<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 5, 1996
REGISTRATION NO. 333-05871
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
DIGEX, INCORPORATED
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
MARYLAND 4813 52-1672337
(STATE OR OTHER (PRIMARY STANDARD (IRS EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
----------------
6800 VIRGINIA MANOR ROAD
BELTSVILLE, MARYLAND 20705
(301) 847-5000
(ADDRESS AND TELEPHONE NUMBER
OF PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL PLACE OF BUSINESS)
----------------
CHRISTOPHER R. MCCLEARY, PRESIDENT
6800 VIRGINIA MANOR ROAD
BELTSVILLE, MARYLAND 20705
(301) 847-5000
(NAME, ADDRESS, AND TELEPHONE NUMBER
OF AGENT FOR SERVICE)
----------------
Copies to:
JOHN D. WATSON, JR., ESQ. JOHN W. WHITE, ESQ.
LATHAM & WATKINS CRAVATH, SWAINE & MOORE
1001 PENNSYLVANIA AVENUE, N.W. WORLDWIDE PLAZA
SUITE 1300 825 EIGHTH AVENUE
WASHINGTON, D.C. 20004-2505 NEW YORK, NEW YORK 10019-7475
(202) 637-2200 (212) 474-1000
----------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION
STATEMENT.
----------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Amended and Restated Certificate of Incorporation of DIGEX, Incorporated
(the "Company"), as amended (the "Amended and Restated Certificate of
Incorporation"), provides that the Registrant shall indemnify to the fullest
extent permitted by Section 145 of the General Corporation Law of the State of
Delaware (the "Delaware Law") any person whom it may indemnify thereunder. The
By-laws of the Registrant provide that indemnification shall be made by the
Registrant only upon a determination that indemnification is proper in the
circumstances because the individual met the applicable standard of conduct.
Advances for such indemnification may be made pending such determination upon
receipt of an undertaking by the director or officer to repay all amounts so
advanced in the event that it shall ultimately be determined that such
director or officer is not entitled to be indemnified by the Registrant. In
addition, the Amended and Restated Certificate of Incorporation provides for
the limitation to the extent permitted by the Delaware Law of personal
liability of directors to the Registrant and its stockholders for monetary
damages for breach of fiduciary duty as directors of the Registrant.
The Company is obtaining a directors' and officers' insurance and company
reimbursement policy in the amount of $ . The policy insures directors and
officers against unindemnified loss arising from certain wrongful acts in
their capacities and reimburses the Registrant for such loss for which the
Registrant has lawfully indemnified its directors and officers. The policy
contains various exclusions, none of which will relate to the offering
hereunder.
ITEM 25. OTHER EXPENSES OF ISSUANCES AND DISTRIBUTION.
The following table sets forth the fees and expenses in connection with the
issuance and distribution of the securities being registered hereunder. Except
for the SEC registration fee and the NASD fee, all amounts are estimates.
<TABLE>
<S> <C>
SEC Registration Fee............................................. $18,965.52
NASD Filing Fee.................................................. 6,000.00
Printing and Engraving Expenses.................................. *
Legal Fees and Expenses.......................................... *
Accounting Fees and Expenses..................................... *
Blue Sky Fees and Expenses....................................... 4,125.00
Miscellaneous Expenses........................................... *
----------
Total......................................................... $ *
==========
</TABLE>
- --------
* To be supplied by amendment
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The Company was incorporated on January 8, 1990 by Mr. Humphrey and Mr.
Doughney (the "Founders"). Mr. Humphrey contributed certain computer hardware
to the Company in exchange for 2,426,861 shares of Common Stock, and Mr.
Doughney contributed certain computer software to the Company in exchange for
1,617,907 shares of Common Stock.
On July 1, 1994, the Company borrowed $300,000 from individuals generally
affiliated or associated with Armata Partners L.P. These loans were evidenced
by 8% promissory notes (the "Bridge Notes") secured by a pledge by the
Founders of their shares of Common Stock. At the same time, the Company issued
warrants to purchase 477,189 shares of Common Stock to seven of these
individuals.
II-1
<PAGE>
On March 25, 1995, the Company entered into the Securities Purchase Agreement
with the Founders and Grotech, Venrock and Southern, pursuant to which the
Company issued a total of 45,454.54 shares of convertible preferred stock
(since redesignated Series A Convertible Preferred Stock), par value $1.00 per
share ("Series A Preferred Stock"), together with warrants to purchase of
2,800,000 shares of Common Stock of the Company for an aggregate investment of
$4,000,000. The Bridge Notes were repaid at their face amount with a portion of
the proceeds of this investment. Grotech IV was issued 18,181.82 shares of
Series A Preferred Stock and warrants to purchase 1,120,000 shares of Common
Stock of the Company, Venrock was issued 15,909.09 shares of Series A Preferred
Stock (4,924.85 shares of which were assigned to Venrock II and warrants to
purchase 980,000 shares of Common Stock (303,371 of which were assigned to
Venrock II) and Southern was issued 11,363.63 shares of Series A Preferred
Stock and warrants to purchase 700,000 shares of Common Stock.
As part of a fee for arranging the above investment, the Company made a cash
payment of $200,000 and issued warrants to purchase 228,020 shares of Common
Stock to nine individuals generally affiliated or associated with Armata
Partners L.P.
On November 28, 1995, the Company issued 10% promissory notes in the
principal amount of $2,000,000 (the "November 1995 Notes") and warrants to
purchase 749,866 shares of Common Stock to Grotech IV, Venrock, Southern and
Venrock Associates, II L.P. ("Venrock II" and, together with Venrock, Grotech
and Southern, the "Investors") as follows: Grotech IV purchased promissory
notes in the principal amount of $800,000 and warrants to purchase 299,946
shares of Common Stock; Venrock purchased promissory notes in the amount of
$483,307 and warrants to purchase 181,198 shares of Common Stock; Venrock II
purchased promissory notes in the principal amount of $216,693 and warrants to
purchase 81,225 shares of Common Stock; and Southern purchased promissory notes
in the principal amount of $500,000 and warrants to purchase 187,467 shares of
Common Stock.
On February 23, 1996, the Company issued additional promissory notes in the
principal amount of $1,000,000 (the "February 1996 Notes") on the same terms as
the November 1995 Notes and additional warrants to purchase 415,975 shares of
Common Stock to the Investors as follows: Grotech IV purchased promissory notes
in the principal amount of $400,000 and warrants to purchase 166,378 shares of
Common Stock; Venrock purchased promissory notes in the principal amount of
$217,000 and warrants to purchase 100,524 shares of Common Stock; Venrock II
purchased promissory notes in the principal amount of $133,000 and warrants to
purchase 45,087 shares of Common Stock; and Southern purchased promissory notes
in the principal amount of $250,000 and warrants to purchase 103,986 shares of
Common Stock.
On May 21, 1996, the Company issued additional promissory notes in the
principal amount of $1,000,000 (the "Convertible Notes") convertible into
shares of Series B Preferred Stock of the Company to the Investors as follows:
Grotech IV purchased promissory notes in the principal amount of $400,000;
Venrock purchased promissory notes in the principal amount of $217,000; Venrock
II purchased promissory notes in the principal amount of $133,000; and Southern
purchased promissory notes in the principal amount of $250,000.
On May 30, 1996, the Company, the Founders, the Investors, Grotech Partners,
Grotech Companion, Grotech Pennsylvania, Blue Chip and Crisler Capital Company,
Limited Partnership ("Crisler," and together with the Investors, Grotech
Partners, Grotech Companion, Grotech Pennsylvania and Blue Chip, the
"Purchasers") entered into the Purchase and Exchange Agreement, whereby the
Investors exchanged the November 1995 Notes and the February 1996 Notes held by
them for 31,263.89 shares of Series B Convertible Preferred Stock of the
Company, par value $1.00 per share (the "Series B Preferred Stock") and
converted the Convertible Notes into 10,000 shares of
II-2
<PAGE>
Series B Preferred Stock. In addition, the Purchasers paid $4,000,000 in cash
in exchange for a further 40,000 shares of Series B Preferred Stock. The above-
referenced exchange, conversion, and purchase resulted in the following
acquisitions of Series B Preferred Stock: Grotech IV acquired 22,505.56 shares
of Series B Preferred Stock; Grotech Partners acquired 8,537 shares of Series B
Preferred Stock; Grotech Companion acquired 930 shares of Series B Preferred
Stock; Grotech Pennsylvania acquired 533 shares of Series B Preferred Stock;
Venrock acquired 10,914.77 shares of Series B Preferred Stock; Venrock II
acquired 5,860.92 shares of Series B Preferred Stock. Southern acquired
11,982.64 shares of Series B Preferred Stock; Blue Chip acquired 16,000 shares
of Series B Preferred Stock; and Crisler acquired 4,000 shares of Series B
Preferred Stock.
In June 1996, the Company entered into a multi-year private network agreement
with WinStar. As part of the agreement, WinStar agreed to pay $5,000,000 to the
Company for connectivity services and received warrants to purchase 600,000
shares of Common Stock.
No underwriters were involved in any of the foregoing transactions. The sales
of all such securities were deemed to be exempt from registration under the
Act, in reliance on Section 4(2) thereunder, as transactions by an issuer not
involving any public offering.
Since September 18, 1995, the Company at various times has granted options to
purchase shares of Common Stock of the Company to certain Company employees. As
of May 31, 1996 options to purchase 4,288,200 shares of Common Stock have been
granted in the aggregate, at exercise prices ranging from $.10 to $1.49 per
share. These grants were exempt from registration pursuant to Section 4(2) of
the Act, Rule 701 thereunder or other applicable exemptions.
II-3
<PAGE>
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of the
Registrant.(2)
3.2 By-Laws of the Registrant
(a) Amended and Restated By-laws of the Registrant.(2)
(b) Amendment No. 1 to Amended and Restated By-laws.(2)
4.1 Form of Common Stock certificate.(2)
5.1* Opinion of Latham & Watkins with respect to the legality of the
securities being registered.
10.1 MCI Special Customer Arrangement between MCI Telecommunications
Corporation and Digital Express Group, Inc. dated March 28,
1996.(2)
10.2 Customer contract with LCI International, Inc. dated May 29,
1996.(2)
10.3 Customer contract with WinStar Communications, Inc. dated June 6,
1996.(2)
10.4 Warrant agreement with WinStar Communications, Inc. dated June 6,
1996.(2)
10.5 Peering agreements
(a) Agreement for T1 Gateway Attachment Services, as amended, with
ANS CO+RE Systems Inc. dated February 1, 1994.(2)
(b) Bilateral Interconnection Agreement with PSINet Inc. dated
February 7, 1996.(2)
(c) Peering Agreement with MCI Telecommunications Corporation
dated April 21, 1995.(2)
10.6 Agreement with Hughes Network Systems, Inc. dated June 7, 1996.(2)
10.7 Lease agreement with Banbury Associates Limited Partnership dated
November 17, 1994.(2)
10.8 Lease Agreement with George Christancos, dated December 4,
1995.(2)
10.9 Lease Agreement with Executive Office Network, Ltd.(1)
10.10 Sublease Agreement with A.S. McGaughaan.(2)
10.11 Employment and consulting agreements
(a) Clyde A. Heintzelman, dated March 19, 1995.(1)
(b) Christopher R. McCleary, dated February 1, 1996.(1)
(c) Brian M. Deobald, dated March 25, 1996.(1)
(d) Earl P. Galleher, dated March 25, 1996.(2)
(e) Nicholas J. Magliato, dated March 25, 1996.(1)
(f) William A. Pendley, dated April 1, 1996.(1)
(g) Thomas M. Brandt, Jr., dated June 1, 1996.(1)
10.12* Incentive Stock Option Plan.
10.13 Securities Purchase Agreement with Grotech Partners IV, L.P.,
Venrock Associates, Southern Venture Fund II, L.P., Douglas E.
Humphery and Michael T. Doughney dated March 24, 1995.(1)
10.14 Stockholders Agreement with Grotech Partners IV, L.P., Venrock
Associates, Southern Ventures II, L.P. Douglas E. Humphery and
Michael T. Doughney dated March 24, 1995.(1)
10.15 (a) Warrant Agreement with Grotech Partners IV, L.P. dated March
24, 1995.(1)
(b) Warrant Agreement with Venrock Associates dated March 24,
1995.(1)
(c) Warrant Agreement with Southern Venture Fund II, L.P. dated
March 24, 1995.(1)
10.16 Loan and Security Agreement with Silicon Valley Bank dated April
11, 1996.(1)
10.17 First Amendment to Loan and Security Agreement with Silicon Valley
Bank dated May , 1996.(1)
10.18 Revolving Promissory Note with Silicon Valley Bank dated April 11,
1996.(1)
10.19 Securities Purchase, Conversion and Exchange Agreement with
Grotech Partners IV, L.P., Grotech Partners III, L.P., Grotech III
Companion Fund, L.P., Grotech III Pennsylvania Fund, L.P., Venrock
Associates, Venrock Associates II, L.P., Southern Venture Fund II,
L.P., Blue Chip Capital Fund Limited Partnership, Crisler Capital
Company, Limited Partnership dated May 30, 1996.(1)
23.1 Consent of Ernst & Young LLP.(1)
23.2* Consent of Latham & Watkins (to be included in Exhibit 5.1).
</TABLE>
- --------
(1) Previously filed with the Company's Registration Statement on Form SB-2,
File No. 333-05871, filed June 12, 1996.
(2) Filed herewith.
*To be filed by amendment.
II-4
<PAGE>
ITEM 28. UNDERTAKINGS
The undersigned Registrant hereby undertakes that:
(1) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons of the small business issuer pursuant to the
foregoing provisions, or otherwise, the small business issuer has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred
or paid by a director, officer or controlling person of the small business
issuer in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the small business issuer will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
(2) For determining any liability under the Act, treat the information
omitted from the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the small business issuer under Rule 424(b)(1), or (4),
or 497(h) under the Act as part of this registration statement as of the
time the Commission declared it effective.
(3) For determining any liability under the Act, treat each post-
effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
(4) It will provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to
each purchaser.
II-5
<PAGE>
SIGNATURES
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS FOR FILING ON FORM SB-2 AND AUTHORIZED THIS AMENDMENT
NO.1 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, IN THE CITY OF BELTSVILLE,
STATE OF MARYLAND, ON JULY 3, 1996.
DIGEX, Incorporated
/s/ Christopher R. McCleary
By: _________________________________
Christopher R. McCleary
Chief Executive Officer, President
and Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No.1 has been signed below by the following persons in the capacities and on
the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
* Director July 3, 1996
- -------------------------------------
FRANK A. ADAMS
/s/ Christopher R. McCleary Chief Executive July 3, 1996
- ------------------------------------- Officer, President
CHRISTOPHER R. MCCLEARY and Chairman of the
Board (principal
executive officer)
* Senior Vice July 3, 1996
- ------------------------------------- President, Chief
THOMAS M. BRANDT, JR. Financial Officer
(principal
financial officer)
* Vice President, July 3, 1996
- ------------------------------------- Controller
JOHN C. WELLING (principal
accounting officer)
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<PAGE>
SIGNATURE TITLE DATE
* Senior Vice July 3, 1996
- ------------------------------------- President, Director
DOUGLAS E. HUMPHREY
* Vice President, July 3, 1996
- ------------------------------------- Director
MICHAEL T. DOUGHNEY
* Director July 3, 1996
- -------------------------------------
WILLIAM F. EARTHMAN, III
* Director July 3, 1996
- -------------------------------------
RAY A. ROTHROCK
* Director July 3, 1996
- -------------------------------------
ROBERT M. STEWART
* Director July 3,1996
- -------------------------------------
JOHN H. WYANT
*/s/ Christopher R. McCleary
By: _________________________________
ATTORNEY-IN-FACT
II-7
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
PAGE
EXHIBIT NO. DESCRIPTION OF EXHIBIT NUMBER
----------- ---------------------- ----------
<C> <S> <C>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of
the Registrant.(2)
3.2 By-Laws of the Registrant
(a) Amended and Restated By-laws of the Registrant(2)
(b) Amendment No. 1 to Amended and Restated By-
laws(2)
4.1 Form of Common Stock certificate.(2)
5.1* Opinion of Latham & Watkins with respect to the
legality of the securities being registered.
10.1 MCI Special Customer Arrangement between MCI
Telecommunications Corporation and Digital Express
Group, Inc. dated March 28, 1996.(2)
10.2 Customer contract with LCI International, Inc. dated
May 29, 1996.(2)
10.3 Customer contract with WinStar Communications, Inc.
dated June 6, 1996.(2)
10.4 Warrant agreement with WinStar Communications, Inc.
dated June 6, 1996.(2)
10.5 Peering Agreements
(a) Agreement for T1 Gateway Attachment Services, as
amended, with ANS CO+RE Systems Inc. dated February
1, 1994.(2)
(b) Bilateral Interconnection Agreement with PSINet
Inc. dated February 7, 1996.(2)
(c) Peering Agreement with MCI Telecommunications
Corporation dated April 21, 1995.(2)
10.6 Agreement with Hughes Network Systems, Inc. dated
June 7, 1996.(2)
10.7 Lease agreement with Banbury Associates Limited
Partnership dated November 17, 1994.(2)
10.8 Lease Agreement with George Christancos, dated
December 4, 1995.(2)
10.9 Lease Agreement with Executive Office Network,
Ltd.(1)
10.10 Sublease Agreement with A.S. McGaughaan.(2)
10.11 Employment and consulting agreements
(a) Clyde A. Heintzelman, dated March 19, 1995.(1)
(b) Christopher R. McCleary, dated February 1, 1996.(1)
(c) Brian M. Deobald, dated March 25, 1996.(1)
(d) Earl P. Galleher, dated March 25, 1996.(1)
(e) Nicholas J. Magliato, dated March 25, 1996.(1)
(f) William A. Pendley, dated April 1, 1996.(1)
(g) Thomas M. Brandt, Jr., dated June 1, 1996.(1)
10.12* Incentive Stock Option Plan.
10.13 Securities Purchase Agreement with Grotech Partners
IV, L.P., Venrock Associates, Southern Venture Fund
II, L.P., Douglas E. Humphery and Michael T.
Doughney dated March 24, 1995.(1)
10.14 Stockholders Agreement with Grotech Partners IV,
L.P., Venrock Associates, Southern Ventures II, L.P.
Douglas E. Humphery and Michael T. Doughney dated
March 24, 1995.(1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
PAGE
EXHIBIT NO. DESCRIPTION OF EXHIBIT NUMBER
----------- ---------------------- ----------
<C> <S> <C>
10.15 (a) Warrant Agreement with Grotech Partners IV, L.P.
dated March 24, 1995.(1)
(b) Warrant Agreement with Venrock Associates dated
March 24, 1995.(1)
(c) Warrant Agreement with Southern Venture Fund II,
L.P. dated March 24, 1995.(1)
10.16 Loan and Security Agreement with Silicon Valley Bank
dated April 11, 1996.(1)
10.17 First Amendment to Loan and Security Agreement with
Silicon Valley Bank dated May , 1996.(1)
10.18 Revolving Promissory Note with Silicon Valley Bank
dated April 11, 1996.(1)
10.19 Securities Purchase, Conversion and Exchange
Agreement with Grotech Partners IV, L.P., Grotech
Partners III, L.P., Grotech III Companion Fund,
L.P., Grotech III Pennsylvania Fund, L.P., Venrock
Associates, Venrock Associates II, L.P., Southern
Venture Fund II, L.P., Blue Chip Capital Fund
Limited Partnership, Crisler Capital Company,
Limited Partnership dated May 30, 1996.(1)
23.1 Consent of Ernst & Young LLP.(1)
23.2* Consent of Latham & Watkins (to be included in
Exhibit 5.1).
</TABLE>
- --------
(1) Previously filed with the Company's Registration Statement on Form SB-2,
File No. 333-05871, filed June 12, 1996.
(2) Filed herewith.
* To be filed by amendment
<PAGE>
EXHIBIT 3.1
-----------
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
DIGITAL EXPRESS GROUP, INC.
DIGITAL EXPRESS GROUP, INC., a Maryland corporation (the
"Corporation"), having its principal office in Prince George's County, Maryland,
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The Corporation desires to amend its charter in its entirety
and to restate its charter as amended.
SECOND: The charter of the Corporation is amended and restated in its
entirety by striking out Articles FIRST through SEVENTH of the charter of the
Corporation and substituting in lieu thereof the following:
"FIRST: The name of the Corporation is "DIGEX, Incorporated."
------
SECOND: The purposes for which the Corporation is formed are as
-------
follows:
(a) To develop, distribute, license, market and sell a full
spectrum of Internet access services.
(b) To engage in any other lawful act or activity for which
corporations may be organized under the Maryland General
Corporation Law.
THIRD: The post office address of the principal office of the
------
Corporation in this State is 6800 Virginia Manor Road, Beltsville,
Maryland 20705. The resident agent of the Corporation in this State
is Douglas E. Humphrey, whose post office address is 6800 Virginia
Manor Road, Beltsville, Maryland 20705. Said resident agent is a
citizen of the State of Maryland, and actually resides therein.
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<PAGE>
FOURTH: The Corporation is authorized to issue Fifty Million
-------
(50,000,000) shares of capital stock, of which (i) forty-nine million
eight hundred thousand (49,800,000) shares are common stock, par value
One Cent ($0.01) per share (the "Common Stock"), (ii) seventy thousand
(70,000) shares are designated Series A Convertible Preferred Stock,
par value One Dollar ($1.00) per share (the "Series A Preferred
Stock"), and (iii) one hundred thirty thousand (130,000) shares are
designated Series B Convertible Preferred Stock, par value One Dollar
($1.00) per share (the "Series B Preferred Stock" and, together with
the Series A Preferred Stock, the "Preferred Stock"). Except as
otherwise provided in this Charter, the Corporation shall have the
power to create and issue, with or without any connection to the issue
and sale of any shares of capital stock or other securities, warrants
entitling the holders thereof to purchase from the Corporation any
shares of its Common Stock, upon such terms and conditions and at such
times and prices as the Board of Directors may provide and which shall
be incorporated in an instrument or instruments evidencing such
rights.
The preferences, conversion rights, voting powers, restrictions,
limitations as to dividends, rights and qualifications of the Common
Stock and Convertible Preferred Stock are as follows:
A. COMMON STOCK
------------
1. Voting Rights.
--------------
Except as otherwise provided herein, every holder of Common Stock
shall be entitled to cast, in person or by proxy, one vote for each share of
Common Stock held of record by such holder on all matters to be voted on by
stockholders. The holders of shares of Common Stock shall vote together with
the holders of shares of Preferred Stock on all matters submitted to a vote of
stockholders, except as otherwise provided herein.
S-2
<PAGE>
2. Dividends
---------
Subject to the provisions of law and these Articles, dividends may be
declared and paid on the Common Stock of the Corporation at such time and in
such amounts as the Board of Directors may deem advisable, provided, in all
events, that no dividends may be paid with respect to shares of Common Stock
until such time as all shares of Preferred Stock have been (i) converted into
shares of Common Stock of the Corporation or (ii) redeemed by the Corporation as
provided herein and payment therefor has been made together with payment of all
accrued and unpaid dividends on said shares of Preferred Stock.
3. Liquidation Rights.
-------------------
In the event of the dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, after payment or provision for
payment of the debts and other liabilities of the Corporation and the
preferential amounts required to be paid to the holders of Preferred Stock as
provided herein, each share of Common Stock shall be entitled to share ratably
with all other shares of Common Stock in all remaining assets of the
Corporation.
B. PREFERRED STOCK.
----------------
1. Voting Rights.
--------------
(a) The holders of shares of Preferred Stock shall vote together with
the holders of shares of Common Stock on all matters submitted to a vote of
stockholders, except as otherwise provided herein. Each holder of Preferred
Stock shall be entitled to cast, in person or by proxy, a number of votes equal
to the number of shares of Common Stock into which all shares of Preferred Stock
held by such holder may be converted at the time of such vote on all matters to
be voted on by stockholders, except as otherwise provided herein.
(b) Subject to the provisions of paragraph B.1(c) hereof, at any
meeting of the stockholders of the Corporation held for the election of
directors, the holders of shares of Preferred Stock, voting as a class, shall be
entitled to elect four (4) directors of the Corporation. Where the holders of
Preferred Stock vote as a class, the affirmative vote of the holders of Sixty-
Three Percent (63%) or more of the votes entitled to be cast by the holders of
the outstanding Preferred Stock, represented in person or by proxy, at a meeting
at which a
S-3
<PAGE>
quorum of Preferred Stock is present shall be necessary and sufficient to
approve any matter with respect to which said holders are entitled to vote.
(c) During any period in which any one or more of the conditions
described in paragraph B. 1 (d) shall exist (a "Voting Period"), the number of
directors constituting the Board of Directors shall be automatically increased
by the smallest number that, when added to the number of directors then
constituting the Board of Directors, shall (together with the directors elected
by the holders of Preferred Stock pursuant to paragraph B. 1 (b)) constitute a
majority of such increased Board of Directors, and the holders of Preferred
Stock, voting as a class, shall be entitled to elect all such additional
directors.
(d) A Voting Period shall commence:
(i) If the Corporation fails (for any reason, including by
operation of law or as a result of an Act of Bankruptcy (as defined in paragraph
(d)(iv) below), without regard to the Corporation's financial or legal ability
to effect such redemption) to redeem any shares of Preferred Stock that it is
obligated to redeem within ten (10) business days after the date on which the
Corporation was obligated to redeem such shares of Preferred Stock;
(ii) If any accumulated dividends (whether or not declared by
the Corporation, and whether or not funds are then legally available in an
amount sufficient therefor) on shares of Preferred Stock shall be unpaid as of
5:00 p.m. Washington, D.C. time on the fifteenth business day after the date on
which the Corporation is obligated to pay such dividends;
(iii) In the event that any of the representations, warranties or
covenants of the Corporation to the holders of Preferred Stock set forth in (A)
that certain Securities Purchase Agreement by and among the Corporation, certain
holders of Preferred Stock and certain holders of Common Stock of the
Corporation as of March 24, 1995 (the "Agreement") or (B) that certain
Securities Purchase, Exchange and Conversion Agreement dated as of May 30, 1996
among the Corporation and the holders of the Preferred Stock and certain other
persons (the "Exchange Agreement") prove to be inaccurate or misleading in any
material respect, or the Corporation is in breach or default of any of its
material covenants, warranties, agreements or undertakings set forth in the
Exchange Agreement, the Agreement and the other "Purchase Documents" (as defined
in the Agreement), including, but not limited to, the failure of the Corporation
to grant or perform the registration rights set forth in Article IX of the
Agreement;
(iv) Upon the commencement of any voluntary or involuntary case
under the federal bankruptcy laws or any state insolvency or similar laws
seeking the
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liquidation or reorganization of the Corporation, or the appointment of a
receiver, liquidator, assignee, custodian, trustee, or similar official for the
Corporation or the Corporation's property, or the failure or inability of the
Corporation to generally pay its debts as they become due, or the making by the
Corporation of an assignment for the benefit of creditors (except that in the
case of any involuntary action, the Corporation shall have sixty (60) days to
have such case dismissed) (each, an "Act of Bankruptcy");
(v) Upon (A) the termination by Christopher R. McCleary
("McCleary") of that certain Employment Agreement dated February 1, 1996, by and
between the Corporation and McCleary for any reason or (B) the termination of
McCleary's employment with the Corporation for any reason;
(vi) Upon the failure by the Corporation to perform or observe
any material obligation or undertaking, except where such failure is not due to
any fault or inaction on the part of the Corporation, (A) under any contract or
instrument requiring the Corporation to pay in excess of, or to provide products
or services valued in excess of, Twenty-Five Thousand Dollars ($25,000) or (B)
under one or more contracts or instruments requiring the Corporation to pay in
excess of, or to provide products or services valued in excess of, Fifty
Thousand Dollars ($50,000) in the aggregate, as of the time of the last to occur
of such failure (whether or not any default has been declared or asserted
thereunder), and such failure continues for a period of thirty (30) days
following notice to the Corporation from a holder of shares of Preferred Stock;
or
(vii) Upon the occurrence of any of the events set forth in
paragraph B.6 of this Article Fourth without the consent of the holders of
shares of Preferred Stock representing sixty-three percent (63%) of all votes
entitled to be cast by the holders of all outstanding shares of Preferred Stock,
as provided therein.
(e) The Voting Period, and the voting rights so created upon the
occurrence of the conditions set forth in subparagraph (d) hereof, shall
continue unless and until: (i) all shares of Preferred Stock shall have been
converted into shares of Common Stock, (ii) the Corporation shall have redeemed
all shares of Preferred Stock that were subject to mandatory redemption (without
regard to the Corporation's legal ability to effect such redemption) as provided
herein and which were not timely redeemed and full payment therefor has been
made, (iii) if the Voting Period commenced solely as a result of an event
referenced in paragraph B.1(d)(ii) hereof, all accumulated and unpaid dividends
on shares of Preferred Stock shall have been paid through the last dividend
payment date, or (iv) if the Voting Period commenced solely as a result of an
event referenced in paragraph B.1(d)(iii) hereof, the performance or cure of any
representation, warranty, covenant or breach of the Corporation referenced in
such paragraph.
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(f) Upon the termination of a Voting Period, the voting rights
described in paragraph B.1(d) hereof shall cease, subject always, however, to
the revesting of such voting rights in the holders of Preferred Stock upon the
further occurrence of any of the events described in paragraph B.1(d).
(g) Within one (1) day after the accrual of any right of the holders
of Preferred Stock to elect directors pursuant to paragraph B.1(d) hereof, the
Board of Directors shall call a special meeting of the holders of Preferred
Stock to be held ten (10) days after the date of mailing of such notice. If the
Corporation fails to send such notice as provided above, the meeting may be
called by any holder of Preferred Stock on like notice. The record date for
determining the holders of Preferred Stock entitled to notice of and to vote at
such special meeting shall be the close of business on the day on which such
notice is given.
(h) The terms of office of all persons who are directors of the
Corporation at the time of a special meeting of holders of Preferred Stock to
elect directors pursuant to paragraph B.1(d) shall continue, notwithstanding the
election at such meeting by the holders of Preferred Stock of the number of
directors that they are entitled to elect, and the persons so elected by the
holders of Preferred Stock, together with the incumbent directors, shall
constitute the duly elected directors of the Corporation.
(i) Simultaneously with the expiration of a Voting Period, the terms
of office of the directors elected by the holders of Preferred Stock pursuant to
paragraph B.1(d) shall terminate, the persons elected by the holders of Common
Stock, and the directors elected by the holders of Preferred Stock pursuant to
paragraph B.1(b), and who are incumbent shall constitute the directors of the
Corporation, and the voting rights of the holders of Preferred Stock to elect
directors pursuant to paragraph B.1(d) shall be suspended.
(j) Except as provided in paragraph B.1(i) hereof, the directors
elected by holders of Preferred Stock pursuant to paragraphs B.1(b) and B.1(d)
may be removed only by the holders of Preferred Stock. If a director elected by
the holders of Preferred Stock resigns, is removed or dies, the vacancy on the
Board of Directors may be filled only by the holders of Preferred Stock. Any
holder of Preferred Stock may call a meeting of holders of Preferred Stock for
the purpose of filling such a vacancy.
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2. Dividends.
----------
(a) Series A Preferred Stock.
------------------------
(i) Subject to the prior right of the holders of the Series
B Preferred Stock, the holders of the then outstanding shares of Series A
Preferred Stock shall be entitled to receive during the period commencing on
March 15, 1997 through the date on which no shares of Series A Preferred stock
are outstanding (the "Series A Dividend Period") cumulative cash dividends at
the Series A Dividend Rate (as hereinafter defined), which dividends shall be
paid monthly in arrears on the 15th day of each month (unless such day is not a
business day, in which case such dividends shall be payable on the next
succeeding business day); provided that no dividends (other than PIK Dividends
(as defined below)) shall be paid with respect to the Series A Preferred Stock
for any monthly period unless full cash dividends have been paid for such
monthly period on all shares of Series B Preferred Stock. The "Series A Dividend
Rate" shall mean (i) for the period from the commencement of the Series A
Dividend Period through and including March 15, 1999, $6.00 per share per annum
and (ii) after March 15, 1999, $10.00 per share per annum; provided that, prior
to March 15, 1999, the Series A Dividend Rate shall be increased by $4.00 per
share during any Voting Period.
(ii) Notwithstanding the foregoing, if the Corporation so
elects, the Corporation may, at its option, (and if the Corporation is unable to
pay cash dividends on the Series A Preferred Stock for any dividend payment
period, the Corporation shall) pay dividends on the Series A Preferred Stock in
additional fully paid and non-assessable shares of Series A Preferred Stock
(such dividends, as well as dividends on Series B Preferred Stock paid in shares
of Series B Preferred Stock, being referred to herein as "PIK Dividends") by
issuing to each holder of shares of Series A Preferred Stock a number (which may
be a fraction) of shares of Series A Preferred Stock for any dividend payment
period equal to (x) the number of shares of Series A Preferred Stock held by
such holder, multiplied by (y) a fraction, the numerator of which is the amount
-------------
of the dividend that would otherwise be payable to such holder in respect of
each such share of Series A Preferred Stock for such dividend payment period,
and the denominator of which is the Per Share Liquidation Value (as hereinafter
defined). The issuance of shares of Preferred Stock as PIK Dividends shall, for
all purposes hereunder, constitute "payment" of the accrued dividends with
respect to which such shares were issued.
(iii) So long as any shares of Series A Preferred Stock remain
outstanding, no dividends shall be declared or paid upon, nor shall any dividend
or other distribution be made with respect to, any shares of any other series or
class of stock of the
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Corporation other than the Series B Preferred Stock and no shares of any series
or class of stock of the Corporation other than the shares of Series A Preferred
Stock and Series B Preferred Stock shall be redeemed, purchased or otherwise
acquired by the Corporation.
(b) Series B Preferred Stock.
------------------------
(i) Commencing on the first date on which shares of Series B
Preferred Stock are outstanding, the holders of the then outstanding shares of
Series B Preferred Stock shall be entitled to receive cumulative cash dividends
at the Series B Dividend Rate (as hereinafter defined), which dividends shall be
paid monthly in arrears on the 15th day of each month (unless such day is not a
business day, in which case such dividends shall be payable on the next
succeeding business day). The "Series B Dividend Rate" shall mean (i) through
and including March 15, 1999, $8.00 per share per annum and (ii) after March 15,
1999, $12.00 per share per annum; provided that, prior to March 15, 1999, the
Series B Dividend Rate shall be increased by $4.00 per share during any Voting
Period.
(ii) Notwithstanding the foregoing, if the Corporation so
elects, the Corporation may, at its option (and, if the Corporation is unable to
pay cash dividends on the Series B Preferred Stock for any dividend payment
period, the Corporation shall), pay dividends on the Series B Preferred Stock in
additional fully paid and non-assessable shares of Series B Preferred Stock by
issuing to each holder of shares of Series B Preferred Stock a number (which may
be a fraction) of shares of Series B Preferred Stock for any dividend payment
period equal to (x) the number of shares of Series B Preferred Stock held by
such holder, multiplied by (y) a fraction, the numerator of which is the amount
-------------
of the dividend that would otherwise be payable to such holder in respect of
each such share of Series B Preferred Stock for such dividend payment period,
and the denominator of which is the Per Share Liquidation Value.
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<PAGE>
(iii) So long as any shares of Series B Preferred Stock remain
outstanding, (A) no dividends shall be declared or paid upon, nor shall any
dividend or other distribution be made with respect to, any shares of any other
series or class of stock of the Corporation other than the dividends on the
Series A Preferred Stock, (B) no dividends may be declared or paid upon the
Series A Preferred Stock or any other class or series of stock of the
Corporation unless all cumulative dividends (whether or not declared) shall have
been paid on the Series B Preferred Stock (either in cash or as PIK Dividends),
(C) no cash dividends shall be paid in respect of the Series A Preferred Stock
for any dividend payment period unless cash dividends have been paid in full on
the outstanding shares of Series B Preferred Stock for such dividend payment
period, and (D) no shares of any series or class of stock of the Corporation
shall be redeemed, purchased or otherwise acquired by the Corporation other than
(i) shares of Series B Preferred Stock or (ii) shares of Series A Preferred
Stock redeemed pursuant to subparagraph B.3(a)(i).
3. Redemption.
-----------
(a) Mandatory Redemption.
---------------------
(i) Commencing January 1, 2000 and continuing on the first day
of each of the next twenty-three months thereafter, the Corporation shall redeem
1/24th (rounded to the nearest whole share) of all issued and outstanding shares
of Series A Preferred Stock (determined as of January 1, 2000) at the Per Share
Liquidation Value together with an amount on each such Redemption Date (as
defined below) equal to the accrued and unpaid dividends on such shares (whether
or not declared by the Corporation) to the applicable Redemption Date (the
"Redemption Price"), provided that, on the last such Redemption Date, the
Corporation shall redeem all shares of Series A Preferred Stock which are
outstanding on such Redemption Date. The number of shares of Series A Preferred
Stock to be redeemed from each holder of Series A Preferred Stock on each
Redemption Date shall equal the product of the total shares of Series A
Preferred Stock to be redeemed on the Redemption Date times a fraction, the
numerator of which shall be the number of shares of Series A Preferred Stock
then owned by said holder of Series A Preferred Stock, and the denominator of
which shall be the total number of shares of Series A Preferred Stock then
issued and outstanding, unless and to the extent that the Corporation receives
written instructions, at least five (5) days prior to the Redemption Date, from
two or more holders of Series A Preferred Stock (or their duly authorized
representatives) setting forth a different number of shares of Series A
Preferred Stock to be redeemed from said holders on one or more Redemption Dates
(provided that, in all events, the total number of shares of Series A Preferred
Stock to be redeemed from all holders of Series A Preferred Stock on said
Redemption Dates shall not exceed the amount of shares then redeemable as
otherwise provided herein), which instructions shall be binding upon the
Corporation and the holders of Series A Preferred Stock submitting such written
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<PAGE>
notice. For the purpose hereof, "Redemption Date" shall mean the date on which
any shares of Series A Preferred Stock or Series B Preferred Stock are required
to be redeemed pursuant to any provision of paragraphs B.3(a) or B.3(b) hereof).
(ii) Commencing January 1, 2001 and continuing on the first day
of each of the next twenty-three months thereafter, the Corporation shall redeem
1/24th (rounded to the nearest whole share) of all issued and outstanding shares
of Series B Preferred Stock (determined as of January 1, 2001) at the Redemption
Price, provided that, on the last such Redemption Date, the Corporation shall
redeem all shares of Series B Preferred Stock which are outstanding on such
Redemption Date. The number of shares of Series B Preferred Stock to be redeemed
from each holder of Series B Preferred Stock on each Redemption Date shall equal
the product of the total shares of Series B Preferred Stock to be redeemed on
the Redemption Date times a fraction, the numerator of which shall be the number
of shares of Series B Preferred Stock then owned by said holder of Series B
Preferred Stock, and the denominator of which shall be the total number of
shares of Series B Preferred Stock then issued and outstanding, unless and to
the extent that the Corporation receives written instructions, at least five (5)
days prior to the Redemption Date, from two or more holders of Series B
Preferred Stock (or their duly authorized representatives) setting forth a
different number of shares of Series B Preferred Stock to be redeemed from said
holders on one or more Redemption Dates (provided that, in all events, the total
number of shares of Series B Preferred Stock to be redeemed from all holders of
Series B Preferred Stock on said Redemption Dates shall not exceed the amount of
shares then redeemable as otherwise provided herein), which instructions shall
be binding upon the Corporation and the holders of Series B Preferred Stock
submitting such written notice.
(iii) Notwithstanding the provisions of paragraph B.3(a)(i)
hereof, the Corporation shall be obligated to redeem all or any portion (as set
forth in the notice provided in subparagraphs B.3(a)(iii)(a) or B.3(a)(iii)(b)
hereof) of the shares of Preferred Stock and pay the Redemption Price for said
shares:
(a) within one (1) day of receipt of written notice
from the holders of sixty-three percent (63%) or more of all votes entitled to
be cast by the holders of the outstanding shares of Preferred Stock, upon the
commencement of any Voting Period as provided in paragraphs B.1(d)(i), (ii),
(iv) and (v) hereof; or
(b) within one (1) day of receipt of written notice
from the holders of Sixty-Three Percent (63%) or more of all votes entitled to
be cast by the holders of the outstanding shares of Preferred Stock, thirty (30)
days after the commencement of any Voting Period as provided in paragraphs
B.1(d)(iii), (vi) and (vii) hereof unless the
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<PAGE>
Corporation shall have fully cured, within such thirty (30) day period, all of
the events giving rise to the commencement of such Voting Period.
(iv) In the event of the consummation of any offering of the
Corporation's Common Stock to the public pursuant to a registration statement
filed with the Securities and Exchange Commission based upon a valuation of the
Corporation of at least $20 million in which at least $10 million of net
proceeds are received by the Corporation and as the result of which shares of
Common Stock of the Corporation are listed on either the New York Stock
Exchange, the American Stock Exchange, or NASDAQ (a "Public Offering"), or the
closing of a sale by the Corporation of all or substantially all of its assets,
or a merger, consolidation or other combination of the Corporation with or into
another business entity (each such event being a "Sale"), if any holder of
shares of Preferred Stock does not elect to convert his or its shares of
Preferred Stock into shares of Common Stock of the Corporation in accordance
with paragraph B.4 hereof, the Corporation shall redeem, at the Redemption
Price, such holder's shares of Preferred Stock, which redemption shall occur not
less than ten (10) nor more than twenty (20) days after the date of the closing
of said Public Offering or Sale; provided, however, that in the case of a Public
Offering, the Corporation shall not be required to redeem the shares of
Preferred Stock pursuant to this paragraph B.3(a)(iv) if, and to the extent, the
managing underwriter determines that proceeds from the Public Offering shall not
be used to redeem such shares.
(v) Notwithstanding the provisions of paragraphs B.3(a)(i) and
(ii) hereof, if, at any time after March 15, 1999, the Corporation or any holder
of Common Stock of the Corporation as of the date hereof receives a bona fide
offer to purchase all or substantially all of the Corporation's assets, or all
or substantially all of the capital stock of the Corporation, the Corporation
shall provide written notice to the holders of Preferred Stock within ten (10)
days of receipt of said offer setting forth all of the relevant terms and
conditions thereof. If the holders of Sixty-three Percent (63%) or more of all
votes entitled to be cast by the holders of the outstanding shares of Preferred
Stock desire for said offer to be accepted, said holders of Preferred Stock
shall provide written notice to the Corporation within thirty (30) days
thereafter to that effect, and the Corporation and/or said holders of Common
Stock, as the case may be, shall thereafter either accept the offer, or no later
than ninety (90) days after receipt of notice from said holders of Preferred
Stock, acquire all of the warrants, shares of Common Stock and other securities
(other than the shares of Preferred Stock), held by all holders of Preferred
Stock, on the same terms and conditions as the proposed offer. The Corporation
shall thereupon immediately redeem all of the outstanding shares of Preferred
Stock at the Redemption Price for each said share as of the closing of said
sale, and as a condition thereof. If the Corporation is unable to fully pay such
amounts in cash, then the offer must be accepted by the Corporation or said
holders of shares of Common Stock, as the
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<PAGE>
case may be, closing with respect thereto shall occur as soon as possible, and
the provisions of paragraph B.3(a) hereof shall continue to apply with respect
to the shares of Preferred Stock.
(b) Optional Redemption of Series A Preferred Stock
-----------------------------------------------
So long as no shares of Series B Preferred Stock are then outstanding,
the Corporation may, at its option, redeem all (but not less than all) of the
shares of the Series A Preferred Stock at a price for each such share equal to
the Redemption Price.
(c) Redemption Discount.
-------------------
If, pursuant to subparagraphs B.3(a)(iii), (iv) or (v) or paragraph
B.3(b) hereof, the Corporation redeems any or all of the shares of Series A
Preferred Stock prior to March 15, 1997, the Redemption Price per share for the
Series A Preferred Stock (but not the Series B Preferred Stock) shall be
decreased by the product of (A) Twelve Dollars ($12.00) times (B) a fraction,
the numerator of which is the number of full months between the Redemption Date
and March 15, 1997, and the denominator of which is twenty-four (24).
(d) Redemption at the Option of the Holders of the Series B
-------------------------------------------------------
Preferred Stock.
---------------
At any time after the earlier of (i) May 30, 1999 and (ii) the date on
which all outstanding shares of Series A Preferred Stock have been redeemed, the
Corporation shall (subject to subparagraph B.3(e)(v)), within sixty (60) days of
receipt of the written request by the holders of shares of Series B Preferred
Stock evidencing more than fifty percent (50%) of the votes entitled to be cast
by all holders of Series B Preferred Stock (a "Series B Redemption Request"),
redeem all shares of Series B Preferred Stock held by such holders at a price
per share of Series B Preferred Stock equal to the Special Redemption Price (as
hereinafter defined); provided that the Corporation shall not be obligated to so
redeem any shares of Series B Preferred Stock if the Corporation shall
consummate a Public Offering prior to receipt by the Corporation of any such
Series B Redemption Request. Notwithstanding the foregoing, at least forty-five
(45) days prior to any redemption pursuant to this subparagraph (d), the
Corporation shall give written notice of such Series B Redemption Request to all
holders of Series B Preferred Stock, and each other holder of Series B Preferred
Stock may, by giving written notice to the Corporation thirty (30) days prior to
the date established for redemption of the shares subject to the Series B
Redemption Request, require the Corporation to (subject to subparagraph
B.3(e)(v)), concurrently with the redemption of shares pursuant to the Series B
Redemption Request, redeem all shares of Series B Preferred Stock held by such
holder at a per share price equal to the Special Redemption Price.
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<PAGE>
For the purposes hereof, "Special Redemption Price" shall mean the
greater of (x) two hundred percent (200%) of the Redemption Price and (y) the
fair market value per share of Series B Preferred Stock as determined by an
independent investment banking firm of nationally recognized standing selected
by the Corporation and reasonably acceptable to the holder(s) of Series B
Preferred Stock requesting such redemption.
(e) General Provisions for Redemptions.
----------------------------------
(i) Except as provided in paragraph B.3(a) hereof, whenever
shares of Preferred Stock are to be redeemed, the Corporation shall mail, not
fewer than thirty (30) nor more than forty-five (45) days prior to the
applicable redemption date, a written notice of redemption by first-class mail,
postage prepaid, to each holder of shares of Preferred Stock to be redeemed (a
"Notice of Redemption"), as its name and address appear on the stock books of
the Corporation. Each Notice of Redemption shall state (A) the Redemption Date,
(B) the Redemption Price, (C) the number of shares of Preferred Stock to be
redeemed, (D) the place or places where such shares of Preferred Stock are to be
redeemed, and (E) the provision of this Charter under which the redemption is
being made. No defect in the Notice of Redemption or in the mailing thereof
shall affect the validity of the redemption proceedings.
(ii) Notice of redemption having been mailed with respect to any
shares of Preferred Stock and provision for payment of the Redemption Price for
such on the applicable Redemption Date having been made by the Corporation,
then, unless default be made in the payment of the sum of the Redemption Price
with respect to such shares of Preferred Stock when and as due, (A) the shares
of Preferred Stock designated for redemption in such notice shall not be
entitled to any dividends accruing after the specified Redemption Date, and (B)
on such Redemption Date all rights of the respective holders of such shares with
respect to their ownership of such shares of Preferred Stock shall cease, except
the right to receive the Redemption Price, upon presentation and surrender of
the respective certificates representing such shares.
(iii) On each Redemption Date, each holder of shares of Preferred
Stock called for redemption shall surrender the certificate evidencing the
shares of Preferred Stock to be redeemed. If fewer than all of the shares
represented by a certificate are to be redeemed, the Corporation shall issue a
new certificate for the shares not redeemed.
(iv) Shares of Preferred Stock that have been redeemed,
purchased or otherwise acquired by the Corporation shall be retired and may not
be reissued.
(v) If the Corporation is unable to pay the full Redemption
Price for any shares of Preferred Stock which the Corporation has become
obligated (or elected, as the case
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may be) to redeem at or prior to such time, the amounts available for redemption
of shares of Preferred Stock (the "Available Amount") shall be applied first to
redeem any shares of Series B Preferred Stock required to be redeemed at such
time and the balance of the Available Amount remaining after the redemption of
all shares of Series B Preferred Stock shall be applied to the redemption of
such portion of the shares of Series A Preferred Stock required to be redeemed
which may be redeemed with such remaining balance. If the Corporation is unable
to pay the Redemption Price of all shares of Series B Preferred Stock which the
Corporation has become obligated to redeem at or prior to such time, each holder
of Series B Preferred Stock shall have the right to have redeemed by the
Corporation a number of such holder's shares of Series B Preferred Stock equal
to the product of (x) the total number of shares of Series B Preferred Stock
that the Corporation is able to redeem at the Redemption Date and (y) a
fraction, the numerator of which shall be the total number of shares of Series B
Preferred Stock held by such holder which the Corporation shall have become
obligated to redeem from such holder at or prior to such Redemption Date, and
the denominator of which shall be the total number of shares of Series B
Preferred Stock which the Corporation shall have become obligated to redeem at
or prior to such Redemption Date. If the Corporation is unable to pay the full
Redemption Price for any shares of Series A Preferred Stock which the
Corporation has become obligated (or elected, as the case may be) to redeem at
or prior to such time, each holder of Series A Preferred Stock which is to be
otherwise redeemed shall have the right to have redeemed by the Corporation a
number of such holder's shares of Series A Preferred Stock equal to the product
of (x) the total number of shares of Series A Preferred Stock the Corporation is
able to redeem at the Redemption Date and (y) a fraction, the numerator of which
shall be the total number of shares of Series A Preferred Stock held by such
holder which the Corporation shall have become obligated (or elected, as the
case may be) to redeem at or prior to such Redemption Date, and the denominator
of which shall be the total number of shares of Series A Preferred Stock which
the Corporation shall have become obligated (or elected, as the case may be) to
redeem at or prior to such Redemption Date.
