
If, in Landlord's estimation, the damage cannot be repaired within such two
hundred twenty-five (225) day period or if there are insufficient insurance
proceeds available to repair such damage, Landlord may elect in its absolute
discretion to either: (a) terminate this Lease; or (b) restore the Premises to
substantially the condition which existed prior to the damage and this Lease
will continue. If Landlord elects to restore the Premises, Landlord will use
reasonable efforts to complete such restoration within such two hundred
twenty-five (225) Calendar Day period, as such period may be extended due to
Force Majeure or any Tenant Delays (as such term is defined in Exhibit C. If
such repairs or restoration are not completed within such period as so
extended, then within 30 days following the expiration of such period (provided
that Landlord does not complete the repair or restoration of the Premises
within such 30 days period), Tenant shall have the right to terminate this
Lease on 30 day notice to Landlord, provided that if Landlord substantially
completes the repair or restoration within such 30 day period, Tenant's notice
of termination shall be deemed rescinded and ineffective for all purposes and
this Lease shall continue in full force and effect. Notwithstanding the
foregoing, Tenant shall not have the right to terminate this Lease as provided
in this Section 4.9 in the event the casualty which caused the damage to the
Premises was the result of Tenant's gross negligence or willful misconduct.
If Landlord restores the Premises under this Section 4.9, then (1) the
Lease Term shall be extended for the time required to complete such
restoration, (2) Tenant shall pay to Landlord, upon demand, any applicable
reasonable deductible amount specified under Landlord's insurance (which
deductible currently does not exceed $25,000) and (3) Landlord shall not be
required to repair or restore Tenant Improvements, Tenant Alterations, or any
or all furniture, fixtures, equipment, inventory, improvements or other
property which was in or about the Premises at the time of the damage and was
not owned by Landlord. Base Rent, Additional Rent and any other sum due under
this Lease during any reconstruction period shall be equitably abated to the
extent and for the period that the Premises are unusable and are not used by
Tenant due to the performance of such reconstruction work by Landlord. Tenant
agrees to look to the provider of Tenant's insurance for coverage for the loss
of Tenant's use of the Premises and any other related losses or damages
incurred by Tenant during any reconstruction period.
36
<PAGE> 67
4.9.2 If the Building is damaged by fire, earthquake or other
casualty and more than fifty percent (50%) of the Building is rendered
untenantable, without regard to whether the Premises are affected by such
damage, Landlord may in its absolute discretion and without limiting any other
options available to Landlord under this Lease or otherwise, elect to terminate
this Lease by notice in writing to Tenant within forty-five (45) Business Days
after the occurrence of such damage. Such notice shall be effective twenty (20)
Business Days after receipt by Tenant unless a later date is set forth in
Landlord's notice which later date shall not be greater then 180 days after the
occurrence of the damage.
4.9.3 Notwithstanding anything contained in this Lease to the
contrary, if there is damage to the Premises, or Building and the holder of any
indebtedness secured by a mortgage or deed of trust covering any such property
requires that the insurance proceeds be applied to such indebtedness or if the
insurance proceeds are otherwise inadequate to complete the repair of the
damages to the Premises, the Building or both, then Landlord shall have the
right to terminate this Lease by delivering written notice of termination to
Tenant within fifteen (15) Business Days after such requirement is made by such
holder.
4.9.4 Notwithstanding the foregoing, if the Premises or the
Building are wholly or partially damaged or destroyed within the final six (6)
months of the Term, Landlord may, at its option, elect to terminate this Lease
upon written notice to Tenant within thirty (30) days following such damage or
destruction.
4.10 Condemnation. If all of the Premises, or such portions of the
Building as may be required for the Tenant's reasonable use of the Premises,
are taken by eminent domain or by conveyance in lieu thereof, this Lease shall
automatically terminate as of the date the physical taking occurs, and all Base
Rent, Additional Rent and other sums payable under this Lease shall be paid to
that date. In case of taking of a part of the Premises or a portion of the
Building not required for the Tenant's reasonable use of the Premises, then
this Lease shall continue in full force and effect and the Base Rent shall be
equitably reduced based on the proportion by which the floor area of the
Premises is reduced, such reduction in Base Rent to be effective as of the date
the physical taking occurs. Additional Rent and all other sums payable under
this Lease shall be redetermined in an equitable manner under the
circumstances. Landlord reserves all rights to damages or awards for any taking
by eminent domain relating to the Premises, Building, Land and the unexpired
term of this Lease. Tenant assigns to Landlord any right Tenant may have to
such damages or award and Tenant shall make no claim against Landlord for
damages for termination of its leasehold interest or interference with Tenant's
business. Tenant shall have the right, however, to claim and recover from the
condemning authority compensation for any loss to which Tenant may be entitled
for Tenant's moving expenses or other relocation costs; provided that, such
expenses or costs may be claimed only if they are awarded separately in the
eminent domain proceedings and not as a part of the damages recoverable by
Landlord.
37
<PAGE> 68
4.11 Parking. Landlord shall provide Tenant unreserved surface
parking at no additional charge in an aggregate amount equal to the Parking
Ratio stated in section captioned "Definitions - Parking Ratio." Landlord shall
have no obligation whatsoever to monitor, secure or police the use of the
parking or other common areas.
4.12 Indemnification.
4.12.1 Tenant shall indemnify, defend and hold harmless Landlord and
Landlord's Agents from and against any and all Claims, arising in whole or in
part out of (a) the possession, use or occupancy of the Premises or the
business conducted in the Premises, (b) any act, omission or negligence of
Tenant or Tenant's Agents except to the extent such claims arise from
Landlord's negligence or willful misconduct, or (c) any breach or default under
this Lease by Tenant.
4.12.2 Landlord shall indemnify, defend and hold harmless Tenant
from and against any and all Claims, arising in whole or in part out of (a) any
intentional acts or omissions or negligence of Landlord or Landlord's Agents in
the Premises except to the extent such accident, injury, damage, failure,
breach or default is a result of or is in any way caused by Tenant, or any of
Tenant's Agents, or (b) any breach or default under this Lease by Landlord.
Notwithstanding the foregoing, neither Landlord nor Landlord's Agents shall, to
the extent permitted by law, have any liability to Tenant, or to Tenant's
Agents, for any Claims arising out of any repair to any portion of the
Premises; interruption in the use of the Premises or any equipment therein; any
accident or damage resulting from any use or operation by Landlord, Tenant or
any person or entity of heating, cooling, electrical, sewerage or plumbing
equipment or apparatus; termination of this Lease by reason of damage to the
Premises or Building; fire, robbery, theft, vandalism, mysterious disappearance
or any other casualty; actions of any other tenant of the Building or of any
other person or entity; inability to furnish any service required of Landlord
as specified in this Lease; or leakage in any part of the Premises or the
Building from rain, ice or snow, or from drains, pipes or plumbing fixtures in
the Premises or the Building; except for Claims arising solely out of the
negligence or willful misconduct of Landlord in failing to repair or maintain
the Building as required by this Lease after notice by Tenant as required by
the Section 4.1 captioned "Maintenance and Repair by Landlord"; provided that,
in no event shall Landlord be responsible for any interruption to Tenant's
business or for any indirect or consequential losses suffered by Tenant or
Tenant's Agents. The obligations of this Section 4.12 shall be subject to the
Section captioned "Waiver of Subrogation".
4.13 Tenant Insurance.
4.13.1 Tenant shall, throughout the Lease Term, at its own expense,
keep and maintain in full force and effect the following policies, each of
which shall be endorsed as needed to provide that the insurance afforded by
these policies is primary and that all insurance carried by Landlord is
strictly excess and secondary and shall not contribute with Tenant's liability
insurance:
38
<PAGE> 69
(a) A policy of comprehensive general liability
insurance, including a contractual liability endorsement covering Tenant's
obligations to indemnify Landlord for the tortuous acts of Tenant or Tenant's
Agents pursuant to the Section captioned "Indemnification", insuring against
claims of bodily injury and death or property damage or loss with a combined
single limit at the Phase I Commencement Date of this Lease of not less than
Two Million Dollars ($2,000,000.00). The amount of insurance required pursuant
to the preceding sentence may be satisfied by the basic policy described in
this subsection (a) plus an umbrella coverage which applies to the Premises and
the Land and which policies together, will provide the required amount of
coverage. The foregoing insurance limit may be reasonably increased during the
Lease Term at Landlord's request to reflect both increases in liability
exposure arising from inflation as well as from changing use of the Premises or
changing legal liability standards, which increases shall be reasonably
comparable to those imposed by landlords of Class A buildings (if any) which
are similar in size, construction, use and level of finish as the Building and
which are located within a ten (10) mile radius of the Building. Such insurance
shall be payable on an "occurrence" rather than a "claims made" basis, and
shall name Landlord and Manager and, at Landlord's request Landlord's mortgage
lender(s) or investment advisors, as additional insureds;
(b) A policy of extended property insurance (which is
commonly called "all risk") covering Tenant Improvements, Tenant Alterations,
and any and all furniture, fixtures, equipment, inventory, improvements and
other property in or about the Premise which is not owned by Landlord, for one
hundred percent (100%) of the then current replacement value of such property;
(c) Business interruption insurance in an amount
sufficient to cover costs, damages, lost income, expenses, Base Rent,
Additional Rent and all other sums payable under this Lease, should any or all
of the Premises not be usable for a period of up to twelve (12) months; and
(d) A policy or worker's compensation insurance as
required by applicable law and employer's liability insurance with limits of no
less than One Million Dollars ($1,000,000.00). The level of coverage required
by the preceding sentence may be satisfied in part by an umbrella policy
coverage which, together with other insurance, will provide the required amount
of coverage.
4.13.2 All insurance policies required under this section shall be
with companies licensed to do business in Maryland and with an A.M. Best rating
of AV or better and each policy shall provide that it is not subject to
cancellation or reduction in coverage except after thirty (30) days' written
notice to Landlord. Tenant shall deliver to Landlord and, at Landlord's request
Landlord's mortgage lender(s), prior to the Phase I Commencement Date and from
time to time thereafter, certificates evidencing the existence and amounts of
all such policies.
39
<PAGE> 70
4.13.3 If Tenant fails to acquire or maintain any insurance or
provide any certificate required by this section, Landlord may, but shall not
be required to, obtain such insurance or certificates and the costs associated
with obtaining such insurance or certificates shall be payable by Tenant to
Landlord on demand.
4.14 Landlord's Insurance. Landlord shall, throughout the Lease
Term, keep and maintain in full force and effect:
(a) A policy of commercial general liability insurance,
insuring against claims of bodily injury and death or property damage or loss
with a combined single limit at the Phase I Commencement Date of not less than
Five Million Dollars ($5,000,000.00), which policy shall be payable on an
"occurrence" rather than a "claims made" basis;
(b) A policy of extended property insurance (what is
commonly called "all risk") covering the Building and Landlord's personal
property, if any, located on the Land in the amount of one hundred percent
(100%) of the then current replacement value of such property; and
(c) Landlord may, but shall not be required to, maintain
other types of insurance as Landlord deems appropriate, including but not
limited to, property insurance coverage for earthquakes and floods in such
amounts as Landlord deems appropriate. Such policies may be "blanket" policies
that cover other properties owned by Landlord.
4.15 Waiver of Subrogation. Notwithstanding anything in this Lease
to the contrary, Landlord and Tenant hereby each waive and release the other
from any and all Claims or any loss or damage that may occur to the Land,
Building, Premises, or personal property located therein, by reason of fire or
other casualty regardless of cause or origin, including the negligence or
misconduct of Landlord, Tenant, Landlord's Agents or Tenant's Agents, but only
to the extent of the insurance proceeds paid to such releasor under its
policies of insurance or, if it fails to maintain the required policies, the
insurance proceeds that would have been paid to such releasor if it had
maintained such policies. Each party to this Lease shall promptly give to its
insurance company written notice of the mutual waivers contained in this
subparagraph, and shall cause its insurance policies to be properly endorsed,
if necessary, to prevent the invalidation of any insurance coverages by reason
of the mutual waivers contained in this subparagraph.
4.16 Assignment and Subletting by Tenant.
4.16.1 Tenant shall not have the right to assign, transfer, mortgage
or encumber this Lease in whole or in part, nor sublet the whole or any part of
the Premises, nor allow the occupancy of all or any part of the Premises by
another, without first obtaining Landlord's consent, which consent shall not be
unreasonably withheld, conditioned or delayed, provided that upon 10 Business
Days written notice to
40
<PAGE> 71
Landlord, Tenant shall have the right to assign this Lease or sublease any
portion of the Premises to any entity which is controlled by or under common
control with Tenant (collectively "Affiliates") for use comparable to that of
Tenant. For purposes of this Section 4.16, "control" shall mean ownership of at
least 50% of the stock or other voting interests in the entity in question.
Notwithstanding any permitted assignment or subletting, Tenant shall at all
times remain directly, primarily and fully responsible and liable for the
payment of all sums payable under this Lease and for compliance with all of its
other obligations as tenant under this Lease. Upon the occurrence of an Event
of Default, if the Premises or any part of the Premises are then subject to an
assignment or subletting, Landlord, in addition to any other remedies provided
in this Lease or by law, may at its option collect directly from such assignee
or subtenant all rents becoming due to Tenant under such assignment or sublease
and apply such rents against any sums due to Landlord from Tenant under this
Lease, and no such collection shall be construed to constitute a novation or
release of Tenant from the further performance of Tenant's obligations under
this Lease.
In addition, notwithstanding the restrictions on assignments and
subleases set forth herein, Landlord's prior consent shall not be required with
respect to any assignment of this Lease resulting from the merger,
consolidation, or other corporate reorganization of Tenant, or the sale or
transfer of the capital stock or all or substantially all of the assets of
Tenant, provided that (i) Tenant after such merger, consolidation,
reorganization or sale of stock or assets has a creditworthiness (e.g. assets
and capitalization) and net worth (which shall be determined on a pro forma
basis using generally accepted accounting principles consistently applied and
using the most recent financial statements) not materially less than that of
Tenant prior to the date of such transfer, (ii) Tenant after such merger,
consolidation, reorganization or sale of stock or assets agrees in writing to
be bound by the terms and conditions of this Lease and to assume all of the
obligations and liabilities of Tenant under this Lease, (iii) Tenant after such
merger, consolidation, reorganization or sale of stock shall conduct a
Permitted Use pursuant to the terms of this Lease which use shall be comparable
to Tenant's use of the Premises, (iv) Tenant provides Landlord with prior
written notice of its intent to assign the Lease not more than forty-five (45)
nor less than fifteen (15) days prior to the date such assignment is to be
effective, (v) the assignment is not a so-called "sham" transaction intended by
Tenant to circumvent the provisions of this Section of the Lease, (vi) a
monetary or material non-monetary Event of Default has not occurred and is
still continuing, and (vii) the assignment (A) will not result in a material
increase in Operating Costs for the Building beyond that which Landlord now
incurs for use by Tenant and (B) will not materially increase the burden on
elevators or other Building systems or equipment over the burden prior to such
assignment or sublease (a "Permitted Transfer"). Any approved sublease or
assignment shall be on a form of sublease or assignment which has been approved
in advance by Landlord.
Notwithstanding any permitted assignment or subletting, Tenant shall
at all times remain directly, primarily and fully responsible and liable for
the payment of all
41
<PAGE> 72
sums payable under this Lease and for compliance with all of its other
obligations as tenant under this Lease. Upon the occurrence of an Event of
Default, if the Premises or any part of the Premises are then subject to an
assignment or subletting, Landlord, in addition to any other remedies provided
in this Lease or by law, may at its option collect directly from such assignee
or subtenant all rents becoming due to Tenant under such assignment or sublease
and apply such rents against any sums due to Landlord from Tenant under this
Lease, and no such collection shall be construed to constitute a novation or
release of Tenant from the further performance of Tenant's obligations under
this Lease.
Tenant makes an absolute assignment to Landlord of such assignments
and subleases and any rent, security deposits and other sums payable under such
assignments and subleases as collateral to secure the performance of the
obligations of Tenant under this Lease.
In no event shall any consent by Landlord be construed to permit
reassignment or resubletting by a permitted assignee or sublessee. Upon any
assignment of this Lease or any subletting in the aggregate of one hundred
percent (100%) of the Premises for all, or substantially all, of the remainder
of the Term of this Lease, or any extension thereof, any and all option rights,
renewal rights, rights of first refusal and expansion rights (including those
rights set forth in Sections 6.19 through 6.21, and those special signage
rights as set forth in Section 4.23) shall terminate and be of no further force
and effect, unless such assignment or sublease were made in favor of an entity
that directly or indirectly controls or is controlled by or is under common
control with Tenant ("Tenant's Affiliate") or arises as a result of a Permitted
Transfer which is approved as provided in the second paragraph of this Section
4.16.1. it being agreed that all such rights are personal to Tenant (and not to
any assignee or subtenant, other than an entity which qualifies as Tenant's
Affiliate) and are not appurtenant to the Premises or this Lease. Any
assignment or subletting not in conformance with the terms of this Lease shall
be void.
4.16.2 In the event Tenant desires to assign this Lease or to sublet
all or any portion of the Premises, Tenant shall give written notice of such
desire to Landlord setting forth the name of the proposed subtenant or
assignee, the proposed term, the nature of the proposed subtenant's or
assignee's business to be conducted on the Premises, the rental rate, and any
other particulars of the proposed subletting or assignment that Landlord may
reasonably request. Without limiting the preceding sentence, Tenant shall also
provide Landlord with: (a) such financial information as Landlord may
reasonably request concerning the proposed subtenant or assignee, including
recent financial statements certified as accurate and complete by a certified
public accountant or by the president, managing partner or other appropriate
officer of the proposed subtenant or assignee; (b) proof satisfactory to
Landlord that the proposed subtenant or assignee will immediately occupy and
thereafter use the entire Premises (or any sublet portion of the Premises) for
the remainder of the Lease Term (or for the entire term of the sublease, if
shorter) in compliance with the terms of this
42
<PAGE> 73
Lease; and (c) a copy of the proposed sublease or assignment or letter of
intent. Tenant shall pay to Landlord, upon Landlord's demand therefor,
Landlord's reasonable attorneys' fees incurred in the review of such
documentation and in documenting Landlord's consent, plus an administrative fee
of $350.00 as Landlord's fee for processing such proposed assignment or
sublease. Receipt of such fee shall not obligate Landlord to approve the
proposed assignment or sublease.
4.16.3 In determining whether to grant or withhold consent to a
proposed assignment or sublease, Landlord may consider, and weigh, any factor
it deems relevant, in its sole reasonable discretion. Without limiting what may
be construed as a factor considered by Landlord, Tenant agrees that any one or
more of the following will be proper grounds for Landlord's disapproval of a
proposed assignment or sublease:
(a) Intentionally omitted;
(b) The proposed assignee or subtenant does not, in
Landlord's good faith judgment, have financial worth or creditworthiness
sufficient financial worth to insure full and timely performance under this
Lease;
(c) Landlord has received insufficient evidence of the
financial worth or creditworthiness of the proposed assignee or subtenant for
Landlord to make the determination set forth in clause (b);
(d) The proposed assignee or subtenant has a reputation
for disputes in contractual relations, for failure to observe and perform its
contractual obligations in a timely and complete manner or for negative
business relations in the business community as a tenant of property or
otherwise;
(e) Landlord has received from any prior lessor of the
proposed assignee or subtenant a negative report concerning such prior lessor's
experience with the proposed assignee or subtenant;
(f) Landlord has had prior negative leasing experience
with the proposed assignee or subtenant;
(g) The use of the Premises by the proposed assignee or
subtenant will not be identical with the Permitted Uses;
(h) In Landlord's judgment, the proposed assignee or
subtenant is engaged in a business, or the Premises or any part of the Premises
will be used in a manner, that is not in keeping with the then standards of the
Building, or that is not compatible with the businesses of other tenants in the
Building, or that is inappropriate for the Building, or that will violate any
negative covenant as to use contained in any other lease of space in the
Building;
43
<PAGE> 74
(i) The use of the Premises by the proposed assignee or
subtenant will violate any Governmental Requirement or create a violation of
Access Laws;
(j) Tenant is in default of any material obligation of
Tenant under this Lease, or Tenant has materially defaulted under this Lease on
three (3) or more occasions during the twenty-four (24) months preceding the
date that Tenant shall request such consent;
(k) Landlord does not, in good faith, approve of any of
the tenant improvements required for the proposed assignee or subtenant; or
(l) Intentionally omitted;
(m) The proposed assignee or subtenant is a party by
whom any suit or action could be defended on the ground of diplomatic or
sovereign immunity.