(vi) Except as otherwise provided in this paragraph (vi), the
Corporation shall not redeem shares of the Preferred Stock at the time otherwise
required for redemption unless all dividends on such shares of stock (accrued
through the date of redemption) shall have been paid, or declared and a sum
sufficient for the payment thereof set apart. If the Redemption Price for any
such shares cannot be paid in full because the Corporation is prohibited by law
from paying any of the accrued but unpaid dividends on such shares, then (A)
such Redemption Price shall be deemed reduced by the amount of such dividends
that the Corporation is prohibited by law from paying, (B) such shares shall be
redeemed in accordance with the requirements of this paragraph B.3(d)(vi), and
(C) such unpayable and accrued and unpaid dividends shall be added in equal
amounts per share to the accrued and unpaid dividends on the shares of Preferred
Stock remaining outstanding in the hands of such holder; provided that, in no
event shall the Corporation purchase or redeem the
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last share of Preferred Stock held by such holder unless the Corporation shall
have paid to such holder all accrued and unpaid dividends on all shares of
Preferred Stock held by such holder at any time.
4. Conversion Rights. The shares of Preferred Stock shall be convertible
-----------------
into shares of Common Stock as follows:
(a) Each share of Preferred Stock shall be convertible, without the
payment of any additional consideration by the holder thereof and at the option
of the holder thereof, at any time after the date of issuance of such share, at
the office of the Corporation or any transfer agent for the Preferred Stock,
into such number of fully paid and non-assessable shares of Common Stock as is
determined by dividing (x) the Per Share Liquidation Value by (y) the applicable
Conversion Price. For the purpose hereof, and subject to the adjustment as
provided in this Section B.4, the "Conversion Price" shall mean (i) for the
Series A Preferred Stock, $3.636363 per share, and (ii) for the Series B
Preferred Stock $1.490851094 per share. Each record holder of shares of
Preferred Stock immediately prior to such conversion shall be entitled to all
accrued (to the time of the conversion) but unpaid dividends on the shares of
Preferred Stock to be converted.
(b) No fractional shares of Common Stock shall be issued upon
conversion of the Preferred Stock. In lieu of any fractional shares to which
the holder would otherwise be entitled, the Corporation shall pay cash equal to
such fraction multiplied by the then fair market value per share of Common Stock
as determined by the Board of Directors in good faith. Before any holder of
Preferred Stock shall be entitled to convert the same into full shares of Common
Stock, such holder shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the Corporation or of any transfer agent for the
Preferred Stock, and shall give written notice to the Corporation at such office
that he or it elects to convert the same and shall state therein such holder's
name or the name or names of his or its nominees in which he or it wishes the
certificate or certificates for shares of Common Stock to be issued, provided,
however, that if any such issuance constitutes a transfer of such shares for
purposes of applicable state and federal securities laws, the Corporation may
condition such issuance on the receipt of an opinion of counsel to the effect
that such transfer complies with such laws. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Preferred Stock or to his or its nominee or nominees, a certificate or
certificates for the number of shares of Common Stock to which he or it shall be
entitled as aforesaid, together with cash in lieu of any fraction of a share,
and a certificate or certificates for such Preferred Stock as were represented
by the certificates surrendered and not converted or redeemed. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of such surrender of the shares of Preferred Stock to be converted, and
the person or persons entitled to receive the shares of Common Stock issuable
S-15
<PAGE>
upon conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.
(c) If the Corporation:
(i) pays a dividend or makes a distribution on its Common Stock
in shares of its Common Stock;
(ii) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(iii) combines its outstanding shares of Common Stock into a
smaller number of shares; or
(iv) issues by reclassification of its Common Stock any shares
of its capital stock;
then the Conversion Price applicable to each series of Preferred Stock in effect
immediately prior to such action shall be adjusted so that a holder of shares of
Preferred Stock thereafter converted may receive the number of shares of capital
stock of the Corporation which he would have owned immediately following such
action if he had converted such shares of Preferred Stock immediately prior to
such action. The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date of a subdivision, combination or reclassification. Such
adjustment shall be made successively whenever any event listed above shall
occur. If, after an adjustment referred to in clauses (i) through (iv) above, a
holder of Preferred Stock upon conversion of such Preferred Stock may receive
shares of two or more classes of capital stock of the Corporation, the Board of
Directors of the Corporation shall determine the allocation of the adjusted
Conversion Price between the classes of capital stock. After such allocation,
the Conversion Price of each class of capital stock shall thereafter be subject
to adjustment on terms comparable to those applicable to Common Stock in this
subparagraph (c).
S-16
<PAGE>
(d) If the Corporation distributes any rights or warrants to any or
all holders of its Common Stock entitling them for a period expiring within
sixty (60) days after the record date mentioned below to purchase shares of
Common Stock at a price per share less than the Applicable Minimum Price per
share of Common Stock (as defined below) on that record date, the Conversion
Price applicable to each series of Preferred Stock shall be adjusted in
accordance with the following formula:
N x P
-----
O + M
------
C'= C x O + N
where:
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
O = the number of Fully Diluted Shares on the record date.
N = the number of additional shares of Common Stock for
which such rights or warrants are initially
exercisable.
P = the offering price per share of the additional shares
of Common Stock.
M = the Applicable Minimum Price per share of Common Stock
on the record date.
For the purpose hereof, (i) the "Applicable Minimum Price per share of Common
Stock" means (i) with respect to the Series A Preferred Stock, $ 0.99 per share,
subject to a proportionate adjustment upon any adjustment to the Conversion
Price of the Series A Preferred Stock, and (ii) with respect to the Series B
Preferred Stock, the Conversion Price of the Series B Preferred Stock then in
effect and (ii) "Fully Diluted Shares" as of any date means all shares of Common
Stock outstanding on such date, plus all shares of Common Stock issuable upon
the exercise or conversion of any and all options, warrants, rights or other
securities outstanding on such date which are exercisable or exchangeable for,
or convertible into, shares of Common Stock.
S-17
<PAGE>
The adjustment shall be made successively whenever any such rights or warrants
are issued and shall become effective immediately after the record date for the
determination of stockholders entitled to receive the rights or warrants. If at
the end of the period during which such warrants or rights are exercisable, not
all warrants or rights shall have been exercised, the Conversion Price
applicable to each series of Preferred Stock shall be immediately readjusted to
what it would have been if "N" in the above formula had been the number of
shares actually issued.
(e) If the Corporation distributes to all holders of shares of its
Common Stock (i) any shares of any class of capital stock of the Corporation
other than its Common Stock, (ii) any evidence of indebtedness of the
Corporation or any subsidiary of the Corporation, (iii) any other assets of the
Corporation, or (iv) any rights, options or warrants to acquire any of the
foregoing (other than rights, options or warrants referred to in subparagraph
4(d) above), the Conversion Price applicable to each series of Preferred Stock
shall be adjusted in accordance with the following formula:
M-F
---
C'= C x M
where:
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
M = the Applicable Minimum Price per share of Common Stock
on the record date mentioned below.
F = the fair market value on the record date of the
capital stock, indebtedness, rights, options or
warrants distributable in respect of one share of
Common Stock. The Board of Directors of the
Corporation shall determine the fair market value.
The adjustment shall be made successively whenever any such distribution is made
and shall become effective immediately after the record date for the
determination of stockholders entitled to receive the distribution.
(f) If the Corporation issues shares of Common Stock for a
consideration per share less than the Applicable Minimum Price per share of
Common Stock on the date the
S-18
<PAGE>
Corporation fixes the offering price of such additional shares, the Conversion
Price applicable to each series of Preferred Stock shall be adjusted in
accordance with the following formula:
O + P
-
M
------
C'= C x A
where:
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
O = the number of Fully Diluted Shares immediately prior
to the issuance of such additional shares.
P = the aggregate consideration received for the issuance
of such additional shares.
M = the Applicable Minimum Price per share of Common
Stock on the date of issuance of such additional
shares.
A = the number of Fully Diluted Shares immediately after
the issuance of such additional shares.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance. This
subparagraph 4(f) does not apply to (i) any transaction or issuance described in
subparagraph 4(c), 4(d) or 4(e) above or subparagraph 4(g) below, (ii) the
conversion of shares of any series of Preferred Stock or the conversion,
exchange or exercise of other securities convertible into or exchangeable or
exercisable for Common Stock, (iii) Common Stock issued to acquire, or in the
acquisition of, all or any portion of a business as a going concern, in an
arm's-length transaction between the Corporation and an unaffiliated third
party, whether such acquisition shall be effected by purchase of assets,
exchange of securities, merger, consolidation or otherwise, or (iv) Common Stock
issued in a bona fide public offering pursuant to a firm commitment
underwriting.
(g) If the Corporation issues any options, warrants, contracts or
securities convertible into or exchangeable or exercisable for Common Stock
(other than Series A Preferred Stock or Series B Preferred Stock or securities
issued in transactions described in
S-19
<PAGE>
subparagraph 4(c), 4(d) or 4(e) above) and for a consideration per share of
Common Stock initially deliverable upon conversion, exchange or exercise of such
options, warrants, contracts or securities less than the Applicable Minimum
Price per share of Common Stock on the date of issuance of such options,
warrants, contracts or securities, the Conversion Price shall be adjusted in
accordance with the following formula:
O + P
-
M
-----
C'= C x O + D
where:
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
O = the number of Fully Diluted Shares immediately prior to the
issuance of such securities.
P = the aggregate consideration received for the issuance of
such securities.
M = the Applicable Minimum Price per share of Common Stock on
the date of issuance of such securities.
D = the maximum number of shares of Common Stock deliverable
upon conversion or in exchange for or upon exercise of such
securities at the initial conversion, exchange or exercise
rate.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance. If all of
the Common Stock deliverable upon conversion, exchange or exercise of such
securities has not been issued when such securities are no longer outstanding,
then the Conversion Price shall promptly be readjusted to the Conversion Price
which would then be in effect had the adjustment upon the issuance of such
securities been made on the basis of the actual number of shares of Common Stock
issued upon conversion, exchange or exercise of such securities. This
subparagraph 4(g) does not apply to (i) the issuance of any such securities to
acquire, or in the acquisition of, all or any portion of a business as a going
concern, in an arm's-length transaction between the Corporation and an
unaffiliated third party, whether such acquisition shall be effected by purchase
of assets, exchange of securities, merger, consolidation or otherwise, (ii) the
issuance
S-20
<PAGE>
of any such securities in a bona fide public offering pursuant to a firm
commitment underwriting or (iii) the issuance of shares of Preferred Stock as
PIK Dividends.
(h) For purposes of any computation respecting consideration received
pursuant to subparagraphs 4(d), 4(f) and 4(g) above, the following shall apply:
(i) in case of the issuance of shares of Common Stock for cash,
the consideration shall be the amount of such cash net of any and all
commissions, discounts and other expenses incurred by the Corporation for
any underwriting of the issue or otherwise in connection therewith;
(ii) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof as determined
by the Board of Directors of the Corporation (irrespective of the
accounting treatment thereof); and
(iii) in the case of the issuance of options, warrants or other
securities convertible into or exchangeable or exercisable for shares, the
aggregate consideration received therefor shall be deemed to be the
consideration received by the Corporation for the issuance of such options,
warrants or other securities plus the additional minimum consideration, if
any, to be received by the Corporation upon the conversion or exchange or
exercise thereof (the consideration in each case to be determined in the
same manner as provided in clauses (i) and (ii) of this subparagraph 4(h)).
(i) No adjustment in the Conversion Price need be made unless the
adjustment would require an increase or a decrease of at least 0.001% in the
Conversion Price. Any adjustments that are not made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under
this paragraph 4 shall be made to the nearest 1/100th of a share, as the case
may be.
(j) No adjustment in the Conversion Price need be made under this
paragraph 4 for any change in the par value or no par value of the Common Stock,
and in no event shall any adjustment made under this paragraph 4 reduce the
Conversion Price below the par value of the Common Stock. If an adjustment is
made to the Conversion Price upon the establishment of a record date for a
distribution subject to subparagraphs 4(c) or 4(d) above and if such
distribution is subsequently cancelled, the Conversion Price applicable to each
Series then in effect shall be readjusted, effective as of the date when the
Board of Directors of the Corporation determines to cancel such distribution, to
the Conversion Price which would have been in effect if such record date had not
been fixed. No adjustment in the Conversion Price need be made under
subparagraphs 4(c) and 4(d) above if the Corporation issues or
S-21
<PAGE>
distributes to each holder of shares of each series of Preferred Stock the
shares of Common Stock, evidences of indebtedness, assets, rights, options or
warrants referred to in those subparagraphs which each holder would have been
entitled to receive had all shares of Preferred Stock held by such holders been
converted into Common Stock prior to the happening of such event or the record
date with respect thereto.
(k) Whenever the Conversion Price is adjusted, the Corporation shall
promptly mail to holders of Preferred Stock, first class, postage prepaid, a
notice of the adjustment. The Corporation shall file with the transfer agent,
if any, for Preferred Stock a certificate from the Corporation's independent
public accountants briefly stating the facts requiring the adjustment and the
manner of computing it. Subject to subparagraph 4(p) below, the certificate
shall be conclusive evidence that the adjustment is correct.
(l) The Corporation from time to time may reduce the Conversion Price
(which shall be applied pro rata to the Conversion Price of the Series A
Preferred Stock and the Series B Preferred Stock) by any amount for any period
of time if the period is at least twenty (20) business days and if the reduction
is irrevocable during the period, but in no event may the Conversion Price be
less than the par value of a share of Common Stock. Whenever the Conversion
Price is reduced, the Corporation shall send to holders of Preferred Stock, by
overnight courier, a notice of the reduction. The Corporation shall send by
overnight courier the notice at least 15 days before the date the reduced
conversion price takes effect. The notice shall state the reduced conversion
price and the period it will be in effect. A reduction of the Conversion Price
does not change or adjust the Conversion Price otherwise in effect for purposes
of subparagraphs 4(c), 4(d), 4(e), 4(f) and 4(g) above.
(m) If:
(i) the Corporation takes any action which would require an
adjustment in the Conversion Price pursuant to subparagraph 4(d) or 4(e)
above, or clause (iv) of subparagraph 4(c) above;
(ii) the Corporation consolidates or merges with, or transfers
all or substantially all of its assets to, another corporation, and
stockholders of the Corporation must approve the transaction; or
(iii) there is a dissolution or liquidation of the Corporation;
a holder of Preferred Stock may want to convert such stock into shares of Common
Stock prior to the record date for or the effective date of the transaction so
that he may receive the rights, warrants, securities or assets which a holder of
shares of Common Stock on that date
S-22
<PAGE>
may receive. Therefore, the Corporation shall send to such holders, by overnight
courier, a notice stating the proposed record or effective date, as the case may
be. The Corporation shall mail the notice at least ten (10) days before such
date. Failure to mail the notice or any defect in it shall not affect the
validity of any transaction referred to in clause (i), (ii) or (iii) of this
subparagraph 4(m).
(n) If the Corporation is party to a merger or consolidation which
reclassifies or changes its Common Stock, upon consummation of such transaction
each series of Preferred Stock shall automatically become convertible into the
kind and amount of securities, cash or other assets which the holder of shares
of such series of Preferred Stock would have owned immediately after the
consolidation or merger if such holder had converted such shares immediately
before the effective date of the transaction, and appropriate adjustment (as
determined by the Board of Directors of the Corporation) shall be made in the
application of the provisions herein set forth with respect to the rights and
interests thereafter of the holders of Preferred Stock, to the end that the
provisions set forth herein (including provisions with respect to changes in and
other adjustment of the Conversion Price) shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares of stock or other
securities or property thereafter deliverable upon the conversion of such shares
of Preferred Stock.
(o) In any case in which this paragraph 4 shall require that an
adjustment as a result of any event become effective from and after a record
date, the Corporation may elect to defer until after the occurrence of such
event (i) the issuance to the holder of any shares of Preferred Stock converted
after such record date and before the occurrence of such event of the additional
shares of Common Stock issuable upon such conversion over and above the shares
issuable on the basis of the Conversion Price in effect immediately prior to
adjustment and (ii) a check for any remaining fractional shares of Common Stock
as provided in subparagraph 4(b) above.
(p) Except as provided in the immediately following sentence, any
determination that the Corporation or its Board of Directors must make pursuant
to this paragraph 4 shall be conclusive. Whenever the Corporation or its Board
of Directors shall be required to make a determination under this paragraph 4,
such determination shall be made in good faith and may be challenged in good
faith by the holders of 63% of the votes entitled to be cast by the holders of
the outstanding shares of Preferred Stock of either series, and any dispute
shall be resolved, at the Corporation's expense, by an investment banking firm
of recognized national standing selected by the Corporation and acceptable to
such holders of Preferred Stock.
S-23
<PAGE>
(q) All shares of Preferred Stock converted pursuant to this
paragraph 4 shall be retired and may not thereafter be reissued.
(r) Notwithstanding any provision of this paragraph (r) to the
contrary, no adjustment to the Conversion Price applicable to any series of
Preferred Stock shall be made pursuant to paragraphs 4(c), (d), (e), (f), or (g)
for (i) the issuance of any options to purchase shares of Common Stock for
employees of the Corporation under a bona fide employee stock option plan
approved by the Board of Directors of the Corporation or the issuance of shares
upon exercise of any such options; provided that such employee stock option plan
does not provide for the grant of options to purchase shares of Common Stock in
excess of 4,167,239 shares and (ii) the grant or exercise of any other option,
right or warrant issued by the Corporation on or before the date hereof and
referenced in the schedules to the Exchange Agreement.
S-24
<PAGE>
(s) The sale or other disposition of any shares of Common Stock of
the Corporation or other securities held in the treasury of the Corporation, or
of any securities resulting from any reclassification or reclassifications or
such shares or other securities which were effected while they were held in the
treasury of the Corporation, shall be deemed an issuance thereof.
(t) If at any time the Corporation shall adjust the subscription,
exercise, conversion or exchange price of any option, warrant, contract or
security exercisable for or convertible into shares of Common Stock or its
equivalent issued or subject to issuance by the Corporation (other than any
Warrant (as defined in the Exchange Agreement) or shares of Preferred Stock),
such adjustment shall constitute an issuance of such securities and the total
consideration for each share thereof shall be the price as so adjusted.
5. Liquidation Rights.
------------------
(a) In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, (i) the holders of
shares of the Series B Preferred Stock shall be entitled to receive out of the
assets of the Corporation available for distribution to stockholders, before any
distribution or payment shall be made in respect of the holders of shares of the
Series A Preferred Stock or the Common Stock, a liquidation distribution in the
amount of One Hundred Dollars ($100.00) per share (the "Per Share Liquidation
Value") plus an amount equal to all accrued but unpaid dividends thereon to the
date fixed for such distribution or payment and (ii) the holders of shares of
the Series A Preferred Stock shall be entitled to receive out of the assets of
the Corporation available for distribution to stockholders, before any
distribution or payment shall be made in respect of the holders of shares of
Common Stock, a liquidation distribution in the amount of the Per Share
Liquidation Value plus an amount equal to all accrued but unpaid dividends
thereon to the date fixed for such distribution or payment. The holders of
shares of Preferred Stock shall not be entitled to receive any additional
distributive amounts with respect to shares of Preferred Stock upon such
liquidation, dissolution or winding up of the affairs of the Corporation
resulting in any distribution of assets to stockholders.
(b) If, upon any such liquidation, dissolution or winding up of the
affairs of the Corporation, the assets of the Corporation available for
distribution to stockholders shall be insufficient to permit the payment in full
to the holders of the Series B Preferred Stock of the amounts to which they are
entitled, then all of such available assets shall be distributed to the holders
of shares of Series B Preferred Stock ratably in proportion to the liquidation
payment otherwise due under paragraph B.5(a) to each such holder and no
distributions shall be made in respect of the Series A Preferred Stock and the
Common Stock. If, upon any such
S-25
<PAGE>
liquidation, dissolution or winding up of the affairs of the Corporation, the
assets of the Corporation available for distribution to stockholders shall be
insufficient to permit the payment in full to the holders of the Series A
Preferred Stock of the amounts to which they are entitled, then, after payment
in full to the holders of Series B Preferred Stock of the amounts to which they
are entitled, all of the remaining available assets shall be distributed to the
holders of shares of the Series A Preferred Stock ratably in proportion to the
liquidation payment otherwise due under paragraph B.5(a) to each such holder and
no distributions shall be made in respect of the Common Stock.
(c) The purchase or redemption by the Corporation of stock of any
class, in any manner permitted by law, shall not for the purpose of this
paragraph B.5 be regarded as a liquidation, dissolution or winding up of the
Corporation. Neither the consolidation nor merger of the Corporation with or
into any other corporation or corporations, nor the sale or transfer by the
Corporation of all or any part of its assets shall be deemed to be a
liquidation, dissolution or winding up of the Corporation for the purpose of
this paragraph B.5.
(d) At least twenty (20) days prior written notice of the date on
which any such liquidation, dissolution or winding up of the affairs of the
Corporation shall be sent by first class mail, postage prepaid, to each holder
of Preferred Stock at his or its address on the records of the Corporation.
6. Restrictions. Until the first to occur of a Public Offering or the
------------
conversion to Common Stock of all shares of Preferred Stock or the redemption by
the Corporation of, and payment for, all of the shares of Preferred Stock and
all accrued and unpaid dividends thereon, the Corporation shall not undertake
any of the actions prohibited by this paragraph B.6 without the prior written
consent (in addition to any other vote or consent required by law) of the
holders of Sixty-Three Percent (63%) or more of the votes entitled to be cast by
the holders of all the outstanding shares of Preferred Stock, voting as a class,
which consent will not be unreasonably withheld.
S-26
<PAGE>
(a) Ordinary Course. Without taking any action or making any
---------------
expenditure outside of the normal and ordinary course of business, the
Corporation shall (i) carry on its business in substantially the same manner
consistent with past operations, (ii) not enter into any obligation out of the
ordinary course of business requiring the annual payment in an amount in excess
of Ten Thousand Dollars ($10,000) in the aggregate for each such obligation
unless such obligation is undertaken in accordance with the "Budget" (as defined
in the Agreement), (iii) not incur or increase any indebtedness for borrowed
money such that the aggregate amount of such indebtedness outstanding at any
time exceeds One Hundred Thousand Dollars ($100,000.00), unless such
indebtedness is undertaken in accordance with the Budget, (iv) except as
contemplated by the Budget, preserve its present business organization intact,
(v) except as contemplated by the Budget, use its best efforts to keep available
the services of present officers, (vi) except in accordance with the Budget,
make no material increase in levels of officer staffing, (vii) use its best
efforts to preserve its present relationships with persons having business
dealings with the Corporation, and (viii) not increase the amount of, or prepay,
any payment pursuant to any contract or agreement, except in the ordinary course
of the business of the Corporation.
(b) Issuance of Capital Stock or Securities. Except with respect to
---------------------------------------
the exercise of the Warrants (as defined in the Exchange Agreement), the
Corporation shall not issue any shares of capital stock, nor issue any rights to
acquire any shares of capital stock nor issue any securities or other
obligations convertible into shares of capital stock, nor redeem any of its
shares of capital stock other than (i) the redemption or repurchase of shares of
Preferred Stock in accordance with the terms hereof, (ii) the issuance of shares
of Preferred Stock as dividends on the Preferred Stock in accordance with the
terms hereof, (iii) the issuance of shares of capital stock upon the conversion
of shares of Preferred Stock and (iv) the issuance of stock options to employees
of the Company which, in the aggregate, are exercisable for no more than
4,167,239 shares of Common Stock or the issuance of shares of Common Stock upon
the exercise of such options.
(c) Extraordinary Actions. The Corporation shall not negotiate or
---------------------
enter into any merger, consolidation or other combination with or into, or
purchase any other business entity or the assets constituting a principal
portion of another business, or liquidate or dissolve, or amend its charter or
bylaws, or alter its corporate structure, purchase an equity interest in any
entity, or establish any partly or wholly owned subsidiaries or joint ventures,
or change the location or nature of its business, or invest in any endeavor not
related to such business, as then constituted, and the property used in the
conduct of such business.
S-27
<PAGE>
(d) Sale of Assets. Except with the prior approval of the Board of
--------------
Directors, the Corporation shall not negotiate or enter into, or consummate, any
agreement with respect to the sale, transfer or other disposition of any of its
assets outside the normal and ordinary course of its business consistent with
its past practices.
(e) Encumbrances. Except with the prior approval of the Board of
------------
Directors, the Corporation shall not pledge, sell, lease, transfer, dispose or
otherwise encumber any of its assets, or permit the creation or existence of any
lien, encumbrance or other security interest in or on any of its assets, other
than liens for indebtedness existing on the date hereof, liens for indebtedness
in accordance with the Budget, and liens with respect to permitted capital
improvements pursuant to subparagraph B.6(g) hereof.
(f) Distributions. The Corporation shall not declare or pay any
-------------
dividends, or make any distributions in cash, securities, capital stock or
otherwise, on its shares of capital stock (other than dividends payable with
respect to shares of the Preferred Stock), or in any other manner whatsoever
advance, transfer or distribute cash or cash equivalents to the holders of
Common Stock or its directors, officers or other personnel (except for salaries,
bonuses, benefits and other compensation in accordance with the Budget as
provided in the Agreement), or repurchase any outstanding shares of capital
stock (other than redemption or repurchase of the Preferred Stock as provided
herein).
(g) Capital Improvements. The Corporation shall not expend in excess
--------------------
of $500,000 in the aggregate in any fiscal year for capital improvements or
similar corporate purposes, except in accordance with the Budget.
S-28
<PAGE>
(h) Transactions with Related Persons. Except with the prior approval
---------------------------------
of the Board of Directors, the Corporation shall not enter into any contract,
agreement or other obligation with any person or affiliate of any person who,
directly or indirectly, owns any shares of its capital stock, or any officer,
director or other management personnel or employee (except for salaries,
bonuses, benefits and other compensation in accordance with the Budget), or
affiliate, on terms and conditions any less favorable than would be received
from any independent third party in the ordinary course of business. For
purposes of this subparagraph B.6(h), if the Corporation enters into any
contract, agreement or other obligation with a holder of shares of Common Stock
or an affiliate of such holder, whether said contract, agreement or other
obligation is on terms and conditions no less favorable than would be received
from an independent third party in the ordinary course of business shall be
determined by the members of the Board of Directors elected by the holders of
Preferred Stock. If the Corporation enters into any contract, agreement or other
obligation with a holder of Preferred Stock or any person directly or indirectly
controlled by such holder and which person owns any shares of capital stock,
whether said contract, agreement or other obligation is on terms and conditions
no less favorable than would be received from an independent third party in the
ordinary course of business shall be determined by the members of the Board of
Directors other than the members elected by the holders of the Preferred Stock.
FIFTH: Except as otherwise provided in Article Fourth, paragraph B.1
-----
hereof, the Corporation shall have no less than seven (7) and no more than nine
(9) directors, which number may be increased or decreased only by an amendment
hereto. At the time of filing of these Articles of Amendment and Restatement,
the Board of Directors of the Corporation consists of Frank A. Adams,
Christopher R. McCleary, Michael T. Doughney, Douglas E. Humphrey, William F.
Earthman, III, Ray A. Rothrock and Robert M. Stewart.
SIXTH: The holders of shares of the capital stock of the Corporation shall
-----
not have preemptive rights to acquire additional shares of stock of the
Corporation.
SEVENTH: The following provisions are hereby adopted for the purpose of
-------
defining, limiting and regulating the powers of the Corporation and of the
directors and stockholders:
(a) Except as otherwise provided in this Charter, the Board of
Directors of the Corporation is hereby empowered to authorize the issuance from
time to time of shares of its stock of any class, whether now or hereafter
authorized, and securities convertible into shares of its stock, of any class or
classes, whether now or hereafter authorized, for such consideration as the
Board of Directors may deem advisable.
(b) Except as otherwise provided in this Charter, the Corporation
reserves the right to make, from time to time, any amendments of its charter
which may now or
S-29
<PAGE>
hereafter be authorized by law, including any amendments which alter the
contract rights of any class of stock as expressly set forth in the charter.
(c) Notwithstanding any provision of law requiring any action to be
taken or authorized by the affirmative vote of the holders of a greater
proportion of the votes of all classes or of any class of stock of the
Corporation, such action shall be effective and valid if taken or authorized by
the affirmative vote of a majority of the total number of votes entitled to be
cast thereon, except as otherwise provided in this Charter.
(d) Except as otherwise provided in this Charter, no contract or
other transaction between this Corporation and any other corporation,
partnership, individual or other entity and no act of this Corporation shall in
any way be affected or invalidated by the fact that any of the directors of this
Corporation are directors, principals, partners or officers of such other
entity, or are pecuniarily or otherwise interested in such contract, transaction
or act; provided that (i) the existence of such relationship or such interest
shall be disclosed to the Board of Directors or to a committee of the Board of
Directors if the matter involves a committee decision, and the contract,
transaction or act shall be authorized, approved or ratified by a majority of
disinterested directors on the Board or on such committee, as the case may be,
even if the number of disinterested directors constitutes less than a quorum or
(ii) the contract, transaction or act shall be authorized, ratified or approved
in any other manner permitted by the Maryland General Corporation Law.
(e) Except as otherwise provided in this Charter, the Board of
Directors shall have the power to classify or reclassify any unissued stock,
whether now or hereafter authorized, by setting or changing the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of redemption of such stock.
(f) Except as contemplated in the Agreement, the other "Purchase
Documents" (as defined in the Agreement), the Exchange Agreement and the
"Ancillary Documents" (as defined in the Exchange Agreement), to the maximum
extent that limitations on the liability of directors and officers are permitted
by the Maryland General Corporation Law, as from time to time amended, no
director or officer of the Corporation shall have any liability to the
Corporation or its stockholders for money damages. This limitation on liability
applies to events occurring at the time a person serves as a director or officer
of the Corporation whether or not such person is a director or officer at the
time of any proceeding in which liability is asserted. No amendment or repeal
of this paragraph, or the adoption of any provision of the Corporation's Charter
inconsistent with this paragraph, shall apply to or affect in any respect the
liability of any director or officer of the Corporation with respect to any
alleged act or omission which occurred prior to such amendment, repeal or
adoption.
S-30
<PAGE>
(h) To the maximum extent permitted by the Maryland General
Corporation Law, as from time to time amended, the Corporation shall indemnify
its currently acting and its former directors against any and all liabilities
and expenses incurred in connection with their services in such capacities,
shall indemnify its currently acting and its former officers to the full extent
that indemnification shall be provided to directors, and may indemnify its
employees and agents and persons who serve and have served, at its request as a
director, officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture or other enterprise, as may be determined by the
Board of Directors. The Corporation shall, also to the same extent, advance
expenses to its directors, officers and other persons, if any, and may by Bylaw,
resolution or agreement make further provision for indemnification of directors,
officers, employees and agents. No amendment or repeal of this paragraph, or
the adoption of any provision of the Corporation's Charter inconsistent with
this paragraph, shall apply to or affect in any respect the indemnification of
any director or officer of the Corporation with respect to any alleged act or
omission which occurred prior to such amendment, repeal or adoption."
THIRD: These Articles of Amendment and Restatement include all provisions
of the charter of the Corporation as currently in effect.
FOURTH: The Board of Directors of the Corporation, by unanimous written
consent filed with the minutes of proceedings of the Board of Directors, adopted
a resolution declaring that the amendments set forth in the foregoing amendment
and restatement of the Charter were advisable, approved the amendment and
restatement of the Charter hereinabove set forth, and directed that it be
submitted for action thereon by the stockholders of the Corporation.
FIFTH: A unanimous consent in writing, setting forth approval of the
amendment and restatement of the Charter of the Corporation hereinabove set
forth was signed by all of the stockholders of the Corporation entitled to vote
thereon, and such consent is filed with the records of the Corporation.
S-31
<PAGE>
SIXTH: (a) The total number of shares of all classes of stock of the
Corporation heretofore authorized, and the number and par value of the shares of
each class were as follows:
Fifty Million (50,000,000) shares of capital stock, consisting of
forty-nine million eight hundred thousand (49,800,000) shares of
Common Stock, par value $.01 per share and two hundred thousand
(200,000) shares of convertible preferred stock, par value $1.00 per
share.
(b) The total number of shares of all classes of stock of the
Corporation as increased, and the number and par value of the shares of each
class, are as follows:
Fifty Million (50,000,000) shares of capital stock, of which (i)
forty-nine million eight hundred thousand (49,800,000) shares are
common stock, par value $0.01 per share, (ii) seventy thousand
(70,000) shares are designated Series A Convertible Preferred Stock,
par value One Dollar ($1.00) per share, and (iii) one hundred thirty
thousand (130,000) shares are designated Series B Convertible
Preferred Stock, par value $1.00 per share.
(c) The aggregate par value of all shares of classes of stock of the
Corporation heretofore authorized was Six Hundred Ninety-Eight Thousand Dollars
($698,000). The aggregate par value of all shares of all classes of stock as
amended by this amendment is Six Hundred Ninety-Eight Thousand Dollars
($698,000).
(d) These Articles of Amendment and Restatement shall have the effect
of redesignating the outstanding shares of Convertible Preferred Stock, par
value One Dollar
S-32
<PAGE>
($1.00) per share, of the Corporation as Series A Convertible Preferred Stock,
par value One Dollar ($1.00) per share of the Corporation.
SEVENTH: A description, as amended, of each class of stock which the
Corporation is authorized to issue, including the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption, is set forth in Article
SECOND above.
S-33
<PAGE>
[Intentionally Left Blank]
S-34
<PAGE>
IN WITNESS WHEREOF, DIGITAL EXPRESS GROUP, INC. has caused these
Articles of Amendment and Restatement to be executed in its name and on its
behalf by its President and attested by its Secretary on the 30th day of May,
1996.
THE UNDERSIGNED acknowledges these Articles of Amendment and
Restatement to be the act of the Corporation, and states, under the penalties
for perjury, that the matters and facts set forth herein with respect to
authorization and approval thereof are true in all material respects, to the
best of his knowledge, information and belief.
ATTEST: DIGITAL EXPRESS GROUP, INC.
/s/ William A. Pendley /s/ Christopher R. McCleary (SEAL)
- ------------------------------ ----------------------------------
William A. Pendley, Secretary Christopher R. McCleary, President
S-1
<PAGE>
EXHIBIT 3.2(a)
AMENDED AND RESTATED BYLAWS
OF
DIGITAL EXPRESS GROUP, INC.
ARTICLE I.
----------
Stockholders
------------
Section 1. Annual Meetings.
- ---------------------------
The annual meeting of the stockholders of the Corporation shall be
held on such date within the month of March as may be fixed from time to time by
the Board of Directors. Not less than ten nor more than 60 days' written or
printed notice stating the place, day and hour of each annual meeting shall be
given in the manner provided in Section I of Article IX hereof. The business to
be transacted at the annual meetings shall include the election of directors,
consideration and action upon the reports of officers and directors, and any
other business within the power of the Corporation. All annual meetings shall
be general meetings at which any business may be considered without being
specified as a purpose in the notice unless otherwise required by law.
Section 2. Special Meetings Called by Chairman of the Board, President or Board
- -------------------------------------------------------------------------------
of Directors.
- -------------
At any time in the interval between annual meetings, special meetings
of stockholders may be called by the Chairman of the Board, or by the President,
or by the Board of Directors. Not less than ten days' nor more than 60 days'
written notice stating the place, day and hour of such meeting and the matters
proposed to be acted on thereat shall be given in the manner provided in Section
I of Article IX. No business shall be transacted at any special meeting except
that specified in the notice.
Section 3. Special Meeting Called by Stockholders.
- --------------------------------------------------
(a) Upon the request in writing delivered to the Secretary by the
stockholders entitled to cast at least 25% of all the votes entitled to be cast
at the meeting, it shall be the duty of the Secretary to call forthwith a
special meeting of the Stockholders. Such request shall state the purpose of
such meeting and the matters proposed to be acted on thereat, and no other
business shall be transacted at any such special meeting. The Secretary shall
inform such stockholders of the reasonably estimated costs of preparing and
mailing the notice of the meeting, and upon payment to the Corporation of such
costs, the Secretary shall give not less than ten nor more than 60 days' notice
of the time, place and purpose of the
<PAGE>
meeting in the manner provided in Section I of Article IX. If, upon payment of
such costs the Secretary shall fail to issue a call for such meeting within ten
days after the receipt of such payment (unless such failure is excused by law),
then the stockholders entitled to cast 25% or more of the outstanding shares
entitled to vote may do so upon giving not less than ten days' nor more than 60
days' notice of the time, place and purpose of the meeting in the manner
provided in Section I Article IX. In addition to the foregoing, upon the
request in writing delivered to the Secretary by the holders of Preferred Stock
entitled to cast at least 63% of all the shares of Preferred Stock, the
Secretary shall call a special meeting of the Preferred Stockholders, in the
manner and subject to the provisions otherwise set forth in this Section 3, for
the purpose of removing the Preferred Directors (as defined in Section 7 of this
Article 1).
(b) Notwithstanding the provisions of Section 3(a) of this Article 1,
within one (1) day after the accrual of any right of the holders of Preferred
Stock to elect directors pursuant to paragraph B. I (d) of Article IV of the
Amended and Restated Articles of Incorporation of the Corporation dated March
24, 1995 (the "Amended and Restated Articles"), the Board of Directors shall
call a special meeting of the holders of Preferred Stock to be held ten (10)
days after the date of mailing of such notice. If the Corporation fails to send
such notice as provided above, the meeting may be called by any holder of
Preferred Stock on like notice. The record date for determining the holders of
Preferred Stock entitled to notice of and to vote at such special meeting shall
be the close of business on the day on which such notice is given. The
Corporation shall bear and pay all associated costs and expenses with the
preparation and mailing of such notice.
Section 4. Place of Meetings.
- -----------------------------
All meetings of stockholders shall be held at the principal office of
the Corporation in the State of Maryland or at such other place within the
United States as may be fixed from time to time by the Board of Directors and
designated in the notice.
Section 5. Quorum.
- ------------------
At any meeting of stockholders, the presence in person or by proxy of
stockholders entitled to cast a majority of the votes thereat shall constitute a
quorum. In the absence of a quorum, the stockholders present in person or by
proxy, by majority vote and without notice other than by announcement, may
adjourn the meeting from time to time, but not for a period exceeding 60 days
until a quorum shall attend.
Section 6. Adjourned Meetings.
- ------------------------------
A meeting of stockholders convened on the date for which it was called
(or one adjourned to achieve a quorum as above provided in Section 5 of this
Article) may be adjourned from time to time without further notice to a date not
more than 120 days after
2
<PAGE>
the record date, and any business may be transacted at any adjourned meeting
which could have been transacted at the meeting as originally called.
Section 7. Voting.
- ------------------
Subject to the provisions of paragraph B. I of Article IV of the
Amended and Restated Articles, the Holders of Preferred Stock, voting as a
class, shall be entitled to elect three (3) directors of the Corporation (the
"Preferred Directors"). The affirmative vote of a sixty-three percent (63%)
majority of the shares of Preferred Stock cast at a meeting duly called and at
which a quorum of Preferred Stock is present shall be sufficient to elect the
Preferred Directors. A majority of all the votes of holders of Common Stock
cast at a meeting of stockholders duly called and at which a quorum is present
shall be sufficient to elect three (3) directors of the Corporation; provided,
however, that with respect to one additional director (the "independent
director"), such independent director shall be nominated and elected in the
manner set forth in that certain Securities Purchase Agreement, dated March 24,
1995, by and among the Corporation, Douglas E. Humphrey, Michael T. Doughney,
Grotech Partners IV, L.P., Venrock Associates, and Southern Venture Fund 11,
L.P. (the "Securities Purchase Agreement"). Each share of Common Stock may be
voted for as many individuals as there are directors to be elected by the
holders of Common Stock and for whose election the share is entitled to be
voted.
A majority of the votes cast at a meeting of stockholders, duly called
and at which a quorum is present, shall be sufficient to take or authorize
action upon any other matter which may properly come before the meeting, unless
more than a majority of votes cast is required by statute or by the Charter.
The Board of Directors may fix the record date for the determination of
stockholders entitled to vote in the manner provided in Article VIII, Section 3
of these Bylaws. Unless otherwise provided in the Charter, each outstanding
share of stock, regardless of class, shall be entitled to one vote on each
matter submitted to a vote at a meeting of stockholders.
Section 8. Proxies.
- -------------------
A stockholder may vote the shares owned of record either in person or
by proxy. The proxy shall be in writing and shall be signed by the stockholder
or by the stockholder's duly authorized attorney-in-fact or be in such other
form as may be permitted by the Maryland General Corporation Law, including
documents conveyed by electronic transmissions. A copy, facsimile transmission
or other reproduction of the writing or transmission may be substituted for the
original writing or transmission for any purpose for which the original
transmission could be used. Every proxy shall be dated, but need not be sealed,
witnessed or acknowledged. No proxy shall be valid after 11 months from its
date, unless otherwise provided in the proxy. In the case of stock held of
record by more than one person, any co-owner or co-fiduciary may execute the
proxy without the joinder of the co-owner(s) or co-fiduciary(ies), unless the
Secretary of the Corporation is notified in writing by any co-owner or co-
fiduciary that the joinder of more than one is to be required.
3
<PAGE>
At all meetings of stockholders, the proxies shall be filed with and verified by
the Secretary of the Corporation, or, if the meeting shall so decide, by the
Secretary of the meeting.
Section 9. Order of Business.
- -----------------------------
At all meetings of stockholders, any stockholder, present and entitled
to vote in person or by proxy shall be entitled to require, by written request
to the Chairman of the meeting, that order of business shall be as follows:
(1) Organization
(2) Proof of notice of meeting or of waivers thereof. (The certificate
of the Secretary of the Corporation, or the affidavit of any other person
who mailed or published the notice or caused the same to be mailed or
published, shall be proof of service of notice.)
(3) Submission by Secretary of the Corporation of a list of the
stockholders entitled to vote, present in person or by proxy.
(4) A reading of unapproved minutes of preceding meetings and action
thereon.
(5) Reports.
(6) If an annual meeting, or a special meeting called for that
purpose, the election of directors.
(7) Unfinished business.
(8) New business.
(9) Adjournment.
Section 10. Removal of Directors.
- ---------------------------------
Except as set forth in the Securities Purchase Agreement, at any
annual or special meeting of the stockholders called in the manner provided for
by this Article, the holders of shares of Common Stock, by the affirmative vote
of a majority of all the votes entitled to be cast for the election of directors
elected by the holders of Common Stock, may remove any director or directors
elected by the holders of Common Stock from office, with or without cause, and
may elect a successor or successors to fill any resulting vacancies for the
remainder of the term. The holders of the Preferred Stock may remove or replace
the Preferred Directors at any annual or special meeting of the stockholders
called in the manner provided for by this Article, with or without cause and may
elect a successor or
4
<PAGE>
successors to fill any resulting vacancies for the remainder of the term. The
holders of shares of Common Stock, by the affirmative vote of a majority of all
votes entitled to be cast for the election of directors elected by the holders
of Common Stock, may remove or replace the independent director provided for in
Section 7; provided, however. that beginning March 15, 1996, and thereafter,
such independent director may be so removed only with the approval of the
holders of Preferred Stock.
Section 11. Informal Action by Stockholders.
- --------------------------------------------
Any action required or permitted to be taken at any meeting of
stockholders may be taken without a meeting if a consent in writing setting
forth such action is signed by all the stockholders entitled to vote thereon and
such consent is filed with the records of stockholders' meetings.
ARTICLE II.
-----------
Directors
---------
Section 1. Powers.
- ------------------
The business and affairs of the Corporation shall be managed under the
direction of its Board of Directors. All powers of the Corporation may be
exercised by or under the authority of the Board of Directors except as
conferred on or reserved to the stockholders by law, by the Charter or by these
Bylaws. A director need not be a stockholder. The Board of Directors shall
keep minutes of its meetings and full and fair accounts of its transactions.
Section 2. Number: Term of Office: Removal.
- -------------------------------------------
(a) Except as otherwise provided below and in the Charter, the number
of directors of the Corporation shall be seven (7). The first directors of the
Corporation shall hold their office until the first annual meeting of the
Corporation, or until their successors are elected and qualify, and thereafter
the directors shall hold office for the term of one year, or until their
successors are elected and qualify. A director may be removed from office as
provided in Article 1, Section 10 of these Bylaws.
(b) During any period in which any one or more of the conditions
described in paragraph B. I (d) of the Amended and Restated Articles shall exist
(a "Voting Period"), the number of directors constituting the Board of Directors
shall be automatically increased by the smallest number that, when added to
number of directors then constituting the Board of Directors, shall (together
with the Preferred Directors) constitute a majority of
5
<PAGE>
such increased Board of Directors, and the holders of Preferred Stock shall be
entitled to elect all such additional directors.
(c) The terms of office of all persons who are directors of the
Corporation at the time of a special meeting of holders of Preferred Stock to
elect directors pursuant to paragraph (b) hereof shall continue, notwithstanding
the election at such meeting by the holders of Preferred Stock of the number of
directors that they are entitled to elect, and the persons so elected by the
holders of Preferred Stock, together with the incumbent directors, shall
constitute the duly elected directors of the Corporation.
(d) Simultaneously with the expiration of a Voting Period, the terms
of office of the directors elected by the holders of Preferred Stock pursuant to
paragraph (b) hereof shall terminate, the persons elected by the holders of
Common Stock, and the Preferred Directors, and who are incumbent, shall
constitute the directors of the Corporation, and the voting rights of the
holders of Preferred Stock to elect directors pursuant to paragraph (b) hereof
shall be suspended.
(e) Except as provided in paragraph (d) hereof, the directors elected
by holders of Preferred Stock pursuant to Section 7 of Article I or paragraph
(b) of this Section 2 may be removed only by the holders of Preferred Stock. If
a director elected by the holders of Preferred Stock resigns, is removed or
dies, the vacancy on the Board of Directors may be filled only by the holders of
Preferred Stock. Any holder of Preferred Stock may call a meeting of holders of
Preferred Stock for the purposes of filling such a vacancy.
Section 3. Annual Meeting: Regular Meeting.
- -------------------------------------------
As soon as practicable after each annual meeting of stockholders, the
Board of Directors shall meet for the purpose of organization and the
transaction of other business. No notice of the annual meeting of the Board of
Directors need be given if it is held immediately following the annual meeting
of stockholders and at the same place. Other regular meetings of the Board of
Directors may be held at such times and at such places, within or without the
State of Maryland as the Board may from time to time determine, as shall be
designated in the notice for such meeting by the party calling the meeting. All
annual and regular meetings shall be general meetings, and any business may be
transacted thereat.
Section 4. Special Meetings.
- ----------------------------
Special meetings of the Board of Directors may be called by the
Chairman of the Board or the President, or by a majority of the directors.
6
<PAGE>
Section 5. Quorum: Voting.
- --------------------------
A majority of the Board of Directors shall constitute a quorum for the
transaction of business at every meeting of the Board of Directors; but, if at
any meeting there be less than a quorum present, a majority of those present may
adjourn the meeting from time to time, but not for a period exceeding ten days
at any one time or 60 days in all, without notice other than by announcement at
the meeting, until a quorum shall attend. At any such adjourned meeting at
which a quorum shall be present, any business may be transacted which might have
been transacted at the meeting as originally called. Except as provided herein
or as otherwise provided by the Charter or by law, directors shall act by a vote
of a majority of those members 'in attendance at a meeting at which a quorum is
present.
Section 6. Notice of Meetings.
- ------------------------------
Notice of the time and place of every regular and special meeting of
the Board of Directors shall be given to each director in the manner provided in
Section 2 of Article IX hereof. Subsequent to each Board meeting, and as soon as
practicable thereafter, each director shall be furnished with a copy of the
minutes of said meeting. At least 24 hours' notice shall be given of all
meetings. The purpose of any meeting of the Board of Directors need not be
stated in the notice.
Section 7. Vacancies.
- ---------------------
Except as otherwise provided by law or in the Charter:
(a) If the office of a director elected by the holders of Common Stock
becomes vacant for any reason other than removal or increase in the size of the
Board, such vacancy may be filled by the holders of Common Stock in the manner
otherwise provided herein for the election of directors by such holders. If the
office of a Preferred Director becomes vacant for any reason (including
removal), such vacancy shall be filled by the holders of Preferred Stock in the
manner otherwise provided herein for the election of the Preferred Directors.
If the office of the independent director becomes vacant for any reason
(including removal), such vacancy shall be filled in the manner otherwise
provided herein for the election of such independent director.
(b) Subject to the provisions of the Securities Purchase Agreement, if
a vacancy occurs as a result of the removal of a director elected by the holders
of Common Stock, the holders of Common Stock may elect a successor or may
delegate that authority to the Board of Directors.
(c) If the entire Board of Directors shall become vacant, any
stockholder may call a special meeting in the same manner that the Chairman of
the Board or the
7
<PAGE>
President may call such meeting, and directors for the unexpired term may be
elected at such special meeting in the manner provided for their election at
annual meetings.
(d) A director elected by the Board of Directors to fill a vacancy, as
permitted hereunder, shall serve until the next annual meeting of stockholders
and until successor is elected and qualifies. A director elected by the
stockholders to fill a vacancy shall serve for the unexpired term and until a
successor is elected and qualifies.
Section 8. Rules and Regulations.
- ---------------------------------
The Board of Directors may adopt such rules and regulations for the
conduct of its meetings and the management of the affairs of the Corporation as
it may deem proper and not inconsistent with the laws of the State of Maryland
or these Bylaws or the Charter.
Section 9. Executive Committee.
- -------------------------------
The Board of Directors may constitute an Executive Committee, composed
of at least two directors, from among its members (at least one of whom shall be
a Preferred Director and at least one of whom shall be a director elected by the
holders of Common Stock). The Executive Committee shall hold office at the
pleasure of the Board of Directors. Between sessions of the Board of Directors,
such Committee shall have all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, except those powers
specifically denied by law. If any position on the Executive Committee becomes
vacant, or if the number of members is increased, such vacancy may be filled by
the Board of Directors. The taking of any action by the Executive Committee
shall be conclusive evidence that the Board of Directors was not in session at
the time of such action. The Executive Committee shall hold formal meetings and
keep minutes of all of its proceedings. A copy of such minutes shall, after
approval by the members of the Committee, be sent to all directors as a matter
of information. Any action taken by the Executive Committee within the limits
permitted by law shall have the force and effect of Board action unless and
until revised or altered by the Board. The presence of not less than a majority
of the Committee shall be necessary to constitute a quorum. Action may be taken
without a meeting if unanimous written consent is signed by all of the members
of the Committee, and if such consent is filed with the records of the
Committee. The Executive Committee shall have the power to elect one of its
members to serve as its Chairman unless the Board of Directors shall have
designated such Chairman.
Section 10. Compensation.
- -------------------------
The directors may receive a stated salary for their services, and/or
expenses of attendance, as shall be determined by resolution of the Board;
provided, however, that each of the Preferred Directors shall be paid an annual
directors' fee of Ten Thousand Dollars ($ 10,000), and further provided that
nothing herein contained shall be construed as
8
<PAGE>
precluding a director from serving the Corporation in any other capacity and
receiving compensation therefor.
Section 11. Place of Meetings.
- ------------------------------
Regular or special meetings of the Board may be held within or without
the State of Maryland as the Board may from time to time determine. The time
and place of meeting may be fixed by the party calling the meeting.
Section 12. Informal Action by the Directors.
- ---------------------------------------------
Any action required or permitted to be taken at any meeting of the
Board may be taken without a meeting, if a written consent to such action is
signed by all members of the Board and such consent is filed with the minutes of
the Board.
Section 13. Telephone Conference.
- ----------------------------------
Members of the Board of Directors or any committee thereof may
participate in a meeting of the Board or such committee by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other at the same time.
Participation by such means shall constitute presence in person at the meeting.
ARTICLE III.
------------
Officers
--------
Section 1. In General.
- ----------------------
The Board of Directors may choose a Chairman of the Board from among
the directors. The Board of Directors shall elect a President, one or more Vice
Presidents, a Treasurer, a Secretary, and such Assistant Secretaries and
Assistant Treasurers as the Board may from time to time deem appropriate. All
officers shall hold office only during the pleasure of the Board or until their
successors are chosen and qualify. Any two of the above offices, except those
of President and Vice President, may be held by the same person, but no officer
shall execute, acknowledge or verify any instrument in more than one capacity
when such instrument is required to be executed, acknowledged or verified by any
two or more officers. The Board of Directors may from time to time appoint such
other agents and employees with such powers and duties as the Board may deem
proper. In its
9
<PAGE>
discretion, the Board of Directors may leave unfilled any offices except those
of President, Treasurer and Secretary.
Section 2. Chairman of the Board.
- ---------------------------------
The Chairman of the Board, if one is elected, shall have the
responsibility for the implementation of the policies determined by the Board of
Directors and for the administration of the business affairs of the Corporation.
The Chairman shall preside over the meetings of the Board and of the
stockholders if present at the meeting. The Chairman shall be the Chief
Executive Officer of the Corporation if so designated by resolution of the
Board.
Section 3. President.
- ---------------------
The President shall have the responsibility for the active management
of the business and general supervision and direction of all of the affairs of
the Corporation. In the absence of a Chairman of the Board, the President shall
preside over the meetings of the Board and of the stockholders if present at the
meeting, and shall perform such other duties as may be assigned by the Board of
Directors or the Executive Committee. The President shall have the authority on
the Corporation's behalf to endorse securities owned by the Corporation and to
execute any documents requiring the signature of an executive officer. The
President shall perform such other duties as the Board of Directors may direct
and shall be the Chief Executive Officer of the Corporation unless the Chairman
of the Board is so designated by resolution of the Board.
Section 4. Vice Presidents.
- ---------------------------
The Vice Presidents, in the order of priority designated by the Board
of Directors, shall be vested with all the power and may perform all the duties
of the President in the latter's absence. They may perform such other duties as
may be prescribed by the Board of Directors or the Executive Committee or the
President.
Section 5. Treasurer.
- ---------------------
The Treasurer shall be the Chief Financial Officer of the Corporation,
shall have general supervision over its finances, and shall perform such other
duties as may be assigned by the Board of Directors or the President. If
required by resolution of the Board, the Treasurer shall furnish bond (which may
be a blanket Bond) with such surety and in such penalty for the faithful
performance of duty as the Board of Directors any from time to time require, the
cost of such bond to be defrayed by the Corporation.
10
<PAGE>
Section 6. Secretary.
- ---------------------
The Secretary shall keep the minutes of the meetings of the
stockholders and of the Board of Directors and shall attend to the giving and
serving of all notices of the Corporation required by law or these Bylaws. The
Secretary shall maintain at all times in the principal office of the Corporation
at least one copy of the Bylaws with all amendments to date, and shall make the
same, together with the minutes of the meeting of the stockholders, the annual
statement of affairs of the Corporation and any voting trust or other
stockholders agreement on file at the office of the Corporation, available for
inspection by any officer, director or stockholder during reasonable business
hours. The Secretary shall maintain and authenticate the records of the
Corporation and perform such other duties as may be assigned by the Board of
Directors or the President
Section 7. Assistant Treasurer and Secretary.
- ---------------------------------------------
The Board of Directors may designate from time to time Assistant
Treasurers and Secretaries, who shall perform such duties as may from time to
time be assigned to them by the Board of Directors or the President.
Section 8. Compensation: Removal: Vacancies.
- --------------------------------------------
The Board of Directors shall have power to fix the compensation of all
officers of the Corporation. It may authorize any committee or office, upon
whom the power of appointing subordinate officers may have been conferred, to
fix the compensation of such subordinate officers. The Board of Directors shall
have the power at any regular or special meeting to remove any officer, with or
without cause. The Board of Directors may authorize any officer to remove
subordinate officers. The Board of Directors may authorize the Corporation's
employment of an officer for a period in excess of the term of the Board. The
Board of Directors at any regular or special meeting shall have power to fill a
vacancy occurring in any office for the unexpired portion of the term.
Section 9. Substitutes.
- -----------------------
The Board of Directors may from time to time in the absence of any one
of its officers or at any other time, designate any other person or persons, on
behalf of the Corporation to sign any contracts, deeds, notes or other
instruments in the place or stead of any of such officers, and may designate any
person to fill any one of said offices, temporarily or for any particular
purpose; and any instruments so signed in accordance with a resolution of the
Board shall be the valid act of the Corporation as fully as if executed by any
regular officer.
11
<PAGE>
ARTICLE IV.
----------
Resignation
-----------
Any director or officer may resign from office at any time.. Such
resignation shall be made in writing and shall take effect from the time of its
receipt by the Corporation, unless some time be fixed in the resignation, and
then from that date. The acceptance of a resignation shall not be required to
make it effective.
ARTICLE V.
----------
Commercial Paper, Etc,
----------------------
All bills, notes, checks, drafts and commercial paper of all kinds
executed by the Corporation as maker, acceptor, endorser or otherwise, and all
assignments and transfers of stock, contracts, or written obligations of the
Corporation, and all negotiable instruments, shall be made in the name of the
Corporation and shall be signed by any one or more of the following officers as
the Board of Directors may from time to time designate, i.e. the Chairman of the
Board, the President, any Vice President, or the Treasurer, or by such other
person or persons as the Board of Directors or Executive Committee may from time
to time designate.
ARTICLE VI
----------
Fiscal Year
-----------
The fiscal year of the Corporation shall cover such period of 12
months as the Board of Directors may determine. In the absence of any such
determination, the accounts of the Corporation shall be kept on a calendar year
basis.
ARTICLE VII
-----------
Seal
----
The seal of the Corporation shall be in the form of two concentric
circles inscribed with the name of the Corporation and the year and State in
which it is incorporated. The Secretary or Treasurer, or any Assistant
Secretary or Assistant Treasurer, shall have the right and power to attest to
the corporate seal. In lieu of affixing the corporate seal to any document, it
shall be sufficient to meet the requirements of any law, rule or regulation
relating to a corporate seal to affix the word "(SEAL)" adjacent to the
signature of the person authorized to sign the document on behalf of the
Corporation.
12
<PAGE>
ARTICLE VIII
------------
Stock
-----
Section 1. Issue.
- -----------------
Each stockholder shall be entitled to a certificate or certificates
which shall represent and certify the number and class of shares of stock owned
in the Corporation. Each certificate shall be signed by the Chairman of the
Board, the President or any Vice President, and countersigned by the Secretary
or any Assistant Secretary or the Treasurer or any Assistant Treasurer, and
sealed with the seal of the Corporation. The signatures of the Corporation's
officers and its corporate seal appearing on stock certificates may be
facsimiles. Stock certificates shall be 'in such form not inconsistent with law
or with the Amended and Restated Articles, as shall be approved by the Board of
Directors. In case any officer of the Corporation who has signed any
certificate ceases to be an officer of the Corporation, whether by reason of
death, resignation or otherwise, before such certificate is issued, then the
certificate may nevertheless be issued by the Corporation with the same effect
as if the officer had not ceased to be such officer as of the date of such
issuance.
Section 2. Transfers.
- ---------------------
The Board of Directors shall have power and authority to make such
rules and regulations as the Board may deem expedient concerning the issue,
transfer and registration of stock certificates. The Board of Directors may
appoint one or more transfer agents and/or registrars for its outstanding Stock,
and their duties may be combined. No transfer of stock shall be recognized or
binding upon the Corporation until recorded on the books of the Corporation, or,
as the case may be, of its transfer agent and/or of its registrar, upon
surrender and cancellation of a certificate or certificates for a like number of
shares.
Section 3. Record Dates for Dividends and Stockholders' Meeting.
- ----------------------------------------------------------------
The Board of Directors may fix a date not exceeding 90 days preceding
the date of any meeting of stockholders, any dividend payment date or any date
for the allotment of rights, as a record date for the determination of the
stockholders entitled to notice of and to vote at such meeting, or entitled to
receive such dividends or rights, as the case may be, and only stockholders of
record on such date shall be entitled to notice of and to vote at such meeting
or to receive such dividends or rights, as the case may be. In the case of a
meeting of stockholders, the record date shall be filed not less than ten days
prior to the date of the meeting.
13
<PAGE>
Section 4. New Certificates.
- ----------------------------
In case any certificate of stock is lost, stolen, mutilated or
destroyed, the Board of Directors may authorize the issue of a new certificate
in place thereof upon indemnity to the Corporation against loss and upon such
other terms and conditions as it may deem advisable. The Board of Directors may
delegate such power to any officer or officers of the Corporation or to any
transfer agent or registrar of the Corporation; but the Board of Directors, such
officer or officers or such transfer agent or registrar may, in their
discretion, refuse to issue such new certificate save upon the order of some
court having jurisdiction in the premises.
ARTICLE IX.
-----------
Notice
------
Section 1. Notice to Stockholders.
- ----------------------------------
Whenever by law or these Bylaws notice is required to be given to any
stockholder, such notice shall be in writing and may be given to each
stockholder by personal delivery or at the stockholder's residence or usual
place of business, or by mailing it, postage prepaid, and addressed to the
stockholder at the address appearing on the books of the Corporation or its
transfer agent. Such leaving or mailing of notice shall be deemed the time of
giving such notice.
Section 2. Notice to Directors and Officers.
- --------------------------------------------
Whenever by law or these Bylaws notice is required to be given to any
director or officer, such notice may be given in any one of the following ways:
by personal notice to such director or officer, by telephone communication with
such director or officer personally, by telegram, cablegram or radiogram,
addressed to such director or officer at the address appearing on the books of
the Corporation, or by depositing the same in the United States mail, postage
prepaid addressed to such director or officer at the address appearing on the
books of the Corporation. Such notice, if sent by United States mail, shall be
deemed given three (3) days after such deposit is made.
Section 3. Waiver of Notice.
- ----------------------------
Notice to any stockholder or director of the time, place and/or
purpose of any meeting of stockholders or directors required by these Bylaws may
be dispensed with if such stockholder shall either attend in person or by proxy,
or if such director shall attend in person, or if such absent stockholder or
director shall, in writing filed with the records of the meeting either before
or after holding a thereof, waive such notice.
14
<PAGE>
ARTICLE X.
----------
Voting of Stock in Other Corporations
-------------------------------------
Any stock in other corporations, which may from time to time be held
by the Corporation, may be represented and voted at any meeting of stockholders
of such other corporations by the President or a Vice-President or by proxy or
proxies appointed by the President or a Vice-President, or otherwise pursuant to
authorization thereunto given by a resolution of the Board of Directors adopted
by a vote of a majority of the directors.
ARTICLE XI.
-----------
Indemnification
---------------
To the maximum extent permitted by the Maryland General Corporation
Law as from time to time amended, the Corporation may indemnify its currently
acting and its former directors, officers, agents and employees and those
persons who, at the request of the Corporation serve or have served another
corporation, partnership, joint venture, trust or other enterprise in one or
more of such capacities against any and all liabilities incurred in connection
with their services in such capacities to the extent determined appropriate by
the Board of Directors. To the extent required by the Charter or applicable
law, the Corporation shall indemnify such individuals.
ARTICLE XII.
------------
Amendments
----------
Until the earlier to occur of (i) a Public Offering, as defined in
paragraph B.3(a)(iii) of Article IV of the Amended and Restated Articles, (ii)
the redemption by the Corporation of, and payment for, all of the shares of
Preferred Stock and all accrued and unpaid dividends thereon as provided in the
Amended and Restated Articles, or (iii) the conversion of all of the shares of
Preferred Stock into shares of Common Stock, the Corporation shall not, without
the consent of the holders of sixty-three percent (63%) or more of the shares of
Preferred Stock, alter, amend, repeal or suspend these Bylaws. Following the
occurrence of any event specified in the preceding sentence, these Bylaws may be
added to, altered, amended, repealed or suspended by a vote of a majority of the
Board of Directors at any regular or special meeting of the Board.
Notwithstanding the foregoing to the contrary, any amendment of these Bylaws
relating to the directors of the Corporation shall be subject to the provisions
of the Securities Purchase Agreement with respect to the nomination and election
of such directors.
15
<PAGE>
********************************************************************************
Page 1
********************************************************************************
Exhibit 3.2.(b)
AMENDMENT NO. 1 TO THE
AMENDED AND RESTATED BYLAWS OF
DIGITAL EXPRESS GROUP, INC.
The first sentence of Article I, Section 3(b) of the Amended and Restated
Bylaws of the Corporation is hereby deleted in its entirety and the following is
inserted in lieu thereof:
"Notwithstanding the provisions of Section 3(a) of this Article I,
within one (1) days after the accrual of any right of the holders of
Preferred Stock to elect directors pursuant to paragraph B.1(d) of Article
IV of the Amended and Restated Articles of Incorporation of the Corporation
dated March 24, 1995, as amended and restated by those certain Articles of
Amendment and Restatement of the Corporation dated as of May __, 1996 (the
"Amended and Restated Articles"), the Board of Directors shall call a
special meeting of the holders of Preferred Stock to be held ten (10) days
after the date of mailing of such notice."
The first paragraph of Article I, Section 7 of the Amended and Restated
Bylaws of the Corporation is hereby deleted in its entirety and the following is
inserted in lieu thereof:
"Subject to the provisions of paragraph B.1 of Article IV of the
Amended and Restated Articles, the Holders of Preferred Stock, voting as a
class, shall be entitled to elect four (4) directors of the Corporation
(the "Preferred Directors"). The affirmative vote of a sixty-three percent
(63%) majority of shares of Preferred Stock cast at a meeting duly called
and at which a quorum of Preferred Stock is present shall be sufficient to
elect the Preferred Directors. A majority of all the votes of holders of
Common Stock cast at a meeting of stockholders duly called and at which a
quorum is present shall be sufficient to elect four (4) directors of the
Corporation; provided, however that with respect to one additional director
(the "independent director"). The Holders of Preferred Stock (by a vote of
sixty-three percent (63%) majority of shares of Preferred Stock) and
Humphrey, so long as Humphrey is employed by the Corporation (and until his
death or disability), shall be entitled to designate (and remove) from time
to time one (1) independent director as they may agree upon. Each share of
Common Stock may be voted for as many individuals as there are directors to
be elected by the holders of Common Stock and for whose election the share
is entitled to be voted."
The first sentence of Article II, Section 2(a) of the Bylaws of the
Corporation is hereby deleted in its entirety and the following is inserted in
lieu thereof:
"Except as otherwise provided below and in the charter, the number of
directors of the Corporation shall be nine(9)."
<PAGE>
EXHIBIT 4.1
- --------------------------------------------------------------------------------
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ This stock certificate showing 510 shares of stock of Digital Express Group, +
+ Inc. is subject to all of the restrictions set forth in a Conditional Sales +
+ Agreement dated April 15, 1990. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
------------------------------------------------------
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
- ------------ --------------
NUMBER [GRAPHIC ART OF EAGLE APPEARS HERE] SHARES
1 510
DIGITAL EXPRESS GROUP, INC.
AUTHORIZED TO ISSUE XXXXXXXXXXXXXX MARYLAND
This Certifies that *********** DOUGLAS F. HUMPHREY *********** is the
-------------------------------------------
registered holder of ***** FIVE HUNDRED AND TEN (510) *********** Shares
--------------------------------------------
of the capital stock of the above named corporation fully paid and
non-assessable, transferable only on the books of the Corporation by the holder
hereof in person or by Attorney upon surrender of this Certificate properly
endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed
this FIFTEENTH day of APRIL A.D. 1990
---------- ---------- ----
[SEAL APPEARS HERE]
[SIGNATURE APPEARS HERE] [SIGNATURE APPEARS HERE]
- ---------------------------- --------------------------
SECRETARY PRESIDENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++
+ XXXXXXX IN USA +
++++++++++++++++++
+++++++++++
+ No. 509 +
+++++++++++
CERTIFICATE
N [ART APPEARS HERE]
4545.46
Convertible Preferred
For Stock Shares
------------------------
Issued to
Grotech Partners, IV, L.P.
- --------------------------------------
- --------------------------------------
- --------------------------------------
Dated March 24 1995
------------------------- ----
FROM WHOM TRANSFERRED
- --------------------------------------
Dated 19
-------------------------- ---
NO.ORIGINAL NO.ORIGINAL NO. OF SHARES
CERTIFICATE SHARES TRANSFERRED
- --------------------------------------
Received CERTIFICATE NO.
-------------
For Shares
---------------------------
this day of 19
--------- --------- ---
- --------------------------------------
- --------------------------------------
<PAGE>
EXHIBIT 10.1
MCI SPECIAL CUSTOMER ARRANGEMENT
THIS MCI SPECIAL CUSTOMER ARRANGEMENT (the "Agreement") is made and entered
into as of the dates set forth below by and between MCI Telecommunications
Corporation ("MCI") and Digital Express Group, Inc. ("Customer"), effective as
of the date of execution by Customer (the "Effective Date"). Notwithstanding
anything herein to the contrary, the rates set forth herein shall be effective
not later than thirty (3O) days from the first day of the next full month's
billing cycle following Customer's execution and delivery of this Agreement to
MCI (such date shall hereinafter be referred to as the "Commencement Date").
WITNESSETH:
-----------
WHEREAS, Customer is desirous of receiving telecommunications services from
MCI and MCI is desirous of providing said services to Customer, pursuant to the
terms and conditions more particularly described herein;
NOW, THEREFORE, for and in consideration of the premises, the terms and
conditions herein and for other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, MCI and Customer
hereby agree as follows:
1. Definitions Contained in MCI Tariff FCC No. 1.
All capitalized terms used herein and not expressly defined herein shall
have the respective meanings given to such terms in the MCI Tariff FCC No.
I ("Tariff') on file with the Federal Communications Commission ("FCC").
2. Definition of Base Rates.
"Base Rates" shall mean rates and discounts for which Customer qualifies
under the Tariff for services described in the Tariff, or if not in the
Tariff, in standard price lists, all calculated following application of
all discounts provided under this Agreement.
3. Service Provisioning and Receipt.
MCI will provide to Customer, and Customer will receive from MCI,
interstate and international telecommunications service(s) provided
pursuant to the Tariff, WUI Tariff FCC No. 27, and any other interstate and
international tariff of MCI and its affiliates (collectively, the
"Tariffs"), each as supplemented by this Agreement, and intrastate
telecommunications services provided pursuant to MCI's state tariffs
governing such services. This Agreement incorporates by reference the terms
of each such tariff. MCI may modify its tariffs from time to time in
accordance with law and thereby affect the service(s) furnished Customer.
<PAGE>
In the event tariff revisions that may be required to implement the terms
of this Agreement are suspended or rejected, then either party may elect to
terminate this Agreement without liability on thirty (30) days' written
notice given not later than thirty (30) days after the event giving rise to
the termination right.
MCI will use its best efforts to maintain its tariffs in a manner
consistent with the terms of this Agreement. In the event that MCI revises
any tariff in a manner inconsistent in any material respect with the
provisions of this Agreement and MCI does not effect revisions that remedy
such inconsistency within thirty (30) days after receipt of written notice
from Customer, then Customer may, as its sole remedy, elect to terminate
this Agreement without liability on thirty (30) days' written notice given
not later than thirty (30) days after the event giving rise to the
termination right.
This Agreement is a Specialized Customer Arrangement as such term is
defined in Section B-17.03 of the Tariff and the services hereunder are
being provided to Customer pursuant to the provisions of the Tariff
applicable to such arrangements.
4. Service Term.
The service term (the "Service Term") shall begin on the Commencement Date
with a ramp period (the "Ramp Period") which shall expire upon the earlier
to occur of. (a) eight (8) months; or (b) when both of the following
conditions are met: (i) Customer's overall monthly billing equals or
exceeds Five Hundred Thousand Dollars ($500,000), and (ii) as part of
Customer's overall monthly billing, Customer's monthly interoffice channel
("IOC") charges equal or exceed Four Hundred Thousand Dollars ($400,000).
Upon expiration of the Ramp Period, the Service Term shall continue
thereafter for sixty (60) months. During the Ramp Period, the Annual
Minimum requirement and monitoring conditions shall not apply, and the
rates and discounts provided by this Agreement shall be available
regardless of whether the Annual Minimum is satisfied. Nothing in this
Agreement shall modify or be deemed to modify MCI's right to terminate
service(s) as provided for in Section B-17.01 of the Tariff or in any other
MCI tariff.
5. Annual Minimum.
(a) Customer shall use not less than Six Million Dollars ($6,000,000)
("Annual Minimum") of MCI services described in this Agreement or any
other tariffed services, calculated at Base Rates, during each
consecutive twelve (12)-month period of the Service Term, commencing
upon the first day of the month following expiration of the Ramp
Period, and each anniversary thereof ("Annual Period"). MCI calculates
the Annual Minimum by adding recurring and usage charges at Base Rates
for all common carrier service furnished to Customer by MCI, but
excluding the following items: (i) taxes and tax-related surcharges;
(ii) charges for any enhanced services, including MCI Mail, MCI Fax,
and Global
2
<PAGE>
Communications Services; (iii) charges for equipment and collocation;
(iv) charges incurred where MCI or an MCI affiliate acts as agents for
Customer in the acquisition of goods or services; and (v) charges
incurred by third parties using pay phones or room phones controlled
by Customer.
(b) If Customer's use of such services during any Annual Period of the
Service Term results in charges at Base Rates of less than the Annual
Minimum, Customer will pay: (i) Customer's actual amount of usage and
other charges calculated at Base Rates during such Annual Period; plus
(ii) an underutilization charge (which Customer agrees is reasonable)
equal to the difference between the Annual Minimum and Customer's
combined actual amount of usage and other charges calculated at Base
Rates during such Annual Period (or pro rata portion thereof for any
partial Annual Period).
6. IOC Subminimum.
(a) As part of the overall Annual Minimum, Customer commits to purchase
not less than Four Million Eight Hundred Thousand Dollars ($4,800,000)
of MCI IOC services, calculated at Base Rates, during each Annual
Period ("IOC Subminimum").
(b) In any Annual Period in which Customer fails to satisfy the IOC
Subminimum, Customer will be billed and required to pay an
underutilization charge ("IOC Underutilization") equal to the
difference between the IOC Subminimum and Customer's actual usage of
IOC services, calculated at Base Rates, during such Annual Period.
Such IOC Underutilization charges shall be separate from and in
addition to any other underutilization charges incurred pursuant to
this Agreement.
7. Rates and Discounts for MCI Services.
(a) Vision Service.
For all domestic Vision outbound service, Customer shall receive the
MCI Vision Power Rates discounted by the three (3)-year, Six Hundred
Thousand Dollar ($600,000) MCI Vision Value Insurance Plus Power Rate
Program ("Power Rate Discounts") as set forth in Section C-3.1845 of
the Tariff, except that minimum volume terms shall not apply. In
addition to the Power Rate Discounts, Customer's domestic outbound
interstate usage shall receive an additional discount of *
.
The discounts referenced in this Section 7(a) shall apply to domestic
Vision outbound usage charges but shall not apply to pass-through
access/egress (or
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
3
<PAGE>
related) charges imposed by third parties (such as local exchange
carriers); access or egress charges for domestic Vision outbound
service, any non-recurring charge imposed in the Tariff, charges for
international service, charges for directory assistance, taxes and
surcharges.
(b) Vision International Service.
For Vision International service, Customer shall receive the MCI
Vision Worldwide Power Rates at the three (3)-year, Six Hundred
Thousand Dollar ($600,000) commitment levels as set forth in Section
C-3.1845 of the Tariff, except that minimum volume terms shall not
apply.
(c) Vision 800 Service.
For all domestic Vision 800 service, Customer shall receive the MCI
Vision Power Rate Discounts associated with the three (3)-year, Six
Hundred Thousand Dollar ($600,000) commitment level as set forth in
Section C-3.1845 of the Tariff except that minimum volume terms shall
not apply. In addition to the Power Rate Discounts, Customer's
domestic interstate Vision 800 usage shall receive an additional
discount of * .
The discounts referenced in this Section 7(c) shall apply to domestic
Vision 800 usage charges but shall not apply to pass-through
access/egress (or related) charges imposed by third parties (such as
local exchange carriers); access or egress charges for domestic Vision
800 service, any non-recurring, charge imposed in the Tariff, charges
for international service, charges for directory assistance, taxes and
surcharges.
(d) International Vision 800 Service.
For International Vision 800 service, Customer shall receive the MCI
Vision Worldwide Power Rates at the three (3)-year, Six Hundred
Thousand Dollar (S600,000) commitment levels as set forth in Section
C-3.1845 of the Tariff, except that minimum volume terms shall not
apply.
(e) Domestic networkMCI Conferencing.
Customer shall receive the rates for both attended and unattended Dial-
Out and Toll Meet Me service calls per participating bridge port, per
minute (inclusive of per-leg charges) as set forth below:
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
4
<PAGE>
Attended Unattended
Rate/Min. Rate/Min.
--------- ---------
Toll Meet Me * *
Dial-Out * *
The rates set forth above are in lieu of Tariff rates described in
Section C-3.17211 and C-3.1741, and also in lieu of any volume
discounts.
(f) Access Pricing Plan.
Customer subscribes to and will receive the maximum discounts
associated with the five (5)-year Access Pricing Plan ("APP")
(applicable to the local loop portion only) for channelized and
unchannelized T-1 access, DSO access, DDS access and analog access,
provided that Customer executes and delivers to MCI an enrollment form
listing each circuit to be enrolled in such plan by location.
(g) Dedicated Leased Line Service.
(i) For Dedicated Leased Line Service, with the exception of TDS 1.5
service, Customer shall be entitled to the benefit of the Network
Pricing Plan ("NPP") discount for Dedicated Leased Line Services
associated with the five (5) year, Seven Hundred Fifty Thousand
Dollar ($750,000) commitment levels specified in the Tariff.
Services provided with such NPP discount shall not be subject to
separate minimum revenue and term requirements, notwithstanding
the Tariff.
(ii) For TDS 1.5 service, in lieu of all other rates and discounts,
tariffed or otherwise, Customer shall receive a rate of Three and
84/100 ($3.84) per circuit mile, provided that Customer shall pay
a monthly minimum of Three Hundred Dollars ($300) per circuit.
8. Installation Credit.
Provided that Customer achieves the Annual Minimum throughout the Service
Term, Customer shall receive credits of up *
.
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
5
<PAGE>
9. Qualifying Condition.
In order to qualify for the rates and discounts set forth in this
Agreement, the MCI services that Customer is purchasing must be new MCI
business.
10. Monitoring Conditions.
Customer understands that to qualify for the rates and discounts for MCI
Services set forth in this Agreement, Customer must maintain at least seven
thousand five hundred (7,500) TDS-45 circuit miles throughout the Service
Term. In any month in which Customer fails to meet these requirements,
Customer shall pay standard tariffed rates for MCI services for such month.
11. Payment.
Customer shall pay MCI for service(s) within twenty-five (25) days of
Customer's receipt of MCI's invoice.
12. Letter of Credit Requirement.
In consideration for services provided by MCI, Customer agrees to provide
MCI with a Letter of Credit issued by an approved financial institution in
the amount of Five Hundred Thousand Dollars ($500,000). At the time that
Customer's monthly usage of MCI services exceeds Two Hundred Fifty Thousand
Dollars ($250,000), MCI agrees to reevaluate in good faith such Letter of
Credit amount based on Customer's payment history and financial solvency.
13. Exclusivity.
Customer agrees to exclusively use MCI as its long distance
telecommunications carrier for ninety percent (90%) of its aggregate access
and IOC services ("Exclusivity Requirement") during the Service Term,
provided that this condition shall not (a) require any termination of an
existing contract not terminable by Customer, or (b) prevent Customer from
obtaining at any time, service(s) not available from MCI at certain
locations. In any monthly billing period of the Service Term in which
Customer fails to satisfy the Exclusivity Requirement and for each month
thereafter until Customer is in compliance with the Exclusivity
Requirement, Customer will be billed and required to pay for MCI Services
at standard tariffed rates. After the Effective Date of this Agreement, but
not more than once annually, MCI may request and Customer shall provide to
MCI in writing, records, data and invoices pertaining to Customer's total
long distance telecommunications usage for the most recent twelve
(12)-month period preceding the request. MCI may review this information
for the sole purpose of determining Customer's compliance with the
Exclusivity Requirement. MCI agrees to
6
<PAGE>
maintain in a confidential manner all such documentation acquired pursuant
to this Section l3.
14. Technological Change.
(a) In the event that: (i) Customer is unable to satisfy the Annual
Minimum solely as a result of a "Technological Change" (as hereinafter
defined); and (ii) Customer certifies to MCI in writing that: (x) it
has not substituted the services provided by other vendors in place of
the services provided by MCI; and (y) it is not able to substitute for
such diminished MCI usage other telecommunications services provided
to Customer by other vendors, then MCI agrees to reduce the Annual
Minimum by the product of the average monthly purchases attributable
to such Technological Change during the six (6) months preceding such
Technological Change, multiples by twelve (12)
(b) For purposes of this provision: (1) "Technological Change" shall mean
a significant technology-driven change that (x) is deemed, by
Customer, to be operationally or economically necessary for Customer;
(y) substantially improves upon the functionality of the services
provided by MCI to Customer under this Agreement; and (z) MCI is
unwilling or unable to make available to Customer, within one hundred
eighty (180) days of receiving written notice from Customer requesting
the availability of such technologically changed services, on terms
and conditions substantially equivalent to those proposed by another
vendor.
15. Termination Liability.
If Customer terminates this Agreement during, the Service Term, for reasons
other than for "Cause" (as hereinafter defined) or to take service under
another arrangement with MCI having equal or greater term and volume
requirements or if MCI terminates this Agreement for Cause, Customer will,
within thirty (30) days after such termination: (i) pay to MCI an amount
equal to the aggregate of the Annual Minimum(s) (or pro rata portion
thereof for any partial Annual Period) that would have been applicable for
the remaining unexpired portion of the Service Term, and (ii) repay to MCI
any and all credits received by Customer hereunder, including, without
limitation, credits for installation charges, in full, without setoff or
deduction. As used herein, "Cause" shall mean a failure of the other party
to perform a material obligation under this Agreement which failure is not
remedied by the defaulting party within thirty (30) days after receipt of
written notice thereof.
16. Representation and Warranty.
Customer represents and warrants that it has the full right, power and
authority to enter into this Agreement, to perform its obligations
hereunder and that the execution, delivery
7
<PAGE>
and performance by Customer of this Agreement will not conflict with,
result in the breach of or constitute a default under any contract,
agreement or other document of whatever kind or nature to which Customer is
a party or by which Customer may be bound or affected.
17. Nondisclosure.
Customer shall not disclose to any third party during the Service Term, or
during the three (3)-year period after termination of this Agreement, any
of the material terms and conditions set forth in this Agreement (including
but not limited to price-related terms), unless such disclosure is lawfully
required by any federal governmental agency or is otherwise required to be
disclosed by law or is necessary in any legal proceeding establishing
rights and obligations under this Agreement. Customer agrees to ensure the
continued confidentiality of such information. Customer agrees to ensure
the continued confidentiality of such information. Customer further agrees
to cooperate with MCI's reasonable confidentiality and other requirements
which may be established from time to time, and immediately notify MCI of
any unauthorized disclosure or use of such confidential information of
which Customer becomes aware. MCI reserves the right to terminate this
Agreement immediately upon delivery written notice to Customer if there has
been any unpermitted third party disclosure hereunder.
18. Overlapping Discounts.
If MCI amends the Tariff to provide a discount applicable to combined usage
of services (as opposed to a discount on any individual service) that is
similar in nature but not necessarily similar in amount to that provided in
this Agreement, Customer may elect either to receive the benefit of such
discount or continue to receive the discount provided hereunder, but shall
not be entitled to receive the benefit of both discounts.
The discounts provided for herein are in lieu of, not in addition to, any
discounts or commissions to which Customer is or would otherwise be
entitled to receive by application of Tariff discounts applicable to
Qualified Commercial Affinity Group members, Qualified Industry Affinity
Group members, Qualified Residential Affinity Group members (all as the
same are defined in the Tariff), and recipients of discounts or commissions
under these or any other similar or related programs (e.g. NASD, IVANS,
etc.).
19. Notice.
All notices, requests, or other communications (excluding invoices)
hereunder shall be in writing and hand delivered or addressed and sent by
certified or registered mail, postage prepaid and return receipt requested
to the parties as follows:
<PAGE>
If to MCI: MCI Telecommunications Corporation
8200 Greensboro Drive
McLean, Virginia 22102
Attn: Vice President, Business Markets
with a copy to: MCI Telecommunications Corporation
3 Ravinia Drive
Atlanta, Georgia 30346
Attn: Director, Legal Affairs
If to Customer: Digital Express Group, Inc.
6800 Virginia Manor Road
Beltsville. Maryland 20705
If either party wishes to alter the recipient or address to which
communications to it are sent, it may do so by providing the name of the
new recipient or a new address, in writing, to the other party. All
notices, requests or other communications addressed in accordance with this
Agreement shall be effective when received if delivered by mail or if
personally delivered, the date on which delivery is made.
20. Governing Law/Arbitration.
Customer acknowledges and agrees that MCI, in conducting its business in
the manner set forth herein, is subject to the Communications Act of 1934,
as amended and as interpreted and applied by the FCC. This Agreement is
subject to and shall be interpreted in accordance with the Federal
Communications Act of 1934 as amended, as interpreted and applied by the
Federal Communications Commission. MCI and Customer hereby stipulate and
agree that any and all disputes between the parties arising out of or
relating to this Agreement, except those disputes as may be preempted by
the original jurisdiction afforded the Federal Communications Commission,
shall be submitted for resolution by arbitration in accordance with the
rules set forth in the Tariff. Notwithstanding the foregoing, MCI shall
have the right to seek and obtain from any court of competent jurisdiction
any equitable or provisional relief or remedy enforcing any right it may
have in connection with this Agreement or applicable MCI tariffs. No such
judicial action permitted by the foregoing sentence shall waive or limit
MCI's right to adjudicate the merits of the dispute by arbitration.
21. Complete Agreement; Amendments.
This Agreement, together with the Tariffs, is the complete agreement of the
parties concerning its subject matter and supersedes all other prior
agreements and representations, oral or in writing, concerning its subject
matter. Any amendments
9
<PAGE>
(except amendments of the Tariff) must be in writing and signed by both
parties to this Agreement. No waiver of any of the provisions of this
Agreement shall be binding unless it is in writing and signed by the party
making the waiver. No waiver shall be deemed, or shall constitute, a waiver
of any other provision, whether or not similar, and no waiver shall be
deemed, or shall constitute, a continuing waiver.
All sections and subsections of this Agreement are severable and the
unenforceability or invalidity of any of the sections or subsections of
this Agreement shall not affect the validity or enforceability of the
remaining sections or subsections of this Agreement, but such remaining
sections or subsections will be interpreted or construed in such a manner
as to carry out fully the intention of the parties. Section titles or
references used in this Agreement shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreements among
the parties hereto evidenced hereby.
22. Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
successors and permitted assigns of the parties hereto. Neither this
Agreement, nor any rights or obligations of Customer herein shall be
transferable or assignable by Customer without MCI's prior written consent
and any attempted transfer or assignment hereof by Customer not in
accordance herewith shall be null and void.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the dates set forth below,
effective as of the Effective Date.
Digital Express Group, Inc. MCI Telecommunications Corporation
By: By:
---------------------------- -------------------------------
Name: Name:
-------------------------- ------------------------------
Title: Title:
------------------------- -----------------------------
Date: Date:
------------------------- -----------------------------
10
<PAGE>
Page 10 of 10
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the dates set forth below,
effective as of the Effective Date.
Digital Express Group, Inc. MCI Telecommunications Corporation
By: /s/ C. A. Heietzelman By: /s/ Edward W. Smith
---------------------------- -------------------------------
Name: C. A. Heietzelman Name: Edward Smith
-------------------------- ------------------------------
Title: CEO Title: Director
------------------------- -----------------------------
Date: 4/22/96 Date: 5/28/96
------------------------- -----------------------------
MCI CONFIDENTIAL
<PAGE>
Exhibit 10.2
Digital Express Group Inc., a Maryland corporation, with offices at 6800
Virginia Manor Road, Beltsville, Maryland 20705, hereinafter referred to as
"DIGEX", and LCI International Telecom Corp. with offices at 8180 Greensboro
Drive, Suite 800 McLean, Virginia 22102 hereinafter referred to as "LCI", agree
that the following terms and conditions shall govern the sale and discounting of
Products as herein defined.
1. Definitions.
-----------
1.1 Parties, Party. "Parties" means DIGEX and LCI, collectively. "Party"
--------------
means either DIGEX or LCI.
1.2 Agreement. "Agreement" means this Authorized LCI Agreement.
---------
1.3 Territory. "Territory" is designated as * .
---------
1.4 Service(s). The term "Service" or "Services" as used herein shall
---------
mean one or more of the items listed on EXHIBIT "1" hereto, as
changed from time to time in accordance with the provisions of this
Agreement.
1.5 *
.
1.6 *
1.7 *
2. Appointment and Territory.
-------------------------
2.1 *
2.2 Public Release of Information. No news releases, articles, brochures,
-----------------------------
advertisements, speeches or other informational releases concerning
this Agreement, the terms contained herein, or the relationship of
the Parties shall be made without written approval of LCI. DIGEX
agrees to give LCI reasonable advance time for review of any material
submitted to LCI for approval.
2.3 Non-Assignability. The Parties' rights under this Agreement are
-----------------
non-transferable, and may not be assigned or sub-licensed without
the prior written authorization of the other party, *
2.4 No Authority to Make Agreements. Except as expressly permitted
-------------------------------
herein, neither Party shall have the authority to make any agreement
or incur any liability on behalf of the other party.
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
-1-
<PAGE>
2.5 Reserved Rights. DIGEX reserves the right to market the Services in
---------------
any manner and without limitation both within and outside of the
Territory.
3. Effective Date and Term.
-----------------------
3.1 Effective Date. This Agreement shall be effective, after execution
--------------
by both Parties, on the commencement date specified herein.
3.2 *
3.3 *
4. Port Acquisition and Revenue.
----------------------------
4.1 *
5. *
5.1 *
5.2 *
a. *
.
b. *
.
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
-2-
<PAGE>
c. *
.
6. Responsibilities of LCI.
------------------------
6.1 *
.
6.2 LCI shall not use in its marketing effort any materials or make any
warranties or representations to LCI Customers regarding the Services
or DIGEX that are misleading or inaccurate, or otherwise not in
accordance with DIGEX's specifications, unless approved in advance in
writing by DIGEX.
6.3 *
6.4 *
.
7. Responsiblities of DIGEX.
-------------------------
DIGEX's responsibilities under this Agreement shall, in addition to
any others contained herein, be as follows:
7.1 Provision of Service. DIGEX will provide the Service for *
---------------------
and other areas within the coverage of
DIGEX's network. The Service will be available following the
successful placement into revenue service of a POP, completion,
integration, and testing of the POP, and receipt by DIGEX of all
necessary regulatory approvals, permits, licenses and certifications
for the POP.
7.2 *
.
7.3 Deactivation of Internet Services. DIGEX shall, upon receipt of
----------------------------------
written notice from LCI requesting deactivation of Internet Services,
promptly arrange for such deactivation, but LCI shall be liable for
all charges for port fees for LCI, activated at LCI's request, until
the end of the business day immediately following the date on which
DIGEX receives notice from LCI to deactivate such Services.
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
-3-
<PAGE>
7.4 DIGEX will provide to LCI upon LCI's request product training and
technical assistance to LCI *
.
7.5 DIGEX will provide the Services to LCI Customers comparable to or
better than the services provided to other DIGEX customers.
7.6 *
7.7 *
.
7.8 *
7.9 *
a. *
b. *
7.10 DIGEX agrees to schedule any downtime maintenance at times which will
minimize LCI Customer interruption. DIGEX will notify LCI of its
downtime maintenance schedule, and upon reasonable request from LCI,
DIGEX will re-schedule such maintenance at the convenience of LCI.
7.11 *
7.12 DIGEX shall not be responsible for the performance, maintenance, or
ongoing support of customer premises equipment.
8. Service integration.
--------------------
8.1 *
a. *
.
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
-4-
<PAGE>
b. *
.
c. *
.
d. *
.
e. *
.
f. *
.
g. *
.
8.2 *
.
9. Fraud prevention.
------------------
9.1 The Services are provided subject to the condition that there will be
no abuse or fraudulent use thereof. Abuse and fraudulent use include,
but are not limited to, the following:
a. Obtaining, interrupting, accessing, altering, or destroying, or
attempting to obtain, interrupt, access, alter, or destroy, any
files, programs, information and/or use of the Services of or by
another DIGEX customer or user by rearranging, tampering with, or
making connection to any facilities of DIGEX by any trick,
scheme, false representation, or through any other fraudulent
means or devices; or
b. Assisting another to perform any of the acts prohibited in
subparagraph a of this section 9.1.
9.2 LCI and DIGEX shall cooperate to prevent abuse or fraudulent usage of
the Services, and LCI shall promptly terminate any LCI Customers, or
participation in or access to the Services by its vendors after
receipt of notice from DIGEX.
10. Rates.
-----
10.1 Rates and charges for the Services shall be as set forth in EXHIBIT
"2", which is attached to and made a part of this Agreement.
10.2 *
.
10.3 *
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
-5-
<PAGE>
10.4 *
.
10.5 *
.
11 Billing of charges.
-------------------
LCI shall pay all charges for access to and use of the Services as set
forth in this SECTION 11.
11.1 Monthly billing. Port and Installation charges will be billed in
----------------
arrears in the month following the month in which they are incurred.
|For purposes of computing partial month charges for Port charges, each
day is considered to be 1/30 (one-thirtieth) of a month. A first invoice
may contain charges from a previous billing period for service provided
from the date of installation through the current invoice period.
12. Taxes.
------
All rates set forth in this Agreement are exclusive of Applicable Taxes.
For purposes of this Agreement, "Applicable Taxes" are taxes,
assessments, surcharges, levies, or similar items assessed by a
governmental body. LCI is liable for, and shall indemnify DIGEX from and
against, all Applicable Taxes which may be passed directly through to
LCI or LCI Customers, and all Applicable Taxes properly chargeable to
LCI or LCI Customers with respect to DIGEX's provision of Service to LCI
or relating to LCI's use, resale, or lease of the Service to LCI
Customers or others, and/or any penalty and interest theron if assessed
by the applicable governmental body. DIGEX will invoice LCI for such
penalties and interest, and LCI shall pay such invoices in accordance
with the provisions of SECTION 13 of this Agreement.
13. Terms of payment.
-----------------
13.1 Payment due date. LCI shall pay to DIBEX all invoiced charges,
-----------------
including Applicable Taxes and any penalties and interest thereon,
whether or not such charges have been paid to LCI by LCI Customers,
within thirty (30) days of the date of invoice, without deduction or
setoff. Payments received will be applied to the earliest outstanding
amounts due under this Agreement.
13.2 Disputed amounts. LCI shall notify DIGEX in writing within sixty (60)
-----------------
days after the date of invoice of any dispute or disagreement with
invoiced charges. All disputed amounts resolved in LCI's favor will be
credited against amounts owing on subsequent invoices.
14. Record keeping and Audit.
-------------------------
14.1 Maintenance of records. As required by law, each party shall, directly
-----------------------
or through a third party service bureau, create and maintain full,
complete and accurate records of business conducted pursuant to this
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
-6-
<PAGE>
Agreement, including but not limited to data relating to customer
activations, deposits, port charges, invoices, payments, and Service
credits.
15. Service credits.
---------------
15.1 In the event of a service outage (as defined in EXHIBIT "1"), DIGEX
will grant to LCI service credit(s) (as set forth in EXHIBIT "1").
16. Termination by DIGEX.
--------------------
DIGEX may suspend or terminate the provision of the Service hereunder
to LCI and/or terminate this Agreement without any liability to LCI
or any third party in the event of a default by LCI. LCI shall be
deemed to be in default under any of the following circumstances:
16.1 LCI fails to pay all charges hereunder, including, without
limitation, all charges based on the Port Acquisition and Revenue
Rates, within sixty (60) days after receipt of notice from DIGEX that
the same are overdue; and
16.2 LCI fails, upon written notice from DIGEX, to terminate, as required
under SECTION 16 of this Agreement, a customer or vendor that has
made fraudulent use of or access to the Service or any other DIGEX
facility; provided, however, such termination shall not violate any
laws, statutes and regulations.
17. Termination by LCI of the Agreement With or Without Cause.
---------------------------------------------------------
17.1 *
.
17.2 *
18. Termination by either party.
---------------------------
Either DIGEX or LCI (the "Terminating Party") may terminate this
Agreement and the use of the Services hereunder if the other party
(the "Defaulting Party") is in default of the provisions of this
Agreement including but not limited to the following:
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
- 7 -
<PAGE>
18.1 Either party makes an unauthorized assignment of its rights, duties
and/or obligations under this Agreement;
18.2 The Defaulting Party dissolves or liquidates;
18.3 The Defaulting Party becomes the subject of voluntary or involuntary
bankruptcy, insolvency, reorganization or liquidation proceedings,
makes an assignment for the benefit of creditors, or admits in
writing its inability to pay its debts as they mature, or a receiver
is appointed for any of its assets or properties, and the same is not
dismissed, vacated, or stayed within thirty (30) days, or the party
seeking to terminate has reason to believe that the commencement of
any such proceeding or assignment for the benefit of creditors is
imminent; or
18.4 Termination under this SECTION 18 shall be effective immediately upon
receipt by the Defaulting Party of written notice of default, or at
the end of such period as the Terminating Party may grant for the
cure of the default; and the non-defaulting Party may pursue any
remedies available to it in law or equity. If LCI terminates DIGEX
under this Section, LCI will not have any financial obligations to
DIGEX, including the payment of the Commitment.