4.16.4 Within fifteen(15) Business Days after Landlord's receipt of
all required information to be supplied by Tenant pursuant to this section,
Landlord shall notify Tenant of Landlord's approval, disapproval or conditional
approval of any proposed assignment or subletting or of Landlord's election to
recapture as described below. Landlord shall have no obligation to respond
unless and until all required information has been submitted. In the event
Landlord approves of any proposed assignment or subletting, Tenant and the
proposed assignee or sublessee shall execute and deliver to Landlord an
assignment (or subletting) and assumption agreement in form and content
reasonably satisfactory to Landlord.
4.16.5 Any transfer, assignment or hypothecation of any of the stock
or interest in, or the assets of, Tenant which is either: (a) greater than
fifty percent (50%) of such stock, interest or assets or (b) intended as a
subterfuge denying Landlord the benefits of this section, shall be deemed to be
an assignment within the meaning and provisions of this section and shall be
subject to the provisions of this section.
4.16.6 If Landlord consents to any assignment or sublease and Tenant
receives rent or any other consideration, either initially or over the term of
the assignment or sublease, in excess of the Base Rent and Additional Rent (or,
in the case of a sublease of a portion of the Premises, in excess of the Base
Rent and Additional Rent paid by Tenant on a square footage basis under this
Lease) plus all reasonable transaction costs, including rent concessions and
other inducements, reasonable brokerage commissions, legal fees, marketing
expenses, subtenant improvement allowances and other costs reasonably incurred
by Tenant in connection with such assignment or subletting ("Sublease Costs")
(which excess shall be referred to as "Sublease Profit") Tenant shall pay to
Landlord fifty percent (50%) of such excess. For the purpose of calculating
Landlord's share of any Sublease Profit, the Sublease Costs shall be allocated
proportionately to all such payments received by Tenant over the term of the
sublease. Tenant shall furnish to Landlord in the February immediately
44
<PAGE> 75
following each calendar year during any part of which any such Sublease shall
be in effect (or within 60 days after the termination of such Sublease), a
reasonably detailed financial statement certified as being correct by Tenant's
Senior Financial Officer setting forth all sums accruing during the prior
calendar year and realized by Tenant from such Sublease and a computation of
the rent or other consideration received on account of such Sublease or
Assignment in excess of the Base Rent and Additional Rent plus Sublease Costs
during the prior calendar year. Tenant shall remit to Landlord, together with
such statement, 50% of such excess on account of such calendar year not
previously remitted to Landlord.
4.16.7 Landlord shall have the right to recapture the Premises or
the applicable portion thereof (a "Recapture") by giving written notice (the
"Recapture Notice") of such Recapture to Tenant within fifteen (15) Business
Days after receipt of Tenant's written request for Landlord's consent to a
proposed assignment or subletting. Tenant shall have the right to retract its
request for Landlord's consent to assign or sublease once such request has been
made provided such retraction is given in writing within ten (10) Business Days
after Landlord delivers the Recapture Notice. Such Recapture shall terminate
this Lease as to the applicable space effective on the prospective effective
date of assignment or subletting, which shall be the last day of a calendar
month and shall not be earlier than forty-five (45) Business Days after receipt
of Tenant's request hereunder. If less than the entire Premises are recaptured,
Landlord and Tenant agree that this Lease shall remain in full force and effect
with respect to that remaining area not recaptured by Landlord and Landlord
shall cause the remaining space to be re-demised at Landlord's expense. Tenant
agrees to surrender that portion of the Premises recaptured by Landlord in
accordance with the terms and conditions of this Lease. Notwithstanding the
first sentence of this subparagraph, Landlord shall have no right to Recapture
the Premises or applicable portion thereof if: (a) Tenant's proposed assignment
or sublet is to an Affiliate, wholly-owned subsidiary or successor entity, or
(b) Tenant's proposed assignment or sublet together with any previous
assignments and sublets encompass, in the aggregate, net rentable area equal to
less than fifty percent (50%) of the total net rentable area of the Premises.
4.17 Assignment by Landlord. Landlord shall have the right to
transfer and assign, in whole or in part, its rights and obligations under this
Lease and in any and all of the Land or Building. If Landlord sells or
transfers any or all of the Building, including the Premises, Landlord and
Landlord's Agents shall, upon consummation of such sale or transfer, be
released automatically from any liability relating to obligations or covenants
under this Lease to be performed or observed after the date of such transfer,
and in such event, Tenant agrees to look solely to Landlord's
successor-in-interest with respect to such liability; provided that, as to the
Security Deposit and Prepaid Rent, Landlord shall not be released from
liability therefor unless Landlord has delivered (by direct transfer or credit
against the purchase price) the Security Deposit or Prepaid Rent to its
successor-in-interest.
45
<PAGE> 76
4.18 Estoppel Certificates and Financial Statements. Tenant shall,
from time to time, upon the written request of Landlord, execute, acknowledge
and deliver to Landlord or its designee a written statement stating (a) the
date this Lease was executed and the date it expires; (b) the date Tenant
entered into occupancy of the Phases of the Premises; (c) the amount of monthly
Base Rent and Additional Rent and the date to which such Base Rent and
Additional Rent have been paid; and (d) certifying that (1) this Lease is in
full force and effect and has not been assigned, modified, supplemented or
amended in any way (or specifying the date of the agreement so affecting this
Lease); (2) Landlord is not in breach of this Lease (or, if so, a description
of each such breach) and that no event, omission or condition has occurred
which would result, with the giving of notice or the passage of time, in a
breach of this Lease by Landlord; (3) this Lease, together with any
specifically identified agreements, represents the entire agreement between the
parties with respect to the Premises; (4) all required contributions by
Landlord to Tenant on account of Tenant Improvements have been received (or a
statement as to what further contributions are claimed as due); (5) on the date
of execution, there exist no defenses or offsets which the Tenant has against
the enforcement of this Lease by the Landlord (or a specific statement as to
what, if any, such defenses or offsets may be); (6) no Base Rent, Additional
Rent or other sums payable under this Lease have been paid in advance except
for Base Rent and Additional Rent for the then current month; (7) no security
has been deposited with Landlord (or, if so, the amount of such security); (8)
it is intended that any Tenant's statement may be relied upon by a prospective
purchaser or mortgagee of Landlord's interest or an assignee of any such
mortgagee; and (9) such other information as may be reasonably requested by
Landlord. If Tenant fails to respond within five (5) Business Days of its
receipt of a written request by Landlord ;is provided in this section, such
shall be a breach of this Lease and Tenant shall be deemed to have admitted the
accuracy of any information supplied by Landlord to a prospective purchaser,
mortgagee or assignee. In addition, Tenant shall, from time to time, upon the
written request of Landlord, deliver to or cause to be delivered to Landlord or
its designee then current financial statements (including a statement of
operations and balance sheet) certified as accurate by a certified public
accountant and prepared in conformance with generally accepted accounting
principles for (i) Tenant, (ii) any entity which owns a controlling interest in
Tenant, (iii) any entity the controlling interest of which is owned by Tenant,
(iv) any successor entity to Tenant by merger or operation of law, and (v) any
guarantor of this Lease provided, however, that such information need not be
supplied by Tenant to the extent that it is readily available to the public in
an equally credible form on the Internet or otherwise (e.g. Form 10-Q filed
with the Securities and Exchange Commission).
4.19 Modification for Lenders. If, in connection with obtaining
construction, interim or permanent financing for the Building or Land,
Landlord's lender, if any, shall request reasonable modifications to this Lease
as a condition to such financing, Tenant will not unreasonably withhold or
delay its consent to such modifications; provided that,
46
<PAGE> 77
such modifications do not increase the obligations of Tenant under this Lease
or materially adversely affect Tenant's rights under this Lease.
4.20 Hazardous Substances.
4.20.1 Tenant agrees that neither Tenant nor any of Tenant's Agents
will store, place, generate, manufacture, refine, handle, or locate on, in,
under or around the Land or Building any Hazardous Substance, except for
storage, handling and use of reasonable quantities and types of cleaning fluids
and office supplies in the Premises in the ordinary course and the prudent
conduct of Tenant's business in the Premises, provided that, (a) the storage,
handling and use of such permitted Hazardous Substances must at all times
conform to all Governmental Requirements and to applicable fire, safety and
insurance requirements; (b) the types and quantities of permitted Hazardous
Substances which are stored in the Premises must be reasonable and appropriate
to the nature and size of Tenant's operation in the Premises and reasonable and
appropriate for a first-class building of the same or similar use and in the
same market area as the Building; (c) no Hazardous Substance shall be spilled
or disposed of on, in, under or around the Land or Building or otherwise
discharged from the Premises or any area adjacent to the Land or Building; and
(d) in no event will Tenant be permitted to store, handle or use on, in, under
or around the Premises any Hazardous Substance which will increase the rate of
fire or extended coverage insurance on the Land or Building, unless: (1) such
Hazardous Substance and the expected rate increase have been specifically
disclosed in writing to Landlord, (2) Tenant has agreed in writing to pay any
rate increase related to each such Hazardous Substance; and (3) Landlord has
approved in writing each such Hazardous Substance, which approval shall be
subject to Landlord's discretion.
4.20.2 Tenant shall indemnify, defend and hold harmless Landlord and
Landlord's Agents from and against any and all Claims arising out of any breach
of any provision of this Section 4.20, which expenses shall also include
laboratory testing fees, personal injury claims, clean-up costs and
environmental consultants' fees. Tenant agrees that Landlord may be irreparably
harmed by Tenant's breach of this section and that a specific performance
action may appropriately be brought by Landlord; provided that, Landlord's
election to bring or not bring any such specific performance action shall in no
way limit, waive, impair or hinder Landlord's other remedies against Tenant.
4.20.3 As of the execution date of this Lease, Tenant represents and
warrants to Landlord that, except as otherwise disclosed by Tenant to Landlord,
Tenant has no intent to bring any Hazardous Substances on, in or under the
Premises except for the type and quantities authorized in the first paragraph
of the section captioned "Hazardous Substances."
4.20.4 Landlord represents that to its actual knowledge as of the
date of this Lease, the Premises, the Building, and the Land (collectively, the
"Property") do not contain asbestos or any other Hazardous Substance in
violation of any Governmental
47
<PAGE> 78
Requirement and that no Hazardous Substances have been or shall be used in the
construction or development of the Property in violation of any Governmental
Requirement, nor will such use of any such materials knowingly be permitted by
Landlord. In the event Landlord is advised, or it shall come to Landlord's
attention, that Hazardous Substances exist in the Premises, if mandated by any
Governmental Requirement, Landlord shall, at its expense, but subject to any
rights it may have (and any restrictions on such rights) to pass such costs on
to tenants, take all reasonable steps necessary to promptly remove, or cause to
be removed or remediated all such Hazardous Substances, and in doing so,
Landlord shall use its reasonable efforts not to materially interfere with the
conduct of Tenant's business; provided, however, that if such substances were
introduced or brought in, on or about the Property by Tenant, its employees,
agents, subcontractors, subtenants or invitees, at Landlord's election, the
removal of such substances from the Property shall be performed by Tenant, at
Tenant's expense, and in such manner as not to interfere with the operation of
the Building or the business of any other tenant in the Building. In the event
that Landlord elects to remove any Hazardous Substances from the Property that
Tenant, its employees, agents, subcontractors, subtenants or invitees have
introduced or otherwise brought in, on or about the Property, such removal
shall be at Tenant's expense as provided in Section 4.20.2.
4.21 Access Laws.
4.21.1 Tenant agrees to notify Landlord immediately if Tenant
receives notification or otherwise becomes aware of: (a) any condition or
situation on, in, under or around the Land or Building which may constitute a
violation of any Access Laws or (b) any threatened or actual lien, action or
notice that the Land or Building is not in compliance with any Access Laws. If
Tenant is responsible for such condition, situation, lien, action or notice
under this section, Tenant's notice to Landlord shall include a statement as to
the actions Tenant proposes to take in response to such condition, situation,
lien, action or notice.
4.21.2 Tenant shall not alter or permit any assignee or subtenant or
any other person to alter the Premises in any manner which would violate any
Access Laws or increase Landlord's responsibilities for compliance with Access
Laws, without the prior approval of the Landlord. In connection with any such
approval, Landlord may require a certificate of compliance with Access Laws
from an architect, engineer or other person acceptable to Landlord. Tenant
agrees to pay the reasonable fees incurred by such architect, engineer or other
third party in connection with the issuance of such certificate of compliance.
Landlord's consent to any proposed Tenant Alteration shall: (a) not relieve
Tenant of its obligations or indemnities contained in this section or this
Lease or (b) be construed as a warranty that such proposed alteration complies
with any Access Law.
4.21.3 After the Commencement Date, Tenant shall be solely
responsible for all costs and expenses relating to or incurred in connection
with: (a)
48
<PAGE> 79
failure of the Premises to comply with the Access Laws; and (b) bringing the
Building and the Common Areas within the Building into compliance with Access
Laws, if and to the extent such noncompliance arises out of or relates to, (1)
Tenant's use of the Premises, including the hiring of employees; (2) any Tenant
Alterations to the Premises; or (3) any Tenant Improvements constructed in the
Premises at the request of Tenant, regardless of whether such improvements are
constructed prior to or after the each of the respective Commencement Dates.
4.21.4 After the Commencement Date, Landlord shall be responsible
for all costs and expenses relating to or incurred in connection with bringing
into compliance with Access Laws Common Areas outside the Building (such as the
parking area, sidewalks, entrance drives and loading docks), unless such costs
and expenses are Tenant's responsibility as provided in the preceding
subparagraph. Any costs so incurred by Landlord shall be amortized over the
useful economic life of such improvements (not to exceed 10 years) using an
amortization rate of 12% per year and shall be an Operating Cost for purposes
of this Lease.
4.21.5 Tenant agrees to indemnify, defend and hold harmless Landlord
and Landlord's Agents from and against any and all Claims arising out of or
relating to any failure of Tenant or Tenant's Agents to comply with Tenant's
obligations under this section.
4.21.6 The provisions of this section shall supersede any other
provisions in this Lease regarding Access Laws, to the extent inconsistent with
the provisions of any other sections.
4.22 Quiet Enjoyment. Landlord covenants that Tenant, upon paying
Base Rent, Additional Rent and all other sums payable under this Lease and
performing all covenants and conditions required of Tenant under this Lease
shall and may peacefully have, hold and enjoy the Premises without hindrance or
molestation by Landlord subject to the provisions of this Lease.
4.23 Signs.
4.23.1 No sign, advertisement or notice shall be inscribed, painted,
affixed or displayed on any part of the outside or the inside of the Building,
or the Premises except (i) the directories and signs on the office doors, and
then only in such places, numbers, sizes, colors and styles as are approved by
Landlord and which conform to all applicable laws and ordinances and to
Landlord's standards for permitted signs and (ii) the exterior fagade sign
described below. Any and all permitted signs shall be installed and maintained
by Landlord, at Tenant's sole expense. In addition, Tenant shall not install
any interior graphics of any nature that would be visible from the exterior of
the Demised Premises without the prior written consent of Landlord.
Notwithstanding the foregoing, Landlord shall provide Tenant with a
building-standard suite- entry sign and a listing strip on the directory board
in the main lobby of the Building identifying Tenant and Tenant's suite number.
If any sign is exhibited without Landlord's approval,
49
<PAGE> 80
Landlord shall have the right to remove it and Tenant shall be responsible for
all expenses incurred by Landlord for such removal, which charges shall be,
treated as Additional Rent.
4.23.2 Notwithstanding the provisions of subparagraph 4.23.1,
Tenant, at Tenant's sole cost and expense, shall have the right to install an
exterior facade sign on the Building provided that the exact size, content,
appearance and location of the sign shall be subject to Landlord's prior
written reasonable approval and provided further that (i) the size, color and
style of the facade sign complies with all covenants encumbering the Land and
all applicable laws and ordinances, (ii) Tenant obtains all necessary permits
for the installation of the sign, (iii) Landlord approves, in Landlord's sole
discretion, the manner and method that the sign shall be affixed to the
Building, (iv) the sign shall be affixed by a contractor approved by Landlord,
and (v) Tenant continues to occupy a minimum of 50% of the Rentable Space of
the Building. If at any time the Tenant fails to occupy a minimum of 50% of the
Rentable Space of the Building or upon Lease termination, Tenant shall remove
the facade sign, with a contractor approved by Landlord, and shall repair the
portion of the Building affected thereby to the condition such portion of the
Building was in at the time the fagade sign was installed.
The sign shall be installed at Tenant's costs and expense, however,
Landlord shall reimburse Tenant for up to $3,500 with respect to expenses
incurred in the design, manufacture and installation of such sign. Shall amount
shall be paid to Tenant within 30 days after receipt by Landlord of paid
vouchers and releases of liens with respect to the sign. Tenant shall indemnify
and hold Landlord and Landlord's Agents harmless from and against any cost,
damage, claim, liability or expense (including reasonable attorney's fees)
incurred by or claimed against Landlord and its Agents, directly or indirectly,
as a result of or in any way arising from the installation and maintenance of
the facade sign. Tenant shall obtain property insurance coverage for such
facade sign and such sign shall be included in Tenant's comprehensive liability
insurance required in this Lease.
4.23.3 If Tenant is the sole occupant of the Building, the Building
shall be named in a manner that is mutually agreeable to Landlord and Tenant.
In such event, Landlord shall use such name in press releases and other public
advertisements with regard to the Building. If at any time Tenant is no longer
the sole occupant of the Building, Landlord may rename the Building from time
to time in any manner at its sole discretion.
4.24 Subordination. Tenant subordinates this Lease and all rights
of Tenant under this Lease to any mortgage, deed of trust, ground lease or
vendor's lien, or similar instrument which may from time to time be placed upon
the Premises (and all renewals, modifications, replacements and extensions of
such encumbrances), and each such mortgage, deed of trust, ground lease or lien
or other instrument shall be superior to and prior to this Lease; provided
that, Landlord provides Tenant with a
50
<PAGE> 81
commercially reasonable nondisturbance agreement on the standard form of the
applicable lender or ground lessor. Notwithstanding the foregoing, the holder
or beneficiary of such mortgage, deed of trust, ground lease, vendor's lien or
similar instrument shall have the right to subordinate or cause to be
subordinated any such mortgage, deed of trust, ground lease, vendor's lien or
similar instrument to this Lease. At the request of Landlord, the holder of
such mortgage or deed of trust or any ground lessor, Tenant shall execute,
acknowledge and deliver promptly in recordable form any instrument or
subordination agreement that Landlord or such holder may request, provided,
however, such instrument shall include a nondisturbance provision on the
standard form of the applicable Lender or ground lessor. Tenant further
covenants and agrees that if the lender or ground lessor acquires the Premises
as a purchaser at any foreclosure sale or otherwise, Tenant shall recognize and
attorn to such party as landlord under this Lease, and shall make all payments
required hereunder to such new landlord without deduction or set-off and, upon
the request of such purchaser or other successor, execute, deliver and
acknowledge documents confirming such attornment. Tenant waives the provisions
of any law or regulation, now or hereafter in effect, which may give or purport
to give Tenant any right to terminate or otherwise adversely affect this Lease
or the obligations of Tenant hereunder in the event that any such foreclosure
or termination or other proceeding is prosecuted or completed.