19. Termination Rights.
-------------------
19.1 Upon any termination of the Service, DIGEX promptly shall refund or
return to LCI, as appropriate, any payments and/or all deposits,
letters of credit and other forms of security provided by LCI, less
only such amounts as are due for use of the Service before
termination and such other amounts as DIGEX reasonably shall
determine are due and owing, or will become due and owing, from LCI.
DIGEX shall pay LCI simple interest on the amount of any cash deposit
so refunded from the date of its deposit with DIGEX to the date
refunded at a per annum rate equal to the prime lending rate
published in the "Money Rates" column of The Wall Street Journal as
-----------------------
of the date of the termination of the Service.
19.2 Upon termination of this Agreement, DIGEX shall, at its expense,
promptly return to LCI, including but not limited to, all copies of
LCI Confidential Information, any marketing or other materials
relating to LCI, and any information regarding the internet protocol
addresses for LCI Customers.
19.3 Upon termination of this Agreement by LCI, with or without cause,
DIGEX shall cooperate and assist LCI with the conversion of LCI
Customers to the new Internet service provider.
19.4 *
20. Delay in Commencement Date.
---------------------------
If the Commencement Date is delayed beyond June 15, 1996, due to LCI,
as determined by DIGEX in its reasonable discretion, either party may
terminate its obligations under this Agreement on thirty (30) days'
notice to the other party without liability hereunder.
21. *
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
- 8 -
<PAGE>
22. *
23. *
.
24. Compliance with Law.
--------------------
LCI and DIGEX shall comply with all applicable laws, statutes, and
regulations relating to the performance of their respective duties
and obligations under this Agreement.
25. *
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
- 9 -
<PAGE>
*
26. General
-------
26.1 Confidential Information. Should confidential or proprietary information
------------------------
of either LCI or DIGEX be disclosed to the other party in the performance
of this Agreement, the Party receiving such confidential or proprietary
information (hereinafter "Recipient") hereby agrees to receive such
information in confidence, and take such precautions as may be necessary
to protect same from disclosure to others during the Term of this
Agreement and for three (3) years following termination of this Agreement.
Precautions taken shall be at least equivalent to Recipient's
precautions with respect to its own confidential and proprietary
information, but in no event less than a reasonable standard of care.
("Confidential Information" shall mean the proprietary and confidential
data or information of a Party which is of tangible or intangible value
to that Party and is not public information or is not generally known or
available to that Party's competitors but is known only to that Party and
those of its employees, independent contractors, consultants, customers or
agents to whom it must be confidential in order to apply it to the uses
intended, including, without limitation, information regarding that
party's customers or prospective customers, marketing methods and business
plans gained by the other Party.) Confidential Information shall not
include information which (i) at the time of disclosure to Recipient is in
the public domain through no acts or omission of Recipient, (ii) as shown
by written records, as already known by Recipient, (iii) is revealed to
Recipient by a third party who does not thereby breach any obligation of
confidentiality and who discloses such information in good faith; or (iv)
is disclosed pursuant to a legal obligation to disclose same to any
governmental entity or pursuant to judicial or quasi judicial action (so
long as Recipient gives disclosing Party prompt written notice sufficient
to allow disclosing Party to seek a protective order or other appropriate
remedy.) Recipient agrees to disclose only such confidential information
as is legally required and will use its best efforts to obtain
confidential treatment for any confidential or proprietary information so
disclosed.
26.2 Each party acknowledges that the disclosing Party's information is
proprietary, and agrees, that in the event of an unauthorized disclosure,
the disclosing Party is entitled to seek equitable relief, including
without limitation, specific performance and injunctions, in addition to
any other remedies at law or equity.
26.3 Arbitration. All disputes concerning the terms and conditions of this
Agreement shall be subject to binding arbitration of the American
Arbitration Association ("AAA") subject to the rules of the AAA then in
effect. The AAA shall decide, as required, on the number and identity of
the arbitrators and the place of the arbitration. Judgement upon the award
rendered in any arbitration may be entered in any court having
jurisdiction of the matter.
26.4 Attorney's Fees. If any arbitration, litigation, or other legal proceeding
occur between the Parties relating to this Agreement, the prevailing Party
shall be entitled to recover (in addition to any other relief
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
-10-
<PAGE>
awarded or granted) its reasonable costs and expenses, including
attorneys' fees, incurred in the proceeding.
26.5 Notices. Unless otherwise expressly provided for, all notices, requests,
-------
demands, consents or other communications required or pertaining to this
Agreement must be in writing and must be delivered personally or sent by
certified or registered mail (postage prepaid and return receipt
requested) to the other Party at the address set forth below (or to any
other address given by either Party to the other Party in writing):
TO: DIGEX-Private Network Group
6800 Virginia Manor Road
Beltsville, Maryland 20705
Attention: DIGEX/LCI PNC Senior Account Manager
TO: LCI International Telecom Corp.
8180 Greensboro Drive, Suite 800
McLean, Virginia 22102
Attention: General Counsel
In case of mailing, the effective date of delivery of any notice, demand,
or consent shall be considered to be five (5) days after proper mailing.
26.6 Waiver and Amendment. No waiver, amendment, or modification of this
--------------------
Agreement shall be effective unless in writing and signed by the Party
against whom the waiver, amendment, or modification is sought to be
enforced. No failure or delay by either Party in exercising any right,
power or remedy under this Agreement shall operate as a waiver of the
right, power or remedy.
26.7 Benefit. Subject to the restrictions in this Agreement on the assignment
-------
by LCI, this Agreement is binding upon and insures to the benefit of the
successors and assigns of the Parties.
26.8 No Third Parties' Rights. This Agreement is not for the benefit of any
------------------------
third party and shall not be deemed to grant any right or remedy to any
third party, whether or not referred to in this Agreement.
26.9 Headings. The SECTION and paragraph headings of this Agreement are
--------
intended as a convenience only, and shall not affect the interpretation of
its provisions.
26.10 Singular and Plural Terms. Where the context of this Agreement requires,
-------------------------
singular terms shall be considered plural and plural terms shall be
considered singular.
26.11 Severablility. If any provision(s) of this Agreement is finally held by a
-------------
court or arbitration panel of competent jurisdiction to be unlawful, the
remaining provisions of this Agreement shall remain in full force and
effect to the extent that the intent of the Parties can be enforced.
26.12 Governing Law and Forum. The validity construction, and performance of
-----------------------
this Agreement is governed by the laws of New York. LCI agrees that this
Agreement is considered to be entered into New York, and that all
obligations of DIGEX under this Agreement are incurred in and are to be
performed in New York. The Parties consent to personal jurisdiction in New
York with respect to any arbitration or suit brought relating to this
Agreement. The Parties waive all objections to venue to the extent
permitted by law.
26.13 Relationship of the Parties. This Agreement does not constitute a
---------------------------
partnership agreement, nor does it create a joint venture or agency
relationship between the Parties.
-11-
<PAGE>
26.14 Survivorship. All obligations and duties hereunder which shall by their
------------
nature extend beyond the expiration or termination of this Agreement,
including 21,22,23,24,25, and 26 shall survive and remain in effect
beyond any expiration or termination hereof.
26.15 Force Majeure. Neither Party shall be responsible for any delay or
-------------
failure in performance of any part of this Agreement to the extent that
such delay or failure is caused by fire, flood, explosion, war, strike,
embargo, government requirement, action of civil or military authority,
or act of God. In the event of any such delay, the time of performance
that was delayed for such causes will be extended for a period equal to
the time lost by reason of the delay.
26.16 Conflicting Terms. The Parties agree that the terms and conditions of
-----------------
this Agreement shall prevail, notwithstanding the contrary or additional
terms, in any purchase order, sales acknowledgement, confirmation or any
other document issued by either Party effecting the purchase and/or sale
of Services.
26.17 Entire Agreement. This Agreement, including all appendices, constitutes
----------------
the complete and final Agreement between the Parties, and supercedes all
prior negotiations and agreements between the Parties concerning its
subject matter. This Agreement may be executed in counterparts, all of
which, when taken together, shall constitute one original Agreement.
26.18 Escalation Procedures. Any customer service or operational system
---------------------
problems will be handled by DIGEX in accordance with EXHIBIT "3".
IN WITNESS WHEREOF, the Parties have duly executed this Agreement this 29th day
----
of May, 1996.
---
Digital Express Group, Inc. LCI International Telecom Corp.
By: /s/ ANTHONY D. ALBERICO, JR. By: /s/ LAWRENCE J. BOWMAN
----------------------------- -----------------------------
Anthony D. Alberico, Jr.
Title: Director of Sales Title: SVP Technology
-------------------------- --------------------------
Date: May 29 / 96 Date: 5/29/96
--------------------------- ----------------------------
-12-
<PAGE>
Exhibit I
- --------------------------------------------------------------------------------
PERFORMANCE SPECIFICATIONS
--------------------------
*
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
<PAGE>
Exhibit 1
- --------------------------------------------------------------------------------
*
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
<PAGE>
Exhibit 1
- -------------------------------------------------------------------------------
*
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
<PAGE>
Exhibit 1
- --------------------------------------------------------------------------------
*
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
<PAGE>
Exhibit 1
- --------------------------------------------------------------------------------
*
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
<PAGE>
(Exhibit 2 Page 1 of 5)
DIGEX's LCI Price - Schedule II-A
DIGEX Port & Installation Fees
*
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
<PAGE>
DIGEX
(Exhibit 2 Page 2 of 5)
*
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
<PAGE>
Appendix B (Exhibit 2 Page 3 of 5)
DIGEX's LCI Price - Schedule III - A
DIGEX Part & Installation Fees
*
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
<PAGE>
Appendix B
Exhibit 2 Page 4 of 5
*
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
<PAGE>
DIGEX's LCI Price - Schedule 1-C
DIGEX's Firewall/Software Services
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
<PAGE>
(Exhibit 3 Page 1 of 2)
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
<PAGE>
(Exhibit 3 page 2 0f 2)
DIGEX PNC Escalation Procedures
- --------------------------------------------------------------------------------
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
<PAGE>
EXHIBIT 10.3
------------
DIGEX Private Network Contract
DIGEX, Inc., a Maryland corporation, with offices at 6800 Virginia Manor Road,
- ----------- -------------------------
Beltsville, Maryland 20705, hereinafter referred as "DIGEX", and WINSTAR
- -------------------------- ----- -------
Communications, Inc, with offices at 230 Park Avenue, Suite 3126, New York, New
- -------------------- ------------------------------------------
York 10169, hereinafter referred to as "WINSTAR", agree that the following terms
- ---------- -------
and conditions shall govern the sale and discounting of Products as herein
defined.
1. Definitions.
-----------
1.1 Parties, Party. "Parties" means DIGEX and WINSTAR, collectively. "Party"
--------------
means either DIGEX and WINSTAR.
1.2 Agreement. "Agreement" refers to this contract for Private Network Capacity
---------
agreed to between WINSTAR and DIGEX.
1.3 Territory. "Territory" is designated as: *
---------
.
1.4 Service(s). The term "Service" or "Services as used herein shall mean one
----------
or more of the items listed on EXHIBITs "A & B" hereto, as changed from
time to time in accordance with the provisions of this Agreement, and all
future DIGEX products and services (which shall be added to EXHIBIT "B").
1.5 *
.
1.6 *
.
2. Appointment.
-----------
2.1 *
A. WINSTAR at its option can disclose in its advertisements, materials and
to customers that it is using the services of DIGEX and DIGEX can also
do so, as to WINSTAR but neither Party can use the trademarks, service
marks, etceteras without the prior written consent of the other.
*
- ----------
* Confidential treatment
Material omitted and filed separately with the Commission.
Page 1
<PAGE>
2.2 Public Release of Information. No news releases, articles, brochures,
-----------------------------
advertisements, speeches or other informational releases concerning this
Agreement, the terms contained herein, or the relationship of the
Parties shall be made without written approval from the other Party.
Both Parties agree to give four (4) hours advance time for review of any
material submitted for approval. Review shall be completed within four
(4) business hours. To the extent that disclosure is required by legal
obligation to any governmental entity or pursuant to judicial, quasi
judicial and/or government action no consent is required, though notice
shall be given.
2.3 No Authority to Make Agreements. Except as expressly permitted herein,
-------------------------------
neither Party shall have the authority to make any agreement or incur
any liability on behalf of the other Party.
2.4 Reserved Rights. DIGEX reserves the right to market the Services in any
---------------
manner and without limitation, *
.
3. Commencement Date And Term.
--------------------------
3.1 Commencement Date. This Agreement shall be effective, upon execution by
-----------------
both Parties.
3.2 *
3.3 *
.
4. Reserved.
--------
5. Commitment.
----------
5.1 Total Commitment. WINSTAR hereby agrees to purchase from DIGEX *
----------------
dollars of Services less any Service Credits at the
Port Acquisition and Revenue Rates received by WINSTAR from DIGEX for
failure to meet Performance Specifications or any other credits or
offsets given to WINSTAR over a *
"Commitment"). WINSTAR further anticipates that it will purchase an
additional * dollars of Services during the
initial term of this Agreement.
5.2 WINSTAR's satisfaction of the Commitment will vary depending on the Term
remaining as follows:
*
.
.
.
- ----------
* Confidential treatment
Material omitted and filed separately with the Commission.
Page 2
<PAGE>
*
.
6. Responsibilities of WINSTAR.
---------------------------
6.1 *
6.2 WINSTAR shall not use in its marketing effort any materials or make any
warranties or representations to WINSTAR Customers regarding the Services
from DIGEX that are misleading or inaccurate, or otherwise not in
accordance with DIGEX's specifications, unless approved in advance in
writing by DIGEX.
6.3 *
7. Responsibilities of DIGEX.
-------------------------
DIGEX's responsibilities under this Agreement shall, in addition to any
others contained herein, be as follows:
7.1 Provision of Service. DIGEX will provide the Service for use throughout
--------------------
the Territory. The Service will be available following the successful
placement into revenue service of a POP, completion, integration, and
testing of the POP, and receipt by DIGEX of all necessary regulatory
approvals, permits, licenses and certifications for the POP.
7.2 *
.
7.3 Deactivation of Services. DIGEX shall, upon receipt of agreed upon notice
------------------------
from WINSTAR requesting deactivation of a Service, promptly arrange for
such deactivation, but WINSTAR shall be liable for all charges for port
fees for WINSTAR, activated at WINSTAR's request, until the end of the
business day next succeeding the date on which DIGEX receives agreed upon
notice from WINSTAR to deactivate such Services.
7.4 DIGEX will provide to WINSTAR upon WINSTAR's request product and services
training to WINSTAR *
.
- -----------
* Confidential treatment
Material omitted and filed separately with the Commission.
<PAGE>
7.5 DIGEX will provide the Services to WINSTAR and hence WINSTAR's Customers
equal to or better than the Services provided to other DIGEX customers.
7.6 *
7.7 *
.
7.8 *
7.9 DIGEX agrees to schedule any downtime maintenance at times which will
minimize WINSTAR Customer interruption. DIGEX will try to notify
WINSTAR thirty (30) days in advance, but in no event less than three (3)
days in advance, of its downtime maintenance schedule, and upon
reasonable request from WINSTAR, DIGEX will re-schedule such maintenance
at the convenience of WINSTAR.
7.10 *
7.11 *
7.12 *
8. Service Integration.
--------------------
8.1 *
;
- ----------
* Confidential treatment
Material omitted and filed separately with the Commission.
Page 4
<PAGE>
*
9. Fraud Prevention.
-----------------
9.1 The Services are provided subject to the condition that there will be no
abuse or fraudulent use thereof. Abuse and fraudulent use shall mean
the following or such things as may be agreed upon by both Parties:
A. Obtaining, interrupting, accessing, altering, or destroying, or
attempting to obtain, interrupt, access, alter, or destroy, any
files, programs, information and/or use of the Services of
another DIGEX customer or user by rearranging, tampering with,
or making connection to any facilities of DIGEX by any trick,
scheme, false representation, or through any other fraudulent
means or devices; or
B. Assisting another to perform any of the acts prohibited in
subparagraph of this SECTION "9.1".
9.2 WINSTAR and DIGEX shall cooperate to prevent abuse or fraudulent usage
of the Services, and WINSTAR shall promptly terminate any WINSTAR
Customer, or participation in or access to the Services by its vendors
after receipt of notice from DIGEX of fraudulent use of the Services by
WINSTAR's Customer(s) provided, however that such notice must be
validated by WINSTAR prior to the Customer(s) termination by DIGEX and
any such termination must be in accordance with any applicable laws
and/or governmental regulations.
10. Rates.
------
10.1 Rates and charges for the Services shall be as set forth in EXHIBIT "B",
which is attached to and made a part of this Agreement. Services can
be ordered and/or provisioned either individually (unbundled) or
together (bundled).
10.2 *
.
10.3 *
.
10.4 *
- ----------
* Confidential treatment
Material omitted and filed separately with the Commission.
Page 5
<PAGE>
*
10.5 *
11. Billing of Charges.
------------------
WINSTAR shall pay all charges for access to and use of the Services as
set forth in this SECTION "11".
11.1 Monthly Billing. Installation and recurring charges will be billed in
---------------
arrears in the month following the month in which they are incurred. For
purposes of computing partial month charges for Port charges, each day
is considered to be 1/30 (one-thirtieth) of a month. A first invoice may
contain charges from a previous billing period for service provided from
the date of installation through the current invoice period.
12. Taxes.
-----
All rates set forth in this Agreement are exclusive of Applicable Taxes.
For purposes of this Agreement, "Applicable Taxes" are taxes,
assessments, surcharges, levies, or similar items assessed by a
governmental body for Service. WINSTAR is liable for, and shall
indemnify DIGEX from and against, all Applicable Taxes which may be
passed directly through to WINSTAR or WINSTAR Customers, and all
Applicable Taxes (excluding DIGEX income taxes), properly chargeable to
WINSTAR or WINSTAR Customers with respect to DIGEX's provision of
Service to WINSTAR or relating to WINSTAR's use, resale, or lease of the
Service to WINSTAR Customers or others, and/or any penalty and interest
thereon if assessed by the applicable governmental body. DIGEX will
invoice WINSTAR for such penalties and interest, and WINSTAR shall pay
such invoices in accordance with the provisions of SECTION "13" of this
Agreement.
13. Terms of Payment
----------------
13.1 Payment due date. *
----------------
, WINSTAR shall pay to DIGEX all invoiced
charges, including Applicable Taxes and any penalties and interest
thereon, whether or not such charges have been paid to WINSTAR by
WINSTAR Customers, within thirty (30) days of the date of invoice.
Payments received will be applied to the earliest outstanding amounts
due under this Agreement.
13.2 Disputed amounts. WINSTAR shall notify DIGEX in writing within fifteen
----------------
(15) business days after the date of invoice of any dispute or
disagreement with invoiced charges. The disputed amount is to be
resolved by WINSTAR and DIGEX within sixty (60) days of the invoice
date. WINSTAR is responsible for leading the resolution process by
bringing supporting documentation forward and DIGEX will maintain good
faith negotiations. DIGEX will not perform unreasonable requests
which include providing information out of that normally available or
from its legacy systems. All disputed amounts resolved in WINSTAR's
favor will be credited against amounts owing on subsequent invoices.
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
Page 6
<PAGE>
14. Record Keeping and Audit.
------------------------
14.1 Maintenance of Records. As required by law, each Party shall, directly or
----------------------
through a third party service bureau, create and maintain full, complete
and accurate records of business conducted pursuant to this Agreement,
including but not limited to data relating to customer activation,
deposits, port charges, invoices, payments, and Services credits.
15. Service Credits.
---------------
15.1 *
15.2 *
16. Termination by DIGEX.
--------------------
DIGEX may terminate this Agreement, immediately, without penalty or
liability to WINSTAR or any third party if any of the following occur:
A. WINSTAR fails to pay all charges hereunder, including, without
limitation, all charges based on the Port Installation and Recurring
Rates (excluding any disputed amounts), within sixty (60) days after
receipt of notice from DIGEX that the same are overdue; and
B. WINSTAR fails, upon written notice from DIGEX, to terminate, as
required under SECTION "9" of this Agreement, a customer or vendor
that has made material fraudulent use of or access to the Service or
any other DIGEX facility; provided, however, such termination shall
not violate any laws, statutes and/or regulations.
17. Termination by WINSTAR
----------------------
17.1 With Cause. WINSTAR may terminate this Agreement, immediately, without
----------
penalty or liability to DIGEX or any third party if any of the following
occur:
*
b) DIGEX provides any information to, or makes any representations or
warranties to, WINSTAR in connection with the Service, or otherwise in
connection with any information required to be provided by it
hereunder, which proves to have been false or misleading in any
material respect as of the date provided or made.
c) Failure to honor DIGEX warranties under this Agreement.
18. Termination by either Party.
---------------------------
18.1 Either DIGEX or WINSTAR (the "Termination Party") may terminate this
Agreement and the use of the Services hereunder if the other Party (the
"Defaulting Party), as follows:
A. Dissolves or liquidates; or
Page 7
<PAGE>
B. Becomes the subject of voluntary or involuntary bankruptcy,
insolvency, reorganization or liquidation proceedings, makes an
assignment for the benefit of creditor, or admits in writing its
inability to pay its debts as they mature, or a receiver is
appointed for any of its assets or properties, and the same is not
dismissed, vacated, or stayed within thirty (30) business days, or
the Party seeking to terminate has reason to believe that the
commencement of any such proceeding or assignment for the benefit of
creditors is imminent.
18.2 Termination under this SECTION "18" shall be effective immediately upon
receipt by the Defaulting Party of written notice of default, or at the
end of such period as the Terminating Party may grant the cure of the
default, and the non-defaulting Party may pursue any remedies available
to it in law or equity.
19. Termination Rights.
------------------
19.1 *
19.3 Upon termination of this Agreement, each Party shall, at its expense,
promptly return to the other Party, all copies of Confidential
Information, including but not limited to any marketing or other
materials.
19.4 *
20. *
21. *
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
Page 8
<PAGE>
*
22. Warranty Limitations.
--------------------
*
23. *
24. Compliance with Law.
-------------------
WINSTAR and DIGEX shall comply with all applicable laws, statutes, and
regulations relating to the performance of their respective duties and
obligations under this Agreement.
25. Patent/Copyright Indemnification.
--------------------------------
*
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
Page 9
<PAGE>
*
26. General
-------
26.1 Confidential Information. Should confidential or proprietary information
-------------------------
of either WINSTAR or DIGEX be disclosed to the other in the performance
of this Agreement, the Party receiving such confidential or proprietary
information (hereinafter "Recipient") hereby agrees to receive such
information in confidence, and take such precautions as may be necessary
to protect same from disclosure to others, during the Term of this
Agreement and for one (1) year following termination of this Agreement.
Precautions taken shall be at least equivalent to Recipient's precautions
with respect to its own confidential and proprietary information, but in
no event less than a reasonable standard of care. ("Confidential
Information" shall mean: (1) any written information marked as
confidential or proprietary, or (2) if verbally disclosed, shall be
identified as confidential and/or proprietary at the time of disclosure
and summarized in writing to the Recipient within fifteen (15) days of
disclosure. Confidential Information shall not include information which
(i) at the time of disclosure to Recipient is in the public domain
through no acts or omission of Recipient or disclosure to Recipient is in
the public domain through no acts or omission of Recipient or
subsequently becomes into the public domain through no acts or omission
of Recipient; (ii) as shown by written records, is already known by
Recipient; (iii) is revealed to Recipient by a third party who does not
thereby breach any obligation of confidentiality and who discloses such
information in good faith, or (iv) is disclosed pursuant to a legal
obligation to disclose same to any governmental entity or pursuant to
judicial or quasi judicial action (so long as Recipient gives disclosing
Party prompt prior written notice) and provided further that Recipient
will disclose only such confidential information as is legally required
and will use its reasonable efforts to obtain confidential treatment for
any confidential or proprietary information so disclose.
26.2 Each Party acknowledges that the disclosing Part's information is
proprietary, and agrees, that the disclosing Party is entitled to seek
equitable relief, including without limitation, specific performance and
injunctions, in addition to any other remedies at law or equity.
26.3 Arbitration. All disputes (except for recovery of the Commitment and/or
------------
foreclosure on WINSTAR's security interest as provided in Section 20 of
this Agreement) concerning the terms and conditions of this Agreement
shall be subject to binding arbitration of the American Arbitration
Association ("AAA") subject to the rules of the AAA then in effect
relating to commercial arbitration. There shall be three arbitrators:
Each Party shall choose one arbitrator within thirty (30) days of
initiation of the arbitration, and the two so chosen shall in turn choose
the third within fifteen (15) days. The arbitration shall be held in New
York City and shall be completed within
Page 10
<PAGE>
ninety (90) days of selection of the initial two arbitrators. Judgement
upon the award rendered in any arbitration may be entered in any court
having jurisdiction of the manner.
26.4 Attorney's Fees. If any arbitration, litigation, or other legal
----------------
proceeding occurs between the Parties relating to this Agreement, the
prevailing Party shall be entitled to recover (in addition to any other
relief awarded or granted) its reasonable cost and expenses, including
attorneys' fees, incurred in the proceeding.
26.5 Notices. Unless otherwise expressly provided for, all notices, requests,
--------
demands, consents or other communications required or pertaining to this
Agreement must be in writing and must be delivered personally or sent by
certified or registered mail (postage prepaid and return receipt
requested) to the other Party at the address set forth below (or to any
other address given by either Party to the other Party in writing:
TO: DIGEX - Private Networks Group
6800 Virginia Manor Road
Beltsville, Maryland 20705
Attention: DIGEX/WINSTAR Sr. Account Manager
TO: WINSTAR Communications, Inc.
230 Park Avenue, Suite 3126
New York, New York 10169
Attention: General Counsel
In case of mailing, the effective date of delivery of any notice, demand,
or consent shall be considered to be five (5) days after proper mailing.
26.6 Waiver and Amendment. No waiver, amendment, or modification of this
---------------------
Agreement shall be effective unless in writing and signed by both
Parties. No failure or delay by either Party in exercising any right,
power or remedy under this Agreement, shall operate as a waiver of the
right, power or remedy.
26.7 Benefit. This Agreement is binding upon and inures to the benefit of the
--------
successors and assigns of the Parties.
26.8 No third party's Rights. This Agreement is not for the benefit of any
------------------------
third party and shall not be deemed to grant any right or remedy to any
third party, whether or not referred to in this Agreement, except as
otherwise provided at Section 25 of this Agreement.
26.9 Headings. The SECTION and paragraph headings of this Agreement are
---------
intended as a convenience only, and shall not affect the interpretation
of its provisions.
26.10 Singular and Plural Terms. Where the context of this Agreement requires,
--------------------------
singular terms shall be considered plural and plural terms shall be
considered singular.
26.11 Severability. If any provision(s) of this Agreement is finally held by a
-----------
court or arbitration panel of competent jurisdiction to be unlawful, the
remaining provisions of this Agreement shall remain in full force and
effect to the extent that the intent of the Parties can be enforced.
26.12 Governing Law and Forum. The validity, construction, and performance of
------------------------
this Agreement is governed by the laws of New York. Both Parties agree
that this Agreement is considered to be entered into in New York, and
that all payment obligations of the Parties under this Agreement are to
be performed in New York. The Parties consent to personal jurisdiction in
New York with
DIGEXPNG-C 6109.9.48:19AM - Revision 4 Page 11
<PAGE>
respect to any arbitration or suit brought relating to this Agreement.
The Parties waive all objections to venue to the extent permitted by law.
26.13 Relationship of the Parties. This Agreement does not constitute a
---------------------------
partnership agreement, nor does it create a joint venture or agency
relationship between the Parties.
26.14 Survivorship. All obligations and duties hereunder which shall be their
------------
nature extend beyond the expiration or termination of this Agreement,
including 20, 21, 22, 23, 24, 25, and 26 shall survive and remain in
effect beyond any expiration or termination hereof.
26.15 Force Majeure. Neither party shall be responsible for any delay or
-------------
failure in performance of any part of this Agreement or order to the
extent that such delay or failure is caused by fire, flood, explosion,
war, strike, embargo, government requirement, action of civil or military
authority, or act of God. In the event of any such delay, the time of
performance that was delayed for such causes will be extended for a
period equal to the time lost by reason of the delay.
26.16 Conflicting Terms. The Parties agree that the terms and conditions of
-----------------
this Agreement shall prevail, notwithstanding the contrary or additional
terms, in any purchase order, sales acknowledgment, confirmation or any
other document issued by either Party effecting the purchase and/or sale
of Services.
26.17 Escalation Procedures. Any customer service or operational system
---------------------
problems will be handled by DIGEX in accordance with EXHIBIT "A".
26.18 Entire Agreement. This Agreement including all appendices and EXHIBITS,
----------------
constitutes the complete and final Agreement between the Parties, and
supersedes all prior negotiations and agreements between the Parties
concerning its subject matter. This Agreement may be executed in
counterparts, all of which, when taken together, shall constitute one
original Agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized representatives intending to be legally bound.
DIGEX, Inc. WINSTAR Communications, Inc.
By: [SIGNATURE APPEARS HERE] By: [SIGNATURE APPEARS HERE]
--------------------------- ---------------------------
Title: VP-GM Private Networks Title: VICE CHAIRMAN
------------------------ ------------------------
Date: 6/10/96 Date: 6/10/96
------------------------- -------------------------
Page 12
<PAGE>
EXHIBIT "A"
DIGEX Network Performance Specifications
----------------------------------------
*
:
- ----------
* Confidential treatment
Material omitted and filed separately with the Commission.
Page 1
<PAGE>
EXHIBIT "A"
*
- ----------
* Confidential treatment
Material omitted and filed separately with the Commission.
Page 2
<PAGE>
EXHIBIT "A"
*
- ----------
* Confidential treatment
Material omitted and filed separately with the Commission.
Page 3
<PAGE>
EXHIBIT "B"
DIGEX PNC Rate Cards
*
- ----------
* Confidential treatment
Material omitted and filed separately with the Commission.
Page 1
<PAGE>
EXHIBIT "B"
DIGEX PNC Rate Cards
PNC Internet Leased Line Pricing:
*
- ----------
* Confidential treatment
Material omitted and filed separately with the Commission.
Page 2
<PAGE>
EXHIBIT "B"
DIGEX PNC Rate Cards
PNC Internet Dial Up Pricing:
- ----------------------------
*
- ----------
* Confidential treatment
Material omitted and filed separately with the Commission.
Page 3
<PAGE>
EXHIBIT "B"
DIGEX PNC Rate Cards
*
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
Page 4
<PAGE>
EXHIBIT "B"
DIGEX PNC Rate Cards
*
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
Page 5
<PAGE>
Exhibit 10.4
------------
THE WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") OR THE SECURITIES ACT OF ANY STATE. THESE SECURITIES HAVE BEEN ISSUED OR
SOLD IN RELIANCE ON THE EXEMPTIONS FROM REGISTRATION CONTAINED IN SECTION 4(2)
OF THE SECURITIES ACT AND IN THE SECURITIES LAWS OF VARIOUS STATES AND MAY NOT
BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO EFFECTIVE REGISTRATION UNDER SUCH ACTS
OR IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACTS.
DIGEX, INCORPORATED
A MARYLAND CORPORATION
STOCK WARRANT
TO PURCHASE COMMON STOCK OF THE COMPANY
FOR VALUE RECEIVED, DIGEX, INCORPORATED, a Maryland corporation (the
"Company"), grants the following rights to WINSTAR COMMUNICATIONS, INC., a
Delaware corporation, its successors and permitted assigns (individually and
collectively, the "Holder").
Section 1. Grant.
In recognition of the agreement by an affiliate of Holder to acquire
wholesale services from the Company, the Holder is hereby granted the right
(collectively, the "Purchase Rights"), in accordance with the terms and
conditions of this Warrant, during the Exercise Period (as defined in Section
3), to purchase from the Company that number of fully paid and non-assessable
shares of Common Stock of the Company, par value One Cent ($0.01) per share, set
forth in Section 2 hereof, at the Exercise Price (as defined in Section 5), upon
delivery of this Warrant to the Company with the subscription form described in
Section 4 hereof, duly executed, and upon tender by the Holder of the Exercise
Price for the shares of Common Stock to be purchased.
Section 2. Number of Shares of Common Stock Purchasable.
Section 2.1. Subject to the provisions of this Section 2, this
Warrant entitles the Holder to purchase an aggregate number of 600,000 shares of
Common Stock (the "Warrant Shares").
Section 2.2. If, prior to the expiration of these Purchase Rights by
exercise or by the terms of this Warrant, the Company shall undertake any
reclassification, stock split, reverse stock split, stock dividend (whether
payable in Common Stock or other equity securities of the Company) or any
similar proportionately-applied change (collectively, a
<PAGE>
"Reclassification") of or with respect to outstanding shares of Common Stock
(other than a change of par value), the Holder shall thereafter be entitled,
upon exercise of this Warrant, to purchase the number of shares of stock and
other securities as would be owned by the Holder had it exercised all its
outstanding Purchase Rights immediately prior to such Reclassification and the
Exercise Price per share of Common Stock will be adjusted accordingly. For
example, if the Company effects a reverse stock split by consolidating every two
shares of Common Stock, par value one cent ($0.01) per share into one share of
Common Stock, par value Two Cents ($0.02) per share, the Holder (assuming it has
not by then exercised any of the Purchase Rights) will become entitled to
300,000 of such shares of Common Stock at an exercise price of $3.00 per share
of Common Stock. If, prior to the expiration of these Purchase Rights by
exercise or by the terms of this Warrant, the Company shall declare a cash
dividend or distribution on the Common Stock, the Exercise Price per share of
Common Stock will be reduced by the amount of the cash dividend or distribution.
Section 2.3. In case, prior to the expiration of these Purchase
Rights by exercise or by the terms of this Warrant, the Company shall
consolidate or merge with, or convey all, or substantially all, of its property
or assets to, any other corporation or corporations, then, as a condition
precedent to such consolidation, merger, or conveyance, lawful and adequate
provision shall be made whereby the Holder shall thereafter have the right to
receive from the Company or the successor corporation, as the case may be, upon
the basis and upon the terms and conditions specified in this Warrant, in lieu
of the shares of Common Stock of the Company theretofore purchasable upon the
exercise of the Purchase Rights, such shares of stock, securities, or assets as
may be issued or payable with respect to, or in exchange for, the number of
shares of Common Stock of the Company theretofore purchasable upon the exercise
of the Purchase Rights had such consolidation, merger, or conveyance not taken
place; and in any such event the rights of the Holder to an adjustment of the
number of shares of Common Stock purchasable upon the exercise of the Purchase
Rights as herein provided, shall continue and be preserved in respect of any
stock or securities which the Holder becomes entitled to purchase. It shall be
a condition of such consolidation, merger, or conveyance that the Company and/or
each successor corporation, as the case may be, shall assume in manner and form
reasonably satisfactory to the Holder the obligation to deliver to the Holder,
upon the exercise of the Purchase Rights, such shares of Common Stock,
securities, or assets as, in accordance with the provisions of this Warrant,
shall have been provided for that purpose.
Section 3. Exercise Period, Registration Statement Notice.
The Purchase Rights represented hereby shall be exercisable in whole
or in part from time to time beginning on the date hereof and ending five years
from the date hereof. The Company shall give the Holder written notice, at the
address of the Holder set forth on the Company's books, not less than thirty
(30) days prior to the filing of any registration statement with respect to a
public offering of the Common Stock of the Company (other than in
2
<PAGE>
connection with the Company's initial public offering of shares of its Common
Stock) and three days prior to consummation.
Section 4. Method Of Exercise.
The Purchase Rights represented by this Warrant are exercisable upon
the terms and conditions set forth herein at the option of the Holder in whole
at any time and in part from time to time during the Exercise Period, upon the
delivery of a duly executed notice to the Company's principal office, in the
form attached hereto and made a part hereof as Exhibit I, together with payment
---------
of the Exercise Price to the Company in cash or bank cashier's or certified
check or by wire to a bank designated by the Company. The Purchase Rights shall
be deemed to have been exercised, and the Holder shall be deemed to have become
a stockholder of record of the Company for the purposes of receiving dividends
and for all other purposes whatsoever with respect to the shares of Common Stock
so purchased, as of the date of delivery of such notice accompanied by tender of
the Exercise Price.
Section 5. Exercise Price.
The aggregate exercise price for the shares of Common Stock issuable
to the Holder hereunder is Nine Hundred Thousand Dollars ($900,000) (the
"Exercise Price"), which is $1.50 per share of Common Stock (subject to
adjustment as set forth in Sections 2.2 and 2.3 hereof). If the Holder
exercises a portion of the Purchase Rights granted hereunder, the exercise price
for the shares of Common Stock issuable upon such exercise shall equal the
product of (i) the Exercise Price and (ii) a fraction, the numerator of which is
the number of shares of Common Stock issuable upon such exercise, and the
denominator of which is the total number of shares of Common Stock issuable
hereunder.
Section 6. Company's Warranties and Covenants as to Capital Stock.
On a fully diluted basis (assuming conversion or exercise of the
Series A Preferred Stock, the Series B Preferred Stock, options and warrants),
after issuance of this Warrant and all other rights to acquire securities of the
Company, the Company will have 20,183,866 shares of Common Stock issued and
outstanding. The Company has taken all action necessary to authorize the
execution and delivery of this Warrant and to issue those shares of Common Stock
issuable to the Holder pursuant to this Warrant. The Common Stock deliverable
on the exercise of the Purchase Rights represented hereby shall, when issued, be
duly and validly issued, fully paid and nonassessable. The Company shall at all
times reserve and hold available sufficient shares of Common Stock to satisfy
all dividend, conversion and purchase rights of all outstanding convertible
securities and warrants, including shares of Common Stock issuable upon exercise
of the Warrant as adjusted pursuant to Section 2.2. As long as the Warrant
shall be outstanding, the Company shall use its best efforts to cause all shares
of Common Stock issuable upon exercise of the Warrant to be listed (subject to
official
3
<PAGE>
notice of issuance) on all securities exchanges (or, if applicable on Nasdaq) on
which the Common Stock is then listed and/or quoted.
Section 7. Transfer.
The Purchase Rights shall be registered on the books of the Company,
which shall be kept by it at its principal office for that purpose. The
Purchase Rights shall be transferable on said books, in whole or in part, by the
Holder in person or by duly authorized attorney upon surrender of this Warrant
properly endorsed. The Company agrees that, while the Purchase Rights remain
valid and outstanding, its stock transfer books shall not be closed for any
purpose whatsoever except under arrangements which shall enure to persons
exercising warrants or applying for transfer of stock all rights and privileges
which they might have had or received if the stock transfer books had not been
closed and they had exercised their Purchase Rights at any time during which
such transfer book shall have been closed.
Section 8. Charges, Taxes and Expenses.
Issuance of certificates for shares of Common Stock issuable upon the
exercise of this Warrant or any portion thereof shall be made without charge to
the Holder hereof for any issue taxes or any other incidental expenses in
respect of the issuance of such certificates to and in the name of the
registered Holder of this Warrant, all of which taxes and expenses shall be paid
by the Company, and such certificates shall be issued in the name of the Holder
of this Warrant. Certificates will be issued in a name other than that of the
Holder upon the request of a Holder and payment by the Holder of any applicable
transfer taxes and compliance with all applicable securities laws.
Section 9. Exchange For Other Denominations.
This Warrant is exchangeable for new certificates of like tenor and
date representing in the aggregate the right to purchase the number of shares
purchasable hereunder in denominations designated by the Holder at the time of
surrender. In the event of the purchase, at any time prior to the expiration of
the Exercise Period, of less than all of the shares of Common Stock purchasable
hereunder, the Company will cancel this Warrant upon surrender thereof, and will
forthwith execute and deliver to the Holder hereof a new warrant of like tenor
and date for the balance of the shares purchasable hereunder.
Section 10. Loss, Theft, Destruction or Mutilation of Warrant.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and, in case of
loss, theft or destruction, of indemnity or security reasonably satisfactory to
it, and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this
4
<PAGE>
Warrant, if mutilated, the Company will make and deliver a new warrant of like
tenor and date, in lieu of this Warrant.
Section 11. Remedies.
The Company acknowledges and agrees that the remedies at law of the
Holder in the event of any default or threatened default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate, and that such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
Section 12. Registration Rights
The Company agrees that if at any time after the date hereof the
Company shall propose to file a registration statement with respect to any of
its equity securities on a form suitable for a secondary offering (other than in
connection with the Company's initial public offering of shares of its Common
Stock), it will give notice in writing to such effect to the Holder at least
thirty (30) days prior to such filing, and, at the written request of the
Holder, made within ten (10) days after the receipt of such notice, will include
therein at the Company's cost and expense (including the fees and expenses of
counsel to the Holder, but excluding underwriting discounts, commissions and
filing fees attributable to the shares included therein) such of the shares of
Common Stock issuable, or previously issued, with respect to the Warrant as the
Holder shall request; provided, however, that if the offering being registered
by the Company is underwritten and if the representative of the underwriters
certifies in writing that the inclusion therein of the shares would materially
and adversely affect the sale of the securities to be sold by the Company
thereunder, then the Company shall be required to include in the offering only
that number of securities, including the shares, which the underwriters
determine in their sole discretion will not jeopardize the success of the
offering (the securities so included to be apportioned pro rata among all
selling shareholders according to the total amount of securities entitled to be
included therein owned by each selling shareholder); provided, further, that if
the proposed offering is of a security other than Common Stock and the
underwriters determine in their sole discretion that it would not be appropriate
to include shares of Common Stock in the offering, then the Company shall not be
required to include any of the shares of Common Stock of the Holder in the
offering. The Company agrees to indemnify the Holder in the manner and to the
extent customary in transactions of this nature and, upon request, will provide
a reasonable number of copies of the registration statement, prospectus and
related documents to the Holder.
Section 13. Notices
Section 13.1. Holder's Right to Receive Notice. Nothing herein shall
--------------------------------
be construed as conferring upon the Holders the right to vote or consent or to
receive notice as a
5
<PAGE>
stockholder for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the events
described in Section 13.2 shall occur, then in one or more of said events, the
Company shall give written notice of such event at least fifteen days prior to
the date fixed as a record date or the date of closing the transfer books for
the determination of the stockholders entitled to such dividend, distribution,
conversion or exchange of securities or subscription rights, or entitled to vote
on such proposed dissolution, liquidation, winding up or sale. Such notice shall
specify such record date or the date of the closing of the transfer books, as
the case may be.
Section 13.2. Events Requiring Notice. The Company shall be required
-----------------------
to give the notice described in this Section 13 upon one or more of the
following events: (i) if the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a dividend
or distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of retained earnings, as indicated by
the accounting treatment of such dividend or distribution on the books of the
Company, or (ii) the Company shall offer to all the holders of its Common Stock
any additional shares of capital stock of the Company or securities convertible
into or exchangeable for shares of capital stock of the Company, or any option,
right or warrant to subscribe therefor, or (iii) a merger or reorganization in
which the Company is not the surviving party, or (iv) a dissolution, liquidation
or winding up of the Company (other than in connection with a consolidation or
merger) or a sale of all or substantially all of its property, assets and
business shall be proposed.
Section 13.3. Notice of Change in Exercise Price. The Company shall,
----------------------------------
promptly after an event requiring a change in the Exercise Price pursuant to
Sections 2.2 and 2.3 hereof, send notice to the Holders of such event and change
("Price Notice"). The Price Notice shall describe the event causing the change
and the method of calculating same and shall be certified as being true and
accurate by the Company's President and Chief Financial Officer.
Section 13.4. Transmittal of Notices. All notices, requests,
----------------------
consents and other communications under this Warrant shall be in writing and
shall be deemed to have been duly made on the date of delivery if delivered
personally or sent by overnight courier, with acknowledgment of receipt by the
party to which notice is given, or on the fifth day after mailing if mailed to
the party to whom notice is to be given, by registered or certified mail, return
receipt requested, postage prepaid and properly addressed as follows: (i) if to
the registered Holder of this Warrant, to the address of such Holder as shown on
the books of the Company, or (ii) if to the Company, to its principal executive
office.
6
<PAGE>
Section 14. Miscellaneous.
This Warrant shall be binding upon the Company's successors. This
Warrant shall be governed, construed and enforced in accordance with the laws of
the State of Maryland. In case any provision of this Warrant shall be invalid,
illegal or unenforceable, or partially invalid, illegal or unenforceable, the
provision shall be enforced to the extent, if any, that it may legally be
enforced and the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby. This Warrant
and any term hereof may be changed, waived, discharged or terminated only by a
statement in writing, signed by the party against which enforcement of such
change, waiver, discharge or termination is sought. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof.
7
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed, under seal and delivered on its behalf this _____ day of June, 1996.
ATTEST: DIGEX, INCORPORATED
By: Anthony D. Alberico, Jr. By: Nick Magliato
------------------------- -------------------------
Name: Anthony D. Alberico, Jr Name: Nick Magliato
------------------------- -------------------------
Title: Director of Sales - Private Title: VP - GM Private Network
------------------------- -------------------------
Network For Company
8
<PAGE>
EXHIBIT I
EXERCISE OF OPTION TO PURCHASE
PURSUANT TO ATTACHED STOCK WARRANT
----------------------------------
________________, _______
To: DIGEX, Incorporated
6800 Virginia Manor Road
Beltsville, Maryland 20705
Attn: ____________________________
The undersigned, the Holder of record of the attached Warrant of
DIGEX, INCORPORATED, hereby exercises the option granted by the Purchase Rights
evidenced by the attached Warrant to purchase upon the terms set forth in such
Warrant shares of Common Stock, which constitutes all [or a portion] of the
shares of Common Stock issuable pursuant to the Purchase Rights represented by
this Warrant, of DIGEX, INCORPORATED, and hereby tenders payment of the Exercise
Price as determined by the Warrant.
By: ____________________________
Name: __________________________
Title: _________________________
<PAGE>
Exhibit 10.5(a)
Amendment
This Amendment modifies the Agreement for T1 Gateway Attachment Services dated 1
February 1994 (the "Gateway Agreement") and between ANS CO+RE Systems Inc.
("ANS") and Digital Express Group, Inc. ("DigEx"). This Amendment is effective
as of 15 June 1995.
The parties hereby agree as follows:
1. ANS CO+RE Systems, Inc. ("ANS") and Digital Express Group, Inc. ("DigEx")
are both data network service providers operating within the United States.
The ANS network is known as ANSnet.
2. "Transit services" are defined as the use of ANSnet to route and deliver
data traffic between customers of DigEx and customers of other commercial
networks connected to ANSnet, where neither the originator nor the
recipient of such traffic is an ANSnet subscriber, or the customer of an
ANSnet subscriber.
3. ANS and DigEx exchange routing information at the public network exchange
point known as MAE-East, in Washington, DC. The information and data
traffic are exchanged under a Domestic Peering Agreement entered into by
ANS and DigEx on 15 June 1995 (the "Peering Agreement"). This Amendment
specifically permits the use of the same interconnection points to exchange
traffic excluded under the Peering Agreement.
4. ANS will provide transit services between DigEx third-party Internet
Service Providers (ISPs) that peer with ANS. ANS makes no warranty that any
third-party ISP will accept such transit traffic.
5. Transit services to be provided do not include carriage of intra-provider
traffic between access points, or between DigEx customers: specifically,
traffic from a DigEx customer may not enter ANSnet for transit ultimately
to another DigEx customer.
6. In exchange for transit services provided by ANS, DigEx agrees that the
annual Network Connection Fees payable by DigEx to ANS shall be set at the
*
.
7. ANS further agrees to provide DigEx with an "MBone" feed. DigEx understands
that such feeds are not a production service; are as-is; and are supported
only on a low-priority, reasonable efforts basis.
- ----------
*Confidential treatment
Material omitted and filed separately with the Commision.
1
<PAGE>
8. The parties remain bound by their respective obligations of the Gateway
Agreement and the Peering Agreement. In the event of any conflict between
either the Gateway Agreement or the Peering Agreement, and the terms of
this Amendment, the latter terms shall prevail.
IN WITNESS WHEREOF the parties have each caused this Addendum to be executed and
delivered by its duly authorized signatory, all as of the date first set forth
above.
Digital Express Group, Inc. ANS CO+RE Systems, Inc.
By: /s/ Clyde A. Heintzelman /s/ Fred W. Diehl
---------------------------- ----------------------------
Name: Clyde A. Heintzelman Fred W. Diehl
---------------------------- ----------------------------
Title: COO Controller
---------------------------- ----------------------------
Date: 2/26/96 3/22/96
---------------------------- ----------------------------
2
<PAGE>
Exhibit 10.5(b)
BI-LATERAL INTERCONNECTION AGREEMENT (BIA)
Between PSINet and ISP-2
This Agreement is made by and between Digital Express Group, Inc., having
its principal place of business at 6800 Virginia Manor Road, Beltsville MD 20705
(hereinafter "ISP-2") and PSINet Inc. having its principal place of business at
510 Huntmar Park Drive, Herndon, Virginia 22070 (hereinafter "PSINet").
R E C I T A L S
WHEREAS, the parties in furtherance of creating greater interconnectivity
throughout the Internet industry has established operational, technical and
administrative mechanisms to ensure fair and open communications among Internet
Service Providers;
WHEREAS, the parties have a requirement to exchange data traffic between their
respective networks; and
WHEREAS, the parties desire to interconnect their data networks in order to
enable their respective customers to communicate with each other;
NOW, THEREFORE, in consideration of the covenants set forth herein, the parties
hereby agree as follows:
DEFINITIONS
1. Internet Service Providers. An Internet Service Provider (ISP) for purposes
of this Agreement must be legally organized to provide TCP/IP or OSI public
data internetworking services to the public in one or more geographic
areas. It is understood that the parties to this Agreement are ISP's. Any
ISP can become a Participant of an Interconnect Exchange (IX) as defined
below.
2. Shared Media Provider. A communications company such as a LEC (Local
Exchange Carrier), CAP (Competitive Access Provider) or IXC (Inter-Exchange
Carrier) that provides ATM, FR, SMDS, FDDI, OC3, T1 or T3 style
communication services.
3. Interconnect Exchange (IX). A location or service implemented by a Shared
Media Provider that provides physical and Data Link level services (as
defined in the OSI specifications) among more than one ISP and which does
not prohibit traffic for commercial use. The objective of an IX is to
concentrate a number of ISP inter-connects in a given geographic area, to
minimize costs of inter-connectivity and maximize efficiency and network
performance. Examples of IX's would be the CIX, MAE-East and SWAB.
AGREEMENTS
1. No Restrictions in Use. the parties agree not to restrict the use of their
network based on traffic type, subject only to applicable laws.
2. No Liability for Traffic. the parties agree that they neither incur nor
present any liability to the other party, by submitting data traffic to or
accepting data traffic from the other party, expect as required by law.
- --------------------------------------------------------------------------------
PSINet/ISP-2 Bilateral Interconnection Agreement 2/8/96
1
<PAGE>
3. Protection of Traffic.
A. No Wiretapping. Neither party shall monitor or capture the contents of
any data or other traffic which transit a ISP-2/PSINet IX. Neither party
can wiretap the infrastructure to examine any data unless an appropriate
legal court order is in force. No statistical information itemized by ISP,
by company, or by IP address can be supplied to any third party under any
circumstances.
B. Aggregated Statistics. Aggregated interface statistics on shared media
or other packet switch media/transmission is available to export as long as
it is not broken down by ISP. This aggregated statistical information can
be made available to third parties but not unilaterally by the
media/transmission provider or either party. Release of these statistics
will occur only upon the mutual agreement of the parties.
C. Organizational Availability. Any organization which is a customer of a
party has the right to request from that party that its statistical
information be made available to it on whatever basis, and in whatever
detail, it desires for its own internal uses.
D. No CLIPPER. Each party certifies that its telecommunications equipment
has NOT been installed with NSA/NIST Clipper technology nor will its
equipment be modified within the duration of this Agreement to include such
technology.
For specifically all non-tariffed telephone company provided service, and
in general whenever legally possible, the tariffed shared media provider
must certify that no NSA/NIST Clipper technology is in place nor will its
systems be modified within the duration of the Agreement to include such
technology.
4. No Settlement Fees. The parties agree not to charge the other party for
interconnection-related matters, including charges based on traffic volume,
commonly called "settlements." No fees will be charged between or among the
parties to pay for digitized information traffic exchanged through the
interconnection.
5. Cooperation and Co-ordination. The parties shall cooperate and coordinate
their activities to faciltate facilitate among the direct customers
of each party and participating ISP's. A party shall not in a
discriminatory manner (as between other ISP's) or without reasonable
justification decline to offer interconnectivity to its direct customers.
Provided, however, that notwithstanding any of the foregoing, the Parties
shall be able to:
A. prevent routing of traffic from third party ISP's (and their customers)
threatening, whether orally or in writing, or taking legal action against a
party;
B. filter certain routes due to security or legal concerns;
C. offer virtual private networks;
D. administer traffic and/or access restrictions for particular networks
where requested;
E. provide special services, if required, or to offer other special
services subject to specified limitations
F. enter into separate interconnectivity agreements with other ISP's.
G. allow interconnectivity between indirect customers through other
interconnections;
H. comply with requests from customers or users for restrictions or
limitations on the receipt, routing or delivery of messages.
- --------------------------------------------------------------------------------
PSINEVISP-2 BLATERM INTERCONNECTION AGREEMENT 2 2/8/98
<PAGE>
6. Physical Connection.
A. Circuit. Each party will provide a connection at its own expense, from
a location of its choice to an interconnection service of mutual
agreement. This Agreement contemplates such physical connection at MAE-
East in Washington, DC USA.
B. Equipment. Each party will provide circuit termination and packet
switching equipment at its end of the circuit, at its own expense,
terminating with a network interface, which interface may be changed from
time to time as the parties agree.
C. Network Operations. Each party will, at its own expense and on a best
efforts basis, provide Network Operations Center ("NOC") support in
cooperation with the other so as to maintain the smooth operation of the
internetwork services. The parties agree to define operating procedures
for providing reliable service to the customers of each party, and for
resolving customer difficulties encountered on the interconnected
services. Each party will use its best efforts to repair any reported and
actual outages within four (4) hours. Each party will also use its best
efforts to route data traffic to its final destination with dispatch.
D. Multiple Connections. The parties may choose to connect at more than
the above location.
7. Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER, EXCEPT AS STATED IN
THE NEXT PARAGRAPH HEREIN. FOR ANY LOSS, DAMAGE, LIABILITY, CLAIM OR
EXPENSE ARISING OUT OF OR IN RELATION TO THIS AGREEMENT, HOWEVER CAUSED,
WHETHER GROUNDED IN CONTRACT, TORT (INCLUDING NEGLIGENCE) OR STRICT
LIABILITY. IN NO EVEN SHALL EITHER PARTY BE LIABLE FOR ANY INCIDENTAL OR
CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN RELATION TO THIS AGREEMENT.
8. Indemnity. Each party shall indemnify and hold the other party harmless
from and against any loss, damage, liability, claim or expense, whether
actual or alleged, which results from a claim or claims asserted by
unrelated third parties concerning an action or omission of such party
with respect to its actions under this Agreement.
9. Insurance. Each party is responsible for assessing its own need for
property, casualty, and liability insurance and each shall obtain such
insurance as each sees fit. Each party shall bear the risk of loss to its
own equipment and agrees to not make any claims against the other for any
property loss, or assign that right to any third party.
10. Confidential Information. No confidential or proprietary information is
protected or implied by this Agreement, and the parties are not
responsible to one another for any confidential information which may be
inadvertently transmitted over the networks.
11. Special Issues.
A. Connection Speed. PSINet and ISP-2 will connect under this Agreement to
MAE-East+ in Washington, DC, USA at 34Mbps.
B. US and International ISP's Attached to Each Party's Network. Each party
will work toward agreement on a means for its customers who are also ISP's
to sign a bi-lateral agreement with each ISP with which they desire to
exchange traffic. The parties will also work toward a neutral third party
to administer the availability, status and archival of these agreements.
Should either party be threatened, whether orally or in writing, by legal
action by the other party's customer (who themselves are an ISP), or
should such legal action be taken by the other party's customer, the
threatened (or defending) party shall be authorized to (1) prevent routing
by that other party's or its customer's networks into and through the
threatened (or defending) party's network, and (2) require the complainant
customer to execute a bi-lateral interconnection agreement with the
threatened (or defending) party.
- --------------------------------------------------------------------------------
PSINET/ISP-2 BILATERAL INTERCONNECTION AGREEMENT 2/8/96
3
<PAGE>
C. Transit Services. Transit services are defined as the use of a
third party ISP to transport traffic between two or more destinations
across either party's network where neither of those destinations is a
subscriber of either party. Both PSINet and ISP-2 agree not to support
transit services as part of this Agreement.
To meet this requirement, PSINet and ISP-2 will implement technical
mechanisms to enforce this policy. Specifically, neither party will
establish a route of last resort directed toward the other party's
network. Instead, a full exchange of explicit routes comprising public
Internet service destinations of entities to whom either party is
contractually obligated to carry traffic will be exchanged by both
parties. Please note the enclosed figure 1.
<TABLE>
<S> <C> <C> <C>
TP ISP-1 Customer A TP ISP-1 Customer B TP ISP-2 Customer A TP ISP-2 Customer B
- ------------------- ------------------- ------------------- -------------------
Third Party ISP-1 ----------- ------------ Third Party ISP-2
---------------- IX IX -----------------
-- --
------------
PSINet Customer ----------- PSINet---------- MAE - East ------ISP-2's -------------- ISP-2 Customer
------ ------------ network
PSINet-Sponsored ISP ------------- --------------------- ISP-2-Sponsored ISP
PSI NetISP's Customer A ISP-2 ISP's -Customer A
PSI NetISP's Customer B ISP-2 ISP's -Customer B
PSI NetISP's Customer C ISP-2 ISP's -Customer C
</TABLE>
Figure 1.
Using Figure 1, traffic between "TP ISP 1"'s customer and destinations
on ISP-2's network would be Transit Traffic, using PSINet as a de facto
backbone. Similarly, traffic between "TP ISP 2"'s customer and
destinations on PSINet as a defacto backbone. Similarly, traffic
between "TP ISP 2"'s customer and destinations on PSINet would be
Transit Traffic, using ISP-2's network as a de facto backbone. Traffic
between "PSINet ISP's Customer" and a "ISP-2 ISP's Customer" is not
considered Transit Traffic.
D. Routing Specifics.
(1) CIDR and Non-CIDR Network Numbers. Both PSINet and ISP-2 will
accept on a technical basis using the BGP4 routing protocol both
Classless Inter-Domain Routing (CIDR) and Non-CIDR network numbers
and distribute them as appropriate to their customers.
(2) All Specific Routes Accepted. Except as provided in sections 5
and 11.B above, both parties will accept all individual routes
announced by the other party.
(3) No Default Routing. Neither party shall establish a default
route pointing at the other party. That is, neither party will send
traffic toward the other which is not destined for a network number
included in the other party's routing announcement.
E. Regulatory Approval. The parties acknowledge that this Agreement,
and any or all of the terms hereof may become subject to regulatory
approval by various local, state or federal agencies. Should
- --------------------------------------------------------------------------------
PSINetISP-2 BILATERAL INTERCONNECTION AGREEMENT 4 2/6/96
<PAGE>
such approval be required from time to time, or at any time, the parties
shall cooperate, to the extent reasonable and lawful, in providing such
information as is necessary to complete any required filing.
Notwithstanding the above, Section 3 "Protection of Traffic" shall remain
in full force and effect.
F. Each Party's Service Fees. Each Party will independently establish the
charges to its customers for the services provided under this Agreement.
12. Relationship of the Parties. This Agreement does not establish a
partnership or joint venture between PSINet and ISP-2.
13. Term and Termination. The duration of this Agreement is for two (2) years
and may be extended as the parties agree. A party may terminate its
responsibilities under this Agreement by giving the other party 180 days
written notice, or sooner by mutual consent of both parties.
14. Non-Exclusivity. Nothing in this Agreement shall be construed to prohibit
or restrain the entry by either party into any separate contract or
agreement with any other ISP on any terms. Other than those contained
explicitly in this Agreement, no representations are made by or among the
parties. No agency status is created among the parties.
15. No Third Party Beneficiaries. Nothing contained in this Agreement shall be
deemed to confer any rights to any party not a signatory to this
Agreement.
16. Disputes. Any disputes arising out of or relating to this Agreement that
is not resolved within thirty (30) days after notice of the dispute is
given shall be finally settled by arbitration conducted expeditiously in
accordance with the rules of the American Arbitration Association. The
arbitration shall be governed by the United States Arbitration Act, 9
U.S.C (paragraph) 1, et seq., and judgment upon the award rendered by the
arbitration(s) may be entered by any court with jurisdiction. The location
of the arbitration shall be Northern Virginia. The arbiters are not
empowered to award damages in excess of compensatory damages, and each
party waives any damages in excess of compensatory damages.
17. General Terms. Neither party may sell, transfer, or assign this Agreement,
except to entities completely controlling or controlled by that party,
without the prior written consent of the other. Any act in derogation of
the foregoing shall be null and void; provided, however, that any such
assignment shall not relieve the assigning party of its obligations
hereunder. If any provision of this Agreement is held by a court of
competent jurisdiction to be contrary to law, the remaining provisions of
this Agreement will remain in full force and effect. This Agreement
represents the complete agreement and understanding of the parties with
respect to the subject matter herein, and supersedes any other agreement
or understanding, written or oral. This Agreement may be modified only in
writing signed by both parties.
BOTH PARTIES ACKNOWLEDGES THAT THEY HAVE READ AND UNDERSTAND THIS AGREEMENT AND
AGREE TO BE BOUND BY ITS TERMS. BOTH PARTIES REPRESENT AND WARRANT THAT THEY
HAVE FULL CORPORATE POWER AND AUTHORITY TO EXECUTE AND DELIVER THIS AGREEMENT
AND TO PERFOMER THEIR OBLIGATIONS HEREUNDER, AND THAT THE PERSON WHOSE SIGNATURE
APPEARS BELOW IS DULY AUTHORIZED TO ENTER INTO THIS AGREEMENT ON BEHALF OF THE
PARTY.
IN WITNESS WHEREOF, THE PARTIES HAVE ENTERED INTO THIS AGREEMENT AS OF THE DATE
SET FORTH:
For PSINet: For ISP-2: /s/ C.A. Heintzelman
------------------------------ ---------------------------
Printed: Printed: Clyde A. Heintzelman
--------------------------------- -----------------------------
Title: Title: COO
----------------------------------- -------------------------------
Date: Date: February 7, 1996
------------------------------------ --------------------------------
- --------------------------------------------------------------------------------
PSINet/ISP-2 BILATERAL INTERCONNECTION AGREEMENT 2/8/96
5
<PAGE>
Exhibit 10.5(c)
Domestic Peering Agreement
This Agreement is made, effective as of April 21, 1995 (the
"Effective Date"), by and between MCI Telecommunications Corporation, a Delaware
corporation with a principal place of business at 8200 Greensboro Drive, McLean,
VA 22102 ("MCI") and Digital Express Group Inc., a Maryland Corporation with a
principal place of business at 6800 Virginia Manor Rd., Beltsville, MD 20705
("DIGEX").
RECITALS
1. Each of MCI and Digex operates an Internet Network, as defined below;
and
2, The parties wish to provide for the interconnection of, and exchange of
traffic between, their respective Internet Networks on the terms and conditions
herein.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Definitions
a. "Internet Network" shall mean a communications network running
the TCP/IP and other Internet protocols.
b. "Interconnection Point" shall mean any interconnection point at
which the parties agree to connect their respective Internet Networks under this
Agreement. A description of all Interconnection Points, together with all direct
interconnections agreed to by the parties, is set forth on Schedule 1 attached
hereto, and Schedule 1 shall be amended in the event of any changes.
2. Exchange of Traffic
a. The parties agree to exchange digital communications traffic over
their respective Internet Networks at agreed upon Interconnection Points and/or
in one or more direct interconnections, subject to the terms and conditions set
forth in this Agreement. Each party shall provide, at its own expense, a
connection from its Internet network to the Interconnection Point(s) or direct
interconnections hereunder, upon a schedule to be mutually agreed.
b. The data rate at which the parties will connect hereunder is
set forth in Schedule 1 attached hereto.
c. The parties agree not to restrict the use of their respective
Internet Networks based on the subject matter of the traffic unless required to
do so by applicable law.
d. Except for control traffic which must be examined in order for
the parties to operate their respective Internet Networks, neither party shall
monitor or capture the contents of any data or other traffic which passes
through the Interconnection Points. Neither party shall modify the
infrastructure in any way to examine any data unless an appropriate court order
is in force. Except as otherwise agreed between the parties and with third
parties as appropriate, neither party shall provide to third parties any
statistical information itemized by service provider, by company, or by IP
address; provided, that each party may provide its customers with their own
statistical data.
<PAGE>
e. Neither party will establish a route of last resort directed
toward the other party's Internet Network. Instead, the parties will fully
exchange explicit routes comprising public Internet service destinations of
entities to whom either party is contractually obligated to handle traffic.
3. Payments
The parties agree that during the twelve-month period immediately
following the Effective Date of this agreement they shall work together to
define the data and operational characteristics of interconnection with a view
toward agreeing upon appropriate financial arrangements for interconnection of
their respective Internet Networks should they mutually be deemed necessary or
desirable. Immediately upon the parties' agreement to such financial
arrangements, the parties shall implement such arrangements by amending this
Agreement to provide for settlement or other payments between the parties.
Until such financial arrangements are finalized, no settlement or other charges
of any kind for data transmission will be paid by either party to the other
hereunder.
4. Term and Termination
This Agreement shall have an initial term of one (1) year following the
Effective Date. Either party may terminate this Agreement: (a) upon 180
calendar days written notice to the other within the six-month period following
the Effective date; and (b) upon 60 calendar days written notice to the other at
any time thereafter. If neither party terminates this Agreement upon expiration
of the initial term, this Agreement shall continue on its present terms and
conditions, specifically including the requirement that the parties continue
their discussions and activities under Paragraphs 3 and 5 hereof, until a party
terminates it by 60 calendar days written notice to the other.
5. Technical and Operational Matters
a. The parties will work together during the term of this
Agreement to establish mutually agreed performance objectives and operational
procedures to enable each party to provide the highest practical quality of
service over its Internet Network and the interconnection provided hereunder, in
a cost effective fashion. In connection therewith, the parties shall use their
reasonable efforts to achieve a minimum end-to-end and one-way packet delay.
b. Each of the parties will use its reasonable efforts to achieve
a mean time to repair of four (4) hours or less for all outages at the
Interconnection Point(s) set forth on Schedule 1. The parties will cooperate
with each other in each party's efforts under this paragraph 5.b.
c. Each of the parties will develop scheduled maintenance
procedures that provide for notification by one party to the other of all
scheduled maintenance that could cause end-to-end connectivity loss for any user
of more than five minutes. Each party agrees to give the other three (3)
calendar days advance notice for scheduled maintenance that is expected to
result in 30 minutes or more of end-to-end connectivity loss.
d. Each party will, at its own expense and on a reasonable efforts
basis, provide Network Operations Center ("NOC") support in cooperation with the
other so as to maintain the smooth operation of the internetwork service. The
parties shall develop operational procedures for
<PAGE>
the interworking of their respective Internet Networks, including without
limitation inter-NOC problem management information exchanges (e.g., trouble
ticket tracking), and NOC escalation procedures for addressing unscheduled
outages or emergency maintenance.
e. Each of the parties will provide the other with access to data for
the purpose of operational monitoring and the diagnosis of end-to-end
connectivity problems. The parties will use their reasonable efforts to develop
procedures to govern the timing and other terms and conditions upon which this
access will be provided.
f. Each of the parties will use its reasonable efforts to collect
during the term hereof and provide to the other party traffic information with
respect to its Internet Network in order to better understand the nature of the
traffic passing through the parties' respective Internet Networks. In addition,
each party shall use its reasonable efforts to track and provide the other party
with average and peak utilization data over the interconnection facility set
forth on Schedule 1 hereto.
6. Customer Relations
Each party will be responsible for communicating with its own customers
with respect to its Internet Network. Each party shall use its reasonable
efforts to notify the other promptly in writing of all trouble reports made to
it by customers of the other party. Each party shall be responsible to screen
the traffic of its own customers not desiring public Internet access from
distribution across the Interconnection Point(s) agreed to hereunder. Each party
will independently establish the charges to its own customers for the services
provided in connection with this Agreement.
7. Limitation on Services
The Agreement shall apply only to traffic passing through the public
Internet. Virtual private data network services and services involving protocols
other than the internet protocols are not covered by this Agreement. Neither
party shall be entitled or required to carry traffic hereunder if doing so would
conflict with any condition imposed by an agreement between the other party and
any third party with whom the other party connects.
8. Nonexclusivity
This Agreement shall not prohibit or restrain either party's entry into
any separate similar or dissimilar contract or agreement with one or more third
parties.
9. Liability
Neither party shall be liable to the other for any loss or damage
arising from: (i) any failure in or breakdown of any facilities or services
hereunder, whatsoever the cause and however long it shall last; (ii) any
interruption of service, whatsoever the cause and however long it shall last;
(iii) such party's submitting traffic to or accepting traffic from the other
party hereunder, or (iv) any other circumstance relating to this Agreement.
10. Insurance
<PAGE>
Each party is responsible for assessing its own need for property,
casualty and liability insurance and each shall obtain such insurance as each
sees fit. Each party shall bear the risk of loss and damage with respect to its
own equipment and agrees not to make any claims against the other, or assign any
such claims to third parties, for any property loss or damage.
11. Authorizations
All undertakings and obligations assumed hereunder by either party are
subject to all applicable existing and future laws, rules and regulations, and
are further subject to the issuance and continuance of all necessary
governmental licenses, waivers, consents, registrations, permissions and
approvals.
12. Force Majeure
No failure or omission by either party to carry out or observe any of
the terms and conditions of this agreement shall give rise to any claim against
the party in question or be deemed to be a breach of this Agreement if such
failure or omission arises from any cause reasonably beyond the control of that
party (a "Force Majeure Event"). Each party shall give the other notice in the
event it experiences a failure or delay due to a Force Majeure Event. Upon such
notice, the party affected by the Force Majeure Event may delay performance
hereunder during the pendency of such Force Majeure Event, and shall have no
liability for such delay.
13. Relationship of Parties
In their performance hereunder the parties are acting as independent
contractors, and nothing contained herein shall be construed to create a
partnership, joint venture or other agency relationship between the parties.
14. Regulatory Approval
The parties acknowledge that this Agreement, and any or all of the
terms hereof, may become subject to regulatory approval by various local, state
or federal agencies. Should such approval be required from time to time, or at
any time, the parties shall cooperate, to the extent reasonable and lawful, in
providing such information as is necessary to complete any required filing.
15. Assignment
Neither party shall transfer or assign its rights or obligations under
this Agreement or transfer by way of merger, consolidation, sale of all or
substantially all of its assets without the prior written consent of the other
party which consent shall not be unreasonably withheld; provided, that MCI may
transfer its interest herein to any subsidiary or affiliate of MCI.
16. Notices
All notices between the parties required or permitted hereunder shall
be effective if hand delivered or sent by post or courier, postage or fees paid,
or by facsimile or electronic mail to the address specified below. All notices
shall be effective when sent.
<PAGE>
If to MCI:
MCI Telecommunications Corporation
2100 Reston Parkway
Reston, Virginia 22091
with a copy to:
MCI Communications Corporation
1133 19th Street N.W.
Washington, D.C. 20036
Attention: Office of General Counsel
If to Digex:
Digital Express Group Inc.
6800 Virginia Manor Rd.
Beltsville, MD 20705
Attn: Ed Kern
17. Entire Agreement
This Agreement represents the entire understanding between the parties
regarding the subject matter hereof and supersedes all other prior and
contemporaneous agreements, understandings, negotiations and discussions between
the parties with respect to such subject matter. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
U.S.A., without regard to the conflicts principles thereof.
18. Severability
If any provision of this agreement is held by a court of competent
jurisdiction to be contrary to law, the remaining provisions of this Agreement
will remain in full force and effect.
19. Amendment
This Agreement may be modified only by a written amendment signed by
both parties.
20. No Third Party Beneficiaries
Nothing contained in this Agreement shall be deemed to confer any
rights in any third party not a signatory to this Agreement.
21. Confidentiality
All information exchanged between the parties under this Agreement or
during the negotiations preceding this Agreement and relating either to the
terms and conditions of this Agreement or any activities contemplated by this
Agreement is confidential and neither party shall disclose to any third party
any of the other party's confidential information disclosed to it. Any
announcement of this Agreement must be mutually agreed upon by both parties,
including the timing and wording of press releases and other announcements to
third parties. Notwithstanding the foregoing, the parties acknowledge that they
intend to disclose the technical objectives and certain technical terms and
conditions contemplated herein to the public.
<PAGE>
in a form and manner and at a time or times to be mutually agreed by the
parties. Should the parties not come to agreement on a press release or other
announcement of the Agreement within 60 days after execution and delivery of the
Agreement, either party may publicly acknowledge that this Agreement exists,
provided that the acknowledgment is not in the form of a press release.
22. Disputes
All disputes arising out of or relating to this Agreement which are not
resolved within 30 days after notice of the dispute is given by either party to
the other shall be finally settled by arbitration conducted expeditiously in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The arbitration shall be conducted by a single arbitrator in
Washington, D.C. The arbitration shall be governed by the United States
Arbitration Act, and judgment upon the award rendered by the arbitrator may be
entered by any court with jurisdiction. The arbitrator is not empowered to award
damages in excess of compensatory damages, and each party hereby waives any
damages in excess of compensatory damages.
IN WITNESS WHEREOF, the parties have caused their respective authorized
representatives to sign this Agreement on their behalf, effective as of the date
first written above.
MCI Telecommunications Corporation Digex
By: By: /s/ Clyde A. Heintzelman 6/1/96
-------------------------- ------------------------------
Name: Name: Clyde Heintzelman
------------------------ ----------------------------
Title: Title: COO
----------------------- ---------------------------
Schedule 1
MAE East + DS3
Sprint NAP DS3
<PAGE>
Exhibit 10.6
[LOGO OF DIRECPC APPEARS HERE] [LOGO OF HUGHES NETWORK
SYSTEMS APPEARS HERE]
EQUIPMENT
RESELLER AGREEMENT
This Agreement is made between Hughes Network Systems, Inc., doing business as
DirecPC (collectively "DirecPC"), having its primary place of business at 100
Lakeforest Blvd., Gaithersburg, MD 20879, and; Digex, Incorporated having its
primary place of business at 6800 Virginia Manor Rd., Beltsville, MD 20705
(Reseller).
================================================================================
1. SCOPE
This Agreement governs the sale of certain equipment and the license of certain
software produced by DirecPC which is used to receive the high speed information
delivery services offered by DirecPC as listed in Attachment A (the "System").
2. APPOINTMENT OF RESELLER
DirecPC appoints Reseller as a nonexclusive Reseller for sale of the Systems as
set forth in this agreement and attachments. Reseller shall use its reasonable
best efforts to market the System to customers who are unaffiliated with
Reseller's business and who acquire the System for their own use or for use
within their own business and not for remarketing, and all Systems purchased or
otherwise obtained hereunder, must be marketed to and for use by such customers.
DirecPC and Reseller are independent contractors and nothing in this Agreement
shall be construed to give either party the power to control the activities of
the other party. This appointment is nonexclusive, and DirecPC expressly
reserves the right to appoint other authorized Resellers and to make direct
sales of the System for its own account.
3. TERM
This Agreement shall commence on the date this Agreement is signed by both
DirecPC and Reseller and shall continue for a period of twelve months ("Initial
Term"). This Agreement shall be renewed automatically for successive periods of
twelve months each unless either party delivers notice to the other in
accordance with the terms hereof at least ninety (90) days before the
termination of the then current term (the Initial Term and each such successive
twelve month term shall each be referred to as "Term"); provided, however, that
the delivery of such notice shall not impair the obligations of either party
with respect to any outstanding purchase order that has been accepted by DirecPC
in accordance with the terms of this Agreement.
Notwithstanding anything to the contrary in this Agreement, DirecPC may refuse
to make scheduled deliveries, in accordance with this Agreement, and may
terminate this Agreement without Liability if Reseller (I) becomes insolvent,
files or has filed against it a petition in bakruptcy, makes an assignment for
the benefit of creditors, or has a receiver appointed or ceases to conduct its
operation in the normal course of business; (II) fails to make timely payment
of all amounts due and owing under this Agreement, or (III) otherwise breaches
this Agreement and fails to cure such breach within thirty (30) days after
receiving written notice of the breach.
1
<PAGE>
4. PURCHASE ORDERS
Upon execution of this Agreement Reseller shall deliver an open purchase order
specifying the quantity (not to be less than the Minimum Purchase Requirement,
as defined below), model numbers, and unit price. From time to time during the
Term of this Agreement, Reseller may issue additional purchase orders and/or
amend such purchase orders to order additional Systems or request shipment dates
and destinations. The purchase orders must specify whether Reseller requests
that DirecPC (or its agent) install the System. Any subsequent purchase order
or amendment to any purchase order shall not become effective until DirecPC
accepts it by issuing a written acceptance indicating an estimated shipment
date. The standard pre-printed terms on any purchase order, invoice, order
acceptance, acknowledgment, or other standard form of either party shall have no
force or effect to the extent that they conflict or are inconsistent with this
Agreement.
5. DELIVERY; RISK OF LOSS
DirecPC shall use reasonable efforts to deliver the System, suitably packaged,
to a common carrier for delivery to the destination specified by Reseller on or
about the estimated shipment date. In the event that Reseller has ordered
installation of the System, Reseller acknowledges that the System will be
installed by agents of DirecPC who shall coordinate directly with Reseller
regarding the date of such installation. Reseller shall be responsible for
providing safe access to the premises, equipment, utilities, including
electrical and telephone services, and shall be responsible to ensure that any
end customer shall cooperate with and assist DirecPC or its agents in the
installation, troubleshooting and fault isolation of the System.
Title and risk of loss to all equipment shipped by DirecPC shall pass to
Reseller upon delivery to the common carrier. DirecPC shall prepay and bill
Reseller for shipping charges. Reseller is responsible for making freight
claims. Reseller may request the manner of shipment and the carrier. However,
DirecPC reserves the right to ship by the method DirecPC deems appropriate if
Reseller does not specify carrier and manner of shipment.
6. SOFTWARE LICENSE
Subject to the performance by Reseller of the terms and conditions of this
Agreement, DirecPC hereby grants to Reseller and Reseller hereby accepts from
DirecPC a limited, nontransferable, nonexclusive license to use the System
software solely in the operation of the System commencing on the date of the
delivery of the relevant System equipment and payment therefor and to last for
the life of the relevant System equipment. DirecPC hereby grants to Reseller
the right to sublicense any such software pursuant to the terms of this Article
to any end user purchasing from Reseller equipment delivered hereunder.
Reseller acknowledges that any System software delivered hereunder is subject to
the proprietary rights of DirecPC, or its vendors and that DirecPC, or its
vendors, as the case may be shall retain title to all of such software.
Reseller agrees that it shall not copy or duplicate or permit anyone else to
copy or duplicate, any part of the software, or create or attempt to create, or
permit others to create or attempt to create, by reverse engineering or
otherwise, the source programs or any part thereof from the object programs or
from other information made available under this Agreement.
7. MINIMUM PURCHASE, PRICING AND PAYMENT
Reseller covenants and agrees that during the Initial Term of this Agreement, it
shall purchase in accordance with the terms hereof the minimum puchase
requirement set forth in Attachment A (the "Minimum Purchase Requirement").
In consideration of delivery to Reseller of the System, Reseller shall pay to
DirecPC the System purchase price as shown in the prevailing current DirecPC
U.S.A. price list less the applicable discount as noted in Attachment A. Payment
terms are net thirty (30) days from invoice date. Reseller shall pay to DirecPC
interest on delinquent balance at the rate of one
2
<PAGE>
and one-half percent (1.5%) per month prorated on a daily basis.
DirecPC shall reserve a purchase money security interest in the System sold to
Reseller until paid in full by Reseller. Reseller agrees to sign any documents
presented to Reseller by DirecPC to protect DirecPC's security interest under
the Uniform Commercial Code. Reseller shall be liable for DirecPC's expenses
(including reasonable attorney's fees) in retaking, holding, and preparing for
sale of the System obtained by DirecPC under the Uniform Commercial Code.
DirecPC reserves the right to increase or decrease the System purchase price
upon thirty (30) days notice to Reseller.
8. ADDITIONAL CHARGES
In addition to the prices set forth in Attachment A, the Reseller will pay to
DirecPC any duties, taxes (including any taxes on the receipts or income of
DirecPC, on either a gross or net basis, which may be assessed by any
governmental authority other than the United States or any of its political
subdivision(s), export packaging, shipping (including shipping related
insurance), or similar charges incurred by DirecPC in transferring and shipping
purchases hereunder. Shipping costs for purchases hereunder, if any, incurred by
DirecPC will be billed to Reseller at DirecPC's cost plus a twenty percent (20%)
handling charge. Other charges which DirecPC may be required to pay or collect
upon with respect to purchases hereunder, will be billed to Reseller at
DirecPC's cost.
9. LIMITED WARRANTY; LIMITATION ON LIABILITY
System equipment delivered by DirecPC to Reseller in accordance with this
Agreement are warranted to Reseller against defects in material and workmanship.
In addition, DirecPC warrants to Reseller that System software delivered
hereunder shall substantially conform to the product descriptions and
specifications contained in the program documentation current on the date of
shipment. The warranty period for the System equipment and software is two (2)
years from the date of delivery of the respective item.
DIRECPC DOES NOT WARRANT THAT OPERATION OF ANY OF THE EQUIPMENT OR SOFTWARE
SHALL BE UNINTERRUPTED OR ERROR FREE IN TERMS OF ACCURACY, RELIABILITY,
CURRENTNESS OR OTHERWISE, OR THAT FUNCTIONS CONTAINED IN THE EQUIPMENT OR
SOFTWARE SHALL OPERATE IN THE COMBINATIONS THAT MAY BE SELECTED, OR THAT ERRORS
WILL BE CORRECTED.
This warranty shall be invalidated if the relevant System items; or portion
thereof (i) have not been installed, handled, or used in accordance with
DirecPC's recommended procedure and installation specifications; (ii) have been
damaged through the negligence or abuse of Reseller or the end user, or (iii)
are damaged by causes external to the System, including shipping damage,
improper installation by entities other than DirecPC or its agents, power
failure, air conditioning failure, or accident.
This warranty is contingent upon the Reseller notifying DirecPC of an alleged
defect during the relevant warranty period. Subsequent to receiving such
notification, DirecPC shall send to Reseller an advance replacement or instruct
Reseller to return the allegedly defective item to DirecPC's designated
location for repair or replacement, which return shall be made freight prepaid
and packed to assure safe arrival.
In the event that DirecPC advance replaces the allegedly defective item, the
Reseller shall return such allegedly defective item to DirecPC's designated
location, freight prepaid and packed to assure safe arrival within thirty (30)
days of receipt of the advance replacement. In the event that the Reseller does
not fulfill such return obligation, DirecPC shall invoice the Reseller for and
the Reseller shall pay to DirecPC within thirty days of the date of such invoice
the cost of the replacement item. In the event that DirecPC repairs or replaces
defective equipment in lieu of advance replacement, DirecPC shall return
repaired or replacement equipment, freight prepaid and packed to assure safe
arrival to the Reseller's designated location.
THE FOREGOING WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
3
<PAGE>
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
DIRECPC'S LIABILITY BY REASON OF SUPPLYING ANY SYSTEM EQUIPMENT OR SOFTWARE
SHALL NOT EXCEED THE LESSER OF THE COST OF REPAIR OR REPLACEMENT OF SUCH SYSTEM
EQUIPMENT OR SOFTWARE NOT ACCEPTED PLUS TEN PERCENT (10%) OF THE PRICE OF THE
SYSTEM EQUIPMENT OR SOFTWARE OR PART THEREOF ON WHICH SUCH LIABILITY IS BASED.
IN NO EVENT SHALL DIRECPC BE LIABLE TO RESELLER OR TO ANY OTHER PERSON FOR ANY
PUNITIVE, SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES. WHETHER ARISING OUT OF
TORT, NEGLIGENCE, BREACH OF WARRANTY, OR OTHERWISE, REGARDLESS OF WHETHER
DIRECPC WAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
10. WARRANTY SERVICE
Any end user purchasing the System from Reseller may receive warranty service
from DirecPC in accordance with DirecPC's standard Warranty Service policy that
may be in place from time to time.
11. MAINTENANCE
DirecPC shall make available to Reseller spare parts and/or maintenance services
for all System equipment or software delivered to it hereunder pursuant to
DirecPC's standard terms and conditions for a period of not less than seven (7)
years from the date of execution of this Agreement.
12. TRAINING
DirecPC shall provide standard curriculum training at its facilities to
Reseller's personnel at DirecPC's then-current rates (less the Reseller Training
discount noted in Attachment A.) The dates of these classes will be published by
DirecPC. The current fee for training services is set forth in Attachment A.
Reseller shall be responsible for all travel, lodging, and other expenses
incurred by Reseller's personnel while attending such classes.
13. CANCELLATION AND RESCHEDULE
If Reseller reschedules any order and such request is accepted by DirecPC,
Reseller agrees to pay DirecPC's reasonable charge to perform the change, which
shall not exceed the following:
Charge
Notification (% of Net Order Value)
------------ ----------------------
0-30 days prior to 18%
scheduled shipment date
31 days or more prior to no charge
scheduled shipment date
14. FORECASTING
Reseller agrees to provide DirecPC with a rolling ninety (90) day forecast on a
quarterly basis. The forecast will include model numbers, units required, and
forecasted order dates and shall include a list containing the names of the
accounts for which it is generating a proposal, has a high expectation of doing
business, or has orders outstanding.
15. DOCUMENTATION/LITERATURE
DirecPC shall provide to Reseller standard documentation and literature for use
in promoting the DirecPC System. Reseller agrees that any promotional material
using the DirecPC name or logo created by or for Reseller must be approved in
writing by DirecPC.
16. CONFIDENTIAL INFORMATION
"Confidential" or "Proprietary" information of the parties will be that
information which is marked "Confidential" or "Proprietary" or which, if
disclosed orally, is identified as confidential or proprietary at the time of
disclosure, provided that the disclosing party ("Disclosing Party") confirms
the confidential or proprietary nature of the information to the receiving
party ("Receiving Party") in writing within five (5) days after oral
disclosure. Notwithstanding the foregoing, Confidential or Proprietary
information will not include information that is already in the possession of
the Receiving Party without restriction, which is in or enters the public
domain, which is independently developed or
4
<PAGE>
rightfully acquired by the Receiving Party without restriction from a third
party, which is approved for release by the Disclosing Party or whose disclosure
is required by a government agency. The Receiving Party will use not less than
the degree of care used to prevent disclosure of its own proprietary information
to prevent disclosure of information received in accordance with this Agreement.
In no event, however, will less than a reasonable standard of care be used.
The Receiving Party will not make copies of Confidential or Proprietary
information, and will not disclosure Confidential or Proprietary information to
others, except to persons within its own organization or to its agents who have
need to know such information for purposes of performing under the terms of this
Agreement and who have agreed in writing to protect such information as though
they were a party to this Agreement.
All Confidential or Proprietary information will remain the property of the
Disclosing Party and the Receiving Party will return or destroy all Confidential
or Proprietary Information at the conclusion of the Discussions or sooner, if
requested by the Disclosing Party to do so.
The restrictions imposed by this Section shall continue for three (3) years
after this Agreement terminates.
17. PRODUCT CHANGES
DirecPC reserves the right to make changes to the System or to any information
delivery service which it may offer from time to time, and to discontinue
providing the System or such service, or any portion thereof.
18. PATENT AND COPYRIGHT INDEMNITY
DirecPC agrees to resist or defend at its own expense any request for royalty
payments or any claim for equitable relief or damages against Reseller based on
an allegation that the manufacture of any DirecPC equipment or the use, lease,
or sale thereof or that any documentation infringes any United States patent or
copyright, and to pay any royalties and other costs related to the settlement of
such request and to pay the costs and damages, including attorney's fees,
finally awarded as the result of any suit based on such claim, provided that
DirecPC is given prompt written notice of such request or claim by Reseller and
given authority and such reasonable assistance and information as DirecPC
requests in writing and as it is available to Reseller for resisting such
request or for the defense of such claim.
In the event that, as a result of any such suit (i) prior to delivery, the
manufacture of any item supplied by DirecPC hereunder is enjoined, or (ii) after
delivery, the use, lease or sale thereof is enjoined, DirecPC will, at its
option and expense, either (a) negotiate a license or other agreement with
plaintiff so that such item is no longer infringing, (b) modify such item
suitably or substitute a suitable item therefor, which modified or substituted
item is not subject to such injunction, and to extend the provisions of this
Article thereto, or if (a) or (b) cannot be effected by DirecPC's reasonable and
diligent efforts, (c) repurchase enjoined items at their then current value on
Reseller's audited accounts.
Notwithstanding the above, DirecPC will not be liable for any damages or costs
resulting from claims (i) that DirecPC compliance with the Reseller's designs,
specifications, or instructions, (ii) that use of any item provided by DirecPC
in combination with products not supplied by DirecPC, or (iii) that a
manufacturing or other process carried out by or through Reseller or any
equipment and user utilizing any item provided by DirecPC constitutes either
direct or contributory infringement of any United States patent (such claims
being collectively referred to herein as "Other Claims"). Reseller will
Indemnify DirecPC from any and all damages and costs (including settlement
costs) finally awarded or agreed upon for infringement of any United States
patent or copyright in any suit resulting from Other Claims, and from reasonable
expenses incurred by DirecPC in defense of such suit if Reseller does not
undertake the defense thereof.
19. FORCE MAJEURE
Neither party will be liable for nondelivery, delay in delivery or installation,
or any other impairment of performance hereunder in whole
5
<PAGE>
or in part caused by the occurrence of any contingency beyond the reasonable
control either of that party or that party's suppliers, including but not
limited to war (whether an actual declaration thereof is made or not), sabotage,
insurrection, rebellion, riot or other act of civil disobedience, act of a
public enemy, failure of or delay in transportation, failure of or delay in
performance of the other party's obligations under this Agreement, act of any
government or any agency or subdivision thereof, judicial action, labor dispute,
fire, accident, explosion, epidemic, quarantine, restrictions, storm, flood,
earthquake or other Act of God, or shortage of labor, fuel, raw material, or
machinery, where such party has exercised ordinary care in the prevention
thereof. If any such contingency occurs, DirecPC may allocate production and
deliveries among DirecPC's customers on a pro rata basis with respect to
production and delivery requirements and the delivery requirements of this
Agreement will be amended accordingly.
20. GENERAL PROVISIONS
This Agreement constitutes the entire agreement between the parties and
supersedes all prior understandings regarding this subject matter. This
Agreement may not be modified except in writing signed by officers of both the
parties hereto.
The failure of either party to require performance by the other party of any
provision hereof shall not affect the right to require such performance at any
time thereafter, nor shall the waiver by either party of a breach of any
provision hereof be held to be a waiver of the provision itself.
If any term or condition of this Agreement is held to be invalid or
unenforceable, the remaining provisions shall continue in effect.
This Agreement shall be governed by the laws of the State of Maryland and the
United States.
Reseller shall not assign or otherwise transfer its right or obligations under
this Agreement without the prior written consent of DirecPC. however, a
successor in interest of either party shall acquire all interest of such party
hereunder.
It is expressly agreed that the execution of this Agreement and the subsequent
delivery of items purchased hereunder shall be subject to all applicable export
controls imposed or administered by the U.S. Department of Commerce as well as
by any other U.S. Government Agency that may impose such controls, including,
but not limited to, the export of technical data, equipment, software and
know-how.
Notices regarding this Agreement shall be in writing and shall be deemed to have
been given when delivered personally or when sent by certified mail (return
receipt requested) to the other party at the addresses set forth above.
Each party shall be excused and shall have no liability for delays or
interruptions caused by the failure of the other party to perform their
obligations under this Agreement or which are otherwise beyond the reasonable
control of such party.
21. TERRITORY
Reseller agrees that it shall remarket the System only in the continental United
States, unless Reseller and DirecPC have executed an Addendum to this Agreement.
22. TRADEMARK
Hughes Network Systems and DirecPC trademarks shall not be altered, hidden or
removed from the System or documentation delivered therewith. The Hughes
Network Systems and DirecPC trademarks are exclusively owned by DirecPC and no
other party shall represent that it has any right, title or interest in or to
the Hughes Network Systems or DirecPC trademarks; provided that Reseller is
hereby authorized use such trademarks to make general statements regarding the
relationship of the parties under this Agreement. Reseller hereby grants to
DirecPC the right to use its names and trademarks solely for the purpose of
making general statements regarding the relationship of the parties under this
Agreement.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date written below.
SELLER: HUGHES NETWORK SYSTEMS
dba DirecPC
Brian M. Deobald Sheldon Revkin
- --------------------------- ---------------------------
Name: Typed or Printed Name: Typed or Printed
/s/ Brian M. Deobald /s/ Sheldon Revkin
- --------------------------- ---------------------------
Vice President Sr. Vice President
- --------------------------- ---------------------------
Title Title
6 June 1996 7 June 1996
- --------------------------- ---------------------------
Date Date
7
<PAGE>
ATTACHMENT A
------------
<TABLE>
<CAPTION>
A. EQUIPMENT PRICING
-----------------
Equipment Pricing
- -----------------
VAR and/or Indirect Distribution
Units Index Model 50 Model 40 Model 30 Model 20 IK-1 PD/MM
DAK DAK Expansion Expansion Installation Upgrade
DAK DAK Kit License
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1-99 * * * * * *
100-499 * * * * * *
500-999 * * * * * *
1000-2499 * * * * * *
2500-4999 * * * * * *
5,000+ * * * * * *
</TABLE>
Marketing Code
<TABLE>
<CAPTION>
Model 50 Model 40 Model 30 Model 20 IK-1
-------- -------- -------- -------- ----
<S> <C> <C> <C> <C>
Adapter Card Adapter Card Adapter Card Adapter Card 100 ft. Cable
Antenna Antenna Manual Manual Misc. Hardware
LNB LNB Software Software
Mount (NP,U,P) Mount (NP,U,P) splitter Kit (Dual) splitter Kit (Dual)
Manual Manual Package Package
Software Software PD/MM/TI TI License Only
Licenses
Package Package
PD/MM/T1 TI License Only
Licenses I
</TABLE>
Model 40 DAK and Model 20 Expansion DAK include software license for DirecPC
Turbo-Internet service only.
Minimum Purchase Requirement: (Not to be less than 100 System Units) 100 System
Units
Prices set forth above are based on annual cumulative volumes. The price for
each System unit sold to Reseller during the Initial Term shall intially be
invoiced at the unit price in the above schedule which corresponds to the
Minimum Purchase Requirement. System units in excess of the Minimum Purchase
Requirement shall be sold at the corresponding volume discounts. At the end of
each Term of this Agreement, DirecPC shall determine, in its discretion, a
forecast (the "Forecast") for sales by Reseller during such Term and each System
unit delivered to Reseller shall initially be invoiced at the unit price in the
above schedule which corresponds to such Forecast.
At the end of each such Term, including the Initial Term, DirecPC shall
determine the actual number of System units acquired by Reseller during such
prior Term and the actual amounts due and owing to DirecPC by Reseller for such
units shall be based on the unit price as set forth in the above schedule
applicable to such actual sales volume. In the event that the number of System
units acquired by Reseller is less than the Minimum Purchase Requirement, or the
Forecast as the case may be, DirecPC shall invoice Reseller for the amount based
on actual sales volumes as provided above. Such invoice shall be due and payable
by Reseller in accordance with the terms of this Agreement. This paragraph shall
be in addition to any other rights or remedies that DirecPC may have in
accordance with the terms of this Agreement or applicable law.
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
A-1
<PAGE>
B. STANDARD INSTALLATION SERVICES
------------------------------
Model 40/50 - *
Model 30 - *
The above installation services prices assume the following: a non-pentrating
mount, the use of 100 feet of RG6 coaxial cable and the connector hardware
included in the standard installation kit; Monday through Friday 8:00 am to 5:00
pm installations (except holidays), an installation site located within 25 miles
of one of the 200 U.S. service cities; and the absence of any permits, site
surveys and engineering drawings or similar requirements. Reseller agrees that
any installation terms other than those assumed in the standard installation
services shall be priced separately.
C. SPARES
------
DirecPC Adapter Cards *
0.6M Antenna *
LNB *
Manual *
Mount (NP,W,P) *
Replacement Software *
Cable (per foot) *
D. DIRECPC SUBSCRIBER SERVICES
---------------------------
A DirecPC subscription is required to access the DirecPC Service. Each Basic
Subscription Includes access to the DirecPC Service, CNN Headline News, Routers
News Wheel, Data Broadcasting Corp. Financial Ticker, Sports Ticker, DirecPC
Object Catalog, DirecPC Programming, 30MBytes of Tubo-Internet Delivery and
Technical Support. Additionally, an Internet Surfer Bundle Subscription is
available which includes the above plus an additional 100MBytes per month of
internet delivery.
Basic Subscription *
Surfer Bundle Subscription *
Other charges for DirecPC Turbo-Internet delivery include:(Prime time is 9:00AM
to 9:00PM EST)
DPC 800 Service Connect Time *
Internet Delivery Usage *
E. WARRANTY AND MAINTENANCE OPTIONS PRICING
----------------------------------------
Five Year Warranty (in lieu of *
standard warranty)
Extension of Warranty *
Above warranties are subject to standard DirecPC warranty terms and conditions
(see Article 9 of the Agreement)
On-site maintance *
Time and materials maintenance *
- ----------
*Confidential treatment
Material omitted and filed separately with the Commission.
A-2
<PAGE>
F. Training
--------
$750 per day per attendee.
A-2
<PAGE>
Exhibit 10.7
LEASE AGREEMENT
---------------
THIS LEASE AGREEMENT, made this ____ day of _____________, 1994, by and
between Banbury Associates Limited Partnership, a Maryland limited partnership,
("Landlord") and Digital Express Group, a _______________ Corporation
-----------
("Tenant").