4.25 Workers Compensation Immunity. If and to the extent that
Tenant is obligated to indemnify, defend or hold harmless Landlord or
Landlord's Agents from any Claims arising from its use of the Premises or any
act or failure to act by Tenant or Tenant's Agents or otherwise, Tenant
expressly waives, to and in favor of Landlord and Landlord's Agents, its
statutory workers compensation act employers immunity relative to any injury to
an employee or employees of Tenant.
4.26 Brokers. Tenant shall indemnify, defend and hold harmless
Landlord, TCMI, TCMD and McShea from and against any and all Claims (including,
without limitation, any Claims for or related to a leasing commission,
brokerage fee, compensation or other payment) asserted against any one or more
of Tenant, Landlord, TCMI, TCMD or McShea by any real estate broker, finder,
intermediary or other person or entity (a) who claims (without regard to the
truth or validity of such claim) to act or have acted for or on behalf of
Tenant, Intermedia Communications, Inc., or any entity controlling, controlled
by or under common control with either Tenant or Intermedia Communications,
Inc.; (b) who claims (without regard to the truth or validity of such claim) to
be or have been a broker, finder, intermediary, contractor, agent or
representative of or for Tenant, Intermedia Communications, Inc. or any entity
controlling, controlled by or under common control with either Tenant or
Intermedia Communications, Inc.; or (c) who secured, presented, or delivered a
proposal or a request for proposal naming or identifying Tenant, with or
without Tenant's approval or authority, as a proposed tenant of all or any
portion of the Building. Any and all of the Claims described in clauses (a),
(b) and (c) of the preceding sentence are individually and collectively
referred to as a "Tenant Indemnified Claim". Landlord shall indemnify, defend
and hold harmless Tenant from and against any and all Claims asserted against
51
<PAGE> 82
Tenant by TCMI, TCMD, McShea or any other real estate broker, finder or
intermediary relating solely to the representation of Landlord in connection
with this Lease. Notwithstanding the foregoing, Landlord's obligation to
indemnify, defend or hold harmless Tenant as set forth in the preceding
sentence shall not extend to any Tenant Indemnified Claim. In all matters
involving a Tenant Indemnified Claim, Tenant shall select the counsel of its
choice to represent Tenant, Landlord, TCMI, TCMD and McShea subject to
Landlord's consent which will not be unreasonably withheld or delayed, provided
that, if Landlord in its good faith discretion is dissatisfied at any time for
any reason with Tenant's selected counsel or such counsel's representation of
Landlord, TCMI, TCMD, or McShea, Landlord shall be entitled to retain
independent counsel of its choice to defend any or all of Landlord, TCMI, TCMD
or McShea in such matter and the reasonable cost thereof (including, attorneys'
fees and costs at trial and on appeal) shall be paid by Tenant to Landlord
promptly upon demand by Landlord for such payment. No Tenant Indemnified Claim
may be settled or resolved without the consent of both Landlord and Tenant;
provided that, if there is a full and complete release of Landlord, TCMI, TCMD
and McShea from any and all obligations, liabilities and responsibilities to
the claimant and if any suit is pending in connection with any Tenant
Indemnified Claim, a dismissal of that suit against all such parties with
prejudice, Tenant may settle such Claim without the consent of Landlord.
Landlord has agreed to pay TCMD a fee pursuant to a certain Maryland 95
Corporate Center Development Services Agreement between Landlord and TCMD dated
in December 1998, which Agreement may be modified on or about the date hereof
by a separate Commission Agreement between Landlord, TCMI, TCMD and McShea.
4.27 Exculpation and Limitation of Liability.
4.27.1 Landlord has executed this Lease by its trustee signing
solely in a representative capacity. Notwithstanding anything contained in this
Lease to the contrary, Tenant confirms that the covenants of Landlord are made
and intended, not as personal covenants of the trustee, or for the purpose of
binding the trustee personally, but solely in the exercise of the
representative powers conferred upon the trustee by its principal.
4.27.2 Liability with respect to the entry and performance of this
Lease by or on behalf of Landlord, however it may arise, shall be asserted and
enforced only against the lesser of (i) Landlord's estate and equity interest
in the Building or (ii) the equity interest that Landlord would have in and to
the Building if the Building were encumbered by debt in an amount equal to
eighty percent (80%) of the value of the Building.
4.27.3 Neither Landlord nor any of Landlord's Agents shall have any
personal liability in the event of any claim against Landlord arising out of or
in connection with this Lease, the relationship of Landlord and Tenant or
Tenant's use of the Premises. Further, in no event whatsoever arising out of or
in connection with this Lease, the relationship of Landlord and Tenant or
Tenant's use of the Premises. Any
52
<PAGE> 83
and all personal liability, if nay, beyond that which may be asserted under
this section, is expressly waived and released by Tenant and by all persons
claiming by, through or under Tenant.
4.28 Intentionally omitted.
4.29 Mechanic's Liens and Tenant's Personal Property Taxes.
4.29.1 Tenant shall have no authority, express or implied, to create
or place any lien or encumbrance of any kind or nature whatsoever upon, or in
any manner to bind, the interest of Landlord or Tenant in the Premises or to
charge the rentals payable under this Lease for any Claims in favor of any
person dealing with Tenant, including those who may furnish materials or
perform labor for any construction or repairs. Tenant shall pay or cause to be
paid all sums legally due and payable by it on account of any labor performed
or materials furnished in connection with any work performed on the Premises on
which any lien is or can be validly and legally asserted against its leasehold
interest in the Premises and Tenant shall indemnify, defend and hold harmless
Landlord from any and all Claims arising out of any such asserted Claims.
Tenant agrees to give Landlord immediate written notice of any such Claim.
4.29.2 Tenant shall be liable for all taxes levied or assessed
against personal property, furniture or fixtures placed by Tenant in the
Premises. If any such taxes for which Tenant is liable are levied or assessed
against Landlord or Landlord's property and Landlord elects to pay them or if
the assessed value of Landlord's property is increased by inclusion of such
personal property, furniture or fixtures and Landlord elects to pay the taxes
based on such increase, Tenant shall reimburse Landlord for the sums so paid by
Landlord, upon demand by Landlord.
4.30 Landlord's Security Interest. Without prejudice to any other
rights granted in this Lease which are available to Landlord upon the
occurrence of an Event of Default, Landlord waives its statutory right to bring
an action of distress for rent.
4.31 Recording. Tenant agrees not to record this Lease or any
memorandum thereof among the relevant land records or any other recording
office except and unless specifically requested by Landlord.
4.32 Cabling/Connectivity Rights.
4.32.1 Subject to the provisions of this Lease, Tenant shall have
the nonexclusive right to run cabling through the Building core and raceways at
those points designated by Landlord for telecommunication conduits and, subject
to Landlord's approval, construct new conduits, install cables, equipment and
other related telecommunications facilities for the Premises. In addition,
Tenant shall have the nonexclusive right to access the fiber optic conduit
installed by Landlord from the Building to Sweitzer Lane. Tenant shall also
have the nonexclusive right to access and utilize the Building's vertical
ground risers and main electric service ground subject to
53
<PAGE> 84
Landlord's consent which will not be unreasonably withheld. All cost associated
with the installation, use and connection to the conduit shall be borne solely
by the Tenant.
4.32.2 Within ninety (90) days prior to the expiration of this
Lease, Landlord may elect by written notice to Tenant to either:
(i) retain any or all wiring, cables, risers or similar
installations appurtenant thereto installed by Tenant in the Building's core,
raceways and risers ("Wiring")
(ii) remove any and all such Wiring and restore the
Premises and the conduits to their condition existing prior to the installation
of the Wiring ("Wire Restoration Work"), which work shall be done at Tenant's
sole cost and expense; or
(iii) require Tenant to perform such Wire Restoration Work
at Tenant's sole cost and expenses.
In the event this Lease should terminate prior to the expiration date
for any reason, Landlord may make the election permitted pursuant to foregoing
section within thirty (30) days after such termination and shall deliver
written notice to Tenant of such election within that time.
4.32.3 In the event Landlord elects to retain the Wiring as provided
above, Tenant covenants that Tenant shall be the sole owner of such Wiring,
Tenant shall have the right to surrender such Wiring and the Wiring shall be
free of all liens and encumbrances and all Wiring shall be left in good
condition and working order; to the extent reasonably possible, properly
labeled at each end and in each telecommunication junction box or electrical
closet and in safe condition.
4.32.4 The provisions of this Section shall survive the expiration
or sooner termination of this Lease.
4.33 Backup Generator. Subject to the provisions of this Lease,
including without limit, Subsections 2.6.3, Tenant shall have the right to
install and operate an emergency electrical generator and related equipment
including, without limit, transfer switches, panels and wiring (collectively,
the "Generator").
4.33.1 The Generator shall be placed in a location in the Building
or on the Land to be designated by Tenant, and approved by Landlord in its
reasonable discretion. The amount of space to be occupied by the Generator
shall not exceed 542 square feet. The area in which the Generator is located
shall be subject to all of the provisions of the Lease as if it were located
within the Premises.
54
<PAGE> 85
4.33.2 Tenant may install, maintain and use the Generator only if
the Premises are occupied by Tenant or an approved subtenant or assignee. The
Generator shall be used only solely for the business of Tenant in the event the
primary electrical service to the Premises is interrupted and shall not be used
for the benefit of any other subtenant, licensee, assignee or other occupant of
the Building without Landlord's consent, which consent shall not be
unreasonably withheld, conditioned or delayed.
4.33.3 Tenant's right to install or modify the Generator is
conditioned upon Landlord's prior written approval of any equipment to be
installed which approval shall not be unreasonably withheld, conditioned or
delayed. Tenant shall provide Landlord a written description of such equipment,
including make, model, size and capacity. Any changes in the equipment shall be
subject to Landlord's prior approval which approval shall not be unreasonably
withheld, conditioned or delayed.
4.33.4 Tenant will allow Landlord's designee to be present (at
Tenant's expense) during the installation of the Generator. Tenant will not
make any repairs or alterations to the Generator without obtaining Landlord's
prior written consent (not to be unreasonably withheld, conditioned or delayed)
and Landlord shall have the right to disapprove any installation or alteration
or require Tenant to remove the Generator in the event such installation or
alteration may void or adversely affect any warranty affecting the Building's
systems including, without limit, the roof.
4.33.5 Tenant at its sole expense shall comply with all Governmental
Requirements and the requirements of Landlord's insurer with respect to the
installation, repair, maintenance or operation of the Generator including all
ancillary equipment. Tenant shall at its expense obtain all permits, variances
and licenses required by Governmental Requirements relating to the Generator
and shall deliver copies to Landlord.
4.33.6 Tenant's use of the area in which the Generator is located,
if such site is not within the Premises, shall be nonexclusive and Landlord may
allow others to use such area. Landlord shall have the right, but not the
obligation, to enter the area where the Generator is located at any time in the
event of an emergency and at all other reasonable times upon reasonable notice
for the purpose of inspecting the Generator, making repairs or exhibiting the
Building.
4.33.7 Landlord may from time to time require Tenant to relocate the
Generator to another site to be determined by Landlord in its sole but
reasonable discretion. In such event, Tenant's means of access to the Generator
and related cabling will be relocated at Landlord's expense in a manner so as
not to unreasonably impair the availability of the Generator as a backup power
source. If Landlord elects to relocate the Generator, the costs shall be borne
by Landlord unless such relocation is required by Governmental Requirements. In
the event Landlord elects to relocate the
55
<PAGE> 86
Generator, Tenant shall be entitled to at least thirty (30) days written
notice, except in an emergency.
4.33.8 The installation, use and maintenance of the Generator shall
not, in Landlord's reasonable judgment, adversely affect the use of the
Building's common areas, systems or machinery or of any other space used by
Landlord or any other Tenant in the Building.
4.33.9 Tenant shall maintain the generator and pay the costs of all
utilities services required for Tenant's use of the Generator.
4.33.10 The purchase, installation, repair, maintenance and operation
of the Generator will be at Tenant's sole risk, cost and expense. Landlord or
Landlord's Agents shall not be liable for any costs or expenses caused in any
manner by such purchase, installation, repair, maintenance and operation except
to the extent caused by Landlord's gross negligence or willful misconduct.
Tenant shall promptly repair at its expense all damage caused by or resulting
from the installation, maintenance, repair or operation of the Generator.
4.33.11 Upon the expiration or earlier termination of this Lease, if
Landlord so directs by ten (10) days written notice to Tenant, Tenant shall
remove the Generator at its sole expense and shall repair any damage to the
Building or the Premises caused by or resulting from such removal.
SECTION 5: DEFAULT AND REMEDIES
-------------------------------
5.1 Events of Default.
5.1.1 The occurrence of any one or more of the following events
shall constitute a material default and breach of this Lease by Tenant ("Event
of Default"):
(a) vacation or abandonment of all or any portion of the
Premises,
(b) failure by Tenant to make any payment of Base Rent,
Additional Rent or any other sum payable by Tenant under this Lease within five
(5) Business Days after its due date;
(c) failure by Tenant to observe or perform any covenant
or condition of this Lease, other than the making of payments, where such
failure shall continue for a period of ten (10) Business Days after written
notice from Landlord provided, however, that if such failure is not reasonably
capable of being cured within such period, then the period within which such
failure maybe cured shall be extended to
56
<PAGE> 87
a total of forty (40) days provided the Tenant promptly commences and
diligently pursues the cure of such failure;
(d) (1) the making by Tenant of any general assignment
or general arrangement for the benefit of creditors; (2) the filing by or
against Tenant of a petition in bankruptcy, including reorganization or
arrangement, unless, in the case of a petition filed against Tenant, unless the
same is dismissed within twenty (20) Business Days; (3) the appointment of a
trustee or receiver to take possession of substantially all of Tenant's assets
located in the Premises or of Tenant's interest in this Lease; (4) any
execution, levy, attachment or other process of law against any property of
Tenant or Tenant's interest in this Lease, unless the same is dismissed within
twenty (20) Business Days; (5) adjudication that Tenant is bankrupt; (6) the
making by Tenant of a transfer in fraud of creditors; or (7) the failure of
Tenant to generally pay its debts as they become due; or
(e) any information furnished by or on behalf of Tenant
to Landlord in connection with the entry of this Lease is determined to have
been materially false, misleading or incomplete when made.
5.1.2 Tenant shall notify Landlord promptly if Tenant becomes aware
of any Event of Default or any facts, conditions or events that, with the
giving of notice or passage of time or both, would constitute an Event of
Default.
5.1.3 If a petition in bankruptcy is filed by or against Tenant,
and if this Lease is treated as an "unexpired lease" under applicable
bankruptcy law in such proceeding, then Tenant agrees that Tenant shall not
attempt nor cause any trustee to attempt to extend the applicable time period
within which this Lease must be assumed or rejected.
5.2 Remedies. If any Event of Default occurs, Landlord may at any
time after such occurrence, with or without notice or demand except as stated
in this section, and without limiting Landlord in the exercise of any right or
remedy at law which Landlord may have by reason of such Event of Default,
exercise the rights and remedies, either singularly or in combination, as are
specified or described in the subparagraphs of this section.
5.2.1 Landlord may terminate this Lease and all rights of Tenant
under this Lease either immediately or at some later date by giving Tenant
written notice that this Lease is terminated. If Landlord so terminates this
Lease, then Landlord may recover from Tenant the sum of:
(a) the unpaid Base Rent, Additional Rent and all other
sums payable under this Lease which have been earned at the time of
termination;
57
<PAGE> 88
(b) interest at the Default Rate on the unpaid Base
Rent, Additional Rent and all other sums payable under this Lease which have
been earned at the time of termination, plus
(c) the amount by which the unpaid Base Rent, Additional
Rent and all other sums payable under this Lease which would have been earned
after termination until the time of award exceeds the amount of such rental
loss, if any, as Tenant affirmatively proves could have been reasonably avoided
and interest on such excess at the Default Rate; plus
(d) the amount by which the aggregate of the unpaid Base
Rent, Additional Rent and all other sums payable under this Lease for the
balance of the Lease Term after the time of award exceeds the amount of such
rental loss, if any, as Tenant affirmatively proves could be reasonably
avoided, with such difference being discounted to present value at the Prime
Rate at the time of award; plus
(e) any other amount necessary to compensate Landlord
for the detriment proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease or which, in the ordinary course of things, would
be likely to result from such failure, including, leasing commissions, tenant
improvement costs, renovation costs and advertising costs; plus
(f) all such other amounts in addition to or in lieu of
the foregoing as may be permitted from time to time by applicable law.
5.2.2 Landlord shall also have the right, with or without
terminating this Lease, to reenter the Premises and remove all persons and
property from the Premises. Landlord may cause property so removed from the
Premises to be stored in a public warehouse or elsewhere at the expense and for
the account of Tenant.
5.2.3 Landlord shall also have the right, without terminating this
Lease, to accelerate and recover from Tenant the sum of all unpaid Base Rent,
Additional Rent and all other sums payable under the then remaining term of the
Lease, discounting such amount to present value at the Prime Rate.
5.2.4 If Tenant vacates, abandons or surrenders the Premises
without Landlord's consent, or if Landlord re-enters the Premises as provided
in subparagraph 5.2.2 or takes possession of the Premises pursuant to legal
proceedings or through any notice procedure provided by law, then, if Landlord
does not elect to terminate this Lease, Landlord may, from time to time,
without terminating this Lease, either: (a) recover all Base Rent, Additional
Rent and all other sums payable under this Lease as they become due; or (b)
relet the Premises or any part of the Premises on behalf of Tenant for such
term or terms, at such rent or rents and pursuant to such other provisions as
Landlord, in its sole discretion, may deem advisable, all with the right, at
Tenant's cost, to make alterations and repairs to the Premises and recover any
deficiency from Tenant as set forth in subparagraph 5.2.6.
58
<PAGE> 89
5.2.5 None of the following remedial actions, singly or in
combination, shall be construed as an election by Landlord to terminate this
Lease unless Landlord has in fact given Tenant written notice that this Lease
is terminated: an act by Landlord to maintain or preserve the Premises; any
efforts by Landlord to relet the Premises; any repairs or alterations made by
Landlord to the Premises, re-entry; repossession or reletting of the Premises
by Landlord pursuant to this section; or the appointment of a receiver, upon
the initiative of Landlord, to protect Landlord's interest under this Lease. If
Landlord takes any of the foregoing remedial action without terminating this
Lease, Landlord may nevertheless at any time after taking any such remedial
action terminate this Lease by written notice to Tenant.