W I T N E S S E T H:
<PAGE>
PREMISES 1.01 - In consideration of the rents, mutual covenants and
--------
agreements hereinafter set forth, Landlord hereby demises and leases to Tenant
and Tenant hereby takes and hires from Landlord, for a term and upon the
conditions hereinafter provided all those premises situate and lying in Prince
George's County, Maryland, which consists of the space (containing approximately
17,409 square feet of rentable area) measured in accordance with the 1989
Washington, D.C. Association of Realtors Standard Method of Measurement. There
shall be no core factor for the purposes of calculating rentable square footage
outlined on Exhibit A which is attached hereto and incorporated herein by
---------
reference the ("Premises") and located in Building D (the "Building") at
-----
Ammendale Business Campus, Prince George's County, Maryland (the Premises, the
remainder of the Building, the tract of land described on Exhibit A, other
---------
buildings on such land, and any other buildings or improvements to be
constructed on such land being hereinafter referred to collectively as the
"Project"). Landlord hereby reserves space for necessary pipes and wires
leading to and from the portions of the Building not hereby leased, which will
not unreasonably interfere with Tenant's use of the Premises. Landlord shall
have the right to use any portion of the roof of the Building for any purposes
except as specifically set forth herein.
TERM 2.01 - The term of this Lease (the "Term") shall commence on the
----
first to occur of the following events (the "Commencement Date"): (a) the date
Tenant first occupies the Premises for business, or (b) the date of "Substantial
Completion" as defined herein. "Substantial Completion" shall be defined as the
date the Premises are constructed in accordance with Tenant's improvements as
attached in Exhibit D with the exception of minor punch-list items that do not
materially effect Tenant's use of the Premises for Tenants intended purpose,
Landlord has obtained with Tenant's assistance a use and occupancy permit, and
Landlord has tendered possession for Tenant's occupancy. Notwithstanding
anything to the contrary contained herein, Tenant shall have the right to occupy
the unleased space in the building immediately upon lease execution until
Substantial Completion of the Premises. Tenant shall pay utility cots during
this early occupancy. The term of this Lease shall terminate at twelve o'clock
midnight on the last day of the calendar month which completes five (5) years
and three (3) months of tenancy hereunder, unless this Lease is sooner
terminated as provided for in this Lease (the "Expiration Date"). Landlord and
Tenant mutually agree to do all things required of them by the provisions of
this Lease in order that the commencement of the Term hereof shall not be
delayed, and to fully cooperate with each other for such purposes. Landlord and
Tenant mutually agree that following "Substantial Completion" they shall execute
a declaration as provided for in Exhibit B hereto specifying the Commencement
---------
Date and Expiration Date as provided for above.
RENT 3.01 - Tenant covenants and agrees to pay to Landlord throughout
----
the full Term of this Lease, without notice, demand, offset or deduction except
as specifically set forth herein, in lawful money of the United States of
America, at Banbury Associates Limited Partnership, c/o ELV Associates, Inc.,
1615 L St., NW, #1105, Washington, D.C. 20036, or at such other place as
Landlord shall designate in writing from time to time: (a) base rent ("Base
Rent") in the amounts set forth on Exhibit C, attached hereto and made a part
---------
hereof, payable in equal monthly installments, in advance, on the first day of
each calendar month during the Term, and (b) additional rent ("Additional Rent")
consisting of all other sums of money due and payable by Tenant hereunder,
including, without limitation, those sums of money due and payable
2
<PAGE>
by Tenant under Section 4.01 of this Lease, at the respective times required
hereunder. Payment of the Rent shall begin on the Commencement Date; provided,
however, that if either the Commencement Date or Expiration Date falls on a date
other than the first day of a calendar month, the Rent due for such fractional
month shall be prorated on a per diem basis between Landlord and Tenant so as to
charge Tenant only for the portion of such fractional month falling within the
Term. As used in this Lease, the term "Rent" shall mean and refer to Base Rent
and Additional Rent.
3.02 - The "Lease Year" is hereby defined to be each twelve (12) month
period that this Lease remains in effect, including any extension or renewals
thereof; provided, however, that if the Commencement Date occurs on other than
the first day of the month, then for purposes of computing the first Lease Year,
the Lease shall be deemed to have commenced on the first day of the month
following the first month of the term during which the Commencement Date
occurred.
3.03 - Any monthly installments of Base Rent not paid within five (5)
days of the due date shall be subject to a late charge of five percent (5%).
All Rent hereunder shall bear interest from the date due until paid at the rate
per annum (the "Interest Rate") four percent (4%) above the prime rate of
interest from time to time publicly announced by Chase Manhattan Bank, or any
successor thereof; provided, however, that if at the time such interest is
sought to be imposed the rate of interest exceeds the maximum rate permitted
under federal law or under the laws of the State having jurisdiction, the rate
of interest on such past due installments of Rent shall be the maximum rate of
interest then permitted by applicable law.
Notwithstanding the foregoing the penalty and late charge shall not be
assessed on the first late payment during each calendar year of this lease as
long as the payment is received within ten (10) days of written notice thereof.
3.04 - No payment by Tenant or receipt and acceptance by Landlord of a
lesser amount than the Base Rent or Additional Rent shall be deemed to be other
than part payment of the full amount then due and payable, nor shall any
endorsement or statement on any check or any letter accompanying any check,
payment of Rent or other payment, be deemed an accord and satisfaction; and
Landlord may accept such part payment without prejudice to Landlord's right to
recover the balance due and payable or pursue any other remedy provided in this
Lease or by applicable law.
3.05 - Intentionally deleted
3.06 - Notwithstanding the foregoing, Landlord shall abate the first
two (2) months base rental payment and the fifteenth (15) months rental payment,
but all operating expenses and CAM expenses shall NOT be abated.
---
OPERATING EXPENSES 4.01 - Tenant shall pay to Landlord, as Additional
------------------
Rent, for each Year (as hereinafter defined) or fraction thereof during the Term
an amount ("Tenant's Operating Costs Payment") equal to Tenant's Share, as
hereinafter defined, of Operating Costs, as hereinafter defined, for such year,
such amount to be calculated and paid as follows:
3
<PAGE>
(a) On the first day of January of each Year during the Term (or,
with respect to the year in which the Commencement Date occurs, prior to the
Commencement Date) or as soon thereafter as is practicable, Landlord shall
furnish Tenant with a statement ("Landlord's Operating Costs Estimate") setting
forth Landlord's reasonable estimate of Operating Costs for the forthcoming
Year (or fractional year in which the Commencement Date or Lease expiration date
occurs, as the case may be). On the first day of each calendar month during
such Year, Tenant shall pay to Landlord one-twelfth (1/12th) of Tenant's
Operating Costs Payment as estimated on Landlord's Operating Costs Estimate. If
for any reason Landlord has not provided Tenant with Landlord's Operating Costs
Estimate on the first day of January of any Year during the Term (or by the
Commencement Date, as the case may be), then, (i) until the first day of the
calendar month following the month in which Tenant is given Landlord's Operating
Costs Estimate, Tenant shall continue to pay to Landlord on the first day of
each calendar month the monthly sum, if any, payable by Tenant under this
Section 4.01 for the month of December of the preceding Year, and (ii) promptly
after Landlord's Operating Costs Estimate is furnished to Tenant or together
therewith, Landlord shall give notice to Tenant stating whether the
installment(s) of Tenant's Operating Costs Payment previously made for such Year
were greater or less than the installments of Tenant's Operating Costs Payment
to be made for such Year in accordance with Landlord's Operating Costs Estimate,
and (A) if there shall be a deficiency, Tenant shall pay the amount thereof to
Landlord within seven (7) days after the giving of Landlord's Operating Costs
Estimate, or (B) if there shall have been an overpayment, Landlord shall apply
such overpayment as a credit against the next accruing installment(s) of Rent
due from Tenant until fully credited to Tenant or if at Lease expiration within
30 days after such overpayment is calculated, and (C) on the first day (as long
as it is not within a ten (10) day period of the due date)of the first calendar
month following the month in which Tenant is given Landlord's Operating Costs
Estimate and on the first day of each calendar month thereafter during the Term
throughout the remainder of such Year, Tenant shall pay to Landlord an amount
equal to one-twelfth (1/12th) of Tenant's Operating Costs Payment. The
foregoing notwithstanding, Landlord shall have the right from time to time
during any Year to notify Tenant in writing of any reasonable change in
Landlord's Operating Costs Estimate, in which event such Tenant's Operating
Costs Payment, as previously estimated, shall be adjusted to reflect the amount
shown in such notice and shall be effective, and due from Tenant, on the first
day of each month during the Year for which given following Landlord's giving of
such notice.
(b) On the first day of April of each Year during the Term (beginning
on the first day of April of the Year following the Year in which the
Commencement Date occurs), or as soon thereafter as is practicable, Landlord
shall furnish Tenant with a statement of the actual Operating Costs for the
preceding Year. Within thirty (30) days after Landlord's delivery of such
statement, Tenant shall make a lump sum payment to Landlord in the amount, if
any, by which Tenant's Operating Costs Payment for such preceding Year, as shown
on such Landlord's statement, exceeds the aggregate of the monthly installments
of Tenant's Operating Costs Payment paid during such preceding Year. If
Tenant's Operating Costs Payment, as shown on such Landlord's statement, is less
than the aggregate of the monthly installments of Tenant's Operating Costs
Payment actually paid by Tenant during such preceding Year, then Landlord shall
apply such amount to the next accruing installment(s) of Rent due from Tenant
under this Section 4.01 until fully
4
<PAGE>
credited to Tenant or if at Lease Expiration within 30 days after such
overpayment is calculated.
(c) If the Commencement Date occurs on a date other than the first day
of January, or if the Term ends on a date other than the last day of December,
the actual Operating Costs for the Year in which the Commencement Date or the
Expiration Date occurs, as the case may be, shall be prorated so that Tenant
shall pay that portion of Tenant's Share of Operating Costs for such Year
represented by a fraction, the numerator of which shall be the number of days
during such fractional Year falling within the Term, and the denominator of
which if 365 (or 366, in the case of a leap year). The provisions of this
Section 4.01 shall survive the Expiration Date or any sooner termination
provided for in this Lease.
4.02 - For purposes of this Lease, the term "Tenant's Share" shall
mean and refer to the fraction, the numerator of which shall be the total
rentable square footage of the Premises and the denominator of which shall be
the total rentable square footage of the space in the Building or the Project
(measured in accordance with the 1989 WDCCAR Standard Method of Measurement or
portions thereof, as the case may be, being served by or benefitting from the
particular item of Operating Costs being charged to Tenant. For the purposes of
this Article 4, the term "Year" shall mean the calendar year. For the purposes
of this Lease, the term "Operating Costs" shall mean any and all reasonable
expenses, costs and disbursements of every kind which Landlord pays, incurs or
becomes obligated to pay in connection with the operation, management, repair
and maintenance of the Building or the Project or portions thereof, as the case
may be. All Operating Costs shall be determined according to generally accepted
accounting principles which shall be consistently applied. Operating Costs
include, but are not limited to, the following: salaries, wages and expenses of
personnel or entities engaged in the operation, maintenance or repairs of the
Project; payroll taxes; license fees relating to the building or Project;
workers' compensation insurance; parking lot lighting; repairs and maintenance;
any local or state surcharges or special charges; utility taxes; water
(including sewer charges) charged to Landlord; casualty and liability insurance
and other insurance carried by Landlord; security services; Project supplies;
exterior window cleaning; snow removal; landscape maintenance; repair and
maintenance of the grounds; amortization of the cost of improvements or
equipment which are capital in nature and which (i) are for the purpose of
reducing Operating Costs of the Project up to the amount saved as a result of
the installation thereof, as reasonably estimated by Landlord, (ii) are required
by any governmental authority after the date of Substantial Completion, or (iii)
replace any equipment needed to operate the Premises at the same quality levels
as prior to the replacement (all such costs, including interest (that is
actually assessed to Landlord), shall be amortized on a straight line basis over
the useful life of the capital investment items, as reasonably determined by
GAAP); service or management contracts; without limitation, any administrative
fees to be paid thereunder; legal and accounting fees; telephone, telegraph,
postage, stationary, supplies and other materials and expenses required for the
routine operation of the Project to be reasonable within the Washington Metro
Area for a project of this type; all Taxes (as defined below); and any other
expense or charge of any nature whatsoever, whether or not herein mentioned,
which would be included in operating expenses in accordance with sound
accounting and management principles generally accepted with respect to the
operation of a project of this type in the Washington Metropolitan Area.
5
<PAGE>
As used in this Lease the term "Taxes" shall mean all taxes, rates and
assessments, general and special, now or hereafter levied or imposed with
respect to the Project, any portion thereof, and/or any of Landlord's personal
property used in connection herewith. If the system of taxation shall be altered
or varied and any new tax or levy shall be levied or imposed on the Project, or
any portion thereof, in substitution for taxes presently levied or imposed on
the foregoing in Prince George's County, Maryland, then any such new tax or levy
shall be included within the term "Taxes." Reasonable expenses incurred by
Landlord in obtaining or attempting to obtain a reduction of any Taxes shall be
added to and included in the amount of any such taxes. It is understood that
other buildings in the Project may share facilities and services with the
Building, and that the costs of providing such shared facilities and services
shall be allocated to Tenant in accordance with the terms of this Article 4.
"Operating Costs" shall not include (i) specific costs for any capital
repairs, replacements or improvements, except as provided above; (ii) expenses
for which are reimbursable or Landlord is indemnified (either by an insurer,
condemnor, tenant, warrantor or otherwise) (iii) expenses incurred in leasing
or procuring tenants (including lease commissions, advertising expenses and
expenses of renovating space for tenants) or the sale of any interest in the
Building or Project; (iv) interest or amortization payments on any mortgages;
(v) costs representing an amount paid to an affiliate general partner, officer
or director of Landlord which is in excess of the amount which would have been
paid in the absence of such relationship; or (vi) costs specially billed to
tenants. There shall be no duplication of costs or reimbursement.
Notwithstanding anything to the contrary above, Operating Costs shall
not include the following:
1) original construction costs of the Building;
2) reserves for repairs, maintenance and replacements;
3) ground rents;
4) salaries, wages, or other compensation paid to employ-ees of any
property management organization whose salaries are deemed covered by a
management fee (i.e., property manager, accounting or clerical personnel);
5) amounts paid to any partners, shareholder, officer or director of
Landlord, for salary or other compensation;
6) costs of electricity for other tenant's spaces or any other
special service to tenants or service in excess of that furnished to Tenant
whether or not Landlord receives reimbursement from such tenants as an
additional charge;
7) expenses for repairs, replacements or improvements arising from
the initial construction of the Building or Project to the extent such expenses
are either (i) reimbursed to Landlord by virtue of warranties from contractors
or suppliers of (ii) result by reason of deficiencies in design or workmanship
except conditions resulting from ordinary wear and tear;
6
<PAGE>
8) accounting or legal fees incurred in tenant
disputes, or in procuring tenants, or for fees not related to the operation and
maintenance of the Building but personal to Landlord;
9) costs of repairs incurred by reason of fire or other casualty or
condemnation to the extent Landlord receives compensation therefor through
proceeds of insurance or condemnation awards;
10) costs relating to maintaining Landlord's existence, either as a
corporation, partnership, or other entity, such as trustee's fees, annual fees,
partnership organization or administration expenses, deed recordation expenses,
legal and accounting fees (other than with respect to Building operations);
11) interest or penalties arising by reason of Landlord's failure to
timely pay any Operating Costs;
12) Intentionally Deleted
13) costs incurred to remove or contain any hazardous or toxic wastes,
materials or substances from either the Building, land, or the Project;
14) depreciation of the Building or Project or any equipment,
machinery, fixtures or improvements therein;
15) Any inheritance, estate, succession, transfer, gift tax, or
capital levy shall not be included in real estate taxes and further, no
franchise, corporation, income or profit tax calculated upon the Landlord's net
income to be passed through to the Tenant, except to the extent that if at any
time during the Term of this Lease the methods of taxation prevailing at the
commencement of the term of this Lease shall be altered so that in lieu of, or
as a substitute for, the whole or any part of the taxes, assessments, levies,
impositions or charges now levied, assessed or imposed on real estate and the
improvements thereon, there shall be levied, assessed or imposed a tax,
assessment, levy fee or other charge: (i) on or measured by the rents received
therefrom; (ii) measured by or based in whole or in part upon the Building or
Project and imposed upon Landlord; or (iii) measured by the rent payable by
Tenant under this Lease, then all such taxes, assessments, levies, impositions,
charges or fees or the part thereof so measured or based, shall be deemed to be
included within the term "real estate taxes."
Landlord agrees to keep accurate books and records reflecting
operating expenses in accordance with sound and generally accepted accounting
principles consistently applied, and to make such records, and reasonable
supporting detail, available for examination during normal business hours upon
reasonable notice by Tenant and its representatives; provided that any such
examination or audit shall be at Tenant's sole cost and expense, unless the
audit discloses a discrepancy of 10% or more then Landlord shall be responsible
for the cost of the audit. In addition, if the audit discloses any overpayment
by Tenant, the overpayment shall be promptly repaid to Tenant.
Notwithstanding anything contained herein to the contrary, during the Tenant's
first lease year, Operating Costs shall be no greater than one dollar and
eighty-eight cents ($1.88) per rentable square foot.
7
<PAGE>
UTILITIES AND SERVICES 5.01 - Landlord agrees to provide at its cost
----------------------
water, electricity and telephone service connections into the Premises, but
Tenant shall be responsible to arrange and pay for all electricity, water, gas,
heat, ventilation, air conditioning, light, power, telephone, sewer, sprinkler
and other utilities and services used on or for the benefit of the Premises,
together with any taxes, penalties, surcharges or the like pertaining thereto
and any maintenance charges for utilities and shall furnish all electric
lightbulbs and tubes. If any such services are not separately metered to
Tenant, Tenant shall pay its proportionate share as reasonably determined by
Landlord of all charges jointly metered within the Building.
5.02 - Landlord reserves the right to interrupt, curtail, stop or
suspend the parking privileges of the Tenant, if any, and/or any services or
utilities provided by Landlord, when necessary by reason of accident or
emergency, or for repairs, alterations, replacements or improvements in the
reasonable judgment of Landlord desirable or necessary to be made or because of
any other reason beyond the control of Landlord, whether such other cause be
similar or dissimilar to those hereinabove specifically mentioned, until said
cause has been removed. In such event, there shall be no diminution or
abatement of Rent or other compensation due from Tenant to Landlord hereunder
except as specifically set forth herein, nor shall this Lease be affected nor
any of Tenant's obligations hereunder reduced, and Landlord shall have no
responsibility or liability for any such interruption, curtailment, stoppage, or
suspension of services or systems provided by Landlord under this Lease.
Notwithstanding the foregoing, in the event Landlord needs to perform work in
the Premises which will interfere with the Tenant's normal course of business,
Landlord will give Tenant notice (except in the case of an emergency) the
Landlord shall use its best efforts to perform such work and clean up the area
after Tenant's business hours and prior to the Tenant's next day of business.
Notwithstanding anything to the contrary contained herein, if Tenant cannot
reasonably use all of the Premises for Tenant's normal business operations by
reason of any interruption in services and such condition exists for five (5)
consecutive business days, then Tenant's rent shall be equitably abated for that
portion of the Premises that Tenant is unable to occupy until such service is
restored and Tenant is able to use the Premises.
ASSIGNMENT AND SUBLETTING 6.01 - Neither Tenant nor its legal
-------------------------
representatives or successors in interest shall, by operation of law or
otherwise, (a) assign, mortgage, pledge, encumber or otherwise transfer this
Lease or any part hereof, or the interest of Tenant under this Lease, or in any
sublease or the rent thereunder, or (b) sublet the Premises or any part thereof,
or permit the occupancy or use thereof for any purpose by anyone other than
Tenant, without Tenant's obtaining in each instance the prior written consent of
Landlord which in all instances shall not be unreasonably withheld or
conditioned. Tenant shall not modify, extend, or amend a sublease previously
consented to by Landlord without obtaining Landlord's prior written consent
which in all instances shall not be unreasonably withheld, delayed, or
conditioned. Landlord shall respond to Tenant's request to sublease or assign
this Lease within 10 business days after Tenant's request. If Landlord does not
respond within such time frame Landlord's consent shall be deemed given.
8
<PAGE>
6.02 - An assignment of this Lease shall be deemed to have occurred if
in a single transaction or in a series of related transactions (a) more than
fifty percent (50%) in interest in Tenant, any guarantor of this Lease, or any
subtenant (whether stock, partnership interests or otherwise), is transferred,
diluted, reduced, or otherwise affected with the result that the present holders
or owners of Tenant, such guarantor, or such subtenant have less than a fifty
percent (50%) interest in Tenant, such guarantor or such subtenant, or (b) any
general partnership interest in Tenant, such guarantor or subtenant or a
controlling interest (i.e. fifty percent or more) in any general partner of
Tenant, such guarantor or subtenant is sold or otherwise transferred with the
result that the present general partner(s) of Tenant, such guarantor or
subtenant are no longer general partner(s) of Tenant, such guarantor or
subtenant or that the present holders or owners of each such general partner no
longer control such general partners.
Notwithstanding anything to the contrary contained herein, Tenant
shall have the right without Landlord's consent to assign this lease to a
corporation which it may merge, acquire, or consolidate, to any parent or
subsidiary or Tenant's, or to a purchaser of substantially all of Tenant's
assets, provided the assignee executes an agreement reasonably required by
Landlord assuming Tenant's obligations.
6.03 - Tenant agrees to reimburse Landlord for reasonable legal fees
and any other reasonable costs incurred by Landlord in connection with any
permitted assignment or subletting. Tenant shall deliver to Landlord copies of
all documents executed in connection with any permitted assignment or
subletting, which documents shall be in form and substance reasonably
satisfactory to Landlord and which documents, (i) in the case of a permitted
assignment, shall require such assignee to assume performance of all terms of
this Lease on Tenant's part to be performed, and (ii) in the case of a permitted
subletting, shall require such sublessee to comply with all terms of this Lease
on Tenant's part to be performed. No acceptance by Landlord or any Rent or any
other sum of money from any assignee, sublessee or other category of transferee
shall be deemed to constitute Landlord's consent to any assignment, sublease, or
transfer, except when Landlord is deemed to have give approval in accordance
with Section 6.01 above.
6.04 - Any attempted assignment or sublease by Tenant in violation of
the terms and provisions of these Sections 6.01 through 6.04, inclusive, shall
be void and shall constitute a material breach of this Lease. In no event shall
any assignment, subletting or transfer, whether or not with Landlord's consent,
relieve Tenant of its primary liability under this Lease for the entire Term,
and Tenant shall in no way be released from the full and complete performance of
all the terms hereof.
6.05 - In no event shall this Lease be assigned or assignable by
voluntary or involuntary bankruptcy, insolvency or reorganization proceedings,
and in no event shall this Lease or any rights or privileges hereunder be an
asset of Tenant under any bankruptcy, insolvency or reorganization proceedings.
6.06 - The term "Landlord," as used in this Lease, so far as covenants
or obligations on the part of Landlord are concerned, shall be limited to mean
and include only the owner or owners, at the time in question, of the fee title
to, or a lessee's interest in a ground lease of, the Building. In the
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event of any transfer, assignment or other conveyance or transfers of any such
title or interest, Landlord herein named (and in case of any subsequent transfer
or conveyances, the then grantor) shall be automatically freed and relieved from
and after the date of such transfer, assignment or conveyance of all liability
as respects the performance of any covenants or obligations on the part of
Landlord contained in this Lease thereafter to be performed and, without further
agreement, the transferee of such title or interest shall be deemed to have
assumed and agreed to observe and perform any and all obligations of Landlord
hereunder (including ensuring Tenant's security deposit remains in place per
Section 3.05 herein), during its ownership of the Building or Project. Landlord
may transfer its interest in the Building or Project without the consent of
Tenant and such transfer or subsequent transfer shall not be deemed a violation
of Landlord's part of any of the terms of this Lease.
USE OF PREMISES 7.01 - The Premises shall be used only or related
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thereto only for general office and warehouse use currently engaged in or
related thereto by Tenant, which are to be in compliance with state and local
laws, regulations or ordinances, and for no other purposes whatsoever. Tenant
shall use and maintain the Premises in a clean, careful, safe, lawful and proper
manner and shall not allow within the Premises, or to emanate from the Premises,
any offensive noise, odor, conduct or private or public nuisance or permit
Tenant's employees, agents, servants, contractors, licensees or invitees to
create a public or private nuisance or act in a disorderly manner within the
Building or the Project. Tenant shall be responsible for obtaining, at its sole
cost and expense, any permits or business licenses required in connection with
Tenant's use and occupancy of the Premises.
7.02 - Tenant shall, at Tenant's sole cost and expense, (i) comply
with all laws, orders, ordinances, and regulations of federal, state, county,
and municipal authorities having jurisdiction over the Premises which relate
strictly to Tenant's business aa opposed to,the Premises meeting such
requirement, (ii) comply with any directive, order or citation made pursuant to
law by any public officer requiring abatement of any nuisance or which imposes
upon Landlord or Tenant any duty or obligation arising from Tenant's occupancy
or use of the Premises or from conditions which have been created by or at the
request or insistence of Tenant, or required by reason of a breach of any
Tenant's obligations hereunder or by or through other fault of Tenant, (iii)
comply with all insurance requirements applicable to the Premises and (iv)
indemnify and hold harmless Landlord from and against any loss, liability, cost,
claim or expense which Landlord incurs or suffers by reason of Tenant's failure
to comply with its obligations under clauses (i), (ii), or (iii) above unless
due to the negligence or willful misconduct of Landlord, its agents, employees,
contractors, invitess, or guests. If Tenant receives notice of any such
direction, order, citation or of any violation of any law, order, ordinance,
regulation or any insurance requirement, Tenant shall promptly notify Landlord
in writing of such alleged violation and furnish Landlord with a copy of such
notice. Landlord shall be responsible to ensure the Building comply's with all
codes and laws.
DEFAULTS 8.01 - The occurrence of any one or more of the following
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events shall constitute an Event of Default (herein so called) of Tenant under
this Lease: (a) if Tenant fails to pay any Rent hereunderten days after written
notice thereof as and when such Rent becomes due; (b) if the Premises become
abandoned for more than ten (10) consecutive days or if Tenant fails to
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take possession of the Premises on the Commencement Date or promptly thereafter;
(c) if Tenant permits to be done anything which creates a lien upon the Premises
and fails to discharge, or bond such lien or post such security within ten (10)
days after notice thereof with Landlord as is required by Section 10.03; (d) if
Tenant violates the provisions of Sections 6.01 through 6.04, inclusive, by
attempting to make an unpermitted assignment or sublease after ten (10) days
written notice thereof; (e) if Tenant fails to maintain in force all policies of
insurance required by this Lease and such failure shall continue for more than
ten (10) days after Landlord gives Tenant notice of such failure; (f) if any
petition is filed by or against Tenant or any guarantor of this Lease under any
present or future section or chapter of the Bankruptcy Code, or under any
similar law or statute of the United States or any state thereof (which, in the
case of an involuntary proceeding, is not permanently discharged, dismissed,
stayed, or vacated, as the case may be, within sixty (60) days of commencement),
or if any order for relief shall be entered against Tenant or any guarantor of
this Lease in any such proceedings; (g) if Tenant or any guarantor of this Lease
becomes insolvent or makes a transfer in fraud or creditors or makes an
assignment for the benefit of creditors; (h) if a receiver, custodian, or
trustee is appointed for the Premises or for all or substantially all of the
assets of Tenant or any guarantor of this Lease, which appointment is not
vacated within sixty (60) days following the date of such appointment; (i) if
Tenant fails to perform or observe any other term of this Lease and such failure
shall continue for more than ten (10) days after Landlord gives Tenant notice of
such failure, or, if such failure cannot be corrected within such ten (10) day
period, if Tenant does not commence to correct such default within said ten (10)
day period and thereafter diligently prosecute the correction of same to
completion within a reasonable time and in any event prior to the time a failure
to complete such correction could cause Landlord to be subject to prosecution
for violation of any law, rule, ordinance or regulation or causes, or could
cause, a default under any deed of trust, mortgage, underlying lease, tenant
leases or other agreements applicable to the Building or the Project; or (j) if
Tenant fails to perform any term of this Lease having a cure period more than
three (3) times in any period of twelve (12) months, notwithstanding that Tenant
has corrected any previous failures within such applicable cure period.
8.02 - Upon the occurrence of any Event of Default, Landlord shall
have the right, at its sole option, then or at any time thereafter to terminate
this Lease. In addition, with or without terminating this Lease, Landlord may
terminate Tenant's right of possession hereunder, and re-enter and re-take
possession of the Premises without demand of rent or demand of possession of
said Premises and may forthwith proceed to recover possession of the Premises by
process of law or otherwise without being liable to prosecution or damages
therefor, any notice to quit, or of Landlord's intention to re-enter the same,
being hereby expressly waived by Tenant. If Landlord elects to terminate this
Lease and/or elects to terminate Tenant's right of possession, then everything
contained in this Lease to be done and performed by Landlord shall cease,
without prejudice, however, to Tenant's liability for all Rent and other sums
accrued through the later of termination or Landlord's recovery of possession.
Whether or not this Lease and/or Tenant's right of possession is terminated,
Landlord shall have the right (if during the Lease Term Tenant is in default
five or more times) to terminate any renewal or expansion right contained in
this Lease and to grant or withhold any consent or approval pursuant to this
Lease in its sole and absolute discretion.
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8.03 - In the event of such re-entry or retaking by Landlord, whether
or not this Lease is terminated, Tenant shall nevertheless in all events be and
remain liable for the full rental to the date of retaking or re-entry, and
Tenant shall also be and remain liable for damages for the deficiency or loss of
Rent which Landlord may thereby sustain in respect of the balance of the Term,
and for any other loss, damage or expense suffered or incurred by Landlord as a
result of such cessation and determination of Tenant's right of possession or in
connection with such re-taking and re-letting (including, but not limited to,
reasonable attorneys fees and costs, leasing commissions, advertising costs and
costs incurred in placing the Premises in rentable condition all of which shall
be prorated to reflect the Tenant's remaining Lease Term). In such case,
Landlord reserves full power, which is hereby acceded to by Tenant, to let the
Premises for the benefit of Tenant in liquidation and discharge, in whole or in
part, as the case may be, of the liability of Tenant under the terms and
provisions of this Lease, and such damages, if ascertainable, and at the option
of Landlord, may be recovered by it at the time of the retaking or re-entry, or
in separate actions, from time to time, as Tenant's obligation to pay Rent would
have accrued if the term had continued, or from time to time as said damages
shall have been made more easily ascertainable by reletting of the Premises; or
such action by Landlord may at the option of Landlord be deferred until the
expiration of the Term, in which latter event the cause of action shall not be
deemed to have accrued until the date of the termination of said Term. All
rents received by Landlord in any such reletting shall be applied first to the
payment of such reasonable expenses as Landlord may have incurred in recovering
possession of the Premises and in reletting the same, second to the payment of
any costs and expenses incurred by Landlord either for making necessary repairs
to the Premises or in curing any default on the part of Tenant in any covenant
or condition herein made binding upon Tenant, and last, any remaining rent shall
be applied toward the payment of Rent due from Tenant under the terms of this
Lease, with interest at the Interest Rate, and any consequential damages; and
Tenant expressly agrees to pay any deficiency thereafter remaining.
8.04 - Intentionally Deleted.
8.05 - If Tenant defaults in the making of any payment or in the doing
of any act herein required to be made or done by Tenant then Landlord may, but
shall not be required to, make such payment or do such act, and the amount of
the expense thereof, if made or done by Landlord, with interest thereon at the
Interest Rate from the date paid by Landlord, shall be paid by Tenant to
Landlord and shall constitute Additional Rent hereunder due and payable within
ten (10) days after written demand for payment by Landlord; but the making of
such payment or the doing of such act by Landlord shall not operate to cure such
default or to estop Landlord from the pursuit of any remedy to which Landlord
would otherwise be entitled.
If the services of an attorney are deemed necessary by the Landlord or
Tenant to enforce any provision, covenant or term hereof, the defaulting party
shall pay all costs and expenses relative thereto including reasonable
attorney's fees and costs.
8.06 - The rights granted to Landlord and Tenant in this Article 8
shall be cumulative of every other right or remedy provided in this Lease or
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which Landlord or Tenant may otherwise have at law or in equity or by statute,
and the exercise of one or more rights or remedies shall not prejudice or impair
the concurrent or subsequent exercise of other rights or remedies or constitute
a forfeiture or waiver of Rent or damages accruing to Landlord or Tenant by
reason of any Event of Default under this Lease.
8.07 - In case Landlord shall fail or neglect to keep or perform any
of the covenants or agreements in this Lease on the part of Landlord to be kept
and performed, and if said default shall continue for thirty (30) days (or such
lesser reasonable period of time if emergency repairs or replacements are
required) following written notice thereof from Tenant to Landlord and Lender to
cure the specific default or defaults in addition to all other remedies provided
hereunder or now of hereafter afforded or provided by law or equity (which
remedies shall be cumulative and nonexclusive), Tenant may at its election
perform such covenant, agreement or work for or on behalf of the Landlord or
make good any such default, and any amount or amounts which Tenant shall advance
in connection therewith shall be repaid by Landlord to Tenant, on demand,
together with interest thereon at the Interest Rate from the date of such
advance to the repayment thereof in full; and, if Landlord shall not repay any
such amount or amounts upon demand, the Tenant may, without forfeiture of its
rights hereunder, withhold or deduct the same, together with interest thereon as
aforesaid, from the next installment or installments of rent, payments for real
estate taxes and operating expenses or other payments which thereafter become
due to Landlord under this Lease. Nothing herein contained shall preclude
Tenant from proceeding by other means to collect the amount so paid by it as
aforesaid without waiting for such offsets to accrue. Tenant's right to cure a
default by Landlord under this paragraph shall not become effective if, within
such thirty (30) day period (or such lesser applicable period if emergency
repairs or replacements are required), Landlord or Lender commences to cure the
default and thereafter diligently performs such things as may be necessary to
cure its default.
MAINTENANCE AND REPAIRS 9.01 - Except as otherwise set forth in this
-----------------------
Article 9, Tenant shall perform all maintenance and make all repairs and
replacements to the Premises (including any Alterations therein) and shall keep
the Premises (including the Alterations therein) in good order and in a safe,
neat and clean condition. No representations respecting the condition of the
Premises or the Building or the other portions of the Project have been made by
Landlord to Tenant except as specifically set forth in this Lease.
9.02 - Subject to the other provisions of this Lease imposing
obligations regarding repair upon Tenant, Landlord shall repair all water,
plumbing, electrical and other mechanical systems of the Building serving or
existing (including serving the Premises) also for the benefit of other tenants
in the Building, and shall repair all portions of the Project which do not
comprise a part of the Premises and are not leased to others and serving the
Premises as outlined in Section 5.01 herein (provided that Tenant shall pay the
costs of any such repairs or replacements caused by Tenant or Tenant's agents,
servants, employees, contractors, invitees and licensees within ten (10) days
after receipt of an invoice therefor from Landlord) subject to the insurance
provisions in this lease. Landlord shall maintain and repair at its sole cost
and expense structural components of the Building including, but not limited to,
foundations, bearing walls, exterior walls, subflooring and the roof.
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9.03 - Landlord shall have no obligation under this Lease to make
repairs which Landlord has undertaken to make hereunder unless and until Tenant
has given written notice to Landlord of the need to make such repairs.
ALTERATIONS 10.01 - The initial improvements to the Premises will be
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pursuant to the following guidelines:
1) Tenant Plans - Tenant shall supply all information needed
for the preparation of plans and finishes to Landlord, which will be included as
exhibit_____. Landlord, at Landlord's sole cost and expense will supply all
architectural and engineering drawings (if required).
2) Construction of Premises - Landlord shall provide Tenant with
$5.85 per rentable square foot for the construction of the Premises and any
unused portions shall be applied to the first rent when due after rental
abatement. Tenant shall spend at least $5.50 of said allowance within the
Premises. Landlord shall also provide Tenant with all computer room including
security system, and computer cabling equipemtn currently in or stored at the
Building that has not been removed by the current Tenant and all such equipment
herein shall remain the property of Landlord.
3) General Contractor Mark-up - In the event any work necessary
to construct and outfit the Premises is provided by Landlord to Tenant, such
work will be provided at the direct cost to the General Contractor from its
subcontractors plus a maximum mark-up of fourteen percent (14%) for overhead,
general conditions and profit to the General Contractor. There shall be no
additional mark-ups by or to the Landlord or General Contractor.
4) Competitive Bidding - Tenant shall have the right to request
Landlord to have three (3) Subcontractors provide bids on all work necessary to
construct and outfit the Premises. Prior to commencing work on any trade which
is not to be competitively bid, Landlord's General Contractor will submit a
detailed list of unit prices (which in all respects shall be competitive rates)
for Tenant's approval in sufficient time to allow for Tenant's review, comment
and subsequent modification.
5) Tenant's Contractor(s) - Tenant shall have the right to
retain its own Subcontractors to perform any specialty work necessary to
construct and outfit the Premises. Tenant's contractor(s) and Landlord's
contractor(s) shall work in harmony during the period of Tenant fit-up.
6) Design and Construction Schedule - In order to ensure timely
completion of construction and outfitting of the Premises, Landlord and Tenant
shall agree to a timetable whereby each party shall be obligated to meet certain
dates in the design and construction process.
7) Early Possession for Tenant Fit-Up - Tenant shall be given
access to the Premises upon lease execution for the purpose of installing
special equipment, furniture, telephone equipment, computers, etc. Tenant's
consultants shall have reasonable access to the Premises during construction to
install cabling and wiring prior to the partitions being enclosed so long as
they do not interfere with Landlord's Contractor and for the purpose of
inspecting the work in progress.
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10.02 - Tenant shall not make any alterations, additions or
improvements, structural or otherwise (excluding the initial improvements)
("Alterations"), in or to the Premises or the Building without Landlord's prior
written consent which consent or approval shall not be unreasonably withheld,
conditioned or delayed. Alterations may be made by Tenant only at Tenant's sole
cost and expense and subject to (i) obtaining Landlord's prior approval of
contractors or subcontractors and of plans and specifications, which approval
will not be withheld or delayed; (ii) obtaining all necessary permits from
governmental authorities having jurisdiction, and (iii) obtaining specified
completion and lien indemnity bonds and insurance. Landlord shall have the
right to have the making of any Alterations inspected by its architects,
contractors or workmen, and any Alterations made by Tenant shall be in full
compliance with all applicable laws, rules, ordinances, orders and regulations
and other governmental or legal requirements. All Alterations in or to the
Premises or the Building made by either party (except moveable trade fixtures
and equipment of Tenant) shall immediately become the property of Landlord and
shall remain upon and be surrendered with the Premises as a part thereof at the
end of the term hereof without disturbance, molestation or injury.
Notwithstanding the foregoing sentence, if Landlord elects that Alterations upon
the Premises be removed upon termination which shall be relayed to Tenant when
the alterations are made, Tenant hereby agrees to cause same (or such thereof as
may be specified in the notice from Landlord) to be removed at Tenant's sole
cost and expense and to repair any damage caused by such removal at Tenant's
sole cost and expense. Landlord shall not charge a supervisory fee for
alterations.
10.03 - If any mechanic's lien is filed against the Premises or the
real property of which the Premises are a part, for work claimed to have been
done for, or materials claimed to have been furnished to Tenant, such mechanic's
lien shall be discharged by Tenant within ten (10) days thereafter, at Tenant's
sole cost and expense, by the payment thereof or by filing any bond required by
law. Tenant will indemnify and hold Landlord and its mortgagee(s) harmless from
and against any and all expenses, liens, claims, liability or damages to person
or property which may or might arise by reason of the making of any Alterations,
unless such damage is caused by the negligence or willful misconduct of
Landlord, its agents, contractors, invitees, or visitors.
10.04 - Tenant shall not install or operate in the Premises, or cause
or permit the installation or operation in the Premises of, any equipment or
machinery of any kind or nature that will or may necessitate any changes,
replacements or additions to or require the extraordinary use of the water,
plumbing, heating, air conditioning, electrical or mechanical systems serving
the Building or connecting to the Premises, without the prior written consent of
Lessor. Notwithstanding the above, Landlord agrees that for the initial
improvements to the Premises, Landlord has consented to their use in the
Premises.
10.05 - Maintenance and repair of any and all heating, ventilating,
and air conditioning systems or equipment installed by Tenant or by Landlord on
behalf of Tenant in or for the sole benefit of the Premises shall be the sole
responsibility of Tenant, and Landlord shall have no obligation in connection
therewith. Tenant shall enter into and keep in full force and effect during the
term of this Lease and any extension hereof a maintenance and service contract
with a reputable contractor with respect to all such
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systems or equipment, which contract and contractor shall be acceptable to
Landlord and shall call for, at a minimum, inspections of such systems or
equipment at least once per annum.
Landlord shall place the HVAC system and air conditioning systems throughout the
Premises and in the computer room area in good working order at Substantial
Completion.
SURRENDER AND RESTORATION 11.01 - Tenant agrees to remove from the
-------------------------
Premises, at the expiration or other termination of this Lease, all goods and
effects not belonging to Landlord, and to surrender possession of the Premises
and, subject to the terms and conditions of Article 10 above, all fixtures and
furnishings connected therewith in good repair, order and condition in all
respects, reasonable wear and use thereof and damage by fire or other
unavoidable casualty only excepted.
INSURANCE AND INDEMNIFICATION 12.01 - Tenant, at its sole expense,
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shall obtain and keep in force during the Term the following insurance:
(a) All Risk insurance insuring Tenant's interest in the Premises
including any and all Alterations (including leasehold improvements) made in or
to the Premises and all of Tenant's property, furnishings, fixtures and
equipment located in the Premises, to the extent of 100% of their full
replacement cost without deduction for depreciation; (b) Comprehensive general
public liability insurance on an occurrence basis, including personal injury,
bodily injury, broad form property damage, operations hazard, owner's protective
coverage, contractual liability (with a cross liability clause and a
severability of interests clause to cover Tenant's indemnities set forth
herein), and products and completed operations liability, in limits not less
than $1,000,000.00 combined single limit per occurrence with a $2,000,000.00
annual aggregate, or such higher limits as Landlord may require from time to
time during the Term; (c) Plate glass insurance, in amounts satisfactory to
Landlord, covering the full cost of replacing or restoring all of the plate
glass in, at or about the Premises; and (d) Any other normal and customary form
or forms of insurance or any changes or endorsements to the insurance required
herein as Landlord, or any mortgagee or lessor of Landlord may require, from
time to time, in form or in amount. All such policies of insurance or
certificates thereof shall name Tenant and Landlord as named insured thereunder
and shall name all mortgagees and lessors of Landlord as additional named
insured of which Tenant has been notified, all as their respective interest may
appear. All such policies or certificates shall be issued by insurers
acceptable to Landlord and in form satisfactory from time to time to Landlord.
Tenant shall deliver to Landlord certificates with copies of policies, together
with satisfactory evidence of payment of premiums for such policies by the
Commencement Date, and, with respect to renewals of such policies, not later
than thirty (30) days prior to the end of the expiring term of coverage. All
policies of insurance shall be primary and Tenant shall not carry any separate
or additional insurance concurrent in form or contributing in the event of any
loss or damage with any insurance required to be maintained by Tenant under this
Lease. Upon Landlord's request, Tenant shall deliver to Landlord certified
copies of such policies. All such policies and certificates shall contain an
agreement by the insurers to notify Landlord and any mortgagee or lessor of
Landlord in writing, by registered U.S. mail, return receipt requested, not less
than thirty (30) days before any material change, reduction in coverage,
cancellation, including cancellation
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for nonpayment of premium, or other termination thereof or change therein and
shall include a clause or endorsement denying the insurer any rights of
subrogation against Landlord, if such clause or endorsement is obtainable
without additional cost to Tenant.
12.02 - Tenant hereby agrees to make no claim against Landlord and
agrees to assume the cost of defending, by counsel chosen by Landlord, any claim
which shall be made against Landlord by any agent, servant, employee, licensee,
visitor, contractor or invitee of Tenant or by others claiming the right to be
on or about the Project through or under Tenant for any injury, loss or damage
to person or property occurring upon the Project from any cause other than the
gross negligence or willful misconduct of Landlord. Tenant shall save Landlord,
its agents and employees, harmless and indemnified from all loss, damage,
liability or expense, including attorneys' fees and court costs, incurred,
suffered, or claimed by reason of Tenant's neglect or the use of the Project or
by reason of any injury, loss or damage to person or property occurring upon the
Premises from any cause other than the gross negligence or willful misconduct of
Landlord. Tenant shall be answerable for all nuisances caused or suffered in
the Premises.
12.03 - Landlord hereby agrees to make no claim against Tenant and
agrees to assume the cost of defending, by counsel chosen by Tenant, any claim
which shall be made against Tenant by any agent, servant, employee, licensee,
visitor, contractor or invitee of Landlord or by others claiming the right to be
on or about the Project through or under Landlord for any injury, loss or damage
to person or property occurring upon the Project from any cause other than the
gross negligence or willful misconduct of Tenant. Tenant shall save Landlord,
its agents and employees, harmless and indemnified from all less, damage,
liability or expense, including attorney's fees and court costs, incurred
suffered, or claimed by reason of Landlord's neglect or the use of the Project
or by reason of any injury, loss or damage to person or property occurring upon
the Premises from any cause other than the gross negligence or willful
misconduct of Tenant. Landlord shall be answerable for all nuisances caused or
suffered in the Premises.
12.04 - All personal property of Tenant, its agents, servants,
employees, visitors, licensees, contractors or suppliers, in and on said
Premises, shall be and remain at its and their sole risk, and Landlord shall not
be liable for any damage to, or loss of, such personal property arising from any
act of negligence of any persons, or resulting from fire, explosion, falling
plaster, rain or snow, or from the leaking of the roof, walls or floors, or from
the bursting, leaking or overflowing of water, sewer or steam pipes, or from
heating or plumbing fixtures or from electrical wires or fixtures, or from any
other cause whatsoever, unless such damage or loss is caused by Landlord, or its
agents, contractors, invitees or guests.
12.05 - Tenant will not conduct or permit to be conducted any
activity, or place any equipment in or about the Premises, which will, in any
way, increase the rate of fire insurance or other insurance on the Building or
the Project, and if any increase in the rate of fire insurance or other
insurance is stated by any insurance company or by the applicable Insurance
Rating Bureau to be due to such activity or equipment in or about the Premises,
such statement shall be conclusive evidence that the increase in such rate is
due to such activity or equipment and, as a result thereof, Tenant shall
discontinue such activity causing the increase immediately liable
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for such increase if actually assessed and as Additional Rent and, within ten
(10) days following notification thereof by Landlord, shall reimburse Landlord
therefor.
12.06 - Landlord will keep insurance in place for the full replacement
costs of the Building, for the replacement of the Premises of, or if the repair
or restore of such damage is estimated to take longer than 180 days, Tenant may
cancel the Lease, and Landlord shall return its security deposit.
LANDLORD'S RIGHT OF ACCESS 13.01 - The Landlord shall have the right
--------------------------
to enter the Premises at all reasonable hours after notice to Tenant (except in
case of emergency when such entry shall be at any time) to exhibit the same to
prospective purchasers or lenders, to examine the same, to perform maintenance
or to make any improvements, alterations and repairs to the Premises or to the
Building. Landlord may as long as it does not unreasonably interfere with
Tenant'suse of the Premises, during the progress of any work in the Premises,
keep and store upon the Premises all necessary materials, tools and equipment
without the same constituting eviction of Tenant in whole or in part, and the
Rents reserved shall in no way abate while said work is in progress and Landlord
shall not in any event be liable for inconvenience, annoyance, disturbance, loss
of business or other damage of or to Tenant in connection with the doing of any
such work in the Premises. Landlord shall, however, in connection with the
doing of any such work, use best efforts to minimize the inconvenience,
annoyance, or disturbance caused to Tenant during such work. In addition to the
foregoing, during the last six (6) months preceding the termination of this
Lease, Landlord shall have the right to enter the Premises at reasonable hours
to exhibit the same for rental.
FIRE CLAUSE 14.01 - This Lease is made on condition that, if the
-----------
Building, the Premises or any part thereof are damaged or destroyed by fire or
other casualty from any cause, Landlord shall have the option either: (1) to
repair or restore such damage (other than damage to Alterations made in or to
the Premises or to personal property of Tenant located in the Premises) at
Landlord's sole cost and expense, with this Lease continuing in full force and
effect, or (2) if the damages will take longer than 180 days to repair, to give
notice to Tenant at any time within ninety (90) days after such damage,
terminating this Lease as of the date specified in such notice. If Landlord
chooses to repair or restore such damages, a just and proportionate part of the
Base Rent, according to the nature and extent of the injury to the Premises,
shall be abated until said Premises have been put in substantially as good
condition for use and occupancy as provided by Landlord at the commencement of
the term of this Lease. If Landlord chooses to repair or restore such damage,
Landlord will proceed at its expense and as expeditiously as may be practicable
to repair the damage, provided insurance proceeds are available therefore.
Notwithstanding anything contained in this Section 14.01, if such damage is due
to the negligence or is otherwise caused by Tenant or its agents, servants,
employees, contractors, visitors, invitees or licensees, without prejudice of
any other rights of subrogation of Landlord's insurer, there shall be no
apportionment or abatement of Rent and Tenant shall pay to Landlord the amount
by which the costs and expenses of restoration exceed the insurance proceeds, if
any, actually received by Landlord on account of such damage or destruction (as
long as the insurance covers the repairs). Landlord shall not repair or
replace, or otherwise be liable for any injury or damage to, any Alternations
made in or to the Premises or to personal property of Tenant located in the
Premises. Notwithstanding the
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above, if Landlord does not repair or restore such damage within 180 days of (1)
above, or if the repair or restore of such damage is estimated to take longer
than 180 days, Tenant may cancel this Lease, and Landlord shall return its
security deposit.
If Tenant or Landlord does not elect to cancel the lease as provided
for above, Tenant's rent will be abated until the Premises are restored to its
original condition.
CONDEMNATION 15.01 - This Lease shall be terminated and the Rent
------------
payable hereunder shall be apportioned to the date of such termination in either
of the two following events, namely: (i) the forcible leasing or condemnation
of the Premises or any part thereof by any competent authority under right of
eminent domain for any public or quasi-public use or purpose; and (ii) the
condemnation by competent authority under right of eminent domain for any public
or quasi-public use or purpose of twenty-five percent (25%) or more of the
Building in which the Premises are located. The forcible leasing by any
competent authority of any portion of said Building other than the Premises will
have no effect whatever upon this Lease except as provided above. In case of
any taking or condemnation, whether or not the term of this Lease shall cease
and terminate, the entire award shall be the property of Landlord, and Tenant
hereby assigns to Landlord all its right, title and interest in and to any such
award. Tenant, however, shall be entitled to claim, prove and receive in the
condemnation proceeding such awards as may be allowed for fixtures and other
equipment installed by it at its expense and relocation costs, but only if such
awards shall not diminish Landlord's award.
SUBORDINATION CLAUSE 16.01 - Subject to the provisions herein set
--------------------
forth, this Lease shall be subordinate to any ground lease, mortgage or deed of
trust which is now or shall be hereafter (provided however, Tenant shall not
subordinate and therefore remain superior to such future loan unless, Landlord
obtains a nondisturbance agreement from any future lender) placed upon the
Building or the Project or any portion thereof and all amendments, renewals and
extensions thereof; provided, however, that in the event the beneficiary under
any deed of trust against such property or any mortgagee shall require this
Lease to be superior and paramount to such deed of trust or mortgage, as
applicable, Tenant agrees to execute and deliver any instruments reasonably
required for such purpose.
16.02 - Tenant shall, without charge, at any time and from time to
time, within five (5) business days after receipt of request therefor by
Landlord, execute, acknowledge and deliver to Landlord a written estoppel
certificate certifying to Landlord, or to a mortgagee, assignee of a mortgage,
or any purchaser, of the Building or the Project, or any other person designated
by Landlord, as of the date of such estoppel certificate, such matters
pertaining to this Lease as may be requested by Landlord. In the event Tenant
fails to deliver such instrument within the specified time, it shall be
conclusively deemed by and upon Tenant that (i) this Lease is in full force and
effect, without modification except as may be represented by Tenant, (ii) there
are no uncured defaults in Tenant's performance and that Tenant has no right of
offset, counterclaim or deduction against Rent, and (iii) no more than one
month's Rent has been paid in advance. Tenant hereby irrevocably appoints
Landlord as attorney-in-fact for the Tenant with full power and authority to
execute and deliver in the name of the Tenant any such statements or
instruments, for this and other matters of fact.
19
<PAGE>
16.03 - In the event of a foreclosure sale or sales of the Building,
or sale thereof under the deed of trust securing Landlord's mortgagee, or a deed
in lieu thereof, Tenant shall, upon request, attorn to and acknowledge the
purchaser of the Building or the Project at such sale as Landlord hereunder.
16.04 - Tenant agrees to give any mortgagees and/or trust deed
holders, by registered mail, a copy of any notice of default served upon
Landlord, provided that prior to such notice Tenant has been notified in writing
of the address of such mortgagees and/or trust deed holders. Tenant further
agrees that if Landlord shall have failed to cure such default, then the
mortgagees and/or trust deed holders shall have a reasonable period of time to
cure such default (including but not limited to commencement of foreclosure
proceedings, if necessary, to effect such cure), in which event this Lease shall
not be terminated while such remedies are being pursued.
If, in connection with obtaining temporary or permanent financing for
the Project or any portion thereof containing the Premises, any such lender
shall request reasonable modifications of this Lease as a condition to such
financing, Tenant agrees that Tenant will not unreasonably withhold, delay or
defer the execution of an agreement of modification of this Lease, provided such
modifications do not increase the financial obligations of Tenant hereunder or
materially adversely affect the leasehold interest hereby created or Tenant's
reasonable use and enjoyment of the Premises.
HOLDOVER 17.01 - In the event Tenant continues in possession of the
--------
Premises after the end of the Term, the tenancy thus created can be terminated
by either party giving to the other party not less than thirty (30) days'
written notice to expire from the Commencement Date. In so continuing, Tenant
agrees to pay as monthly rental twice the amount payable as Rent by Tenant for
the last month of the Term, which amount shall become the new Rent in
substitution for the amounts set forth in Section 3.01 above. Tenant also
agrees to keep and fulfill all of the other covenants, conditions, and
agreements hereof, and in the case of default or breach of any of said
covenants, conditions and agreements, hereby waives its right to a thirty (30)
day or any other notice to quit; provided, however, that in the event that
Tenant shall hold over after the expiration of the thirty (30) day notice to
quit referred to above, or after breach of any of the terms and conditions of
this Lease, and if Landlord shall desire to regain possession of the Premises
promptly at the expiration of the Term, or upon expiration of said thirty (30)
day notice, or upon such breach, then, in any of said events, Landlord, at its
option, may forthwith re-enter and re-take possession of the Premises without
process, or by any legal process in force, it being specifically understood and
agreed that, in any such event, Landlord shall be entitled to accept monthly
payments in the amount of the hold over rent provided for in this Article from
Tenant for such period after such expiration of the Term, or of the thirty (30)
day notice to quit, or after such breach, as Tenant shall remain in occupancy of
the Premises, which payments shall be deemed the reasonable value of the use and
occupation of the Premises for the period of Tenant's continued occupancy
thereof until Landlord regains possession, and such acceptance shall not
constitute a waiver of Landlord's right to terminate the Lease, or any hold over
period thereof, and Landlord hereby disclaims any intention to waive its right
to terminate the Lease, or any hold over period thereof, by its acceptance of
such payment(s).
20
<PAGE>
WAIVER 18.01 - No waiver of any breach of any covenant, condition or
------
agreement herein contained shall operate as a waiver of the covenant, condition
or agreement itself, or of any subsequent breach thereof.
SIGNS 19.01 - Except as described below with respect to signs, no
-----
sign, advertisement, notice or poster shall be inscribed, painted, affixed or
displayed on any part of the outside or the inside of the Building. Tenant may
place a sign on the exterior of the Building on the north side front facade of
the Building, at the Tenant's sole cost and expense, provided that such sign
shall be of the type, size, color and style and in a location approved in
advance by Landlord, which approval shall not be unreasonably withheld and or
delayed.
MISCELLANEOUS 20.01 - If there be more than one Tenant, the
-------------
obligations hereunder imposed upon Tenant shall be joint and several, and all
agreements and covenants herein contained shall be binding upon the respective
heirs, personal representatives, and successors and assigns of the parties
hereto. If there is a guarantor of Tenant's obligations hereunder, Tenant's
obligations shall be joint and several obligations of Tenant and such guarantor,
and Landlord need not first proceed against Tenant hereunder before proceeding
against such guarantor, and any such guarantor shall not be released from its
guarantee for any reason, including any amendment of this Lease, any forbearance
by Landlord or waiver of any of Landlord's rights, the failure to give Tenant or
such guarantor any notices, or the release of any party liable for the payment
or performance of Tenant's obligations hereunder. Notwithstanding the
foregoing, nothing contained in this Section 20.01 shall be deemed to override
Sections 6.01 through 6.04, inclusive.
20.02 - Feminine or neuter pronouns shall be substituted for those of
the masculine form, and the plural shall be substituted for the singular,
wherever the context shall require.
20.03 - This Lease together with any Exhibits, Riders and Addendums,
embodies the entire agreement and understanding between the parties and
supersedes all prior negotiations, agreements and understandings. Any
provisions of this Lease may be modified, waived or discharged only by an
instrument in writing signed by the party against which enforcement of such
modification, waiver or discharge is sought.
20.04 - All notices required or permitted hereunder shall be deemed to
have been given, whether actually received or not, when dispatched for hand
delivery or delivery by air express courier (with signed receipts) or two (2)
days after they have been mailed in the United States Post Office by certified
or registered mail, postage prepaid, addressed to Landlord or Tenant,
respectively, at the following addresses or to such other addresses as the
parties may designate in writing from time to time:
LANDLORD TENANT
Banbury Associates Prior to Occupancy
--------------------------------
Limited Partnership Mr. Doug Humphrey
--------------------------------
ELV Associates, Inc. Digital Express Group, Inc.
--------------------------------
1615 L Street, NW #1105 6006 Greenbelt Road, #228
--------------------------------
Washington, D.C. 20036 Greenbelt, MD 20770
--------------------------------
20
<PAGE>
After occupancy by Tenant:
Mr. Doug Humphrey at the Premises
With a copy to:
Mr. Mark Ezra
The Fred Ezra Company
4520 East-West Highway
Suite 650
Bethesda, MD 20814
Jennifer S. Blank, Esq.
Reed, Smith, Shaw and McClay
1200 18th Street, NW
Washington, D.C. 20036
20.05 - After Tenant occupies the Premises to conduct its business
hereby elects domicile at the Premises for the purpose of service of all
notices, writs of summons, or other legal documents, or process, in any suit,
action or proceeding which Landlord may undertake under this Lease.
20.06 - Landlord covenants and agrees with Tenant that upon Tenant
paying the Base Rent and Additional Rent and is not an Event of Default and
observing and performing all the terms, covenants and conditions on Tenant's
part to be observed and performed, Tenant may peaceably and quietly enjoy the
Premises hereby demised, subject, nevertheless, to the terms and conditions of
this Lease, and to the mortgages and deeds of trust hereinbefore mentioned.
20.07 - Landlord and Tenant each agree to and they hereby do waive
trial by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other on any matters whatsoever arising out of or in
any way connected with this Lease, the relationship of landlord and tenant,
Tenant's use or occupancy of said Premises and/or any claim of injury or damage,
and any statutory remedy.
20.08 - This Lease shall be construed and governed by the laws of
Maryland. Should any provision of this Lease and/or its conditions be illegal
or not enforceable under the laws of the State having jurisdiction, it or they
shall be considered severable, and the Lease and its conditions shall remain in
force and be binding upon the parties as though the said provisions had never
been included.
20.09 - As part of the consideration for the granting of this Lease,
Landlord and Tenant represents and warrants to each other that no broker or
agent, other than Barnes, Morris, Pardoe & Foster representing the Landlord and
-------------------------------------------------------------
The Fred Ezra Co. representing the Tenant, is entitled to the payment of a
- -----------------------------------------
commission by Landlord for services rendered in connection with the procurement
of this Lease. Each party shall indemnify and hold Landlord harmless against
any other broker's commissions or finder's fees or the like with respect to this
Lease or the transactions contemplated hereby.
20.10 - Tenant, its agents and employees shall abide by and observe
any recorded covenants for the Project and the rules and regulations attached
22
<PAGE>
hereto as Rider No. 1. Tenant, its agents and employees shall abide by and
-----------
observe such other reasonable covenants reasonable and/or rules or regulations
as may be promulgated from time to time by Landlord for the operation and
maintenance of the Building or the Project, provided that the same are not
inconsistent with the provisions of this Lease and that a copy thereof is sent
to Tenant and such provided rules and regulations do not materially effect
Tenant's normal course of business or increase tenant's costs. Nothing
contained in this Lease shall be construed to impose upon Landlord any duty or
obligation to enforce such covenants or rules and regulations, or the terms,
conditions or covenants contained in any other lease against any other tenant,
its agents, servants, employees, contractors, visitors, invitees, or licensees.
20.11 - Anything contained in this Lease to the contrary
notwithstanding, Tenant agrees that Tenant shall look solely to the estate and
property of Landlord in the Building which shall be deemed to include insurance
proceeds, condemnation awars, or any proceeds from any sale, for the collection
of any judgment or other judicial process requiring the payment of money by
Landlord for any default or breach by Landlord under this Lease or relating to
Tenant's occupancy and use of the Premises, subject, however, to the prior
rights of any mortgagee or lessor of the Project or the Building. No other
assets of Landlord or any partners, shareholders, or other principals of
Landlord shall be subject to levy, execution or other judicial process for the
satisfaction of Tenant's claim.
20.12 - Whenever a period of time is herein prescribed for action to
be taken by Landlord or Tenant, Landlord or Tenant shall not be liable or
responsible for, and there shall be excluded from the computation for any such
period of time, any delays due to force majeure, which term shall include
strikes, riots, acts of God, acts or omissions of Tenant or Landlord, shortage
of labor or materials, war, governmental approvals, laws, regulations, or
restrictions, or any other cause of any kind whatsoever which is beyond the
reasonable control of Landlord or Tenant.
20.13 - If Tenant signs as a corporation, execution hereof shall
constitute a representation and warranty by Tenant that Tenant is a duly
organized and existing corporation, that Tenant has been and is qualified to do
business in the State of Maryland and is in good standing in the State of its
incorporation and in the State of Maryland, that the corporation has full right
and authority to enter into this Lease, and that all persons signing on behalf
of the corporation were authorized to do so by appropriate corporate action. If
Tenant signs as a partnership, trust, or other legal entity, execution hereof
shall constitute a representation and warranty by Tenant that Tenant has
complied with all applicable laws, rules, and governmental regulations relative
to Tenant's right to do business in the State of Maryland, that such entity has
the full right and authority to enter into this Lease, and that all persons
signing on behalf of Tenant were authorized to do so by any and all necessary or
appropriate partnership, trust, or other actions.
20.14 - Any Additional Rent accruing to the Landlord under any
provision of this Lease shall, except as is otherwise set forth herein, be due
and payable when the installment of the Base Rent next falling due after such
Additional Rent accrues and becomes due and payable, unless the Landlord makes
23
<PAGE>
written demand upon the Tenant for payment thereof at any earlier time, in which
event such Additional Rent shall be due and payable.
20.15 - At any time at the request of Landlord or of the beneficiary
under any deed of trust or mortgagee of any mortgage encumbering the Building or
the Project, Tenant shall, upon ten (10) days prior written notice, but in no
event more than once per calendar year, provide Landlord with a current
financial statement and financial statements of the two (2) years prior to the
current financial statement year. Such statement shall be prepared in
accordance with generally accepted accounting principles and, if such is the
normal practice of Tenant, shall be audited by an independent certified public
accountant.
20.16 - In the event that this Lease requires that a party hereto be
reasonable in granting its consent to a matter, it is hereby acknowledged that
the parties may disagree as to what is reasonable under the circumstances and in
the event of such a dispute each of the parties hereto agrees that its sole
remedy in the event of such dispute shall be an action for a declaratory
judgment and that it shall not be entitled to and hereby waives any damage claim
arising from such dispute.
20.17 - Landlord reserves the right to change, increase or reduce,
from time to time, the number, composition, dimensions or location of any
parking areas, signs, the Building name, service areas, walkways, roadways or
other common areas or make alterations or additions to the Project, in its sole
discretion, provided the Tenant's normal conduct of business is not effected and
Tenant's allotment of parking spaces as outlined herein are not diminished.
20.18 - Intentionally Deleted.
20.19 - To the extent permitted by law, in any action or proceeding
brought by either party against the other under this Lease, the prevailing party
shall be entitled to recover from the other party its actual professional
investigation costs, and other legal expenses and court costs incurred by the
prevailing party in such action or proceeding.
IN WITNESS WHEREOF, Landlord and Tenant have hereunto executed this
Lease as of the date first above written.
LANDLORD:
Banbury Associates
Limited Partnership, a
Maryland limited partnership
By: Banbury Real Estate
Investment, Inc.,
General Partner
Witness/Attest:
By:
- ------------------------ ---------------------------
Name:
-------------------------
Title:
------------------------
24
<PAGE>
TENANT:
Digital Express Group
-----------------------------
-----------------------------
Witness/Attest:
By:
- ------------------------ ---------------------------
Name:
-------------------------
Title:
------------------------
25
<PAGE>
EXHIBIT A
---------
PREMISES
--------
The Premises consists of approximately 17,409 rentable square feet in the
------
building located at 6800 Virginia Manor Road in Beltsville, Maryland 20705 (as
----
shown above) of the Ammendale Business Campus, 308,000 square foot
office/warehouse project located in Prince George's County, Maryland.
PROJECT
- -------
1
<PAGE>
Lot 12, Outlot E and Outlot F (until such Outlot(s) may be conveyed to Prince
George's County), Ammendale Business Campus, as per plat recorded in Plat Book
NLP 134 at plat 52, among the Land Records of Prince George's County, Maryland.
Together with Driveway Easements through Outlot A and Outlot B, Ammendale
Business Campus, as 1 per plat recorded in Plat Book NLP 134 at plat 52, among
the Land Records of Prince George's County, Maryland.
Vansville (1st) Election District.
2
<PAGE>
EXHIBIT B
---------
FORM OF COMMENCEMENT NOTICE
---------------------------
This Commencement Notice is entered into this _______ day of
_____________________, 1994 by and between Banbury Associates Limited
Partnership, a Maryland limited partnership ("Landlord"), and Digital Express
---------------
Group, a , Corporation. ("Tenant"), pursuant to the
- ----- ---------------------------------
provisions of Section 3.03 of that certain Lease Agreement (the "Lease") dated
______________________, 1994, by and between Landlord and Tenant covering
certain space in the building located at _______________ Virginia Manor Road,
Beltsville, Prince Georges County, Maryland (the "Building"). All terms used
herein with their initial letter capitalized shall have the meaning assigned to
such terms in the Lease.
W I T N E S S E T H:
1. The Building, the Premises, and all other improvements required to be
constructed and furnished by Landlord in accordance with the terms of the Lease
have been satisfactorily completed by the Landlord and accepted by the Tenant,
subject to the completion of "Punch List" items.
2. The Premises have been delivered to, and accepted by, the Tenant.
3. The Commencement Date of the Lease is the _____ day of
___________________, 1994, and the Expiration Date is the _____ day of
_________________, 1994.
IN WITNESS WHEREOF, Landlord and Tenant have set their hands and seals
hereunto and have caused this Commencement Notice to be executed by duly
authorized officials thereof, the day and year respectively set forth
hereinbelow.
LANDLORD:
Banbury Associates
Limited Partnership, a
Maryland limited partnership
By: Banbury Real Estate
Investment, Inc.,
General Partner
Witness/Attest:
By:
- -------------------------- --------------------------------
Name:
-------------------------
Date: Title:
--------------------- -----------------------------
TENANT:
1
<PAGE>
Digital Express Group
----------------------------------
----------------------------------
Witness/Attest:
By:
- -------------------------- --------------------------------
Name:
-------------------------
Date: Title:
--------------------- -----------------------------
2
<PAGE>
RIDER NO. 1
-----------
RULES AND REGULATIONS
---------------------
1. Sidewalks, doorways, vestibules, and halls and similar areas shall
not be obstructed by tenants or their officers, agents, servants, and employees,
or used for any purpose other than ingress and egress to and from the Premises
and for going from one part of the Building to another part of the Building.
2. Plumbing fixtures and appliances shall be used only for the purpose
for which constructed, and no sweepings, rubbish, rags, or other unsuitable
material shall be thrown or placed therein.
3. No nails, hooks, or screws shall be driven into or inserted in any
part of the Building, except by Building maintenance personnel, provided,
however, that Tenant shall be permitted to hang pictures on the interior office
walls of the Premises.
4. The Premises shall not be used for conducting any barter, trade, or
exchange of goods or sale through promotional giveaway gimmicks or any business
involving the sale of second-hand goods, insurance salvage stock, or fire sale
stock, and shall not be used for any auction or pawnshop business, any fire
sale, bankruptcy sale, going-out-business sale, moving sale, bulk sale, or any
other business which, because of merchandising methods or otherwise, would tend
to lower the character of the Building or the Project.
5. Tenants shall not do anything, or permit anything to be done, in or
about the Building or the Project, or bring or keep anything therein, that will
in any way increase the possibility of fire or other casualty or obstruct or
interfere with the rights of, or otherwise injure or annoy other tenants, or do
anything in conflict with the valid pertinent laws, rules, or regulations of any
governmental authority.
6. Each tenant shall cooperate with Building employees in keeping the
Premises neat and clean.
7. No animals, or reptiles, or any other creatures, shall be brought
into or kept in or about the Building, except two caged birds.
8. Should a tenant require additional electrical or telegraphic,
telephonic, annunciator, or any other communication service, such service shall
be tenant's sole cost and expense, and Landlord will direct the electricians and
installers where and how the wires are to be introduced and placed, and none
shall be introduced or placed except as Landlord shall direct, in its sole but
reasonable discretion.
9. Tenants shall not make or permit any improper noises in the Building,
or otherwise interfere in any way with other tenants or persons having business
with them.
10. No equipment of any kind shall be operated on the Premises that could
in any way annoy any other tenant in the Building or the Project.
1
<PAGE>
11. Business machines and mechanical equipment belonging to Tenant which
cause noise and/or vibration that may be transmitted to the structure of the
Building or to any leased space so as to be objectionable to Landlord or any
tenants in the Building shall be placed and maintained by Tenant, at Tenant's
expense, in setting of cork, rubber, or spring type noise and/or vibration
eliminators sufficient to eliminate vibration and/or noise.
12. Tenants shall not use or keep in or about the Building any
inflammable or explosive fluid or substance; nor shall Tenant use or keep in or
about the Building any illuminating material, unless it is battery powered, UL
approved.
13. Landlord has the right to evacuate the Building in event of emergency
or catastrophe.
14. If any governmental license or permit shall be required for the
proper and lawful conduct of Tenant's business, Tenant, before occupying the
Premises, shall procure and maintain such license or permit and submit it for
Landlord's inspection. Tenant shall at all times comply with the terms of any
such license or permit.
15. Landlord (at no cost to Tenant) shall furnish Tenant with keys for
the door(s) entering the Premises. No additional locks shall be allowed on any
door of the Premises without providing a key for said locks to Landlord. Upon
termination of this Lease, Tenant shall surrender to Landlord all keys to any
locks on doors entering or within the Premises and give to Landlord the
explanation of the combination of all locks for safes, safe cabinets and vault
doors, if any, in the Premises.
16. During all deliveries whereby a tractor trailer or other large
delivery truck is used, Tenant shall supply and place beneath the dropped
trailer legs, supporting platforms of sufficient strength beneath such legs to
protect the asphalt. A minimum acceptable platform shall be a 4' by 4' by 1"
thick plywood board. Any damage resulting from Tenant's deliveries shall be
repaired at Tenant's cost in accordance with Section 9.01 of the Lease.
17. Landlord reserves the right to rescind any of these Rules and
Regulations and make such other and further rules and regulations not
inconsistent with the express terms of the Lease as in the judgment of Landlord
shall from time to time be needed for the safety, protection, care, and
cleanliness of the Building or the Project, the operation thereof, the
preservation of good order therein, and the protection and comfort of its
tenants, their agents, employees, and invitees, which Rules and Regulations when
made and notice thereof given to Tenant shall be binding upon Tenant in like
manner as if originally herein prescribed.
2
<PAGE>
RIDER NO. 1
-----------
RENEWAL OPTION
--------------
Tenant shall have the right to renew and extend the Term of this Lease with
respect to the Premises then subject to this Lease for the Renewal Term (herein
so called) upon and subject to the following terms and conditions:
1. Tenant may extend this Lease for one Renewal Term of five (5) years
by Tenant's giving written notice thereof to Landlord no later than eight (8)
months prior to the expiration of the original Term. Such Renewal Term shall
commence immediately upon the expiration of the original Term and upon exercise
of the renewal option the "Expiration Date" of the Term shall automatically
become the last day of the Renewal Term.
2. The exercise by Tenant of the renewal option set forth herein must be
made, if at all, by written notice executed by Tenant and delivered to Landlord
on or before the dates set forth hereinabove. Once Tenant shall exercise the
renewal option, Tenant may not thereafter revoke such exercise. Tenant shall
not have the right to exercise the renewal option if Tenant is in an Event of
Default, either at the time Tenant gives notice of its election to renew, or
immediately prior to the commencement of the Renewal Term. Tenant's failure to
exercise timely the renewal option for any reason whatsoever shall conclusively
be deemed a waiver of such renewal option.
3. Tenant shall take the Premises "as is" for the Renewal Term and
Landlord shall have no obligation to make any improvements or alterations to the
Premises.
4. Intentionally Deleted.
5. Base Rent for the first (1st) year of the Renewal Term shall be $7.00
p.s.f. Base Rent for the second and all subsequent years during the Renewal
Term shall be escalated at three (3)%.
6. Except as set forth in this Rider, the leasing of the Premises for
the Renewal Term shall be upon the same terms and conditions as are applicable
for the original Term, and shall be upon and subject to all of the provisions of
this Lease, including, without limitation, any increases to Base Rent as
provided in the Lease, the obligation of Tenant to pay Tenant's Operating Cost
Payment, and any other costs or amounts payable by Tenant to Landlord in
addition to Base Rent under the Lease.
3
<PAGE>
EXHIBIT C
---------
RENTAL RATES
------------
Year 1 $143,624.25 per annum, payable in equal monthly installments of
----------
$11,968.68.
- ----------
Year 2 $147,932.97 per annum, payable in equal monthly installments of
----------
$12,327.74.
- ----------
Year 3 $152,370.95 per annum, payable in equal monthly installments of
----------
$12,697.57.
- ----------
Year 4 $156,942.07 per annum, payable in equal monthly installments of
----------
$13,078.50.
- ----------
Year 5 $161,650.33 per annum, payable in equal monthly installments of
----------
$13,470.86.
- ----------
1
<PAGE>
FIRST AMENDMENT TO LEASE AGREEMENT
----------------------------------
THIS FIRST AMENDMENT TO LEASE AGREEMENT (this "First Amendment") is made
and entered into as of August 15, 1995 by and between: (i) DANBURY ASSOCIATES
---------
LIMITED PARTNERSHIP, a Maryland limited partnership ("Landlord"), and (ii)
DIGITAL EXPRESS GROUP, INC., a Maryland corporation ("Tenant")
WITNESSETH:
----------
RECITALS:
- --------
R-1. Landlord and Tenant previously entered into a Lease Agreement, dated
November 17, 1994 (the "Original Lease"), pursuant to which Landlord leased to
Tenant certain premises (the "Original Premises") located in Building D in the
Ammendale Business Campus, in Prince George's County, Maryland (the "Building").
The Original Premises consist of approximately 17,409 rentable square feet. The
Term of the Original Lease expires on April 30, 2000 (the "Expiration Date").
R-2. Pursuant to Section 20.20 of the Original Lease, Tenant has the right,
at any time prior to the end of the first lease year under the Original Lease,
to lease the remainder of the Building from Landlord (the "Expansion Space")
upon and subject to the terms and provisions set forth in Section 20.20 of the
Original Lease.
R-3. Tenant has elected to lease the Expansion Space form Landlord upon
certain terms and conditions as have been mutually agreed to by Landlord and
Tenant.
R-4. Landlord and Tenant desire to enter into this First Amendment for the
purposes of reflecting Tenant's election to lease the Expansion Space from
Landlord, and to amend the Original Lease in certain other respects, as provided
in this First Amendment.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Recitals. The foregoing Recitals are hereby incorporated herein to
--------
the same extent as if set forth herein in full.
2. Definition of "Lease". The Original Lease, as amended pursuant to
---------------------
this First Amendment, is referred to herein as the "Lease."
3. Defined Terms. All capitalized terms used herein shall have the
-------------
same meanings given to them in the Lease, unless specific definitions for such
terms are set forth herein.
4. Lease of Expansion Space. Subject to the terms and conditions set
------------------------
forth below in this First Amendment, Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord the Expansion Space. The Expansion Space is
comprised of approximately 16,191 rentable square feet, and is more particularly
shown in cross-hatching on the floor plan that is attached hereto as Exhibit A
---------
and incorporated herein by this reference.
5. Expansion Space Term. The term of the lease for the Expansion
--------------------
Space (the "Expansion Space Term") shall commence on the "Expansion Space
Commencement Date" (as defined below), and shall terminate at twelve o'clock
midnight on the Expiration Date. The Expansion Space Commencement Date shall be
the later of (i) August 1, 1995, or (ii) the date upon which the Expansion
<PAGE>
Space Improvements are substantially completed in accordance with Section 8
below, subject to any adjustment because of a Tenant Delay, as provided in
Section 8(g).
6. Expansion Space Rent.
--------------------
a. Tenant shall pay to Landlord through the full Expansion Space
Term, without notice, demand, offset or deduction: (a) base rent ("Expansion
Space Base Rent") in the amounts set forth on Exhibit B attached hereto and
---------
incorporated herein by this reference, payable in equal monthly installments, in
advance, on the first day of each calendar month during the Expansion Space
Term; and (b) additional rent ("Expansion Space Additional Rent") consisting of
all other sums of money due and payable by Tenant under the Lease in connection
with or with respect to the Expansion Space, including, without limitation,
those sums of money due and payable by Tenant under Section 4.01 of the Lease,
at the respective times required under the Lease. Payment of "Expansion Space
Rent" (as defined below) shall commence on the Expansion Space Commencement
Date; provided, however, that if the Expansion Space Commencement Date falls on
a date other than the first day of a calendar month, the Expansion Space Base
Rent due for such fractional month shall be prorated on a per diem basis between
Landlord and Tenant so as to charge Tenant only for the portion of such
fractional month falling within the Expansion Space Term. As used herein, the
term "Expansion Space Rent" shall collectively mean Expansion Space Base Rent
and Expansion Space Additional Rent.
b. "Expansion Space Lease Year" is hereby defined as follows: the
first Expansion Space Lease Year shall begin on the Expansion Space Commencement
Date. If the Expansion Space Commencement Date is the first day of a month, the
first Expansion Space Lease Year will end twelve (12) full calendar months after
the Expansion Space Commencement Date. If the Expansion Space Commencement Date
is a day other than the first day of a month, the first Expansion Space Lease
Year will end on the last day of the month in which the first anniversary of the
Expansion Space Commencement Date occurs. Each subsequent Expansion Space Lease
Year shall commence on the day immediately following the last day of the
preceding Expansion Space Lease Year, and shall continue for a period of twelve
(12) full calendar months, except that the last Expansion Space Lease Year will
end on the Expiration Date.
c. Section 3.03 and 3.04 of the Lease shall apply in all respects
to Tenant's obligations to pay Expansion Space Rent to Landlord.
d. Notwithstanding the foregoing provisions of this Section 6,
Landlord shall abate the first two (2) months of Expansion Space Base Rent that
are payable by Tenant pursuant to Section 6 above; provided that, none of
Tenant's obligations to pay Expansion Space Additional Rent to Landlord for such
period shall be abated.
7. Expansion Space Operating Expenses. Tenant shall be obligated to pay
----------------------------------
to Landlord, as Additional Rent, Tenant's Share of Operating Costs in conformity
with the provisions of Section 4.01 of the Lease.
8. Alterations for Expansion Space.
-------------------------------
a. The initial improvements to the Expansion Space (the "Expansion
Space Improvements") shall be constructed by Landlord pursuant to this Section
8.
b. Attached hereto as Exhibit C is the space plan showing the
Expansion Space Improvements (the "Space Plan"). As soon as practical after the
date of this Amendment, Landlord,
2
<PAGE>
at its cost, will prepare architectural and engineering drawings based upon the
Space Plan (the "Working Drawings"), and will submit the Working Drawings to
Tenant for its approval. Tenant shall promptly supply to Landlord all
specifications, finishes and other information needed for the preparation of
the Working Drawings.
c. Within two (2) business days after the Working Drawings
are submitted to Tenant. Tenant will either approve them or provide Landlord
with any needed revisions. If revisions are necessary, Landlord will submit the
revised Working Drawings to Tenant for its approval. Within one (1) business
day after any revisions are submitted to Tenant. Tenant shall either approve
them or provide Landlord with any additional revisions that are needed.
d. After the Working Drawings have been completed and
approved, Landlord will construct the Expansion Space Improvements. Tenant
acknowledges that Landlord will use the general contractor of its choice (the
"General Contractor") for the Expansion Space Improvements.
e. Landlord shall provide Tenant with a total allowance
equal to Ten and No/100 Dollars ($10.00) per rentable square foot in the
Expansion Space for the construction of the Expansion Space Improvements (the
"Construction Allowance"), Within thirty (30) days after receipt of an invoice
from Landlord, Tenant shall pay directly to the General Contractor the
difference between (i) the total cost to complete the Expansion Space
Improvements (including the total price paid to the General Contractor), and
(ii) the Construction allowance.
f. Upon substantial completion of the Expansion Space
Improvements, Landlord shall tender possession of the Expansion Space to Tenant.
The Expansion Space Improvements shall be substantially completed when (i) they
have been completed in accordance with the Working Drawings except for minor
items that do not materially affect Tenant's ability to use the Expansion Space
for its intended purpose and [ii] Tenant may lawfully occupy the Expansion Space
pursuant to a use and occupancy permit (the "Occupancy Permit") or other
authorization from Prince George's County, Maryland. Landlord shall obtain the
Occupancy Permit on Tenant's behalf, but Tenant shall provide Landlord with any
assistance in connection therewith that Landlord requires. Before tendering the
Expansion Premises to Tenant, Landlord and Tenant shall conduct a walk through
and shall prepare a punchlist of items to be completed after tender. Landlord
will complete the punchlist items as soon as practical after tendering the
Expansion Space to Tenant.
g. If substantial completion of the Expansion Space
Improvements is delayed because of a "Tenant Delay" (as defined below), then,
for purposes of establishing the Expansion Space Commencement Date under Section
5 above, the date of substantial completion shall be the date (as determined by
the General Contractor, in its sole but reasonable judgement) that the Expansion
Space Improvements would have been substantially completed but for the Tenant
Delay. For purposes of this provision, a "Tenant Delay" means: (i) any delay by
Tenant in promptly providing information for the Working Drawings requested
under subsection (b) above, (ii) any delay by Tenant by not approving or
commenting on the Working Drawings within the time periods set forth in
subsection (c) above, (iii) any delays caused by changes to the Space Plan
requested by Tenant, (iv) any delays caused by change orders requested by Tenant
after the Working Drawings have been approved, or (v) any other delay that, in
the General Contractor's reasonable judgment, is caused by Tenant, its
contractors or employees.
3
<PAGE>
h. The provisions set forth in Section 10.01(3), (4), (5) and (6)
shall apply to the construction work to be performed for the Expansion Space.
i. If the Expansion Space improvements are not substantially
completed by December 1, 1995 for any reason other than a Tenant Delay, Tenant
shall receive a rent credit equal to one (1) day of Expansion Space Base Rent
for each day after December 1, 1995 that elapses before the Expansion Space
Improvements are substantially completed. This rent credit shall be applied
against the Expansion Space Base Rent due immediately after the abatement
provided in Section 6(d) above.
9. Amendments to Certain Defined Terms in the Lease.
------------------------------------------------
a. The term "Premises" as used in the Lease shall hereafter mean
the Original Premises leased by Tenant from Landlord pursuant to the Original
Lease and the Expansion Space leased by Tenant from Landlord pursuant to this
First Amendment.
b. The term "Base Rent" as used in the Lease shall mean the Base
Rent defined in Section 3.01 of the Original Lease and the Expansion Space Base
Rent.
c. The term "Additional Rent" as used in the Lease shall mean the
Additional Rent defined in Section 3.01 of the Original Lease and the Expansion
Space Additional Rent.
d. The term "Rent" as used in the Lease shall mean the Rent
defined in Section 3.01 of the Original Lease and the Expansion Space Rent.
e. The term "Tenant's Share" as defined in Section 4.02 of the
Original Lease is hereby amended to mean a fraction, the numerator of which
shall be the total rentable square footage of the Original Premises plus the
total rentable square footage of the Expansion Space (which total is 33,600),
and the denominator of which shall be the total rentable square footage of the
space in the Building or the Project (measured in accordance with the 1989 WDCAR
Standard Method of Measurement) or portions thereof, as the case may be, being
served by or benefitting from the particular item of Operating Costs being
charged to Tenant.
10. Inapplicability of Certain Sections of the Original Lease.
---------------------------------------------------------
Sections 3.08, 10.01(1), 10.01(2) and 10.06 of the Original Lease shall not
apply to the Expansion Space.
11. Amendment to Section 19.01 of the Original Lease.
------------------------------------------------
Sections 19.01 of the Original Lease is hereby amended by deleting the same in
its entirety and inserting the following in its place:
19.01 Exterior Signage.
----------------
(a) With Landlord's prior written consent, and subject to
compliance with all applicable codes and the other terms of the Lease, Tenant
may erect signage depicting Tenant's name or logo (the "Exterior Signs") on the
exterior of two sides of the Building in locations mutually agreed to by
Landlord and Tenant and pursuant to signage specifications reasonably approved
by Landlord in writing. Tenant shall pay for the cost of its Exterior Signs,
except for $1,200.00, which shall be paid by Landlord. Landlord shall pay its
portion of the cost of the Exterior Signs within thirty (30) days after the
Exterior Signs are installed. Tenant, at its expense, shall (i) maintain the
Exterior Signs in good condition, (ii) remove the Exterior Signs on or before
the date that the Lease terminates, and (iii) repair any damage to the Building
caused by the
4
<PAGE>
installation, maintenance or removal of the Exterior Signs. Tenant's right
to have two Exterior Signs shall continue only as long as Digital Express
Group, Inc. is occupying at least 30,000 rentable square feet in the
Building. If Digital Express Group, Inc. occupies less than 30,000
rentable square feet, it may have one Exterior Sign as long as Digital
Express Group, Inc. is still the Tenant under this Lease.
(b) Except as otherwise permitted under Section 1.03 of this Lease,
Tenant shall not be entitled to mount any signage or other apparatus
whatsoever on the roof of the Building or to make any penetrations of the
roof membrane for any reason whatsoever or to make any alterations or
improvements in any way affecting the roof.
12. Amendment to Section 20.04 of the Original Lease.
------------------------------------------------
The notice address for Landlord set forth in Section 20.04 of the Original Lease
is deleted in its entirety and the following substituted in its place:
Banbury Associates Limited Partnership
6610 Virginia Manor Road
Beltsville, Maryland 20705
with a copy to:
Desmond D. Connall, Jr.
David, Hagner, Kuney & Krupin, P.C.
1120 19th Street, N.W.
Washington, D.C. 20036
13. Amendment to Section 20.20 of the Original Lease.
------------------------------------------------
Section 20.20 of the Original Lease is hereby deleted in its entirety.
14. Amendment to Section 20.21 of the Original Lease.
------------------------------------------------
Section 20.21 of the Original Lease is hereby deleted in its entirety.
15. Amendment to Rider No. 2 of the Original Lease.
----------------------------------------------
Rider No. 2 to the Original Lease is hereby amended by deleting the same in its
entirety and inserting the following new Section 20.22 in place thereof:
20.22 Option to Renew.
---------------
(a) Renewal Period. Provided that this Lease is in full force
--------------
and effect and Tenant is not in default under this Lease, Tenant shall have
an option to extend the Term of this Lease for one (1) additional period of
five (5) years (the "Renewal Period"). This renewal option shall be
exercisable upon notice from Tenant to Landlord at least two hundred forty
(240) days prior to the expiration of the Term. In the event that Tenant
exercises the option to renew this Lease, the Term shall be extended
accordingly upon the same terms, covenants and conditions as set forth in
the Lease, except that Base Rent during the Renewal Period shall be
determined pursuant to the following provisions of this Section, and Base
Rent during the Renewal Period shall be subject to escalation based upon
the "Fair Market Escalation Rate" to be determined pursuant to the
following provisions of this Section. Time is of the essence as to Tenant's
obligation to notify Landlord in accordance with the terms of this Section
20.22.
(b) Renewal Economic Terms. Effective as of the commencement of
----------------------
the Renewal Period, certain economic terms of this Lease (hereinafter
collectively referred to as the "Renewal Economic Terms") shall be adjusted
as follows:
5
<PAGE>
(i) Base rent for the first Lease Year of the Renewal Period shall be adjusted
to equal ninety-five percent (95%) of the "Fair Market Rent" (as defined below)
for the Premises; and (ii) the amount by which Base Rent is escalated during
each subsequent Lease Year of the Renewal Period shall be adjusted to equal the
"Fair Market Escalation Rate" (as defined below). The term "Fair Market Rent"
shall mean the prevailing base rent being offered by landlords and accepted by
tenants as of the commencement of the Renewal Period for renewal leases with
premises of comparable size and quality of build-out as the Premises in other
buildings located in the Project and in other buildings in the Beltsville area
that are similar to the Building (collectively, "Comparable Buildings"). In
determining the Fair Market Rent, the parties shall take into consideration the
prevailing fair market tenant concessions, if any, being offered by landlords
and accepted by tenants as of the commencement of the Renewal Period for renewal
leases with premises of comparable size and quality of build-out as the Premises
in Comparable Buildings. The term "Fair Market Escalation Rate" shall mean the
prevailing escalation rates applicable to base rent being offered by landlords
and accepted by tenants as of the commencement of the Renewal Period for renewal
leases with premises of comparable size and quality of build-out as the Premises
in Comparable Buildings.
(c) Determination of Renewal Economic Terms. If Tenant exercises the
---------------------------------------
option to renew as provided above, Landlord and Tenant shall have a period of
fifteen (15) days after Tenant's exercise of its renewal option to agree upon
the Renewal Economic Terms. If Landlord and Tenant fail to reach agreement on
the Renewal Economic Terms within this fifteen (15) day period, then the Renewal
Economic Terms shall be determined by three (3) licensed real estate brokers,
one of whom shall be named by Landlord, one of whom shall be named by Tenant,
and the third of whom shall be selected by the brokers chosen by Landlord and
by Tenant. Each such broker shall be a real estate broker licensed in Maryland,
specializing in commercial leasing in the Prince George's County, Maryland
area, with at least five (5) years experience as a licensed broker and
recognized as reputable within the local real estate industry (each such broker
being defined herein as a "Qualified Broker"). The parties each agree to select
its qualified Broker within five (5) days after the expiration of the aforesaid
fifteen (15) day period. The third Qualified Broker shall be selected within
five (5) days after the first two Qualified Brokers have been selected. If a
party fails to timely select a Qualified Broker, the determination of the
Renewal Economic Terms for the Renewal Period shall be made by the Qualified
Broker selected by the other party. Within ten (10) days after the third
Qualified Broker has been selected, all of the Qualified Brokers shall meet to
attempt to agree upon the Renewal Economic Terms for the Renewal Period. If the
Qualified Brokers are unable to reach agreement, each qualified Broker shall,
within ten (10) days after the expiration of the preceding ten (10) day period,
submit to Landlord and Tenant in writing the Renewal Economic Terms he or she
deems appropriate and the Renewal Economic Terms shall be, with respect to each
Renewal Economic Term, the amount which is the mean between the closest two of
the Renewal Economic Term determined by the Qualified Brokers. Each party shall
pay the costs of the services of the Qualified Broker selected by that party,
and the cost of the services of the third Qualified Broker shall be divided
equally between Landlord and Tenant.
(d) Revocation of Exercise of Renewal Option. After the Renewal
----------------------------------------
Economic Terms are determined as provided above, Tenant may revoke its exercise
of the renewal option
6
<PAGE>
by giving Landlord notice of such revocation (the "Revocation Notice").
The Revocation Notice must be given no later than fifteen (15) days
after the date that the Renewal Economic Terms are determined, and not
less than one hundred eighty (180) days prior to the expiration of the
Term. Time is of the essence with respect to the giving of the
Revocation Notice. If the Revocation Notice is not given as provided
above, Tenant's exercise of the renewal option shall be irrevocable, and
the Term of this Lease shall be renewed on the terms stated above.
16. Right of First Offer to Lease Space in Building F.
-------------------------------------------------
In the event that during the Term or any renewals thereof any office space in
Building F in the Ammendale Business Campus ("Building F") becomes "available"
(as hereafter defined) for lease by Landlord, then Landlord shall offer to lease
such available space to Tenant prior to offering to lease such space to any
other person or entity, provided (i) this Lease is in full force and effect, and
(ii) Tenant is not in default under any of the terms, conditions and provisions
of this Lease. (The address for Building F is 6900 Virginia Manor Road,
Beltsville, Maryland 20705.) Landlord shall make such offer to lease such
available space containing such terms and conditions as are determined by
Landlord, in Landlord's reasonable discretion. Tenant shall have the right to
accept such offer by executing and acknowledging such letter of intent and
delivering it to Landlord within ten (10) days from the date of receipt by
Tenant. If Tenant fails to execute and deliver such letter of intent to Landlord
within this ten (10) day period [or, having signed such letter, the parties are
unable to reach agreement on the final terms of a lease within thirty (30) days
from the date of the letter of intent], then Landlord shall be free to lease
such rejected space (the "Rejected Space") to any other person or entity without
first offering to lease the Rejected Space to Tenant; provided, however, that
after the Rejected Space is leased, if it becomes available again, Landlord
shall be required to offer the Rejected Space to Tenant pursuant to this
provision. For purposes of this subsection, office space shall be deemed
"available" if all of the following conditions are met with respect to the
space: (i) the space is vacant, or the lease with the current tenant will expire
within six (6) months and the current tenant has not signed a lease extension or
letter of intent to extend the term of its lease; (ii) the current tenant does
not have an option to renew its lease for the space (or the current tenant has
an option to renew, but failed to exercise it); and (iii) the space is not
subject to any expansion option in favor of another tenant (or, if so, that
tenant has declined to exercise its expansion option).
17. Ratification of Lease. Except as set forth in this First
---------------------
Amendment, the Lease is hereby ratified by Landlord and Tenant and shall remain
unmodified and in full force and effect.
18. Conflicts. In the event that any conflict shall arise between
---------
the provisions of the Original Lease and the provisions of this First Amendment,
the provisions of this First Amendment shall govern and control.
19. Governing Law. This First Amendment shall be governed and
-------------
construed in accordance with the laws of the State of Maryland.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment under seal as their free act and deed for the uses and purposes herein
contained as of the day and year first-above written.
LANDLORD:
--------
BANBURY ASSOCIATED LIMITED PARTNERSHIP,
A Maryland Limited Partnership
WITNESS/ATTEST: By: Banbury Real Estate Investment,
Inc., General Partner
/s/ Missy Nun By: [SIGNATURE APPEARS HERE] (SEAL)
- --------------------- -------------------------
Name: [NAME APPEARS HERE]
--------------------
Title: VICE PRESIDENT
-------------------
TENANT:
------
WITNESS/ATTEST: DIGITAL EXPRESS GROUP, INC.
A Maryland Corporation
[SIGNATURE APPEARS HERE] By: /s/ Doug Humphrey (SEAL)
- ------------------------ ---------------------------
Name: Doug Humphrey
----------------------
Title: President
---------------------
List of Exhibits
- ----------------
Exhibit A - Floor Plan of Expansion Space
Exhibit B - Expansion Space Base Rent
Exhibit C - Space Plan for Expansion Space Improvements
<PAGE>
EXHIBIT A
[FLOOR PLAN OF EXPANSION SPACE APPEARS HERE]
<PAGE>
EXHIBIT B
---------
EXPANSION SPACE BASE RENT RATES
-------------------------------
Expansion Space Lease Year 1 $133,575.75 per annum, payable
in equal monthly installments
of $11,131.31
Expansion Space Lease Year 2 $137,583.02 per annum, payable
in equal monthly installments
of $11,465.25
Expansion Space Lease Year 3 $141,710.51 per annum, payable
in equal monthly installments
of $11,809.21
Expansion Space Lease Year 4 $145,961.83 per annum, payable
in equal monthly installments
of $12,163.49
Expansion Space Lease Year 5 $150,340.68 per annum, payable
in equal monthly installments
of $12,528.39
<PAGE>
Exhibit 10.8
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease") made effective this 04 day of December, 1995,
by and between George Christacos and Lisa Christacos (hereinafter referred to as
"Lessor"); and Digital Express Group, Inc. (hereinafter referred to as
"Lessee").
WITNESSETH:
WHEREAS, Lessor owns, operates and controls certain real property situated
at Centerway Road in the City of Greenbelt, Prince George's County, Maryland,
known as Greenbelt Shopping Center (the "Project");
WHEREAS, Lessor and Lessee are the parties to that certain office space
lease dated May 1, 1992 (the "Office Space Lease"), pursuant to which Lessee
leases office space from Lessor on a month-to-month basis;
WHEREAS, Lessor and Lessee desire to restate their agreement related to the
office space and to set forth herein the definite terms and conditions of their
agreement;
NOW, THEREFORE, for the mutual promises contained herein, and other good
and valuable consideration; the adequacy of which is hereby attested, Lessor and
Lessee agree as follows:
1. DEMISED PREMISES; TERM OF LEASE; RENTAL SECURITY DEPOSIT.
--------------------------------------------------------
(A) The Lessor does hereby grant, for and in consideration of the rents,
agreements and covenants herein agreed to be paid, observed and performed by the
Lessee, and the Lessee does hereby take, hire and rent from Lessor, that certain
portion of interior retail space in the Project said premises of which the
Demised Premises is a part having a street address of 133 Centerway Road,
Greenbelt, Maryland, Suites 201 and 202 (hereafter referred to as the "Demised
Premises" or the "Premises") having an approximate area of 1,500 square feet of
suitable space.