5.2.6 If Landlord relets the Premises, Landlord shall apply the
revenue from such reletting as follows: first, to the payment of any
indebtedness of Tenant to Landlord other than Base Rent, Additional Rent or any
other sums payable by Tenant under this Lease; second, to the payment of any
cost of reletting (including finders' fees and leasing commissions) as limited
in subparagraph 5.2.1(e), third, to the payment of the cost of any alterations,
improvements, maintenance and repairs to the Premises, as limited in
subparagraph 5.2.1(e); and fourth, to the payment of Base Rent, Additional Rent
and other sums due and payable and unpaid under this Lease. Landlord shall hold
and apply the residue, if any, to payment of future Base Rent, Additional Rent
and other sums payable under this Lease as the same become due, and shall
deliver the eventual balance, if any, to Tenant. Should revenue from letting
during any month, after application pursuant to the foregoing provisions, be
less than the sum of the Base Rent, Additional Rent and other sums payable
under this Lease and Landlord's expenditures for the Premises during such
month, Tenant shall be obligated to pay such deficiency to Landlord as and when
such deficiency arises.
5.2.7 Pursuit of any of the foregoing remedies shall not preclude
pursuit of any of the other remedies provided in this Lease or by law (all such
remedies being cumulative), nor shall pursuit of any remedy provided in this
Lease constitute a forfeiture or waiver of any Base Rent, Additional Rent or
other sum payable under this Lease or of any damages accruing to Landlord by
reason of the violation of any of the covenants or conditions contained in this
Lease.
5.3 Right to Perform. If Tenant shall fail to pay any sum of
money, other than Base Rent or Additional Rent, required to be paid by it under
this Lease or shall fail to perform any other act on its part to be performed
under this Lease, and such failure shall continue for ten (10) Business Days
after notice of such failure by Landlord, or such shorter time if reasonable
under the circumstances, Landlord may, but shall not be obligated to, and
without waiving or releasing Tenant from any obligations of Tenant, make such
payment or perform such other act on Tenant's part to be made or performed as
provided in this Lease. Landlord shall have (in addition to any other right or
remedy of Landlord) the same rights and remedies in the event of the nonpayment
of sums due under this section as in the case of default by Tenant in the
payment of Base Rent.
59
<PAGE> 90
5.4 Landlord's Default. Landlord shall not be in default under
this Lease unless Landlord fails to perform obligations required of Landlord
within twenty (20) Business Days after written notice is delivered by Tenant to
Landlord and to the holder of any mortgages or deeds of trust (collectively,
"Lender") covering the Premises whose name and address shall have theretofore
been furnished to Tenant in writing, specifying the obligation which Landlord
has failed to perform; provided, however, that if the nature of Landlord's
obligation is such that more than twenty (20) Business Days are required for
performance, then Landlord shall not be in default if Landlord or Lender
commences performance within such twenty (20) Business Day period and
thereafter diligently prosecutes the same to completion. All obligations of
Landlord hereunder shall be construed as covenants, not conditions. In the
event of any default, breach or violation of Tenant's rights under this Lease
by Landlord, Tenant's exclusive remedy shall be either an action for specific
performance or an action for actual damages. Tenant hereby waives the benefit
of any laws granting it the right to perform Landlord's obligation, a lien upon
the property of Landlord and/or upon Rent due Landlord, or the right to
terminate this Lease or withhold Rent on account of any Landlord default.
SECTION 6: MISCELLANEOUS PROVISIONS
-----------------------------------
6.1 Notices. Any notice, request, approval, consent or written
communication required or permitted to be delivered under this Lease shall be:
(a) in writing; (b) transmitted by personal delivery, express or courier
service, United States Postal Service in the manner described below, or
electronic means of transmitting written material; and (c) deemed to be
delivered on the earlier of the date received or four (4) Business Days after
having been deposited in the United States Postal Service, postage prepaid.
Such writings shall be addressed to Landlord or Tenant, as the case may be, at
the respective designated addresses set forth opposite their signatures, or at
such other address(es) as they may, after the execution date of this Lease,
specify by written notice delivered in accordance with this section, with
copies to the persons at the addresses, if any, designated opposite each
party's signature. Those notices which contain a notice of breach or default or
a demand for performance may be sent by any of the methods described in clause
(b) above, but if transmitted by personal delivery or electronic means, shall
also be sent concurrently by certified or registered mail, return receipt
requested.
6.2 Attorney's Fees and Expenses. In the event either party
requires the services of an attorney in connection with enforcing the terms of
this Lease, or in the event suit is brought for the recovery of Base Rent,
Additional Rent or any other sums payable under this Lease or for the breach of
any covenant or condition of this Lease, or for the restitution of the Premises
to Landlord or the eviction of Tenant during the Lease Term or after the
expiration or earlier termination of this Lease, the non-breaching party shall
be entitled to a reasonable sum for attorney's and paralegal's fees, expenses
and court costs, including those relating to any appeal.
60
<PAGE> 91
6.3 No Accord and Satisfaction. No payment by Tenant or receipt
by Landlord of an amount less than the Base Rent or Additional Rent or any
other sum due and payable under this Lease shall be deemed to be other than a
payment on account of the Base Rent, Additional Rent or other such sum, nor
shall any endorsement or statement on any check or any letter accompanying any
check or payment be deemed an accord and satisfaction, nor preclude Landlord's
right to recover the balance of any amount payable or Landlord's right to
pursue any other remedy provided in this Lease or at law.
6.4 Successors, Joint and Several Liability. Except as provided
in the section captioned "Exculpation and Limitation of Liability" and subject
to the section captioned "Assignment and Subletting by Landlord", all of the
covenants and conditions contained in this Lease shall apply to and be binding
upon Landlord and Tenant and their respective heirs, executors, administrators,
successors and assigns. In the event that more than one person, partnership,
company, corporation or other entity is included in the term "Tenant", then
each such person, partnership, company, corporation or other entity shall be
jointly and severally liable for all obligations of Tenant under this Lease.
6.5 Choice of Law. This Lease shall be construed and governed by
the laws of the state in which the Land is located. Tenant consents to
Landlord's choice of venue for any legal proceeding brought by Landlord or
Tenant to enforce the terms of this Lease.
6.6 No Waiver of Remedies. The waiver by Landlord of any covenant
or condition contained in this Lease shall not be deemed to be a waiver of any
subsequent breach of such covenant or condition nor shall any custom or
practice which may develop between the parties in the administration of this
Lease be construed to waive or lessen the rights of Landlord to insist on the
strict performance by Tenant of all of the covenants and conditions of this
Lease. No act or thing done by Landlord or Landlord's Agents during the Lease
Term shall be deemed an acceptance or a surrender of the Premises, and no
agreement to accept a surrender of the Premises shall be valid unless made in
writing and signed by Landlord. The mention in this Lease of any particular
remedy shall not preclude Landlord from any other remedy it might have, either
under this Lease or at law, nor shall the waiver of or redress for any
violation of any covenant or condition in this Lease or in any of the rules or
regulations attached to this Lease or later adopted by Landlord, prevent a
subsequent act, which would have originally constituted a violation, from
having all the force and effect of an original violation. The receipt by
Landlord of Base Rent, Additional Rent or any other sum payable under this
Lease with knowledge of a breach of any covenant or condition in this Lease
shall not be deemed a waiver of such breach. The failure of Landlord to enforce
any of the rules and regulations attached to this Lease or later adopted,
against Tenant or any other tenant in the Building, shall not be deemed a
waiver. Any waiver by Landlord must be in writing and signed by Landlord to be
effective.
61
<PAGE> 92
6.7 Offer to Lease. The submission of this Lease to Tenant or its
broker or other agent does not constitute an offer to Tenant to lease the
Premises. This Lease shall have no force or effect until: (a) it is executed
and delivered by Tenant to Landlord; and (b ) it is executed and delivered by
Landlord to Tenant.
6.8 Force Majeure. In the event that Landlord or Tenant shall be
delayed, hindered in or prevented from the performance of any act or obligation
required under this Lease (except, with respect to Tenant, its obligations to
pay any sums due to Landlord) by reason of acts of God, strikes, lockouts,
labor troubles or disputes, inability to procure or shortage of materials or
labor, failure of power or utilities, delay in transportation, fire, vandalism,
accident, flood, severe weather, other casualty, Governmental Requirements
(including mandated changes in the Plans and Specifications or the Tenant
Improvements resulting from changes in pertinent Governmental Requirements or
interpretations thereof), delay in obtaining insurance reimbursements (provided
that Landlord uses commercially reasonable efforts to diligently pursue such
reimbursements), riot, insurrection, civil commotion, sabotage, explosion, war,
natural or local emergency, acts or omissions of others, including Tenant or
Landlord (as applicable), or other reasons of a similar or dissimilar nature
not solely the fault of, or under the exclusive control of, Landlord (or
Tenant, as applicable), then performance of such act or obligation (except,
with respect to Tenant, its obligations to pay any sums due to Landlord) shall
be excused for the period of the delay and the period for the performance of
any such act or obligation shall be extended for the period equivalent to the
period of such delay. Notwithstanding the foregoing provisions of this Section
6.8, in no event will an event of Force Majeure extend the time within which
Tenant must complete its construction obligations under Exhibit C of this Lease
unless otherwise specifically provided in Exhibit C.
6.9 Landlord's Consent. Unless otherwise provided in this Lease,
whenever Landlord's consent, approval or other action is required under the
terms of this Lease, such consent, approval or action shall be subject to
Landlord's judgment or discretion exercised in good faith and shall be
delivered in writing.
6.10 Severability; Captions. If any clause or provision of this
Lease is determined to be illegal, invalid, or unenforceable under present or
future laws, the remainder of this Lease shall not be affected by such
determination, and in lieu of each clause or provision that is determined to be
illegal, invalid or unenforceable, there be added as a part of this Lease a
clause or provision as similar in terms to such illegal, invalid or
unenforceable clause or provision as may be possible and be legal, valid and
enforceable. Headings or captions in this Lease are added as a matter of
convenience only and in no way define, limit or otherwise affect the
construction or interpretation of this Lease.
6.11 Interpretation. Whenever a provision of this Lease uses the
term (a) "include" or "including", that term shall not be limiting but shall be
construed as illustrative, (b) "covenant", that term shall include any
covenant, agreement, term or
62
<PAGE> 93
provision, (c) "at law", that term shall mean at law or in equity, or both, and
(d) "day", that uncapitalized word shall mean a calendar day. This Lease shall
be given a fair and reasonable interpretation of the words contained in it
without any weight being given to whether a provision was drafted by one party
or its counsel.
6.12 Incorporation of Prior Agreement; Amendments. This Lease
contains all of the agreements of the parties to this Lease with respect to any
matter covered or mentioned in this Lease, and no prior agreement or
understanding pertaining to any such matter shall be effective for any purpose.
No provision of this Lease may be amended or added to except by an agreement in
writing signed by the parties to this Lease or their respective successors in
interest.
6.13 Authority. If Tenant is a partnership, company, corporation
or other entity, each individual executing this Lease on behalf of Tenant
represents and warrants to Landlord that he or she is duly authorized to so
execute and deliver this Lease and that all partnership, company, corporation
or other entity actions and consents required for execution of this Lease have
been given, granted or obtained. If Tenant is a partnership, company,
corporation or other business organization, it shall, within ten (10) Business
Days after demand by Landlord, deliver to Landlord satisfactory evidence of the
due authorization of this Lease and the authority of the person executing this
Lease on its behalf.
6.14 Time of Essence. Time is of the essence with respect to the
performance of every covenant and condition of this Lease.
6.15 Survival of Obligations. Notwithstanding anything contained
in this Lease to the contrary or the expiration or earlier termination of this
Lease, any and all obligations of either party accruing prior to the expiration
or termination of this Lease shall survive the expiration or earlier
termination of this Lease, and either party shall promptly perform all such
obligations whether or not this Lease has expired or terminated. Such
obligations shall include any and all indemnity obligations set forth in this
Lease.
6.16 Consent to Service. Tenant irrevocably consents to the
service of process of any action or proceeding at the address of the Premises
or to such other address as Tenant may in writing designate to Landlord.
Nothing in this section shall affect the right to serve process in any other
manner permitted by law.
6.17 Landlord's Authorized Agents. Notwithstanding anything
contained in the Lease to the contrary, including without limitation, the
definition of Landlord's Agents, only officers of Riggs Bank N.A., are
authorized to amend, renew or terminate this Lease, or to compromise any of
Landlord's claims under this Lease or to bind Landlord in any manner. Without
limiting the effect of the previous sentence, no property manager or broker
shall be considered an authorized agent of Landlord to amend, renew or
terminate this Lease or to compromise any of Landlord's claims under this Lease
or to bind Landlord in any manner.
63
<PAGE> 94
6.18 Waiver of Jury Trial. LANDLORD AND TENANT AGREE TO WAIVE
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER
AGAINST THE OTHER ON ANY MATTER ARISING OUT OF OR RELATING IN ANY WAY TO THIS
LEASE.
6.19 Option to Extend Term.
6.19.1 Extension Option: Tenant shall have and is hereby granted two
(2) options (the "Extension Options") to extend the Lease Term for two (2)
periods of five (5) additional Lease Years each (the "Extension Periods")
provided (i) Tenant gives written notice to Landlord of its election to
exercise the Extension Option no later than sixteen (16) months prior to the
Termination Date of the initial Lease Term or the first Extension Option, as
applicable, (ii) as of the exercise of the Extension Option no uncured Event of
Default exists and no condition shall then exist, which is an Event of Default
or which after notice and/or the passage of time would constitute an Event of
Default if not cured within the applicable period and no monetary default shall
arise subsequent to the exercise of the Extension Option, and (iii) Tenant
elects to extend the Lease Term for no less than three (3) full floors of the
Building.
6.19.2 Terms of Extension: All terms and conditions of this Lease,
shall remain in full force and effect during the Extension Period, except that
the Base Rent and Additional Rent payable during the Extension Period shall be
the then Current Market Rental Rate as of the commencement of the Extension
Period, as such rate is defined pursuant to this section, provided that such
amount as so calculated shall not be less than the Base Rent and Additional
Rent for the Premises which is in effect for the calendar month immediately
prior to the commencement of the Extension Period.
6.19.3 Current Market Rental Rate:
(a) The "Current Market Rental Rate" for purposes of
this section shall mean the current market rent as of the relevant date for a
renewing tenant with space in excess of twenty-five thousand (25,000) square
feet in comparable class A buildings of the same quality, size and level of
finish within a ten (10) mile radius of the Building, taking into account all
relevant factors including, without limit, the size of the Tenant's space; the
term of the Lease; types and amounts of escalations and rent steps; base year
and passthrough of real estate taxes and operating expenses; the building's
age, condition and use and giving consideration to any free rent periods,
retrofit allowances or other concessions.
(b) Within ten (10) days after receipt of Tenant's
notice of its election to exercise the Extension Option, Landlord shall provide
Tenant with Landlord's good faith determination of the Current Market Rental
Rate ("Landlord's Extension Rent Notice"). In the event Tenant agrees with
Landlord's determination of such Rate, Tenant shall so notify Landlord within
fifteen (1 5) days after Tenant's receipt of
64
<PAGE> 95
Landlord's Extension Rent Notice and the parties shall be bound by the
Landlord's determination of such Rate.
(c) In the event Tenant does not agree with Landlord's
determination of the Current Market Rental Rate within the fifteen (15) day
period provided in this section, the relevant Current Market Rental Rate shall
be determined by a board of three (3) licensed real estate brokers, one of whom
shall be named by Landlord, one by Tenant, and the third selected by the two so
appointed. Each member of the board of brokers shall be licensed in Maryland as
a real estate broker, specializing in the field of commercial office leasing in
the Prince George's County, having no less than ten (10) years' experience in
such field, and recognized as ethical and reputable within the field. Landlord
and Tenant shall each make their appointments within five (5) days after the
expiration of the fifteen (15) day period and shall notify the other of their
choices within such time. If either party fails to select a broker within such
time, the broker selected by the other party shall establish the Current Market
Rental Rate. The two brokers selected by Landlord and Tenant shall promptly
select a third broker within ten (10) days after they both have been appointed.
If the brokers selected by the parties fail to select a third broker within
such time, the parties may select such third broker or either party may request
such appointment be made by the American Arbitration Association ("AAA")
pursuant to its Commercial Arbitration Rules. Within fifteen (15) days after
the third broker is selected, each broker shall submit to the parties in
writing his or her determination of the Current Market Rental Rate. The Current
Market Rental Rate shall be the average of the two (2) closest rental rate
determinations and the parties shall be bound by such decision. Landlord and
Tenant shall each pay the fee of the broker selected by it, and shall equally
share the payment of the fee of the third broker and, if applicable, the AAA.
6.19.4 Lease Addendum:
(a) Within twenty (20) days following the date that the
Base Rent and Additional Rent is established for the Extension Period, Landlord
and Tenant shall execute an Addendum to this Lease reflecting the extension and
the new Base Rent and Additional Rent. Failure of the parties to execute such
Addendum shall not affect the commencement of the Extension Term or Tenant's
obligation to pay Rent during that term at the rate established pursuant to
this section.
(b) In the event the final determination of the Current
Market Rental Rate shall not be made on or before the first day of the
Extension Period in accordance with the provisions of this Section, pending
such final determination, Tenant shall continue to pay, as the Base Rent and
Additional Rent the same Base Rent and Additional Rent then payable by Tenant
on the Termination Date of the original Term. If, based upon the final
determination of the brokers or the agreement of the parties, such payments
made by Tenant on account of Base Rent and Additional Rent for such portion of
the Extension Period differ from the Base Rent and Additional
65
<PAGE> 96
Rent which should have been paid by Tenant during that portion of the Extension
Period, the parties shall promptly adjust such amount by a cash payment.
6.20 First Right of Offer. Provided no uncured Event of Default
then exists under this Lease, Tenant shall have a first right of offer on the
leasing of all of any building that Landlord may construct on that certain
parcel of land currently owned by The Washington Suburban Sanitary Commission
("WSSC") and located on Sweitzer Lane just north of the Building (the "WSSC
Site"), provided that Landlord shall acquire the same. Landlord shall notify
Tenant at such time as Landlord elects to lease space in any building
constructed by Landlord on the WSSC Site. Tenant shall have ten (10) Business
Days of receipt of such notice to exercise its right to lease such space at the
then Current Market Rental Rate as determined pursuant to the section captioned
"Current Market Rental Rate" and otherwise on all the terms and conditions of
this Lease and an additional fifteen (15) calendar days within which to execute
such lease. If Tenant does not exercise this First Right of Offer or execute
such Lease within such times, this First Right of Offer shall terminate.
6.21 Termination Option. Tenant shall have and is hereby granted a
one time right to terminate this Lease to be effective at the end of the
eighty-fourth (84th) month after the Phase II Commencement Date (the
"Termination Option Date"), provided (i) Tenant gives written notice to
Landlord of its election to terminate this Lease no later than fourteen (14)
months prior to the Termination Option Date (the "Termination Option Notice"),
(ii) as of the receipt by Landlord of the Termination Option Notice no uncured
Event of Default exists and no condition shall then exist, which is an Event of
Default or which after notice and/or the passage of time would constitute an
Event of Default if not cured within the applicable period and no monetary
default shall arise subsequent thereto, (iii) Tenant delivers to Landlord the
Lease Termination Fee with the delivery of the Termination Option Notice, and
(iv) Tenant has not subleased more than thirty thousand (30,000) square feet of
rentable space.
66
<PAGE> 97
IN WITNESS WHEREOF, this Lease has been executed the day and year
first above set forth.
Designated Address for Landlord: LANDLORD:
------------------------------- --------
c/o Riggs Trust Group RIGGS & COMPANY, a division of
Attn: Patrick Mayberry Riggs Bank N.A., as Trustee of the
808 17th Street, N.W. Multi-Employer property Trust, a
Washington, DC 20006 trust organized under 12 C.F.R.
Facsimile: 202-835-6887 Section 9.18
By: /s/ S. Kay Chase
-----------------------------
Name: S. Kay Chase
----------------------------
Its: Managing Director
-----------------------------
with a copy to Manager at:
-------------------------
Trammell Crow Real Estate
Services, Inc.
7315 Wisconsin Avenue
Suite 300W
Bethesda, Maryland 20814
Attn: Dan Hudson
Designated Address for Tenant: TENANT:
----------------------------- ------
DIGEX, INC., a Delaware Corporation
-----------------------------
By: /s/ Timothy M Adams
----------------------------- ------------------------------
Name: Timothy M Adams
----------------------------- -----------------------------
Its: CFO
Facsimile: ------------------------------
-------------------
67
<PAGE> 98
EXHIBIT A to Lease
LEGAL DESCRIPTION OF LAND
-------------------------
All that certain lot or parcel of land, lying and being situate in Prince
George's County, Maryland and more particularly described as follows:
BEING KNOWN AND DESIGNATED AS LOT 10, as shown on a Plat
entitled "Lots 4 thru 13 Maryland 95 Corporate Park", which
Plat is recorded in Plat Book NLP 140, page 19, among the
Land Records of Prince George's County, Maryland.
Ex. A
1
<PAGE> 99
EXHIBIT B to Lease
LISTING OF PLANS AND SPECIFICATIONS FOR TENANT IMPROVEMENTS
LIST OF PHASE I CONTRACT DRAWINGS
1. ARCHITECTURAL SHEETS by Greenwell Goetz Architects all dated 5/30/00
Al TITLE SHEET
A2 STANDARDS AND SCHEDULES
01-A4 FIRST FLOOR ARCHITECTURAL PLAN
01-A4.1 ENLARGED ARCHITECTURAL PLAN
01-A5 FIRST FLOOR ARCHITECTURAL REFLECTED CEILING PLAN
01-A5.1 ENLARGED REFLECTED CEILING PLAN
01-A6 FIRST FLOOR ARCHITECTURAL TELEPHONE & ELECTRIC PLAN
01-A7 FIRST FLOOR FINISH WALL PLAN
01-A8 FIRST FLOOR FINISH FLOOR PLAN
02-A4 SECOND FLOOR ARCHITECTURAL PLAN
02-A4.1 SECOND FLOOR ENLARGED ARCHITECTURAL PLAN
02-A5 SECOND FLOOR ARCHITECTURAL REFLECTED CEILING PLAN
02-A5.1 SECOND FLOOR ENLARGED REFLECTED CEILING PLAN
02-A6 SECOND FLOOR ARCHITECTURAL TELEPHONE AND ELECTRICAL PLAN
02-A7 SECOND FLOOR FINISH WALL PLAN
02-A8 SECOND FLOOR FINISH FLOOR PLAN
02-A9 SECOND FLOOR FURNITURE PLAN
R-10 ROOF PLAN
A20 FIRST FLOOR ELEVATIONS
A21 SECOND FLOOR ELEVATIONS
A24 MILLWORK ELEVATIONS
A25 MILLWORK SECTIONS & DETAILS
A27 DETAILS
A28 CEILING DETAILS
2. MECHANICAL SHEETS by Meta Engineers, P.C. all dated 5/30/00
TM-1 COVER SHEET - HVAC
TM-2 FIRST FLOOR PLAN - HVAC
TM-3 SECOND FLOOR PLAN - HVAC
TM-4 DETAILS AND PART PLAN - HVAC
TM-5 SCHEDULED AND RISER DIAGRAM-HVAC
3. SUPPLEMENT to BASE BUILDING SPECIFICATIONS dated 5/30/00
4. PLUMBING SHEETS by Meta Engineers, P.C. all dated 5/30/00
TP-1 COVER SHEET - PLUMBING AND FIRE PROTECTION
TP-2 FIRST FLOOR PLAN - PLUMBING AND FIRE PROTECTION
TP-3 SECOND FLOOR PLAN - PLUMBING AND FIRE PROTECTION
TP-4 DETAILS AND RISER DIAGRAMS - PLUMBING
Ex. B
1
<PAGE> 100
5. ELECTRICAL SHEETS by Meta Engineers, P.C. all dated 05/30/00
TE-1 COVER SHEET - ELECTRICAL
TE-2 FIRST FLOOR LIGHTING PLAN - ELECTRICAL
TE-3 FIRST FLOOR POWER PLAN - ELECTRICAL
TE-4 SECOND FLOOR PLAN - ELECTRICAL
TE-5 SECOND POWER FLOOR PLAN - ELECTRICAL
TE-6 PANEL SCHEDULES - ELECTRICAL
TE-7 PANEL SCHEDULES - ELECTRICAL
TE-8 PANEL SCHEDULES - ELECTRICAL
TE-9 RISER DIAGRAMS - ELECTRICAL
TE-10 RISER DIAGRAMS, DETAILS & SCHEDULES - ELECTRICAL
Ex. B
2
<PAGE> 101
EXHIBIT C to Lease
WORK LETTER AND CONSTRUCTION AGREEMENT
(Landlord to Construct Improvements)
1. Tenant's Improvements.
Except as set forth in this Work Letter and Construction
Agreement (the "Work Letter"), Tenant accepts the Premises and existing
improvements therein in their "as is" condition. Landlord shall furnish and
install within the Premises those items of general construction, but not
personal property or trade fixtures (the "Tenant Improvements"), shown on the
plans and specifications attached to this Lease as Exhibit B or, if the
foregoing is not applicable, as finally approved by Landlord and Tenant,
pursuant to Paragraph 2 below. All Tenant Improvements shall be constructed
pursuant to this Work Letter and shall be performed by Landlord's Tenant
Improvements General Contractor (defined below) utilizing those subcontractors
selected in accordance with this Work Letter. All subcontractors shall satisfy
those union labor requirements set forth in this Work Letter and in the
paragraph captioned "Tenant's Work Performance" of the Lease.
2. Plans and Specifications for Improvements.
2.1 Tenant has retained Greenwell Goetz Architects as architects
("Tenant's Architect") and Meta Engineers as MEP engineers (together, the
"Design Professionals"). Landlord has approved the Design Professionals to
prepare the plans and specifications described hereinafter for the Tenant
Improvements. The plans and specifications shall be subject to Landlord's
approval, which approval shall not be unreasonably delayed, provided that such
plans and specifications comply with and satisfy requirements (i) through (iii)
set forth below in subparagraph 2.4.
2.2 The parties have agreed that the construction of the Tenant
Improvements (the "Work") will proceed in two Phases. Phase I will consist of
the Work on floors one (1) and two (2) of the Building. Phase II will consist
of the Work on floors three (3) and four (4) of the Building.
2.3 The Space Plan for Phase I has been approved by Landlord and
such approved plans are referred to in Exhibit B of the Lease.
No later than June 21, 2000, Tenant shall cause Tenant's
Architect to furnish to Landlord for Landlord's approval space plans sufficient
to convey the architectural design of the third (3/rd/ ) and fourth (4/th/)
floors of the Premises (i.e., Phase II), including, without limitation, the
location of doors, partitions, electrical and telephone outlets, plumbing
fixtures, heavy floor loads and other special requirements. If required by
Landlord, Tenant's Architect shall consult with Landlord's engineer in
preparing the
Ex. C
1
<PAGE> 102
Phase II Space Plan, and incorporate Landlord's engineer's requirements for
that Space Plan. If Landlord fails to disapprove the Space Plan for Phase II
within the five (5) day period following Landlord's receipt of the Phase II
Space Plan, such Space Plan shall be deemed approved. If Landlord shall
disapprove of any portion of such Space Plan within such five (5) day period,
Landlord shall notify Tenant of the reasons therefor and of the revisions that
are reasonably required by Landlord. Tenant shall within five (5) days
following receipt of Landlord's notice submit to Landlord, for Landlord's
approval, a redesign of the Phase II Space Plan, incorporating the revisions
required by Landlord. If Landlord in good faith does not approve the redesign
of that Space Plan within five (5) days following Landlord's receipt of same,
then Landlord may in its reasonable discretion elect (a) to terminate this
Lease or (b) designate as Tenant Delay (as hereinafter defined) the period from
the date of Tenant's receipt of Landlord's rejection of such redesign until the
date Landlord approves a subsequent redesign.
Within fifteen (15) days of submission of the Space Plan to
the Landlord for approval, Tenant shall deliver to Landlord a complete list of
the equipment that Tenant proposes to install initially and in the future
within the Premises (the "Equipment List") which shall include the following:
the number and location of computer, copiers, printers, telephones, faxes, UPS
equipment, back-up power supplies, servers, kitchen equipment, racks, telephone
switch, LAN equipment and any other heat generating equipment with the
specifications and cut sheets for these items which shall include the name of
the manufacturer, model number, dimensions, power requirements (voltage,
phasing, full load amperage, wafts, horsepower, etc.), heat generation (in
BTU's), exhausting requirements, grounding requirements and any other load that
Tenant requires.
2.4 Tenant shall cause Tenant's Architect to prepare from the
approved Space Plans, complete architectural and engineering plans, drawings
and specifications ("Plans") by May 31, 2000 with respect to Phase I and within
thirty (30) days after Landlord approves the Phase II Space Plan. The Plans for
both Phases shall (i) be compatible with the Building shell and with the
design, construction and equipment of the Building; (ii) comply with all
applicable laws and ordinances, and the rules and regulations of all
governmental authorities having jurisdiction; (iii) comply with all applicable
insurance regulations; (iv) be in a form sufficient for the permitting and the
construction of the Tenant Improvements shown thereon and (v) be consistent
with the approved Space Plans. Tenant shall submit the Plans of the relevant
Phase for Landlord's approval in the same manner as provided in Subparagraph
2.2 above for approval by Landlord of Tenant's Phase II Space Plan. Landlord
will have ten (10) days to review such Plans. If Landlord fails to respond in
ten (10) days after receipt of the Plans from Tenant, the Plans will be deemed
to have been approved by Landlord. If Landlord requests modifications which are
acceptable to Tenant, within five (5) days after Tenant's receipt of Landlord's
request, the Plans shall be revised by Tenant's Architect to reflect the
applicable changes. If Tenant does not agree with Landlord's requested
modifications, Landlord and Tenant shall exercise good faith efforts to reach
Ex. C
2
<PAGE> 103
agreement on the Plans and the period from the date of Tenant's receipt of
Landlord's rejection of the redesigned plans until the date Landlord approves a
subsequent redesign shall be deemed Tenant Delay. If Landlord and Tenant are
unable to agree upon mutually acceptable Plans within five (5) days after the
delivery to Tenant of Landlord's request for modifications, then Landlord may
in its discretion terminate this Lease without liability to Tenant upon five
(5) business days notice during which time the Plans are not approved by
Landlord and Tenant.
Within twenty-two (22) days after Landlord has received the
Plans for each Phase, Landlord will cause the Tenant Improvements General
Contractor to prepare and submit to Landlord, and Landlord will submit to
Tenant, an Initial Tenant Improvements Pricing Letter which will include in
reasonable detail the costs of permitting and construction of the Tenant
Improvements for the relevant Phase. Tenant will approve the Initial Tenant
Improvements Pricing Letter for such Phase within four (4) days of receipt or
advise Landlord of changes, if any which Tenant reasonably requires to be made
to the Plans in order to reduce such costs. Based on such changes, Landlord
will cause the Tenant Improvements General Contractor to prepare a Final Tenant
Improvements Pricing Letter for Tenant's approval, which approval shall not be
unreasonably withheld, conditioned or delayed. Landlord shall, within four (4)
days of receipt of Tenant's approval of the Final Tenants Improvement Pricing
Letter issue a Notice to Proceed ("NTP") to the Tenant Improvements General
Contractor. Any changes in the Plans for any Phase directed by Tenant after
approval of the Final Tenant Improvements Pricing Letter for such Phase or
delays by Tenant in approving the Final Tenant Improvements Pricing Letter
shall be Tenant Delay.
Concurrent with the completion and delivery to Landlord of
the Plans for either Phase, Tenant shall provide to Landlord four (4) sets of
architectural and engineering plans signed and sealed by professionals licensed
in the State of Maryland (the "Permit Documents") for permit submission.
Landlord will promptly submit the Permit Documents to the local government
authorities no later than two (2) Business Days after receipt of the Permit
Documents. If the government authorities do not accept the Permit Documents due
to delay, error or omission on the part of the Design Professionals, the period
between the date that the Permit Documents were so rejected and the date the
Permit Documents are resubmitted to the governmental authorities will
constitute a Tenant Delay. However, if the Building Permit is still obtained
within twenty-eight (28) days following Landlord's first receipt of the Permit
Documents, no actual Tenant Delay will be incurred as a result of such
rejection and delay by the local government authorities.
If the Building Permit for either Phase is not obtained
within twenty-eight (28) days from its submission to the local government
authority having jurisdiction, there will be a day-for-day extension to
Landlord's required Substantial Completion Date for such Phase for each day
beyond such twenty-eight (28) day period that the Permit is delayed except that
if such delay is due to Tenant Delay, the extension of time
Ex. C
3
<PAGE> 104
provided pursuant to this paragraph shall not impair or affect Landlord's
rights under Section 5.4 of this Exhibit C entitled "Effect of Tenant Delay."
In the event there is a conflict between the following charts
and the times set forth in the preceding provisions of Paragraphs 2.3 and 2.4
of this Exhibit C relating to the times for the approval or processing of
documents, the times set forth in the following charts shall control.
The schedule for approval and preparation of Documents as
described in Paragraphs 2.3 and 2.4 above may be summarized as follows:
<TABLE>
<CAPTION>
Phase I Required Completion Date Responsible Party
------- ------------------------ -----------------
<S> <C> <C>
Space Plan Completed Done Tenant
Equipment List provided to Landlord Done Tenant
Space Plan approved by Landlord Done Landlord
Phase I Plans Done Tenant
Landlord approves/comments to Phase I Done Landlord
Plans
Permit Documents Done Tenant
Apply for Building Permit Done Landlord
Obtain Building Permit 28 days after application for Landlord
permit is filed
Prepare Cost Estimate Done Landlord
Tenant Approval of Initial TI Pricing 4 days after receipt of estimate Tenant
Letter
Issue NTP to start construction 2 Business Days after Tenant Landlord
Approves Final TI Pricing Letter
Substantial Completion of Phase I 98 days after NTP Landlord
</TABLE>
Ex. C
4
<PAGE> 105
<TABLE>
<CAPTION>
Phase II Required Completion Date Responsible Party
-------- ------------------------ -----------------
<S> <C> <C>
Space Plan ("SP") completed Done Tenant
Equipment List provided to Landlord Done Tenant
Space Plans approved/commented 5 days after receipt of SP Landlord
Tenant Revise SP (if necessary) 5 days after receipt of LL comments Tenant
Revised SP approved/commented 5 days after receipt of revised SP Landlord
Phase II Plans 30 days after approved SP Tenant
Landlord approves/comments to Phase II 10 days after receipt of Plans Landlord
Plans
Permit Documents 30 days after approved SP
Apply for Building Permit 2 Business Days after Landlord Landlord
receives Permit Documents
Obtain Building Permit 28 days after application for permit Landlord
Prepare Cost Estimate 21 days after receipt of Phase II Landlord
Plans
Tenant Approval of Initial TI Pricing 4 days after receipt of estimate Tenant
Letter
Issue NTP to start construction 2 Business Days after Tenant Landlord
Approval of Final TI Pricing Letter
Substantial Completion of Phase II 98 days after issuance of NTP Landlord
</TABLE>
Landlord will not be required to issue a Notice to Proceed to the Tenant
Improvements General Contractor with respect to the construction of any Phase
until Landlord has approved the Plans for the relevant Phase in accordance with
this Paragraph 2.4.
2.5 Tenant shall cause the Design Professionals to provide
documentation for all changes to the Plans at the time each change is
authorized for construction, pursuant to the requirements of Paragraph 4.9 of
this Work Letter. At the conclusion of construction, Tenant shall cause the
Design Professionals to update the Plans as necessary to reflect all changes
approved during the course of construction and to issue a set of sepias to the
contractor for its review and mark up. Tenant shall cause the Design
Professional to review and certify the contractor's marked up plans
Ex. C
5
<PAGE> 106
and provide to Landlord's designated construction representative a "record set"
of as-built sepias within thirty (30) days following completion of the Tenant
Improvements. Landlord shall have no liability to Tenant or to any other person
for errors or omissions in the Plans, Landlord's review being for Landlord's
own purposes. Tenant shall rely solely on the advice and experience of the
Design Professionals in assuring the accuracy and sufficiency of the Plans for
Tenant's purposes. The fees of the Design Professionals (plus fees for food
service design, acoustical engineers and other special consultants) shall be a
Cost of Tenant Improvements (as hereinafter defined).
3. Building Shell Changes.
If the Plans or any amendment thereof or supplement thereto shall
require changes in the Building shell, the cost of the Building shell work
caused by such Plans, amendment or supplement, shall be charged against Tenant.
The preceding sentence shall not be construed as requiring that Landlord must
approve any Plans which specify changes in the Building shell. If Building
shell work is permitted by Landlord, the cost thereof shall include all
architectural and/or engineering fees and expenses in connection therewith, as
well as compensation to Landlord for the costs of any delays which arise from
such changes (which delays shall also constitute Tenant Delay).
4. Tenant Improvement Construction and Cost.
4.1 Tenant Improvements General Contractor.
A. James G. Davis Construction Corporation shall be
retained by Landlord as the General Contractor with respect to Tenant
Improvement work (the "Tenant Improvements General Contractor"). The
subcontracting work shall be awarded subject to bid, provided any subcontractor
selected to perform work on Tenant Improvements is a party to and is bound by a
collective bargaining agreement with a labor organization affiliated with the
Building and Construction Trades Council of the AFL-CIO and employs only
members of such labor organizations to perform work within their respective
jurisdictions. In addition, the successful bidders must be reputable and
licensed and bonded for performing such services in Prince George's County,
Maryland. Landlord will cause the Tenant Improvements General Contractor to use
reasonable efforts to obtain at least three (3) bids from qualified
subcontractors located in the Washington/Baltimore metropolitan area for any
subcontractor work. The cost of any payment or performance bonds shall be at
Tenant's expense which may be paid from the Tenant Improvement Allowance. The
Tenant Improvements General Contractor shall warrant its work with respect to
both Phases for one full year following Substantial Completion of the subject
Phase.
B. Upon receipt of the Tenant Improvements General
Contractor's cost of construction, Landlord shall provide Tenant with a
detailed breakdown of the cost of furnishing and installing the Tenant
Improvements, (the "Initial
Ex. C
6
<PAGE> 107
Tenant Improvements Pricing Letter" referred to in Paragraph 2.4 of this
Exhibit C) including, without limitation: the cost of constructing
improvements; the - cost of preparing engineering plans; governmental agency
plan check, permit and other fees; sales and use taxes; all other costs to be
expended by Tenant in the construction of the Tenant Improvements; provisions
for payment in favor of Landlord in the event of contractors late delivery
which payment shall not be less than the penalties imposed upon Landlord for
late delivery provided in Section 2.4.4 of the Lease; and the Construction
Manager's Fee described in Paragraph 4.5 of this Exhibit C (collectively, the
"Cost of Tenant Improvements"). The Cost of Tenant Improvements shall also
include expenses and "soft costs" incurred by Tenant, such as the fees of the
Design Professionals. Tenant shall approve in writing the estimated Cost of
Tenant Improvements within five (5) days following its receipt of same. No
construction of Tenant Improvements shall commence until such approval is
received by Landlord as provided in Paragraph 2.4 of this Exhibit C. At
Landlord's election, any delay by Tenant in giving such approval shall
constitute Tenant Delay.