(B) The term of this Lease shall be three (3) years and 2 weeks commencing upon
December 15, 1995 and ending on May 31, 1998 (the "Initial Term") unless renewed
or terminated pursuant to the terms hereof. If Lessee fails to quit and vacate
the Demised Premises at the expiration of the Initial Term or any Renewal Term
hereof, and if Lessor accepts payment of rental from Lessee thereafter, then in
such event such holding over of possession of the Demised Premises by Lessee
shall be deemed to create only a tenancy from month-to-month, beginning for same
on the day immediately following the expiration of the then-expired Term hereof,
such monthly hold-over tenancy to be upon all of the Terms, covenants and
conditions contained in this lease, except that either party by giving to the
other party at least thirty (30) days prior written notice may terminate such
monthly hold-over tenancy
Page 1 of 19
<PAGE>
Lessee's failure to timely surrender possession of the Premises where herein
required shall constitute a default of Lessee hereunder.
(C) During the stated Term of the Lease, the Lessee agrees to pay the Lessor
Sixteen Hundred Dollars ($1,600) per month as the minimum rental, to be paid in
advance on the first day of each month during the initial or renewal Term. if
the monthly rental shall not be paid by midnight of the tenth day of the month
then the Lessee shall be assessed as a late charge five percent (5%) of any rent
monies due and outstanding. Lessee shall pay to Lessor, at the specified times
hereinafter indicated, the additional items and amounts specified in Paragraph 8
hereof for taxes and assessments, all of which additional sums shall not
constitute additional rents under this Lease. All rentals and other sums
payable by Lessee hereunder shall be paid to Lessor, or to such other party and
address as Lessor may from time to time designate to Lessee in writing.
(D) This Lease may be renewed for an additional three (3) years (the "Renewal
Option"). To exercise the Renewal Option, Lessee must forward, in writing, by
certified mail, notice of its intent to exercise the Renewal Option to Lessor,
no later than thirty (30) days prior to the termination of the Initial Term of
the Lease, but no sooner than the first day of the fifth month of the Initial
Term of this Lease. This notice shall be forwarded to Lessor at the same
address as Lessee sends its monthly rentals.
(E) If Lessee exercises the Renewal Option, then all terms and conditions of
this Lease shall remain in full force and effect except that the base rent as
referenced in paragraph 1(C) above shall be increased (commencing the 2nd year
of the renewal term) annually by 100% of the increase in CPI, but in no event
more than 3%. As used herein, the word "Term" includes the Initial term and any
Renewal Term.
2. TENDER OF POSSESSION; LESSOR'S WORK.
-----------------------------------
The Lessee has accepted possession of the Demised Premises, under the terms of
the month-to-month tenancy, and will continue to accept possession thereof when
delivered by Lessor, subject to the Punchlist items set forth in Schedule A, for
the Term herein created, upon the agreements and covenants herein expressed, and
does hereby covenant and agree that Lessee shall pay to Lessor the rents, taxes,
assessments, insurance repair and other costs and charges reserved in Paragraph
8 of this Lease, at the time or times the same are due and payable as herein
specified. Prior to January 31, 1996, Lessor or authorized agents will conduct a
walk-through inspection of the Premises to ensure Lessor has completed the
Punchlist items.
Page 2 of 19
<PAGE>
3. USE OF PREMISES: REPAIRS AND MAINTENANCE; ALTERATIONS.
-----------------------------------------------------
(A) Lessee covenants and agrees to use the Demised Premises only for the
conduct and operations of Lessee's business, subject to and in compliance with
all applicable zoning and other laws and for no other use or purpose without the
express prior consent of the Lessor.
(B) Lessee agrees at its own expense to maintain the Demised Premises in a
clean, neat and orderly manner. Lessor agrees to keep the Premises free of
rodents and insects and to furnish regular pest exterminating services, but
shall not effect said extermination services without written notice seven (7)
days in advance of any use of any types of chemicals in the Demised or
surrounding Premises. Lessee further agrees that it will not, under any
circumstances, display or permit to accumulate any merchandise, boxes or other
articles on the driveways, parking areas, streets or sidewalks in front of
or adjacent to the Demised Premises.
(C) For purposes of this Paragraph 3(C) and of all other provisions of this
Lease, the term "Structure" shall refer to the foundations, structural frame,
exterior walls, ground floor slab and exterior roof of the Demised Premises, and
the term "Exterior Utility Lines" shall refer to all electrical, plumbing, and
sewage systems and liens located outside of the Structure of the Premises.
Lessee will during the full Term of this Lease and any renewal periods, at
Lessee's expense, promptly make all repairs and perform all acts of maintenance
necessary to keep the Demised Premises and all equipment and utility lines
therein and all other elements thereof in good condition and repair, including
also without limitation all maintenance, repairs, replacements, excepting only
for repairs to the Structure and to any Exterior Utility Lines located outside
of the Structure of the Demised Premises: unless such repairs of the Structure
or Exterior Utility Lines are necessitated by any intentional acts, omissions or
gross negligence of Lessee or its agents, servants, employees, contractors,
invitees, licensees, customers or subtenants (collectively, the "Permittees").
Said repairs to the Structure and Exterior Utility Lines shall be done by Lessor
(except where otherwise provided in the preceding sentence and except where
otherwise provided in Section 4) as promptly as possible after receipt of
written notice form Lessee of the necessity therefor. At the expiration of the
Initial Term or the Renewal Term of this Lease, or of any hold-over term, Lessee
shall surrender and deliver to Lessor exclusive possession of the Demised
Premises free of occupants and sublessees, broom clean and in the same good
condition in which they were delivered at the commencement of the term hereof
(with such alterations as may have been approved by Lessor), reasonable wear
excepted. Lessee shall give the Lessor prompt notice of any fire, accident,
defects, damage or injury occurring at, in or to the Demised Premises and of any
death, damage or injury to persons therein, but nothing herein
Page 3 of 19
<PAGE>
contained shall be construed to require Lessor to make any repairs to said
Premises or to provide compensation for any such death, damage or injury, except
as otherwise expressly herein provided. The Lessor will certify that the
heating, ventilation and air-conditioning systems and equipment (the "HVAC") is
in good condition at the initiation of this Lease, and that its installation and
related equipment meets the current requirements of the Building and Electrical
codes, and in accordance with the Punchlist. Lessee at Lessee's expense will
keep in force a contract with a licensed and competent HVAC contractor for
regular service and maintenance of the HVAC. Lessor at Lessor's expense will
make all necessary repairs and maintenance for the HVAC not covered by the
maintenance contract serving the Demised Premises.
(D) Lessee shall remove, or cause to be removed from said Premises at Lessee's
own expense, all trash, garbage and refuse at least two (2) times each week.
All trash, garbage, and refuse shall be stored by Lessee, for removal as
aforesaid, in proper covered sanitary containers, to be kept at an appropriate
place within said Premises, and Lessee shall not maintain a nuisance in or about
the Demised Premises. Lessee shall not cause or permit odors, smoke, grease,
oils, vapors, liquids or other substances, or any noises or vibrations of any
kind to emanate from the Demised Premises or to be discharged into drains, in
such a manner as may damage or interfere with the possession and enjoyment by
other tenants of their Premises in the building or Project or as may violate
applicable laws, codes or regulations of governmental authorities or insurance
companies or underwriters.
(E) Lessee will not make any structural or other material alterations,
modifications, changes or additions in or to any part of the interior or
exterior of the Demised Premises without in each case having obtained Lessor's
express prior written approval thereof. Lessee will not paint nor permit to be
painted, nor cut, disfigure or alter any stone work, iron work, or brick work or
other materials on the front or exterior of the Demised Premises, without prior
written consent of the Lessor. Lessor shall not unreasonably withhold,
condition or delay its consent to any requests by Lessee to make alterations,
modifications or changes within the Demised Premises. Lessee shall not be
required to remove such installations or alterations at the termination of the
Lease unless such request is made by the Lessor at the time approval for such
installation or alteration is sought and agreement by Lessee is given in
writing.
(F) Any partitioning, painting, installation, removal or alteration of utility
lines, flooring, paneling, mechanical equipment (heating, ventilation or air
conditioning), plumbing, electrical, gas, water, sewer, interior, exterior, roof
or other alterations, changes or additions to the Demised Premises which Lessor
may desire to perform or make shall be subject to the
Page 4 of 19
<PAGE>
following conditions, namely: (i) no such work shall be done without Lessor's
express prior written consent in each instance; (ii) complete plans and
specifications for any such work shall be submitted to Lessor and Lessor's
written approval thereof shall be obtained prior to commencement of such work
(which work shall be done in strict compliance with such plans and
specifications if and as so approved); (iii) the work is to be done by
contractors acceptable to Lessor and in compliance with all applicable
governmental laws, codes, orders and regulations without any damage to the
Demised Premises of the building, free of liens and claims and all at Lessee's
sole cost and expense; and (iv) Lessee is to promptly discharge liens and claims
arising from such work. Lessor shall incur no liability by approving or not
approving Lessee's plans, specifications or work or other matters hereunder
(such actions by Lessor being solely for its own benefit and not being any
assurance by Lessor as to the legality or technical sufficiency or safety of
Lessee's plan, specifications or work or any other maters). It is agreed that
all work, materials, machinery, apparatus, leasehold improvements and other
installations and alterations to the Demised Premises including, without
limitation, partitions, interior and exterior doors and door opening machinery,
lighting and plumbing fixtures, flooring, floor, wall and window coverings,
mechanical equipment, utility lines and equipment, loading facilities,
elevators, and other items of any kinds, except only Lessee's merchandise,
furniture and movable personal property and the equipment used by Lessee in
the pursuit of its business, whether installed by or at the expense of the
Lessor or Lessee, shall at all times belong solely to the Lessor and shall not
be removed by the Lessee; except for such alterations and installations made by
Lessee which the Lessor has requested Lessee to remove and Lessee has agreed to
remove, in accordance with the terms of Section 3(D), by the expiration or
termination thereof. Notwithstanding the foregoing, Lessor acknowledges that the
equipment used by Lessee in the pursuit of its business, and like equipment
acquired by Lessee during the Term hereof, is and shall remain the personal
property of Lessee and/or entities not party to the Lease and shall not be
subject to the immediately preceding sentence.
(G) Throughout the Term Lessor shall maintain the roof and exterior glass of
the Demised Premises; provided, that such maintenance or replacement caused by
the gross negligence or intentional actions of Lessee or Lessee's authorized
agents shall be at Lessee's Expense. If such events occur, Lessee has the sole
responsibility to repair or replace only the portion of the roof or exterior
glass covering the Demised Premises damaged thereby.
(H) During the Term, Lessor at Lessor's expense shall insure the Premises are
in compliance with all applicable codes and/or laws in effect.
Page 5 of 19
<PAGE>
(I) If the presence of asbestos is detected, Lessor at Lessor's sole expense
shall immediately remove the asbestos, so as to comply with all governmental
regulations. During such period of asbestos removal, Lessor shall supply
alternative space to Lessee, or Lessee's rental obligations hereunder shall be
abated for the time period that asbestos is being removed by Lessor.
(J) Lessee, at Lessee's option and at its sole cost and expense, may install
security devices such as bars or alarms, so long as such security devices comply
with Prince George's County Code requirements.
4. UTILITY CHARGES: MAINTENANCE AND REPAIRS.
----------------------------------------
(A) During the Term, Lessee shall pay all utility charges and costs of utility
services of any and every kind and nature, including but not limited to gas,
oil, water, sewer service, heat, power, fuel, telephone service and electricity,
arising out of or connected with the use and/or occupancy of the Demised
Premises (the "Utility Charges"), promptly, as same shall become due and
payable, but in no event shall Lessee be obligated to pay such Utility Charges
as are attributable to other parts of the Project. Lessee shall furnish to
Lessor, within ten (10) days after each request, evidence satisfactory to Lessor
that Lessee's payments as called for in this Paragraph have been timely paid.
Except as otherwise expressly provided in this Lease, all costs of furnishing
plumbing, heating, ventilation, air-conditioning and other utilities and
services to the Demised Premises shall be borne solely by the Lessee, and Lessor
shall bear the sole cost of all routine maintenance and repairs of the plumbing,
electrical, sewer, water, power, telephone and other utility service lines
leading to and servicing the Demised Premises but which lie outside of the
exterior walls or underneath the floor of the Demised Premises, excepting
additional telephone lines installed by Lessee for use in Lessee's business
operations.
(B) Lessor will make available "common areas" consisting of parking areas,
driveways, walkways, and green areas. Lessor shall manage, light the parking
areas of, repair, replace and maintain in good condition the common areas for
their intended purposes. Lessor grants to Lessee and to Lessee's officers,
employees, authorized representatives and invitees, during the Term the
non-exclusive right to use the common areas, in common with Lessor and with
others designated by Lessor's reasonable rules and regulations applicable to,
all tenants concerning the use and operation of the common areas. Lessee will
limit use of parking areas by its employees and staff and by its customers to
those parking areas, and number of parking spaces, as designated from time to
time by Lessor. Lessor shall be responsible for all major repairs and/or
replacements of plumbing, heating and air-conditioning equipment except those
replacements which were necessitated by Lessee's or Lessee's agent or employee's
gross negligence or intentional act.
Page 6 of 19
<PAGE>
5. BANKRUPTCY
----------
(A) For purposes hereof, the following shall be deemed "Events of Bankruptcy"
of Lessee: (i) if Lessee becomes "insolvent", as defined in Title 11 of the
United States Code 11 U.S.C. Section 101 et seg. (hereinafter called the
------
"Bankruptcy Code"), or under the insolvency laws of the State of Maryland
("Insolvency Law"); or (ii) if a receiver or custodian is appointed for any or
all of the Lessee's property or assets, or if there is instituted a foreclosing
action on any of Lessee's property; or (iii) if Lessor files a voluntary
petition under the Bankruptcy Code or Insolvency Law; or (iv) if there is filed
an involuntary petition against Lessee as the subject debtor under the
Bankruptcy Code or Insolvency Law, which is not dismissed within ninety (90)
days of filing, or which results in issuance of an order for relief against the
debtor; or (v) if Lessee makes or consents to an assignment of its assets in
whole or part, for the benefit of creditors, or a common law compensation of
creditors.
(B) Upon the occurrence of an Event of Bankruptcy, Lessor at its option and
sole discretion may terminate this Lease by written notice to Lessee, subject to
applicable provisions of the Bankruptcy Code or Insolvency Law during the
pendency of any action thereunder involving Lessee as the subject debtor. If
this Lease is terminated under this paragraph, Lessee shall surrender and vacate
the Premises within 30 days, and agrees that Lessor's obligations under this
Lease shall cease from such termination date, and Lessor may recover possession
of the Premises by process or law or in any other lawful manner.
(C) If Lessee becomes the subject debtor in a case pending under the Bankruptcy
Code, Lessor's right to terminate this lease under this Section 5 shall be
subject to the applicable rights (if any) of the Trustee in Bankruptcy to assume
or assign this Lease as then provided in the Bankruptcy Code. However, the
Trustee in Bankruptcy must give to Lessor and Lessor must receive proper written
notice of the Trustee's assumption or rejection of this Lease, within sixty (60)
days after the date of the Trustee's appointment; it being agreed that failure
of the Trustee to give notice of such assumption hereof within said sixty (60)
days period shall conclusively and irrevocably constitute the Trustee's
rejection of this lease and waiver of any rights of the Trustee to assume or
assign this Lease. The Trustee shall not have the right to assume or assign this
Lease unless said Trustee (i) promptly and fully cures all defaults of Lessee
under this Lease; (ii) promptly and fully compensates Lessor for all monetary
damages incurred as a result of such defaults; and (iii) provides to Lessor
"Adequate Assurances" (as defined hereinbelow). Lessor and Lessee hereby agree
in advance that Adequate Assurances, as used in this Paragraph, shall mean that
all of the following minimum criteria must be met: (a) the Lessee or Trustee
must pay to Lessor, at the time the next payment of rent is then due under this
Lease, in addition to such
Page 7 of 19
<PAGE>
payment of the rent, an amount equal to the next one month rent due under this
lease, said amount to be held by Lessor in escrow with interest accruing to
Lessee until either the Trustee or Lessee defaults under any provisions of this
Lease (whereupon the Lessor shall have the right at its option and exclusive
discretion to draw on such escrowed funds) or until the expiration of this
Lease (whereupon the funds shall be returned to the Trustee or Lessee within 30
days thereafter, if Lessee is not in default hereunder); (b) the Lessee or
Trustee must agree to pay to Lessor, at any time the Lessor is authorized to and
does draw on the funds escrowed pursuant to clause (a) of this
subsection 5(c)(iii) the amount necessary to restore such escrow account to the
original level required by said provision; (c) Lessee must pay to Lessor all
rents and other sums payable by Lessee hereunder including also therein its
share (as estimated by Lessor) of the cost of all services provided by Lessor
(whether directly or through agents or contractors, and whether or not the cost
of such services is to be passed through to Lessee), upon the performance or
provision of such services, and (d) the Lessee or Trustee must agree in writing
delivered to Lessor that the use of the Demised Premises will remain unchanged,
and that the assumption or assignment of this Lease will not violate or affect
the right of other lessees in the building. In the event Lessee is unable to
(i) cure its defaults; (ii) reimburse Lessor for its monetary damages; (iii)
timely pay the rents due under this Lease or any other payment required of
Lessee under this Lease; or (iv) meet the criteria and obligations imposed by
(a) through (d) above in Paragraph 5(C), then Lessee hereby agrees in advance
that it has not met its burden to provide Adequate Assurances, and this Lease
may be terminated by Lessor in accordance with Paragraph 5(C) above.
6. INDEMNIFICATION/INSURANCE
------------------------
Lessee will be responsible for any claim for damages and other claims of any
kind arising from death or injury to persons or damage to or loss of property at
or upon the Demised Premises caused or occasioned directly by Lessee's use or
occupancy of said Premises, and Lessee will and does hereby indemnify the
Lessor, its management agent, and its and their successors and assigns from and
against any and all liability, damages, expenses, claims, suits, actions and
causes or rights of action arising from or caused by any such damages or injury
or claim for damages or injury (including also death) to persons or damage to or
loss of property upon said Premises during the Term. In confirmation thereof,
the Lessee covenants and agrees that it will at all times during the Term, at
its own expense, carry and keep in full effect, public liability insurance in a
form and contents satisfactory to Lessor, with limits of at least One Million
Dollars ($1,000,000.00), for injury, including death, to more than one person in
any single casualty or occurrence, and with property damage coverage of at
least Two Hundred Fifty
Page 8 of 19
<PAGE>
Thousand Dollars ($250,000.00), naming the Lessee and Lessor and Lessor's
management agent as additional named insureds. Each such policy, or a
certificate showing the same to be in effect for at least a one (1) year period,
shall be delivered to Lessor at the commencement of the hereof. Renewal
certificates shall be delivered to Lessor after at least thirty (30) days prior
written notice to all named insured as to any cancellation, non-renewal or
amendment of any such policy. Lessee shall not be responsible for any loss or
damage resulting from the negligence of Lessor, its agents, employees or
contractors. Lessee shall not be responsible for fire or casualty insurance
coverage, except any coverage or tenant insurance it might desire to obtain;
provided, however, if Lessee does not desire to obtain tenant or contents
insurance, Lessor will not be liable, responsible or obligated to reimburse
Lessee for any damage incurred by Lessee which would have been covered under a
contents or tenant insurance policy unless damage was caused through negligence,
action or inaction of Lessor. Lessee at its sole expense may purchase loss of
income insurance.
7. SUBLETTING AND ASSIGNMENT
-------------------------
Lessee shall have no right to, and will not, transfer or assign this lease, or
sublet or transfer possession of the Demised Premises, or any part thereof,
voluntarily or involuntarily, whether by operation of law, in bankruptcy or
otherwise, without the prior written consent of the Lessor (which consent shall
not be unreasonably withheld, conditioned or delayed by Lessor). In the event of
such unauthorized assignment, Lessor shall have the right (and such right is
hereby expressly reserved unto Lessor) to cancel and terminate this Lease and
recover possession of the Demised Premises or to relet the Premises. Any
assignment or subletting shall not release Lessee from any secondary liability
under this Lease, and shall not waive the obligation to obtain Lessor's prior
written consent to any further assignment or subletting. Any assignment or
subletting including the use and occupancy of the Premises by the assignee or
sublessee, shall be subject to all of the terms and provisions of this Lease.
Any violation of this Section 7 will constitute a default of Lessee under this
Lease.
8. PAYMENT OF REAL ESTATE TAXES
----------------------------
In addition to the basic rental payable under Paragraph 1(c) hereof, the Lessee
covenants and agrees that it will also pay to Lessor, within thirty (30) days
after demand by Lessor therefor, the "Lessee's Pro-Rata Share" (as that term is
defined below in this paragraph) of any real estate taxes and similar
impositions, which may be levied, assessed or payable (for any periods of time
within the Term), upon the building in which the Demised Premises is situated
(collectively, the "Impositions"). For purposes of this Paragraph 8, it is
expressly stipulated and agreed that the term "Lessee's Pro-Rata Share" shall be
defined and is agreed to
Page 9 of 19
<PAGE>
mean six percent (6%). The amount of said Impositions as shown on the government
- - issued tax bills or assessment notices shall be deemed conclusive evidence of
the amount of said Impositions. The sums payable by Lessee under Paragraph 8
shall be appropriately adjusted and apportioned by Lessor and shall be paid by
Lessee to Lessor, for any fraction of the governmental tax year occurring at the
commencement and at the expiration of the Term.
9. DAMAGE BY FIRE OR OTHER CASUALTY
--------------------------------
(A) If the Premises should be damaged by fire or other casualty so that the
same shall be rendered partially untenantable, such damage shall be repaired by
the Lessor as promptly as is reasonably possible, and the rent shall be abated
(from the date of such damage until the damage is repaired) in the same
proportion as the area of the Demised Premises rendered untenantable bears to
the total area of the Demised Premises. The Lessor shall not be held liable in
damages or otherwise for any delays occasioned by time necessary to settle
insurance claims, nor strikes, acts of God or other casualties or any
circumstances beyond reasonable control of the Lessor, its agents, contractors
or subcontractors, occurring during the period of restoration of the damaged
Premises.
(B) If the Premises shall be substantially (i.e., 60% or more of the demised
space) destroyed or rendered totally untenantable for more than thirty (30)days,
then the Lessor shall have the option of rebuilding the Premises, or of not
rebuilding the Premises and instead cancelling this Lease. The Lessor, in its
exercise of such option, shall determine whether or not it will rebuild and
shall notify Lessee of such determination in writing, within thirty (30) days
after such damage or destruction. If Lessor elects to rebuild or repair the
damage, Lessor agrees to make such repairs as to make the Demised Premises
Tenantable, as that term is hereinafter defined, within sixty (60) days from
such damage or destruction and the rental shall abate (from the date of damage
or destruction, until the damage to the Premises is repaired to the same status
as prior to the casualty). If Lessor determines to rebuild as aforesaid, this
rebuild as aforesaid, this rebuilding and repair must be completed with sixty
(60) days after such damage or destruction. For purposes hereof, "Tenantable"
means the Demised Premises are capable of being used by Lessee as Lessee is now
using them, with all utilities connected and operational. If the Premises are
not rendered Tenant within sixty (60) days from the date of the damage or
destruction, Lessee has the exclusive option to cancel this Lease and only be
responsible for any and all rents and additional rents accruing through the
date of damage. However, if lessee does not opt to cancel within thirty (30)
days, Lessee still has the right to cancel, after sixty (60) days from the date
of damage, by giving fifteen (15) days written notice. Lessee, at its own
expense will repair or replace any
Page 10 of 19
<PAGE>
personal property and other items belonging to Lessee if damaged or destroyed by
fire or other casualty.
10. COMPLIANCE WITH FEDERAL OR MUNICIPAL LAWS, ETC.
-----------------------------------------------
Lessee, at its own expense, will promptly comply with, observe and perform all
of the requirements of, and will obtain and maintain in force all license,
permits and other authorizations required by all of the statutes, ordinances,
rules, orders and regulations, now in force or hereafter enacted, concerning the
conduct of Lessee's business, and whether required by federal, state, county or
town governments. The Lessee agrees that it will promptly comply, at its own
expense, with all rules, orders and regulations of the Board of Fire
Underwriters having jurisdiction for the prevention of fire, applicable to the
Demised Premises regarding only Lessee's property, or for the preservation,
correction or abatement of nuisances or grievances caused by Lessee for or in
connection with the Demised Premises during the Term of this Lease. Should
Lessee at any time after the inception of the Lease then be ordered or required
as a condition of its occupancy by any governmental official or agency to
install or expand the current sprinkler system, the Lessor shall pay all of the
cost of such system including installation.
11. LESSOR
------
Lessor, at its own expense, will promptly comply with, observe and perform all
of the requirements of, and will maintain in force all licenses, permits and
authorizations required by all of the statutes, ordinances, rules, orders and
regulations now in force or hereinafter enacted, concerning the Premises, and
whether required federal, state, county or town governments. Lessor's shall
promptly cause the Premises to be in compliance with applicable housing codes in
accordance with the requirements in Schedule A. NOTWITHSTANDING LESSEE SHALL BE
RESPONSIBLE FOR OBTAINING CERTIFICATE OF OCCUPANCY.
12. NON-WAIVER OF BREACH
--------------------
The failure of either party to insist, in any one or more instances, upon a
strict performance of any of the covenants of this Lease, or to exercise any
option herein contained, or to serve any notice, or to institute any action or
summary proceedings, shall not be construed as a waiver or relinquishment by
either party for the present or future of such covenant or option, or right
thereafter to serve notice and to have this Lease expire under any provisions of
this Lease but such covenant or option shall continue and remain in full force
and effect. The receipt by Lessor of rent, or the continued occupancy of the
Demised Premises by Lessee, with knowledge of the breach of any covenant
hereof, shall not be deemed a waiver of such breach. No waiver by either party
of any provision hereof shall be deemed to have been made, unless expressed in
writing and signed by the party or its duly authorized agent. The rights and
remedies
Page 11 of 19
<PAGE>
herein created are cumulative, and the use of one remedy shall not be taken to
exclude or waive the right to the use of another.
13. DEFAULTS OF LESSEE; REMEDIES.
----------------------------
(A) It is hereby mutually covenanted and agreed, that:
(i) if Lessee should fail to pay promptly when and as due any rental,
additional rental or other sums payable by Lessee hereunder, within sixty (60)
days of the due date thereof, or if Lessee within thirty (30) days of written
notice of any default hereunder shall fail to commence and diligently pursue the
cure thereof; or
(ii) if Lessee shall wholly and completely abandon the Demised Premises
and fails to pay rent when due; or
(iii) if the Lessee's estate hereby created shall be taken on execution or
other process or law; or
(iv) if there shall occur any of the events described in Paragraph 5
hereof which entitle Lessor to terminate this Lease pursuant to said
Paragraph 5;
Then, and in each and every event, from thenceforth and at all times thereafter,
at the exclusive and absolute option and discretion of Lessor, the Lessee's
right of possession of the Demised Premises shall thereupon cease and terminate,
and Lessor shall be entitled to the immediate possession of said Premises, with
process of law and becoming liable to prosecution therefor, and in the event of
such re-entry or re-taking of possession of the Premises by Lessor, Lessee
shall nevertheless remain in all events liable and answerable to the full rental
to the date of the re-taking or re-entry, and such damages at the option of the
Lessor, may be recovered by it at the time or re-taking or re-entry.
(B) The losing party expressly agrees to reimburse the prevailing party for any
expenses, including but not limited to court costs and reasonable attorney's
fees, which may be incurred in enforcing rights under this lease, including, but
not limited to, the collection of rent and the securing of possession of the
Premises.
14. LESSOR'S LIABILITY UPON SALE OF PROJECT
---------------------------------------
If Lessor shall sell, convey or otherwise transfer or dispose of the Demised
Premises and/or the building in which same is located, and if the purchaser then
assumes all obligations of the Lessor under this Lease, then the undersigned
Lessor shall be deemed to be released of all obligations hereunder, effective
from and after the date of such transfer. Lessor agrees to notify Lessee in
writing within thirty (30) days of the effective
Page 12 of 19
<PAGE>
date of any sale or transfer of the property; provided that, upon such sale.
Lessee shall have a one time right to terminate this Lease within (30) days of
receipt of Lessor's Notice. If Lessee does not opt to terminate the Lease, then
the Lease shall continue in full force and effect between Lessee and Lessor's
Successor.
15. LESSEE'S SIGNS
--------------
Lessee shall not place any signs or other forms or kinds of advertising, nor any
flashing, blinking or neon lights, in or about the Demised Premises, which may
be visible from the exterior thereof, without Lessor's prior written consent in
each instance, (which consent to any written request from Lessee shall not be
unreasonably withheld by Lessor). Any signs installed by Lessee shall be
installed at its own expense and in compliance with all applicable laws, and
shall be removed by Lessee by the expiration or termination hereof, with all
damage to Lessor's property repaired by Lessee.
16. FOR RENT SIGNS
--------------
Lessee agrees that Lessor and its agents shall have the right to place a "For
Lease" sign in the front of the leased Premises within the sixty (60) days prior
to the termination of this Lease. Lessee will not disturb or obstruct any such
signs.
17. EMINENT DOMAIN
--------------
If the Demised Premises, or any part thereof, shall be taken, condemned or
acquired for public or quasi public use or purpose by any public authority,
whether by condemnation proceedings, lease or purchase, Lessee shall have no
claim against Lessor and shall not have any claim or right to any portion of the
amount that may be awarded as damages or paid as a result of any condemnation,
lease or purchase; it being agreed that the full amount of such award, or other
proceeds, if any, made or paid by the taking authority shall be paid to and
retained by Lessor free of any claim by Lessee to any portion thereof. Should
any part of the Demised Premises be so taken or acquired, so that Lessor retains
possession or control of any part of the Project, then at Lessee's option, this
Lease shall cease and terminate from the date of the taking. All rentals and
other sums payable by Lessee hereunder shall be pro rated to the date on which
Lessee is required, by said taking authority, to surrender possession of said
Premises. Notwithstanding anything to the contrary contained in this Section
17, Lessee shall have the right to pursue its claim for moving and relocation
expenses against the condemning authority.
Page 13 of 19
<PAGE>
18. GENDERS; PRONOUNS
-----------------
Whenever required in the context hereof, the singular number shall include the
plural number, the plural number shall include the singular number, and the use
of any gender shall be deemed to include all genders. It is understood and
agreed that the relationship between Lessor and Lessee created by the Lease is
that of landlord and tenant and none other. The headings used herein are for
convenience and do not impart any meaning nor have effect upon the rights and
obligations of the parties hereunder.
19. LESSEE'S PROPERTY
-----------------
All personal property of Lessee, its sublessees and others in and upon the
leased Premises shall be and remain there at Lessee's sole risk, and the Lessor
shall not be liable for any damage to or loss of any personal property arising
from any acts of negligence of any other persons save Lessor. Lessee covenants
and agrees that it will not operate any machinery in the Premises which may
cause vibration or damage to the Premises, nor use a loud speaker which can be
heard outside the Premises. No storage of any kind will be allowed on the
exterior of the building.
20. SUBORDINATION
-------------
Lessee covenants and agrees that this Lease and its rights hereunder are subject
and subordinate to the lien of any mortgage or deed of trust encumbrance or
encumbrance now in place upon said Premises or the building by Lessor, and to
any and all renewals, modifications, consolidations, recastings, refinancings
and replacements thereof (collectively or separately the "Financing"). It is the
intention of the parties that this provision be self-operating and that no
further instrument shall be required to effect such subordination. The Lessee,
however, does hereby agree to execute and deliver within thirty (30) days after
each request from Lessor or its mortgagees any and all instruments necessary to
effect such subordination which the Lessor or its mortgagees may request or
require. Notwithstanding the subordination of this Lease as aforesaid, any
present or future mortgagee or beneficiary under any mortgage or deed of trust
covering such financing at its option may require that this Lease shall be
senior in line to such mortgage or deed of trust, and that this Lease shall not
terminate in the event of foreclosure of any such mortgage or deed of trust.
Lessee covenants and agrees in the event of foreclosure of any such mortgage or
deed of trust, within thirty (30) days after each request of the purchaser or
mortgagee, to attorn to the purchaser upon such foreclosure sale and to
recognize such purchaser as the landlord under this Lease, and Lessee agrees to
execute and deliver, within thirty (30) days after each request of Lessor or of
any such mortgagee, any instrument which may be necessary in any such
foreclosure proceeding or otherwise to evidence such attornment. If such
mortgagee becomes lessor or mortgagee in
Page 14 of 19
<PAGE>
possession, its liability hereunder shall cease when it is no longer has any
interest in the Demised Premises.
21. LESSEE'S ACTIVITIES
-------------------
Lessee will not carry on any activity in the Demised Premises, or do or permit
to be done therein, which is contrary to any law, ordinance or regulation of the
Federal, State, or municipal governments, or of any board, agency, or department
thereof.
22. CLEANING OF PARKING AREA
------------------------
Lessee agrees to cooperate with Lessor in keeping the parking area in front of
the leased Premises clean and free of Lessee's and its invitees' trash,
abandoned vehicles and equipment. In the event that Lessee shall fail to abide
by the foregoing provisions of this Lease, and it becomes necessary for Lessor
to perform same, Lessee agrees to reimburse the Lessor within thirty (30) days
for such expenses and costs occasioned by the Lessee's neglect.
23. NOTICES
-------
All notices required or desired to be given under this Lease must be in writing,
and sent via certified or registered U.S. First Class Mail, return receipt
requested, postage prepaid, or hand delivered, addressed as follows:
If to Lessor: George and Linda Christacos
7425 Arlington Road
Bethesda, Maryland 20814
and if to Lessee: Digital Express Group, Inc.
6800 Virginia Manor Road
Beltsville, MD 20705
Attn: Bill Pendly
cc: Danielle Deibler
with a copy
which shall not
constitute notice
to: The Fred Ezra Company
4520 East-West Highway
Bethesda, MD 20814
Attn: Mike Jacoby and Mark Ezra
or to such other address as either party for itself may from time to time
designate to the other by written notice given at least ten (10) days in
advance. The date of giving such notices shall be deemed to be three days after
the date of deposit thereof as aforesaid, if by mail, or of actual delivery by
hand.
Page 15 of 19
<PAGE>
24. BINDING EFFECT
--------------
The provisions of this Lease shall bind, and inure to the benefit of, the
parties hereto and their respective heirs, executors, administrators, personal,
representatives, successors and (subject to Paragraph 7 hereof) assigns. All of
Lessee's obligations arising during the Term hereof, including also all
indemnifications herein granted by Lessee to or for the benefit of Lessor
and/or Lessor's agents, shall (until fully performed by Lessee) survive
expiration or termination of this Lease for the applicable statute of
limitations period.
25. MISCELLANEOUS GENERAL PROVISIONS
--------------------------------
(A) This Lease constitutes the entire agreement of the parties in respect of
the Premises hereby leased, supersedes all previous agreements, and there are no
oral agreements between the parties.
(B) If any provision of this Lease shall at any time be finally adjudicated to
be invalid or illegal by any court of competent jurisdiction, this Lease shall
be read and construed as if such invalid or illegal provision had not been
contained herein.
26. LESSEE ESTOPPEL CERTIFICATES
----------------------------
Lessee shall, without charge therefor, at any time and from time to time, within
thirty (30) days after request from Lessor, execute, acknowledge and deliver to
Lessor a written estoppel certificate (in form and contents requested by
Lessor), certifying to Lessor and/or mortgagee, assignee of a mortgagee, any
master landlord or any purchaser of the Demised Premises, or any other party
designated by Lessor, as of the date of such estoppel certificate, as to all of
such of the following matter as requested by Lessor if true, namely: (a) that
Lessee has unconditionally accepted and is occupying the Premises covered by the
Lease; (b) that the Demised Premises, including the Lessor's Work called for in
Paragraph 2 hereof, have been completed as required by the terms of the Lease;
(c) that this Lease is in full force and effect, and that no known defaults now
exist thereunder; (d) that this Lease constitutes the entire agreement between
Lessor and Lessee and has not been modified; (e) that the rentals are now being
paid on a current basis, and the date to which any rent has been paid in
advance; (f) that in the event the Lessee receives written notice from the
mortgagee of Lessor stating that a default has occurred under its deed of trust
loan, then the Lessee will thereafter remit all rental payments as directed and
to the address set forth in such written notice; (g) that there are no offsets
or credits against rentals, and rentals have not been prepaid; (h) that Lessee
has received no notice of a prior assignment, or pledge of rentals under this
Lease; (i) complete details of any matters of which Lessee has knowledge or
which Lessee claims are contrary to the statements contained in clauses (a)
through (i) of this Paragraph; (j) the commencement and
Page 16 of 19
<PAGE>
expiration dates of the Term hereof, and of any then exercised or unexercised
renewal terms; (k) such other matters concerning this Lease, the parties hereto
and/or the Demised Premises as Lessor may request; and (1) that Lessee
understands such Estoppel Certificate is being relied on by the mortgage lender
or purchaser requesting same as an inducement to its loan or purchase.
27. REMOVAL BY LESSEE
-----------------
By the time of expiration of the Term, Lessee shall surrender to Lessor
exclusive possession of the Demised Premises in good condition and repair
(reasonable ordinary wear excepted) and Lessee shall have removed from the
Demised Premises all of Lessee's merchandise, furniture and other personal
property including the Equipment used by Lessee in the pursuit of its business
(excluding any items which belong to Lessor or which are not to be removed by
Lessee, as elsewhere herein provided) and Lessee at its own expense will
promptly repair any damage done to the Demised Premises or the building or
property of others by any such removals.
28. QUIET POSSESSION
----------------
Lessor covenants and agrees that the Lessee, subject to the terms hereof, and
upon paying the basic monthly rental and additional rent and performing the
other terms, covenants and conditions of this lease, shall and may peaceably and
quietly have, hold, occupy, possess and enjoy the leased premises during the
Term.
29. RULES AND REGULATIONS
---------------------
Lessee, its agents, employees, invitees, licensees, customers, clients and
guests shall at all times abide by the rules and regulations of the Project
whenever on Project property. In addition, Lessee, its agents, employees,
invitees, licensees, customers, clients and guests shall abide by such other
rules and regulations as may be promulgated from time to time by Lessor with a
copy sent to Lessee, for operation and maintenance of the building, provided,
however, that the same are necessary in Lessor's reasonable judgment for the
general well being, safety, care and/or for the cleanliness of the building or
its appurtenances, and that the same apply to all tenants of office or warehouse
space in the building. Nothing contained in this Lease shall be construed to
impose on Lessor any duty to enforce such rules and regulations against any
other tenant, and Lessor shall not be liable to Lessee for violations of the
same by any other tenant, its employees, agents, business invitees, licensees,
customers, clients and guests. If there is any inconsistency between this Lease
and said Rules and Regulations, this Lease shall govern. A copy of the Rules and
Regulations in effect at
Page 17 of 19
<PAGE>
the beginning of the lease Term shall be provided to the Lessee by the Lessor,
and this Lease shall not take effect and/or be binding until such time as the
Lessee indicates in writing to the Lessor that the Rules and Regulations are
acceptable to the Lessee.
30. OPERATION OF LESSEE'S BUSINESS
------------------------------
Lessee recognizes that the Demised Premises are situated in a shopping center
containing businesses occupied by others, and it is imperative in the interests
of Lessor and such other tenants and occupants of the building that extreme
care be exercised by Lessee in the operations of its business in a manner that
will not detract from the high standards of the Project.
31. MUTUAL WAIVER OF CLAIMS
-----------------------
Anything herein contained to the contrary notwithstanding, the Lessor and Lessee
do each hereby release the other from any and all liability for any loss or
damage to their respective properties caused by fire or any of the other
casualties covered by the risks included in extended coverage insurance. This
limited mutual release is given, notwithstanding , that such fire or casualty
insurance proceeds shall have resulted from the act, omission or negligence of
Lessor or Lessee or their respective agents, employees, licensees or
contractors. Lessor and Lessee agree to cause their respective insurance
policies covering the building and/or Demised Premises and contents thereof to
contain an appropriate endorsement whereby the insurer agrees that the insurance
policy and coverage will not be invalidated by reason of the foregoing waiver of
the right of recovery against Lessor or Lessee, respectively, for loss occurring
to the properties covered by such policies, and whereby such insurers also waive
any right of subrogation by the insurer. However, the provisions of this
Paragraph 31 shall not be operative during any period of time when such "waiver
of subrogation" feature is not available for insurance companies licensed to do
business in the State of Maryland. In no event shall the release contained
herein apply to any third party claims.
32. COMPLETION OF PUNCHLIST
-----------------------
Lessor shall complete, to the satisfaction of the Lessee, repairs addressing
those deficiencies identified in and /or affecting the Demised Premises that are
described in a Punchlist, which is attached hereto a Schedule A. If Lessor fails
to accomplish the items set forth by January 31, 1996, then Lessee may terminate
this Lease immediately upon notice to Lessor.
33. ROOF ACCESS AND TELEPHONE EQUIPMENT ACCESS
------------------------------------------
The Lessee shall have reasonable access to the roof of the building as required.
Due to the critical nature of these building spaces to the Lessee's operations,
the Lessee will have
Page 18 of 19
<PAGE>
unrestricted access to the building spaces which house the electrical switching
and metering equipment, the HVAC equipment, and to the Telephone Company Network
Interface cabinet, on a 24 hours per day, 365 day per year basis, without any
requirement for prior notification of the Lessor.
IN WITNESS WHEREOF, the Lessor has caused this instrument to be Executed by the
undersigned, and the Lessee has executed this instrument; all done on the date
first hereinabove written.
LESSOR:
BY: /s/ George Christacos (SEAL)
- -------------------------- --------------------------
Witness George Christacos
BY: (SEAL)
- -------------------------- --------------------------
Witness Lisa Christacos
LESSEE:
DIGITAL EXPRESS GROUP, INC.
BY: /s/ Douglas E. Humphrey (SEAL)
- -------------------------- --------------------------
Witness Douglas E. Humphrey, President
SECURITY DEPOSIT
- ----------------
LESSEE SHALL DEPOSIT WITH LESSOR A SECURITY DEPOSIT IN THE AMOUNT OF SIXTEEN
HUNDRED DOLLARS ($1,600) TO BE RETURNED BY LESSOR AT THE TERMINATION OF THIS
LEASE.
Page 19 of 19
<PAGE>
SCHEDULE A
PUNCHLIST
I. THE FOLLOWING ITEMS SHALL BE ACCOMPLISHED BY LESSOR
AT LESSOR'S EXPENSE:
<TABLE>
<CAPTION>
Item Lessee
Number Description Sign Off
- ------ ----------- --------
<S> <C> <C>
1 Bathroom: Lessor at Lessor's
expense shall fix the bathroom
walls and hot water in the
bathroom which is part of the
premises.
2 HVAC: Lessor at Lessor's expense
shall replace (or bring to good
working order, if a licensed HVAC
contractor warrants in writing such
replacement is not necessary) one (1)
air conditioning unit. In addition,
Lessor at Lessor's expense shall
be responsible for all costs for the
two (2) roof-mounted air conditioning
units which control the office portions
of the Premises; provided that, Lessee
at Lessee's expenses shall maintain a
maintenance contract on said air
conditioner units as provided in
Section 3(c) of the Lease Agreement.
3 Water Meter: Lessor at Lessor's
expense shall install a separate
water meter for the Premises,
which shall be separately billed to
Digex.
4 Building Code: Lessor at Lessor's
expense shall complete all work
necessary to bring Premises into
compliance with all applicable codes,
regulations and laws, including removal
of the partition in the private office
previously occupied by Doug Humphrey.
</TABLE>
<PAGE>
EXHIBIT 10.10
May 3, 1996
HAND DELIVERED
- --------------
Mr. Jerome Benton
Project Manager
Digital Express Group, Inc.
6800 Virginia Manor Road
Beltsville, MD 20705
Re: Digital Express Group, Inc. ("Digex") Occupancy
at 6900 Virginia Manor Road, Beltsville, Maryland
-------------------------------------------------
Dear Jerome:
Thank you for your letter dated April 30, 1996. As you know, ELV
Associates is the agent for the owner of the property, Banbury Associates
Limited Partnership ("Banbury"). the purpose of this letter is to set forth
Banbury's understanding regarding the issues raised in your letter.
1. Banbury consents to the construction work described in the first
paragraph of your letter subject to the following conditions:
A. Banbury must approve the plans and specifications for the
installation of the Fiber Optic and Cooper Wire Connection (the "Connection")
that is to be installed between 6800 Virginia Manor Road and 6900 Virginia Manor
Road before the installation process begins. The installation of the Connection
shall be performed in accordance with all requirements of governmental
authorities and all reasonable rules made by Banbury and without interfering
with other tenants in either building.
B. DIGEX hereby indemnifies and holds Banbury harmless from and
against any and all claims, losses, actions, damages, liabilities and expenses
(including, without limitation attorney's fees) arising from any injury to any
person or any damage to the 6800 and 6900 buildings, or to any common area of
the project during the installation or removal of the Connection.
C. This letter does not constitute consent to the proposed
Sublease Agreement between A.S. McGaughan Company, Inc. (the "Sublease") and
DIGEX. DIGEX bears all risk and shall have no recourse against Banbury in the
event the Sublease is not approved by all necessary parties to the transaction.
Banbury reserves the right to withhold its consent to the Sublease in accordance
with its rights under the prime lease between Banbury and
<PAGE>
Wiltel Communication System, Inc. If the Sublease is not fully executed and
approved by July 1, 1996, DIGEX, at its expense, shall remove the Connection as
soon as possible thereafter. In addition, if the Sublease is fully executed and
approved, DIGEX, at its expense, shall remove the Connection prior to the end of
the term of the Sublease.
D. Banbury shall pay DIGEX Six Thousand and No/100 Dollars
($6,000.00) as an allowance to be applied against the cost of the installation
of the Connection within thirty (30) days after DIGEX submits to Banbury (I)
invoices and other written evidence that DIGEX has expended the funds, and (ii)
waivers from all contractors performing the work.
2. Banbury agrees to extend the term of the Lease Agreement dated
November 17, 1994 between Banbury and DIGEX, as amended, for its premises in
6800 Virginia Manor Road by four months provided that (I) the Sublease is fully
executed and is approved by Banbury, and (ii) Banbury and DIGEX reach agreement
as to the rent to be paid during this four month extension.
3. Before DIGEX installs any equipment on the roof of 6900 Virginia
Manor Road, DIGEX must submit to Banbury detailed plans and specifications and
DIGEX shall not commence the installation of any equipment on the roof without
first obtaining Banbury's approval of such plans and specifications. Any
equipment installed on the roof shall comply with all applicable laws, any such
equipment before the end of the term of the Sublease and shall repaid any damage
caused by this removal.
Please acknowledge your acceptance of the terms set forth in this
letter by signing below and returning the original to me. I have enclosed an
additional original of this letter for your records.
Thank you for your cooperation.
Very truly yours,
Theresa F. McLaughlin
Property Manager
AGREED AND ACCEPTED:
DIGITAL EXPRESS GROUP, INC.
By: __________________________
Date: __________________________
2
<PAGE>
Agreement Between Digital Express Group
and A.S. McGaughan Company
This agreement made this 2nd day of May 1996 is entered into by and between
-------- ------
A.S. McGaughan Company, Inc. a Maryland corporation (hereinafter referred to as
ASM) and Digital Express Group, Inc. a Maryland corporation (hereinafter
referred to as DIGEX).
Whereas, DIGEX intends to sublease and occupy the Premises currently occupied by
ASM at 6900 Virginia Manor Road, Beltsville, Maryland; and
Whereas DIGEX and ASM desire to set forth their understandings on other issues
with respect to the Premises as more particularly described herein.
Now, therefore, the parties agree as follows:
1. ASM shall provide DIGEX with all of the existing furniture and equipment
within the Premises with the exception of the following items: selected filing
cabinets, selected bookcases, two small copiers, fax machine, plotters, all
computer hardware (except ASM shall leave two (2) high speed data printers), all
telephone hardware and miscellaneous files, records and employee personal items.
At the conclusion of the lease term, DIGEX shall own the remaining furniture and
equipment.
2. DIGEX shall assume the remainder of ASM's telephone line subscription with
Bell Atlantic, subsequent to successful transition from the 419 exchange to the
847 exchange (ANC).
3. DIGEX shall be given access to the Premises immediately upon execution of
the Sublease Agreement for the purpose of installing special equipment,
furniture, telephone equipment, computers, etc. Digex shall make all reasonable
efforts not to disrupt ASM's business operation during this access period.
4. This agreement shall be governed by and construed in accordance with the
laws of the State of Maryland.
In Witness thereof, the parties have executed this agreement as of the day and
year first above written.
Witness/Attest: Subtenant:
Digital Express Group, Inc.
(SIGNATURE APPEARS HERE) By: (SIGNATURE APPEARS HERE)
- ------------------------ -------------------------------
Title:
----------------------------
Witness/Attest: Sublandlord:
A.S. McGaughan Company, Inc.
(SIGNATURE APPEARS HERE) By: (SIGNATURE APPEARS HERE)
- ------------------------ -------------------------------
Title:
----------------------------