4.2 Tenant Improvement Allowance. Landlord shall establish the
Tenant Improvement Allowance as set forth in the Lease, which shall be used by
Landlord solely for the design and installation of the Tenant Improvements. In
the event Tenant elects to require Landlord to provide the Above Standard
Tenant Improvement Allowance pursuant to Section 1.3 of the Lease, references
to the "Tenant Improvement Allowance" in this Work Letter shall be deemed to
include such additional amount. Tenant shall have the right to use the Tenant
Improvement Allowance for the Cost of Tenant Improvement. In no event shall the
Tenant Improvement Allowance be used to pay for costs of Tenant's furniture or
other personal property, which shall be paid for by Tenant at its sole cost and
expense. If the Cost of Tenant Improvements is less than the Tenant Improvement
Allowance, Landlord shall retain such excess portion of the Tenant Improvement
Allowance as its sole and separate property and Tenant shall have no rights or
claims to it whatsoever, nor shall Tenant be entitled to any credit as a result
of such excess. Notwithstanding anything to the contrary contained in this Work
Letter, if at any time Landlord determines in its reasonable judgment that the
Cost of Tenant Improvements will exceed the Tenant Improvement Allowance
("Excess Cost of Tenant Improvements"), Tenant shall deposit with Landlord, in
cash, the amount of such Excess Cost of Tenant Improvements as provided in
Section 2.6 of the Lease, to be disbursed by Landlord following full
disbursement of the Tenant Improvement Allowance. The balance of any amount so
deposited which is not so applied, if any, shall be returned to Tenant, without
interest, following completion of, and full payment for, the Tenant
Improvements.
4.3 Subsequent Increases in Costs. If the Cost of Tenant
Improvements increases due to the requirements of any governmental agency
subsequent to Landlord's approval of the bids pursuant to Paragraph 4.1, or for
any other reason other than Landlord's negligence or willful misconduct, such
expense shall be added to the Cost of Tenant Improvements or, if the Tenant
Improvement Allowance
Ex. C
7
<PAGE> 108
is insufficient, paid to Landlord by Tenant within twenty (20) days after
receipt of notice of such cost increases as provided in Paragraph 4.2 of this
Work Letter.
4.4 Ownership of Tenant Improvements. Subject to the terms of
Section 2.6 of the Lease and Paragraph 4.7 of this Work Letter, all of the
Tenant Improvements, whether or not the cost thereof is covered by the Tenant
Improvement Allowance, shall become the property of Landlord upon expiration or
earlier termination of the Lease and shall remain on the Premises at all times
during the Term.
4.5 Construction Management. TC MidAtlantic Development Inc.
shall be the Construction Manager with respect to construction of the Tenant
Improvements. If such company ceases to be the Construction Manager, Landlord
shall select a Construction Manager which is reasonably satisfactory to Tenant.
The Construction Manager's fee shall be paid by Landlord and deducted from the
Tenant Improvement Allowance.
4.6 Costs of Tenant Improvements. Except for the Tenant
Improvement Allowance or as otherwise provided in the Lease or this Work
Letter, Tenant shall pay all costs associated with the Tenant Improvements
including, without limitation, all permits, inspection fees, fees of space
planners, architects, engineers, consultants, contractors, the costs of all
labor and materials, bonds, insurance and any structural or mechanical work,
additional HVAC equipment or modifications to any building, mechanical,
electrical, plumbing or other systems and equipment, either within or outside
the Premises required as a direct result of the layout, design or construction
of the Tenant Improvements and the cost of design and permitting and
installation of Tenant's fixtures, specialized equipment, systems, furniture
and data and phone cabling systems.
Notwithstanding the foregoing provisions of this Paragraph 4.6, Tenant
shall not be liable for costs associated with the Tenant Improvements to the
extent such costs (including related increases in the Construction Manager's
Fee) may have been incurred or increased due to:
(a) The failure by Landlord to timely furnish or timely
respond to Tenant's Plans and Specifications, as and when required by this Work
Letter, or the failure of either of them to comply with the provisions of the
Lease or this Work Letter relating to the construction of the Tenant
Improvements; or
(b) The negligence or willfully wrongful act of
Landlord. Costs of the Tenant Improvements payable from the Tenant Improvement
Allowance shall be advanced as provided in Paragraph 4.8. Costs of Tenant
Improvements in excess of the Tenant Improvement Allowance shall be paid as
provided in Paragraph 4.2.
Ex. C
8
<PAGE> 109
4.7 Landlord Approvals. Landlord shall not unreasonably withhold,
condition or delay the approval of the Plans (or clarifications thereto) except
that Landlord may withhold its approval with regard to proposed Tenant
Improvements which (a) will have an adverse visible impact from the exterior of
the Building, or (b) will adversely affect the structure of the Building (as a
result of heavy loads or otherwise) or the electrical, heating, air
conditioning, ventilation, plumbing, fire protection, life safety or other
systems or equipment of the Building including the penthouse and the core. As a
condition of Landlord's approval of the proposed Tenant Improvements, Landlord
shall have the right to notify Tenant in writing at the time of such approval
that Tenant will be required upon termination or expiration of this Lease to
remove any specified Tenant Improvements constructed by the General Contractor
or Tenant's contractors if in Landlord's reasonable judgment such Tenant
Improvements are not customarily found in Class A office buildings in the
Laurel, Maryland submarket and removal of such items would subject Landlord to
unreasonable expense. If Tenant fails to remove such Tenant Improvements which
were installed subject to such condition, Landlord may do so and Tenant shall
pay Landlord the entire cost thereof within ten (10) Business Days after
receipt of Landlord's written demand therefor and this obligation shall survive
the termination or expiration of this Lease.
4.8 Advances of Tenant Allowance. Payments with respect to the
Tenant Improvement Allowance or amounts deposited by Tenant with Landlord on
account of excess Cost of Tenant Improvements will be advanced by Landlord in
amounts approved in writing by Landlord no more frequently than monthly during
the planning and construction of the Tenant Improvements (a) to the Tenant
Improvements General Contractor, based upon written invoices and lien waivers
submitted on forms satisfactory to Landlord and (b) with respect to amounts
paid by Tenant to other parties, based on vouchers or written invoices
submitted to Landlord by Tenant accompanied by paid invoices, lien waivers and
such additional information as Landlord may reasonably request. Such invoices,
lien waivers and vouchers shall be submitted no later than thirty (30) days
prior to the monthly disbursement. Landlord shall reduce the Tenant Improvement
Allowance during the course of construction as costs which are eligible for
application of funds from the Tenant Improvement Allowance are incurred and
advanced.
4.9 Changes.
4.9.1 Tenant may request a change, addition or alteration in the
Tenant Improvements as shown by the Plans after Landlord's final approval of
such Plans (a "Change Order") by delivery of a written request to Landlord for
its approval and for the Tenant Improvements General Contractor's determination
of (i) the increase in the cost of work to implement the Change Order, and (ii)
the estimated delay, if any, in the construction of the Tenant Improvements
occasioned by the Change Order. Tenant's architect shall complete all working
drawings necessary to show the change, addition or alteration, and a Change
Order in form satisfactory to Landlord. If Landlord approves the Change Order
and any delays in construction occasioned by the Change
Ex. C
9
<PAGE> 110
Order (which delays shall constitute Tenant Delay), Landlord shall deliver to
Tenant its written approval of the Change Order and authorization to proceed
with the work as shown by the Change Order, conditioned upon payment by Tenant
to Landlord, in advance and in full, of any cost increase occasioned thereby.
Landlord may decline any proposed Change Order if the change is inconsistent
with the provisions of any of paragraphs 1 through 4 above or as otherwise
provided in the Lease. Any delay caused by work stoppage pending Landlord's
approval of a Change Order or payment by Tenant of any cost increase shall
constitute Tenant Delay.
4.9.2 No changes, modifications, alterations or additions to the
approved Plans (except minor changes resulting from field conditions) may be
made without the prior written consent of the Landlord and Tenant as set forth
above, after written request therefore. In the event a change requested by
Tenant with respect to the Plans causes the costs of the Tenant Improvements to
exceed the Tenant Improvement Allowance and any amount deposited with Landlord
by Tenant on account of Excess Cost of Tenant Improvements, then all additional
costs attributable to any such change requested by Tenant and approved by
Landlord, including the Tenant Improvements General Contractor's general
conditions fee as applied solely to the net increase in the cost of the Tenant
Improvements, shall be payable by Tenant, within twenty (20) Business Days
after Landlord's submission of a statement of the additional costs attributable
to such change order, as Additional Rent. Any actual delay in the Commencement
Date which results from a change requested by Tenant shall constitute a Tenant
Delay.
4.10 Coordination of Tenant Improvements. Construction of the
Tenant Improvements shall be coordinated, under Landlord's direction, so that
the Tenant Improvements will not interfere with or delay the completion of any
other construction work in or about the Building or the Land.
4.11 Right to Stop Work. If Tenant shall default under any of the
terms of this Work Letter, and shall not cure such default within five (5)
Business Days after receipt of written notice thereof or, in case of an
emergency, immediately, Landlord may order that work on the Tenant Improvements
be stopped at once and that no further deliveries to the Premises be made until
such default is cured, without limitation as to any other remedy provided
Landlord under this Lease and any delay resulting from such cessation of work
shall be Tenant Delay and any delay in Substantial Completion as a result of
such default by Tenant shall be Tenant Delay.
4.12 Additional Rent. Any amounts payable by Tenant to Landlord
pursuant to this WorkLetter shall be paid as Additional Rent under the Lease.
4.13 Time of the Essence. Time is of the essence with respect to
Landlord and Tenant's obligations under this Work Letter.
Ex. C
10
<PAGE> 111
4.14 Tenant Access. Upon Tenant's request, Landlord shall grant to
Tenant and its subcontractors non-exclusive access to the Premises at times
reasonably determined by Landlord for the purpose of installing telephone
equipment, cabling and wiring, a security system and other items necessary for
Tenant to conduct its business (collectively, "Tenant's Installations"),
provided, however, that the performance of Tenant's Installations does not
materially interfere with or delay the work of Landlord's general contractor
engaged in the construction of the Building or the Tenant Improvements General
Contractor or their respective subcontractors. Such periods of access by Tenant
and its contractors shall hereinafter be referred to as the "Non-Exclusive
Access Period." Tenant shall coordinate with Landlord's general contractor
engaged in the construction of the Building or the Tenant Improvements General
Contractor for the performance of Tenant's Installations during the
Non-Exclusive Access Period and comply with their scheduling requirements so
that the construction of Tenant's Installations does not delay or impede
required approvals or construction of the Building or the Tenant Improvements.
Any delay caused by Tenant's failure to do so shall be considered Tenant Delay.
Tenant acknowledges that employees of such general contractors and
subcontractors shall have access to and be working in the Building and the
Premises during the Non-Exclusive Access Period and the Building and Premises
shall not be locked during the times work is being performed. Tenant shall be
liable for any damage caused by persons engaged in installing Tenant's
Installations and any delay caused by such damage shall be Tenant Delay.
Landlord, its agents and employees shall not be liable to Tenant for any theft,
damage or destruction that may occur during the Non-Exclusive Access Period to
Tenant's Installations or other property in the Premises or the Building except
for such loss due to Landlord's gross negligence or willful misconduct. Tenant
shall obtain and maintain "Direct Causes of Physical Loss or Damage" coverage
insurance on all of Tenant's Installations in the Premises from the date of
their installation, with a waiver of subrogation in favor of Landlord. Prior to
the Non-Exclusive Access Period, Tenant shall, in addition, obtain the public
liability insurance and contractors' insurance required by the provisions of
Paragraph 4.13 of this Lease. Tenant shall deliver a certificate of such
policies to Landlord prior to entering the Premises for the purposes described
in this Paragraph 4.14. Tenant shall not be charged for the use of elevators
during the Non-Exclusive Access Period or Tenant's actual move into the
Premises.
5. Construction of Tenant Improvements.
5.1 Upon approval by Landlord of the Plans and Cost of the Tenant
Improvements, the Tenant Improvements General Contractor shall commence
construction of the Tenant Improvements. The Tenant Improvements General
Contractor shall secure such permits as are necessary to construct the Tenant
Improvements.
5.2 The construction of Tenant Improvements shall be subject to
the following:
Ex. C
11
<PAGE> 112
(i) As part of the Cost of the Tenant Improvements to be
paid by Tenant (subject to Landlord's contribution of the Tenant Improvement
Allowance), Tenant shall reimburse Landlord for all reasonable costs directly
or indirectly related to the Tenant Improvements, including, without
limitation: costs of site services, facilities and utilities (such as trash
removal, use of vertical transportation, electrical service, etc.); costs of
remedying deficient or faulty work or inadequate clean-up done by Tenant or its
contractor(s); and costs incurred by reason of delays caused by such work.
While Tenant's prior approval of the costs referred to in the preceding
sentence shall not be required, Landlord agrees to exercise reasonable efforts
(except in the event of an emergency) to notify Tenant prior to committing to
incurring such costs. Tenant agrees to respond to such notice promptly.
(ii) All Tenant Improvements shall be installed only
under the supervision of Landlord's Construction Manager.
5.3 "Tenant Delay" shall include, without limitation, any delay
in the Phase I Commencement Date or the Phase II Commencement Date beyond the
dates stated in Section 1.5 of the Lease resulting from (i) Tenant's failure to
comply with the provisions of this Work Letter or the Lease, including without
limitation Tenant's failure to meet any time deadlines established herein, (ii)
any additional time as reasonably determined by Landlord required for ordering,
receiving, fabricating and/or installing Long Lead Items or items of materials
or other components of the construction of Tenant Improvements, including,
without limitation, mill work, which are not used in the construction of Tenant
Improvements in accordance with Landlord's building standards and which causes
a delay in the Substantial Completion of the Tenant Improvements beyond the
time when such improvements would otherwise be completed if constructed in
accordance with the standards used in the remainder of the Building, (iii)
delay in work caused by submission by Tenant of a request for any Change Order
following Landlord's approval of the Plans, (iv) any additional time, as
reasonably determined by Landlord, required for implementation of any Change
Order with respect to the Tenant Improvements, (v) any changes in the Building
Shell required by the Tenant Improvements, (vi) any other delay arising from
the act or omission of Tenant or Tenant's Agents or vendors, including
providers and installers of furniture and equipment, (vii) delay caused by
Tenant's architect, contractor or subcontractor, (viii) Tenant's failure to
provide any of the items called for in Paragraph 2.4 of this Exhibit C within
the times required, unless such failure is a result of Landlord's failure to
meet a mandatory response time or Landlord's failure to promptly deliver to
Tenant any available information reasonably required by Tenant in order to meet
its response time or (ix) the occurrence of any other act, omission, failure or
event which this Work Letter or the Lease describes as "Tenant Delay". If there
shall be any Tenant Delay, then Landlord may require Tenant to commence the
payment of Rent under the Lease based upon that date when Substantial
Completion would have occurred but for the
Ex. C
12
<PAGE> 113
Tenant Delay, or if not previously required by Landlord, Tenant shall pay such
Rent to Landlord prior to Tenant occupying the Premises. Landlord shall not be
liable for, and Tenant waives all claims against Landlord for, any defaults of
the Tenant Improvements General Contractor and all subcontractors and suppliers
relating to construction of the Tenant Improvements. In the event of any such
default, Tenant shall look solely to the Tenant Improvements General Contractor
or such subcontractors or suppliers.
5.4 Effect of Tenant Delay. To the extent that completion of the
Building or any of the Tenant Improvements to be performed by Landlord is
delayed as a result of Tenant Delay, but the delayed completion of such items
does not affect Landlord's achievement of Substantial Completion of any Phase
of the Tenant Improvement Work by the earliest date required for the delivery
of such Phase, then, provided Tenant continues to pursue the resolution of such
Tenant Delay with due diligence, such Tenant Delay shall not affect the
Commencement Date of such Phase, provided, however, that Tenant shall be
responsible for any increase in the cost of the Tenant Improvement Work with
respect to such Tenant Improvements caused by such Tenant Delay.
If Tenant Delay does affect Landlord's ability to achieve
Substantial Completion of any Phase by the date required for completion of that
Phase, then, as provided in Section 2.4 of the Lease, the Commencement Date for
such Phase shall be deemed to have occurred on the day on which such
Commencement Date for such Phase would have occurred but for such Tenant Delay
and Tenant shall be responsible for any increase in the cost of such Tenant
Improvement Work as a result of such Tenant Delay.
6. Miscellaneous.
6.1 Any default of Tenant under this Work Letter shall constitute
a default of Tenant under the Lease, and Landlord's remedies shall be as set
forth therein. All provisions of the Lease are fully incorporated in this Work
Letter as though set forth herein at length.
6.2 Tenant shall designate in writing one (1) construction
representative ("Tenant's Representative") authorized to act for Tenant upon
whom Landlord can rely, and who shall, on Tenant's behalf, consult with
Landlord, the Design Professionals, the Tenant Improvements General Contractor
and Landlord's contractors, employees and agents in connection with the
construction of the Tenant Improvements. Tenant's Representative shall have the
power to legally bind to Tenant with respect to notices from Tenant making
requests for and approving changes, giving approval of plans or Work or
otherwise giving direction to Landlord for the Work to be completed under this
Work Letter. Tenant hereby designates Richard Alexander as Tenant's
Representative.
Ex. C
13
<PAGE> 114
6.3 Tenant shall indemnify, defend, protect and hold Landlord's
Agents harmless from all Claims which arise in any way, directly or indirectly
from or in connection with the design of the Tenant Improvements, including,
without limitation, claims arising from the work of the Design Professionals or
Tenant's employees or agents.
6.4 Landlord will endeavor to complete the Tenant Improvement
Work for each Phase by the respective Commencement Dates set forth in Section
1.15 of the Lease. If at any time Landlord believes that any Completion Date
will change, Landlord will promptly so notify Tenant in writing.
6.5 The Commencement Date for each Phase shall be as determined
pursuant to Section 2.4 of the Lease.
Ex. C
14
<PAGE> 115
EXHIBIT D to Lease
FORM OF MEMORANDUM OF COMMENCEMENT DATE
---------------------------------------
RIGGS & COMPANY, a division of Riggs Bank N.A., as Trustee of the
MultiEmployer Property Trust, a trust organized under 12 C.F.R. Section 9.18,
as Landlord, and DIGEX, INC., a Delaware corporation, as Tenant, executed that
certain Lease dated as of _______________, 2000 (the "Lease").
The Lease contemplates that upon satisfaction of certain conditions
Landlord and Tenant will agree and stipulate as to certain provisions of the
Lease. All such conditions precedent to that stipulation have been satisfied.
Landlord and Tenant agree as follows:
1. The Phase ____ Commencement Date of the Lease is________________.
2. The Termination Date of the Lease is____________________________.
3. The Premises consist of __________________ rentable square feet.
4. Base Rent is as follows:
______________ through ______________ ; $ ____________ per month
______________ through ______________ ; $ ____________ per month
______________ through ______________ ; $ ____________ per month
______________ through ______________ ; $ ____________ per month
5. The Lease is in full force and effect as of the date hereof,
Landlord has fulfilled all of its obligations under the Lease required
to be fulfilled by Landlord on or prior to such date, and Tenant has
no right of set-off against any rentals.
IN WITNESS WHEREOF, the parties have caused this Memorandum to be duly
executed as of _________, 2000.
LANDLORD: TENANT:
-------- ------
RIGGS & COMPANY, a division of Riggs Bank N.A., DIGEX, INC.,
as Trustee of the Multi- a Delaware corporation
-----------------------------------------------
Employer property Trust, a trust organized
under 12 C.F.R. Section 9.18
By: By:
-------------------------- ----------------------------
Name: Name:
------------------------ --------------------------
Its: Its:
------------------------- ---------------------------
Ex. D
1
<PAGE> 116
EXHIBIT E to Lease
RULES AND REGULATIONS
---------------------
1. No sign, placard, picture, advertisement, name or notice
shall be installed or displayed on any part of the outside or inside of the
Building or Land without the prior written consent of the Landlord. Landlord
shall have the right to remove, at Tenant's expense and without notice, any
sign installed or displayed in violation of this rule. All approved signs or
lettering on doors and walls shall be printed, painted, affixed or inscribed at
the expense of Tenant by a person chosen by Landlord.
2. If Landlord objects in writing to any curtains, blinds,
shades, screens or hanging plants or other similar objects attached to or used
in connection with any window or door of the Premises, Tenant shall immediately
discontinue such use. No awning shall be permitted on any part of the Premises.
Tenant shall not place anything against or near glass partitions or doors or
windows that may appear unsightly from outside the Premises.
3. Tenant shall not obstruct any sidewalk, halls, passages,
exits, entrances, elevators, escalators, or stairways of the Building. The
halls, passages, exits, entrances, elevators, escalators and stairways are not
open to the general public. Landlord shall in all cases retain the right to
control and prevent access to such areas of all persons whose presence in the
judgment of Landlord would be prejudicial to the safety, character, reputation
and interest of the Land, Building and the Building's tenants; provided that,
nothing in this Lease contained shall be construed to prevent such access to
persons with whom any Tenant normally deals in the ordinary course of its
business, unless such persons are engaged in illegal activities. Tenant shall
not go upon the roof of the Building.
4. The directory of the Building will be provided exclusively
for the display of the name and location of tenants only, and Landlord reserves
the right to exclude any other names therefrom.
5. All cleaning and janitorial services for the Building and the
Premises shall be provided exclusively through Landlord, and except with the
written consent of Landlord, no person or persons other than those approved by
Landlord shall be employed by Tenant or permitted to enter the Building for the
purpose of cleaning the same. Cleaning and janitorial services shall be
provided five (5) days per week. Tenant shall not cause any unnecessary labor
by carelessness or indifference to the good order and cleanliness of the
Premises. Landlord shall not in any way be responsible to any Tenant for any
loss of property on the Premises, however occurring, or for any damage to any
Tenant's property by the janitor, any of Landlord's Agents or any other person.
6. Landlord will furnish Tenant, free of charge, two (2) keys to
each door lock in the Premises. Landlord may make a reasonable charge for any
additional keys.
Ex. E
1
<PAGE> 117
Tenant shall not make or have made additional keys, and Tenant shall not alter
any lock or install a new additional lock or bolt on any door of its Premises.
Tenant, upon the termination of its tenancy, shall deliver to Landlord the keys
of all doors which have been furnished to Tenant, and in the event of loss of
any keys so furnished, shall pay Landlord therefor.
7. HVAC service shall be provided to the Premises Monday through
Friday from 800 a.m. to 6.00 p.m., except for holidays as defined in these
Rules.
8. If Tenant requires telegraphic, telephonic, computer
circuits, burglar alarm or similar services, it shall first obtain, and comply
with, Landlord's instructions for their installation, and shall pay the entire
cost of such installation(s).
9. Tenant shall not place a load upon any floor of the Premises
which exceeds the load per square foot which such floor was designed to carry
and which is allowed by Governmental Requirements. Landlord shall have the
right to prescribe the weight, size and position of all equipment, materials,
furniture or other property brought into the Building. Heavy objects shall, if
considered necessary by Landlord, stand on such platforms as determined by
Landlord to be necessary to properly distribute the weight. Business machines
and mechanical equipment belonging to Tenant, which cause noise or vibration
that may be transmitted to the structure of the Building or to any space in the
Building or to any other tenant in the Building, shall be placed and maintained
by Tenant, at Tenant's expense, on vibration eliminators or other devices
sufficient to eliminate noise or vibration. The persons employed to move such
equipment in or out of the Building must be acceptable to Landlord. Landlord
will not be responsible for loss of, or damage to, any such equipment or other
property from any cause, and all damage done to the Building by maintaining or
moving such equipment or other property shall be repaired at the expense of
Tenant.
10. Tenant shall not use or keep in the Premises any kerosene,
gasoline or inflammable or combustible fluid or material other than those
limited quantities permitted by the Lease. Tenant shall not use or permit to be
used in the Premises any foul or noxious gas or substance, or permit or allow
the Premises to be occupied or used in a manner offensive or objectionable to
Landlord or other occupants of the Building by reason of noise, odors or
vibrations nor shall Tenant bring into or keep in or about the Premises any
birds or animals.
11. Tenant shall not use any method of heating or
air-conditioning other than that supplied by Landlord.
12. Tenant shall not waste any utility provided by Landlord and
agrees to cooperate fully with Landlord to assure the most effective operation
of the Building's heating and air-conditioning and to comply with any
governmental energy-saving rules, laws or regulations of which Tenant has
actual notice.
Ex. E
2
<PAGE> 118
13. Landlord reserves the right, exercisable without notice and
without liability to Tenant, to change the name and street address of the
Building.
14. Landlord reserves the right to exclude from the Building
between the hours of 6 p.m. and 7 a.m. the following day, or such other hours
as may be established from time to time by Landlord, and on Sundays and legal
holidays, any person unless that person is known to the person or employee in
charge of the Building and has a pass or is properly identified. Tenant shall
be responsible for all persons for whom it requests passes and shall be liable
to Landlord for all acts of such persons. Landlord shall not be liable for
damages for any error with regard to the admission to or exclusion from the
Building of any person. Landlord reserves the right to prevent access to the
Building in case of invasion, mob, riot, public excitement or other commotion
by closing the doors or by other appropriate action.
15. Tenant shall close and lock the doors of its Premises and
entirely shut off all water faucets or other water apparatus, and electricity,
gas or air outlets before Tenant and its employees leave the Premises. Tenant
shall be responsible for any damage or injuries sustained by other tenants or
occupants of the Building or by Landlord for noncompliance with this rule.
16. Tenant shall not obtain for use on the Premises ice, drinking
water, food, beverage, towel or other similar services, except at such hours
and under such regulations as may be fixed by Landlord.
17. The toilet rooms, toilets, urinals, wash bowls and other
apparatus shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be deposited
in them. The expenses of any breakage, stoppage or damage resulting from the
violation of this rule shall be borne by Tenant if it or its employees or
invitees shall have caused it.
18. Tenant shall not sell, or permit the sale at retail, of
newspapers, magazines, periodicals, theater tickets or any other goods or
merchandise to the general public in or on the Premises. Tenant shall not make
any room-to-room solicitation of business from other tenants in the Building.
Tenant shall not use the Premises for any business or activity other than that
specifically provided for in the Lease.
19. Tenant shall not install any radio or television antenna,
loudspeaker or other device on the roof or exterior walls of the Building.
Tenant shall not interfere with radio or television broadcasting or reception
from or in the Building or elsewhere.
20. Tenant shall not mark, drive nails, screws or drill into the
partitions, woodwork or plaster or in any way deface the Premises. Landlord
reserves the right to direct electricians as to where and how telephone and
telegraph wires are to be introduced to the Premises. Tenant shall not cut or
bore holes for wires. Tenant shall not affix any floor covering to the floor of
the Premises in any manner except as
Ex. E
3
<PAGE> 119
approved by Landlord. Tenant shall repair any damage resulting from
noncompliance with this rule.
21. Tenant shall not install, maintain or operate upon the
Premises any vending machine without the written consent of Landlord.
22. Canvassing, soliciting and distribution of handbills or any
other written material, and peddling in the Building or Land are prohibited,
and Tenant shall cooperate to prevent the same.
23. Landlord reserves the right to exclude or expel from the
Building and Land any person who, in Landlord's judgment, is intoxicated, under
the influence of liquor or drugs or in violation of any of these Rules and
Regulations.
24. Tenant shall store all of its trash and garbage within the
Premises. Tenant shall not place in any trash box or receptacle any material
that cannot be disposed of in the ordinary and customary manner of trash and
garbage disposal. All garbage and refuse disposal shall be made in accordance
with directions issued from time to time by Landlord.
25. The Premises shall not be used for lodging or any improper or
immoral or objectionable purpose. No cooking shall be done or permitted by
Tenant, except that use by Tenant of Underwriters' Laboratory approved
equipment for brewing coffee, tea, hot chocolate and similar beverages shall be
permitted; provided that, such equipment and its use is in accordance with all
Governmental Requirements.
26. Tenant shall not use in the Premises or in the public halls
of the Building any hand truck except those equipped with rubber tires and side
guards or such other material-handling equipment as Landlord may approve.
Tenant shall not bring any other vehicles of any kind into the Building.
27. Without the prior written consent of Landlord, Tenant shall
not use the name of the Building in connection with or in promoting or
advertising the business of Tenant except as Tenant's address.
28. Tenant shall comply with all safety, fire protection and
evacuation procedures and regulations established by Landlord or any
governmental agency.
29. Tenant assumes any and all responsibility for protecting the
Premises from theft, robbery and pilferage, which includes keeping doors locked
and other means of entry to the Premises closed.
30. The requirements of Tenant will be attended to only upon
appropriate application to the Manager of the Building by an authorized
individual. Employees of Landlord are not required to perform any work or do
anything outside of their regular duties unless under special instructions from
Landlord, and no employee of Landlord is
Ex. E
4
<PAGE> 120
required to admit Tenant to any space other than the Premises without specific
instructions from Landlord.
31. Tenant shall not park its vehicles in any parking areas
designated by Landlord as areas for parking by visitors to the Building or
Land. Tenant shall not leave vehicles in the parking areas overnight nor park
any vehicles in the Building parking areas other than automobiles, motorcycles,
motor driven or nonmotor driven bicycles or four-wheeled trucks.
32. Landlord may waive any one or more of these Rules and
Regulations for the benefit of Tenant or any other tenant, but no such waiver
by Landlord shall be construed as a waiver of such Rules and Regulations in
favor of any other person, nor prevent Landlord from thereafter revoking such
waiver and enforcing any such Rules and Regulations against any or all of the
tenants of the Building.
33. These Rules and Regulations are in addition to, and shall not
be construed to in any way modify or amend, in whole or in part, the covenants
and conditions of any lease of premises in the Building. If any provision of
these Rules and Regulations conflicts with any provision of the Lease, the
terms of the Lease shall prevail.
34. Landlord reserves the right to make such other and reasonable
Rules and Regulations as, in its judgment, may from time to time be needed for
safety and security, the care and cleanliness of the Building and Land and the
preservation of good order in the Building. Tenant agrees to abide by all the
Rules and Regulations stated in this exhibit and any additional rules and
regulations that are so made by Landlord.
35. Tenant shall be responsible for the observance of all of the
foregoing rules by Tenant and Tenant's Agents.
36. The Landlord designates the following as holidays (on the
dates observed by the Federal Government (as applicable): New Year's Day,
Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day,
Thanksgiving Day and Christmas.
Ex. E
5
<PAGE> 121
EXHIBIT F TO LEASE
FORM OF
LETTER OF CREDIT
----------------
______ BANK
(Address)
NUMBER:_________________ __________________,1999
IRREVOCABLE LETTER OF CREDIT
Riggs & Company, a division of Riggs Bank N.A.
As Trustee of the Multi-Employer Property Trust,
a trust organized under 12 C.F.R. 9.18
808 17/th/ St. N.W.
Washington, D.C. 20006
Gentlemen:
We hereby issue our Irrevocable Letter of Credit No.___________ (the
"Letter of Credit") authorizing you or your transferees or assignees (each, a
"Beneficiary") to draw on us for the account of Digex, Inc., ("Applicant") for
an aggregate amount up to _____________ Dollars _____________) which may be
made in one (1) or more draws of any sum or sums up to such amount, available
by your drafts at sight presented at our office at the address noted below,
delivery of such draft to be made either (i) in person; or (ii) by overnight
courier; or (iii) by facsimile, provided that an original draft confirming such
facsimile is sent to us by overnight courier within twenty-four (24) hours
following such facsimile.
Each draft submitted must state that it is "DRAWN UNDER IRREVOCABLE
LETTER OF CREDIT NO. ___________, DATED ___________, OF _________ BANK" and be
accompanied by a statement purportedly signed by an authorized representative
of the Beneficiary stating either that (a)a default of tenant has occurred
under that certain Deed of Lease (the "Lease") by and between the Beneficiary
and Applicant and remains uncured beyond the applicable notice and cure period
provided for in such Lease or (b) the Tenant under the said Lease has failed to
provide a substitute Letter of Credit or an amendment to this Letter of Credit
in
Ex. F
1
<PAGE> 122
accordance with the terms of the Lease and that therefore Beneficiary is
entitled to demand and receive payment under the subject Letter of Credit.
We agree to accept the foregoing statement furnished by Beneficiary as
binding and correct, without our investigation or responsibility for accuracy,
veracity or conclusive correctness or validity of the same or any part thereof.
Upon receipt of such draft in accordance with the foregoing, we will wire
payment of such funds directly to Beneficiary's account in accordance with
wiring instructions delivered by Beneficiary.
This Letter of Credit remains in force until _____20__. This Letter of
Credit shall be automatically extended for one (1) additional period of one (1)
year from the present expiration date unless Beneficiary notifies us in writing
not less than thirty (30) days before such date that such extension shall not
be necessary.
This Letter of Credit is assignable and transferable and may be
assigned or transferred one (1) or more times, without charge, upon our receipt
of your, or your successor Beneficiary's, written notice by certified mail,
return receipt requested, that an agreement to transfer or assign this Letter
of Credit has been executed. Following our receipt of such notice, any such
designated new beneficiary shall thereafter be deemed to constitute the
Beneficiary hereunder.
We hereby agree that drafts drawn under and in compliance with the
terms of this Letter of Credit will be honored upon presentation at the office
of _______ Bank, _______Street, Washington, D.C.
Except as otherwise provided hereafter, this Letter of Credit sets
forth in full the terms of our undertaking and such undertaking shall not in
any way be modified, amended, amplified or limited by reference to any
document, instrument or agreement in which this Letter of Credit is referred
to, or to which this Letter of Credit relates and any such reference shall not
be deemed to incorporate by reference any such document, instrument or
agreement.
Except so far as otherwise expressly stated herein, this Letter of
Credit is subject to the Uniform Customs and Practices for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication No. 500 and, as
to matters not governed by such publication, by the laws of the State of
Maryland, including, without limit, the Uniform Commercial Code in effect
therein.
We hereby agree with you that drafts drawn under and in compliance
with the terms of this Letter of Credit will be duly honored if presented to us
on or before the above stated expiration date.
Very truly yours,
Ex .F
2
<PAGE> 123
Bank
-------------------------------------
By:
--------------------------------------
Authorized Signature
Ex. F
3
<PAGE> 124
EXHIBIT G to Lease
SCHEDULE OF CLEANING SERVICES
-----------------------------
Introductory Note: All services set forth in this Exhibit shall only be
performed if and to the extent the applicable surface to be vacuumed, buffed,
polished, swept, moped, dusted, wiped, washed or otherwise cleaned is exposed
and readily accessible.
Daily Cleaning Services
1. Empty waste baskets and remove refuse to designated area. Reline and
wipe clean receptacles as needed.
2. Break down all boxes or any items marked trash and remove to
designated areas.
3. Thorough vacuuming of all carpeted area, including corner and crevice
vacuuming in all tenant spaces and common areas.
4. Vacuum upholstered chairs and sofas where necessary.
5. Sweep all hard floors (tile, wood, etc.).
6. Sweep and damp mop all vinyl, marble and quarry tile floors. Spot buff
as needed.
7. Spot clean all tenant and common area carpets as needed. Shampoo all
common area high traffic lanes as needed.
8. Dust and/or wipe clean the following surfaces
o desks
o chairs
o file cabinets
o tables
o telephones
o pictures and frames
o doors
o lamps
o ledges and shelves
o desk/furniture partitions
o any other horizontal surface of a fixture or furniture subject to
collecting dust
Ex. G
1
<PAGE> 125
9. Wipe clean the following surfaces.
o window sills and ledges
o counter tops and kitchen cabinets
o switch plates
o private entrance doors
o glass, mirrored and wood doors, panels, windows and walls
o walls in kitchen and disposal area
o conference tables
10. Wash, clean and disinfect water fountains and/or coolers. Give special
attention to adjacent floor areas.
11. Establish regular cleaning maintenance program for floor in public
lobby area in conjunction with Property Manager; standard necessary to
maintain is high quality shine with no water marks, stains, scuffing
or other signs of wear.
12. Wipe and polish all glass, chrome and metal surfaces such as windows
(interior and up to standard ceiling height), partitions, banisters,
door knobs, light switch plates, kick plates, directional signs and
door saddles.
13. Dust and wipe clean sand urns.
14. Polish directory.
15. Vacuum and spot shampoo all carpet entrance mats.
16. Spot clean all wall surfaces.
17. Clean all entrance doors.
Daily Elevators
1. Wash and polish wood and stainless walls, doors and hall plate. Keep
tracks clean of dust, dirt and debris. Vacuum carpet. Spot clean
carpet as needed.
Daily Vending Areas
1. Thoroughly vacuum carpeting and damp mop tile flooring daily.
2. Thoroughly wipe all tops and sides of vending machines and express
mail box cabinets with damp cloth. Spot clean all wall surfaces.
Thoroughly clean microwave inside and outside.
Ex. G
2
<PAGE> 126
3. Empty trash and reline can daily.
4. Wash trash container as needed.
Daily Lavatories
1. Sweep and wet mop all tile floors using disinfectant.
2. Thoroughly clean all mirrors, top to bottom.
3. Scour, wash and disinfect all sink basins, counter tops, bowls, and
urinals, including undersides.
4. Wash toilet seats, both sides.
5. Wipe clean all partitions.
6. Wipe clean all wall tile as needed.
7. Remove all trash and sanitary waste, wash receptacles as necessary.
Remove rubbish to designated area.
8. Restock hand soap and paper products.
9. Polish all stainless dispensers.
Weekly Cleaning Services
1. Wash and sanitize metal partitions. Dust horizontal surfaces exceeding
70" height. Damp clean ceiling and exhaust fans.
2. Wash all interior glass, including hallways, windows (excluding second
story atrium windows), lobby doors, partitions and glass door panels.
3. Dust all blinds in common areas.
4. Sweep fire tower stairwells. Wet mop as needed. Wipe hand rails and
dust metalwork.
5. Wipe clean all desk tops and credenzas.
6. Remove all finger prints and dirt from door frames, kick and push
plates, handles and railings.
Ex. G
3
<PAGE> 127
7. Wet wipe all horizontal surfaces to 70" including moldings, shelves,
etc.
8. Polish all fine wood furniture including desks, chairs and cabinets.
9. Spray buff all vinyl tiles floors as necessary.
10. Machine buff other hard surfaces, floors to include ceramic, quarry
and marble title as necessary.
11. Wipe clean all plant containers in common areas.
Monthly / Quarterly Cleaning Services
1. Thoroughly wipe clean all ceiling vents and exhaust fans and area
immediately adjacent: monthly to quarterly, as needed.
2. Strip and refinish all tile floors including restroom floors on a
quarterly basis.
3. Wipe clean and remove all fingerprints from full height doors.
4. Vacuum all upholstered chairs.
5. Thoroughly clean all venetian blinds, pipes, ventilating and air
conditioning louvers, ducts and high molding: monthly to quarterly, as
needed.
6. Wipe clean as needed all vinyl base. Vacuum as needed all carpet cove
base: monthly to quarterly, as needed.
7. Thoroughly wash all trash receptacles, inside and outside.
8. Spot clean all vertical surfaces.
9. Spray buff all vinyl floors (both tenant and common areas) quarterly.
Semi-Annual Cleaning Services
1. Wash all common area walls including wallcovering, paint, marble and
vinyl base.
Ex. G
4
<PAGE> 128
EXHIBIT H to Lease
MARYLAND 95 EXECUTIVE CENTER
BUILDING DESCRIPTION
FOUR STORY BUILDINGS - 120,904 SF
Site Work and Landscaping
The four-story building will be landscaped to provide a park-like
atmosphere. Free surface parking will be provided.
Building Structure
The building will be designed with a composite deck providing one
hundred pounds per square foot loading on the second, third and fourth
floors and a slab on grade allowing two hundred pounds per square foot
on the first floor.
Skin and Glass
The brick veneer with "ribbon" windows is planned on all elevations.
Brick work will included accent landing such as recessed soldier
courses and row locks. Store front windows will consist of stock color
aluminum extrusions and one inch (1") insulated glass. Glass will
either be muted or low "E" treated for maximum energy conservation.
One inch (1") miniblinds will be installed on all windows.
Lobby and Care
The building's main lobby on the first floor will be predominately
finished with granite flooring, accent lighting, and polymix wall
covering. Building core bathrooms will be finished with ceramic tile
floors, vinyl wall covering, and granite surface vanity tops. Bathroom
partitions will be the ceiling hung, painted metal type.
Elevator/Stairs
The building will be supplied with three hydraulic elevators finished
in plastic laminate panels, stainless steel doors and jambs, and
carpet flooring. Three sets of stairs will also provide access to the
other floors. The stairwells will be well lit and conductive to use by
the tenants.
HVAC System
The HVAC system will be a split system with self contained units on
each floor connected to a cooling tower. Base Building distribution
will be through a
<PAGE> 129
variable air volume (VAV) system equipped with perimeter diffusers
(relocation will be Tenant workletter cost). All interior zone
ductwork and diffusers will be installed as part of the tenant
improvements.
Sprinkler System
The buildings will be fully sprinkled to include detector check valves
and U. L. monitoring station. Sprinkler heads will be the
semi-recessed style. The Base Building sprinkler system will be in
place as required by code (i.e. distributed with upright heads), all
relocation or additional heads will be part of the Tenant
Improvements.
Electric
The shell improvement will include all distribution panels (both 277v
and 110v) to provide tenants with 6 wafts psf of low voltage power.
All circuitry outside of the core areas will be installed as part of
the Tenant Improvements.
Ex. H
2
<PAGE> 130
EXHIBIT 10.4
March 22, 2000
Mr. Thomas Davidsson
Runebergsgatan 4
114 29 Stockholm
Sweden
Dear Thomas:
On the behalf of Digex, Inc., I am pleased to offer you the position of Senior
Vice President for Europe at Digex, Inc., reporting to myself, Mark Shull,
Chief Executive Officer, Digex, Inc. You will be an employee of our wholly
owned Digex Sweden subsidiary, which is in the process of being established.
This is a regular full-time position and will be based in Sweden. You will be
expected to travel extensively.
We will look to you to lead the planning and execution of our expansion into
Europe and in mobile applications hosting globally. We anticipate that this
will result in your holding a Managing Director position in Digex Europe and
becoming the General Manager for our mobile applications hosting business
globally.
We hope that you will be able to join us on the first of April 2000.
Base Salary
In this position, your annual base salary will be SEK 1,800,000. Base salary
will be payable in arrears in twelve installments per annum. Salaries are
reviewed annually on an anniversary basis, and increases are granted in
accordance with Company policy.
Incentive Compensation
You will be eligible to participate in Digex's Executive Management Incentive
Compensation Plan. In this position, you will be eligible for a bonus of 50% of
your base salary. At 100% of objectives achievement your total potential cash
compensation is SEK 2,700,000.
The incentive will be prorated on the base pay received during the current
fiscal calendar year. This incentive opportunity is contingent upon the
achievement of corporate and individual objectives as determined by your
management. This bonus is evaluated and paid on an annual basis.
<PAGE> 131
Mr. Thomas Davidsson
March 22, 2000
Page 2
Car
In this assignment, Digex will provide you with a vehicle in line with the
Company Car Policy. In your position, standard of car shall be equivalent to a
Saab 95 (Fuel expenses for business and private use and all maintenance costs
are included).
You can alternatively elect to receive a car allowance in cash, paid out per
month on a cost neutral basis.
Share Option Scheme
Digex is currently working on the design of a stock option plan for its
European employees. You will be eligible for inclusion in the share option
scheme of Digex Europe. All conditions related to the Share Option Scheme are
set and decisions made at the Company's absolute discretion. Any change of
conditions shall not constitute breach of this agreement.
As an alternative to your participation in the future Digex stock incentive
plan for European employees, Digex could extend you the opportunity to
participate to the US stock incentive plan under the condition that Digex would
not incur any employer's tax liability on your behalf.
Accordingly, you will arrange your personal location and circumstances to
mitigate or eliminate any charge to tax whatsoever on the employer/Digex that
might arise from, in connection with or by reference to your holding of any
stock options under the Digex Stock Incentive Plan or any dealing release or
exercise relating thereto.
On that basis, this offer would include a stock option grant covering an
aggregate of 200,000 shares of Digex common stock contingent upon approval by
the Compensation Committee of the Board of Directors. You will be granted
180,000 shares at an exercise price equal to the market price of Digex Inc.
common stock on the date that the grant is approved and the remaining 20,000
shares at an exercise price equal to $50.00 less than the strike price of the
first part of the grant.
Vesting of the award will begin with the approval of the grant and will
continue over a four-year period. 25% of the shares covered by the option will
vest one year following the date of grant. The balance of the shares will vest
in equal quarterly installments over the next three years so long as you
continue to be employed by Digex. Additionally, upon a change in control of the
company, this grant will fully vest one year following such change. Details
will be provided in your Grant Agreement upon approval by the Board of
Directors. The option will be issued pursuant to the Company's US long-term
Incentive Plan and will be subject to all the terms and conditions of that
plan.
Benefits
As an employee of Digex you will be entitled to all employee benefits offered
to Digex's senior management in Europe.
<PAGE> 132
Mr. Thomas Davidsson
March 22, 2000
Page 3
Short Term Cash Sickness Benefit
In the event of the Employee being unable to discharge his duties, the Company
will pay the Employee a short-term cash sickness benefit in line with common
practice in Swedish Industry. After 90 days of continuous illness, the pension
insurance will come into force and pay a long-term disability pension.
Pension & Insurance Coverage
The Company will annually contribute towards a pension scheme selected and
designed by the Employee, "Ordinary Retirement Scheme". Company contribution
shall be equal to the maximum amount deductible (10 base amounts, currently SEK
366,000 per annum). Social charges on levied contributions to pension
arrangements will be paid by the Company. Disability coverage and survivor's
benefits shall be a part of the arrangement and be on a satisfactory level.
Retirement age is 65.
Holiday Entitlement
Vacation will be granted in accordance to Digex's European vacation policy for
senior management employees.
Termination of Agreement
The agreement may be terminated by either party giving to the other six months
advance notice in writing. The Company reserves the right to remove the
Employee from his position during the time of notice period. During the notice
period the Employee is entitled to the conditions of this agreement.
Should the agreement be terminated by the Company for any reason other than
material breach of agreement, the Employee shall receive in addition to time of
notice a severance pay amounting to six months salary as per date the day
before giving notice. The severance pay shall, unless otherwise agreed upon, be
paid every month starting the first month after the effective date of
termination.
The Company reserves the right to terminate this agreement at any time without
advance notice or severance pay in the event of material breach of contract,
including act of gross negligence or gross misconduct by the Employee and
willful failure to perform his duties with the Company. Material breach of
contract after the termination of employment may result in the immediate
cessation of severance pay and other benefits.
<PAGE> 133
Mr. Thomas Davidsson
March 22, 2000
Page 4
Jurisdiction
This offer is construed according to the laws of the state of Delaware, USA
applicable to contracts made and to be performed in that state. Any dispute
about the agreement shall be submitted to an Arbitration court if the parties
cannot come to a consensus as to the interpretation of the conditions. Cost for
the arbitration proceedings shall be defrayed by the Company provided the
Employee has not unduly instigated the arbitration procedure. In such case, the
arbitrators shall determine the distribution of arbitration cost.
Other Employment Conditions
This offer is contingent on the following:
Your acknowledgement and execution of our "Employee Agreement Regarding
Intellectual Property and Proprietary Information", "Conflict of Interest and
Disclosure of Confidential Information" and which will be reviewed and
authorized by you and a company representative.
Kindly acknowledge your acceptance of this offer by signing and dating the
enclosed copy of this letter and returning it to me by the 27th of March 2000.
If we do not receive your acceptance of this offer by the close of business on
the above date, this offer will be withdrawn without further liability of
either party to the other.
If you have any questions or need additional information, please feel free to
call me at (240) 264-2470 or Tim Adams, Chief Financial Officer, 240 264-2635,
[email protected]. I am looking forward to your joining the Digex Executive Team
and feel it will be a mutually beneficial relationship. I wish you success in
the continuation of your career with Digex.
Sincerely yours,
/s/ MARK SHULL
---------------------------
Mark Shull
President &
Chief Executive Officer
Digex, Inc.
cc: D. Ruberg
Enclosure
/s/ THOMAS DAVIDSSON March 22, 2000
--------------------------- -----------------
Accepted: Thomas Davidsson Date:
<PAGE> 134
EXHIBIT 10.5
July 5, 2000
Mr. Todd Carlson
1000 Blue Ridge Place
Richardson, TX 75080
Dear Todd:
On the behalf of Digex Incorporated, I am pleased to offer you the position of
Senior Vice President of Business Operations, reporting to Mark Shull, Chief
Executive Officer. This is a regular part time position that will require you
to work in the Washington, DC area a minimum of 10 days per month.
Compensation
Your annual base salary will be $125,000 (based on 52 weeks of service).
Salaries are reviewed annually, and increases are granted based on individual
performance during the year and in accordance with Company policy.
You will be eligible to participate in Digex's Executive Management Incentive
Compensation Plan. In this position, you will be eligible for a bonus of 50% of
your base salary. At 100% of objective achievement your total potential cash
compensation is $187,500.
The incentive will be prorated on the base pay received during the current
fiscal calendar year. This incentive opportunity is contingent upon the
achievement of corporate and individual objectives as determined by your
departmental management.
Stocks
This offer includes a stock option grant covering an aggregate of 125,000
shares of Digex common stock contingent upon approval by the Compensation
Committee of the Board of Directors. You will be granted 100,000 shares at an
exercised price equal to the market price of Digex Inc. common stock on the
date that the grant is approved and the remaining 25,000 shares at an exercised
price equal to $20.00 less than the market price referenced above.
Vesting of the award will begin with the approval of the grant and will
continue over a four-year period. 25% of the shares covered by the option will
vest one year following the date of grant. The balance of the shares will vest
in equal quarterly installments over the next three years so long as you
continue to be employed by Digex. Additionally, upon a "change in control" as
defined in the stock option plan (attached), this grant will fully vest one
year following such change.
Details will be provided in your Grant Agreement upon approval by the Board of
Directors. The option will be issued pursuant to the Company's long-term
Incentive Plan and will be subject to all the terms and conditions of that
plan.
Benefits
As an employee of Digex you will be entitled to all employee benefits: Medical
insurance, medical and prescription drug card, dental insurance, short and
long-term disability, life insurance, 401(k) plan, educational reimbursement,
holidays, sick leave, vacation time, military leave, bereavement leave, voting
time off and jury duty leave. Your medical benefits will be effective the first
day of the month following your start of employment. An outline of these
benefits is attached. Should you have any benefit questions, please contact Ms.
Marilyn Garner, Senior Human Resources Generalist, 240-264-2391.
<PAGE> 135
Todd Carlson
page 2
July 5, 2000
Temporary Housing/Commuting Expenses
This offer does not include relocation, however Digex will provide suitable
temporary housing and commuting expenses on an ongoing basis while employed at
Digex. It is understood that you will be located in Dallas, Texas. However you
are expected to work a minimum of ten (10) days per month in the Washington, DC
area.
This offer is contingent on the following:
o Your acknowledgement and execution of our "Employee Agreement Regarding
Intellectual Property and Proprietary Information", which will be reviewed
and authorized by you and a company representative.
o Proof that you are legally authorized to work in the United States per
Immigration Reform Act of 1986 (see attachment A).
o Completion of the enclosed employment application.
As you know, in the ordinary course of business, pay and benefits plans evolve
as laws, employee, and/or business need change. If, in the future, it becomes
necessary to change any of the benefit or compensation plans currently in
effect, these changes will apply to you as they do to other eligible employees.
Furthermore, while this letter is our commitment to employ you in the
previously mentioned position, it does not constitute a contract for a specific
length of employment.
Kindly acknowledge your acceptance of this offer by signing and dating the
enclosed copy of this letter and returning it to me by July 14, 2000. If we do
not receive your acceptance of this offer by the close of business on the above
date, this offer will be withdrawn without further liability of either party to
the other.
If you have any questions or need additional information, please feel free to
call me at (240) 264-4712 or fax at (240) 264-2666. I am looking forward to
your joining the Digex Executive Management Team and feel it will be a mutually
beneficial relationship. I wish you success in the continuation of your career
with Digex.
Sincerely yours,
/s/ DAVID GAY
----------------------------
David Gay
Director of Employment
cc: M. Shull
D. Ruberg
Encl.
/s/ TODD CARLSON 7/8/00 7/1/00
---------------------------- ---------- -------------
Accepted: Todd Carlson Date: Start Date:
<PAGE> 136
EXHIBIT 10.6
July 6, 2000
Mr. Bruce Metge
1219 Old Stable Road
McLean, VA 22102
Dear Bruce:
On the behalf of Digex Incorporated I am pleased to offer you the position of
Senior Vice President & General Counsel, reporting to Mark Shull, Chief
Executive Officer.
Compensation
Your annual base salary will be $200,000 (based on 52 weeks of service).
Salaries are reviewed annually, and increases are granted based on individual
performance during the year and in accordance with Company policy.
You will be eligible to participate in Digex's Executive Management Incentive
Compensation Plan. In this position, you will be eligible for a bonus of 50% of
your base salary. At 100% of objective achievement your total potential cash
compensation is $300,000.
The incentive will be prorated on the base pay received during the current
fiscal calendar year. This incentive opportunity is contingent upon the
achievement of corporate and individual objectives as determined by your
departmental management.
Sign-On Bonus
To facilitate your transition to Digex, we are pleased to offer you a
Sign-On-Bonus of $50,000 in two installments: 50% of this bonus will be paid
shortly after starting and 50% six months after your start date, provided you
are still employed with us on that date.
Stocks
This offer includes a stock option grant covering an aggregate of 200,000
shares of Digex common stock contingent upon approval by the Compensation
Committee of the Board of Directors. You will be granted 175,000 shares at an
exercised price equal to the market price of Digex Inc. common stock on the
date that the grant is approved and the remaining 25,000 shares at an exercised
price equal to $30.00 less than the market price referenced above.
Vesting of the award will begin with the approval of the grant and will
continue over a four-year period. 25% of the shares covered by the option will
vest one year following the date of grant. The balance of the shares will vest
in equal quarterly installments over the next three years so long as you
continue to be employed by Digex. Additionally, upon a "change in control" as
defined in the stock option plan (attached), this grant will fully vest one
year following such change.
Details will be provided in your Grant Agreement upon approval by the Board of
Directors. The option will be issued pursuant to the Company's long-term
Incentive Plan and will be subject to all the terms and conditions of that
plan.
<PAGE> 137
Bruce Metge
page 2
July 6, 2000
Severance
Upon termination for reason other than "cause", you will be entitled to receive
the equivalent amount of your base pay and medical and dental benefits for a
12-month period. Cause shall be defined as your (i) willful and continued
failure to substantially perform duties assigned consistent with your position
as Senior Vice President & General Counsel (other than any failures resulting
from physical or mental illness or death); (ii) continuing failure to perform
or discharge the duties of Senior Vice President & General Counsel assigned to
you by the Chief Executive Officer, if such failure to perform or discharge
your duties continues for a period of thirty (30) days after written notice to
you detailing such failure; or (iii) conviction of a felony that adversely
affects the business and/or reputation of Digex. It is understood that this
definition of Cause shall be applicable to any "change of control" provisions
as contained in the Stock Option Agreement.
Benefits
As an employee of Digex you will be entitled to all employee benefits: Medical
insurance, medical and prescription drug card, dental insurance, short and
long-term disability, life insurance, 401(k) plan, educational reimbursement,
holidays, sick leave, vacation time, military leave, bereavement leave, voting
time off and jury duty leave. Your medical benefits will be effective the first
day of the month following your start of employment. An outline of these
benefits is attached. Should you have any benefit questions, please contact Ms.
Marilyn Garner, Senior Human Resources Generalist, 240-264-2391.
This offer is contingent on the following:
o Your acknowledgement and execution of our "Employee Agreement Regarding
Intellectual Property and Proprietary Information", which will be reviewed
and authorized by you and a company representative.
o Proof that you are legally authorized to work in the United States per
Immigration Reform Act of 1986 (see attachment A).
o Completion of the enclosed employment application.
As you know, in the ordinary course of business, pay and benefits plans evolve
as laws, employee, and / or business need change. If, in the future, it becomes
necessary to change any of the benefit or compensation plans currently in
effect, these changes will apply to you as they do to other eligible employees.
Furthermore, while this letter is our commitment to employ you in the
previously mentioned position, it does not constitute a contract for a specific
length of employment.
Disputes
In the event of any dispute regarding the parties compliance with the terms and
condition of this offer, your employment or termination of employment, then
either party may file a demand for arbitration with the American Arbitration
Association ("AAA") in Washington, DC, pursuant to its rules for commercial
arbitration, except that a single arbitrator shall be chosen by the parties. In
the event of such arbitration proceeding, the parties shall either agree on a
single arbitration or request from the AAA as many lists of arbitrators as may
be necessary for the parties to agree on an arbitrator, subject to a maximum of
three (3) lists. The AAA striking procedure shall not be used. The fees
associated with the filing and processing of such arbitration, including any
filing fees, the fees and costs of the mutually agreed arbitrator, and any
transcripts, shall be borne equally by the parties. The prevailing party shall
pay any other costs, including attorneys fees.
<PAGE> 138
Bruce Metge
page 3
July 6, 2000
Kindly acknowledge your acceptance of this offer by signing and dating the
enclosed copy of this letter and returning it to me by July 14, 2000. If we do
not receive your acceptance of this offer by the close of business on the above
date, this offer will be withdrawn without further liability of either party to
the other.
If you have any questions or need additional information, please feel free to
call me at (240) 264-4712 or fax at (240) 264-2666. I am looking forward to
your joining the Digex Executive Management Team and feel it will be a mutually
beneficial relationship. I wish you success in the continuation of your career
with Digex.
Sincerely yours,
/s/ TIMOTHY ADAMS
-----------------------------
Timothy Adams
Chief Financial Officer
cc: M. Shull
D. Ruberg
Encl.
/s/ BRUCE METGE 6 JULY 00 27 JULY 00
----------------------------- --------- ------------
Accepted: Bruce Metge Date: Start Date:
