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Exhibit 99.1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 000-26873
DIGEX, INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE ▇▇-▇▇▇▇▇▇▇
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(Address of principal executive offices)
(▇▇▇) ▇▇▇-▇▇▇▇
Telephone Number
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form10-K or any
amendment in this Form 10-K. [ ]
Aggregate market value of the voting stock held by non-affiliates (1) of
the registrant on March 31, 2001: $343,198,254.
As of March 31, 2001, there were 24,624,090 and 39,350,000 shares of the
Registrant's Class A and Class B Common Stock outstanding, respectively.
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(1) As used herein, "voting stock held by non-affiliates" means shares of Common
Stock held by persons other than executive officers, directors and persons
holding in excess of 5% of the registrant's Common Stock. The determination
of market value of the Common Stock is based on the last reported sale price
as reported by the Nasdaq Stock Market on the date indicated. The
determination of the "affiliate" status for purposes of this report on Form
10-K shall not be deemed a determination as to whether an individual is an
"affiliate" of the registrant for any other purposes.
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INTRODUCTORY NOTE
Digex, Incorporated hereby amends its Annual Report on Form 10-K for the
year ended December 31, 2000, originally filed with the Securities and Exchange
Commission (the "SEC") on April 2, 2001, solely to add the information required
by Part III of the Form 10-K.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The names of the current directors of Digex, and their ages as of March 31,
2001, and certain biographical information for each of them is set forth below:
DIRECTOR
NAME AGE SINCE POSITION
---- --- -------- --------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇............. 55 1999 Chairman of the Board of Directors
▇▇▇▇ ▇. ▇▇▇▇▇............... 45 1999 Director, President and Chief Executive Officer
▇▇▇▇ ▇. ▇▇▇▇▇............... 51 1999 Director
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.......... 64 1999 Director
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇........... 57 1999 Director
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇........... 41 2000 Director
▇▇▇▇ ▇. ▇▇▇▇▇............... 50 1999 Director
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ has served as a director and Chairman of the Board of
Directors of Digex since April 1999. ▇▇. ▇▇▇▇▇▇ has served as President, Chief
Executive Officer and a director of Intermedia Communications Inc., our majority
stockholder, since May 1993, and as Chairman of the Board of Directors of
Intermedia since March 1994. ▇▇. ▇▇▇▇▇▇ is currently a director of QS
Communications AG, a competitive Digital Subscriber Line ("DSL") carrier in
Germany. From September 1991 to May 1993, he was an independent consultant to
the computer and telecommunications industries. ▇▇. ▇▇▇▇▇▇ received his B.A. in
mathematics from Middlebury College and his M.S. in computer science from the
University of Michigan.
▇▇▇▇ ▇. ▇▇▇▇▇ has served as President and Chief Executive Officer of Digex
since July 1999. From February 1997 to June 1999, he served as Vice President of
the Web hosting and electronic commerce business unit of GTE Internetworking, an
internet infrastructure services provider. From March 1995 to January 1997,
prior to GTE Internetworking's acquisition of BBN Planet Corporation, an
internet services provider, he served as Vice President of BBN Planet
Corporation's Internet Business Solutions Group. From July 1993 to March 1995,
he served as a Senior Consultant at EDS Management Consulting. ▇▇. ▇▇▇▇▇
received his B.A. in public and international affairs from Princeton University
and holds a ▇.▇. from Stanford Law School.
▇▇▇▇ ▇. ▇▇▇▇▇ has served as a director of Digex since April 1999. He has
served as a director of Intermedia since February 1988. ▇▇. ▇▇▇▇▇ has been the
President of ▇▇▇▇▇ Capital Corp., a private equity investment management firm,
since September 1995. ▇▇. ▇▇▇▇▇ is currently a member of the Supervisory Board
of QS Communications AG, a competitive DSL carrier in Germany, and a member of
Intermedia's Compensation Committee.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ has served as a director of Digex since April 1999. He
has served as a director of Intermedia since September 1996. ▇▇. ▇▇▇▇▇▇▇▇
retired from Bell Atlantic, a telecommunications company, as Director, Vice
Chairman and Chief Financial Officer in 1991. Previously, he served as President
of New Jersey Bell, ▇▇▇▇▇▇▇ ▇▇▇▇ and Bell Atlantic Network Services.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ has served as a director of Digex since July 1999. He has
served as President, Chief Executive Officer and a director of Pathnet, Inc., a
communications services provider, since August 1997. From January 1995 to August
1997, ▇▇. ▇▇▇▇▇▇ served as President and Group Executive of NYNEX
Telecommunications Group. ▇▇. ▇▇▇▇▇▇ is currently a director of HSBC Bank USA,
formerly Marine
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Midland Bank, a commercial bank; a director and member of the Compensation
Committee of Ikon Office Solutions, Inc., a company engaged in wholesale and
retail office equipment sales; and a director of Home Wireless Networks, a
company developing a wireless product for home and business premises.
Pathnet Telecommunications, Inc. and its subsidiaries (including Pathnet,
Inc.) filed voluntary petitions pursuant to Chapter 11 of the Federal bankruptcy
law with the U.S. Bankruptcy Court for the District of Delaware on April 2,
2001. Pathnet intends to continue to provide service to its customers while it
evaluates its strategic options and pursues discussions with potential
purchasers of all or part of its ongoing business.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ has served as a director of Digex since January 2000. ▇▇.
▇▇▇▇▇▇▇ has served as Senior Vice President, Chief Financial Officer of
Intermedia since September 1996. ▇▇. ▇▇▇▇▇▇▇ joined Intermedia from DMX Inc., a
Los Angeles-based cable programmer, where he was Executive Vice President,
Senior Financial Executive and a Director of DMX-Europe from October 1991 to
September 1996. Prior to his tenure at DMX, ▇▇. ▇▇▇▇▇▇▇ spent ten years in the
investment banking field in corporate finance and mergers and acquisitions, most
recently with ▇▇▇▇▇▇▇▇▇▇▇ and Co., Inc. as Vice President, Corporate Finance,
managing their Entertainment/Leisure Time Group from October 1988 to October
1991. ▇▇. ▇▇▇▇▇▇▇ is a graduate of ▇▇▇▇▇▇▇▇ College.
▇▇▇▇ ▇. ▇▇▇▇▇ has served as a director of Digex since July 1999. Since
November 1998 , he has served as President of KJE Inc., a management and
investment consulting firm. From December 1996 to November 1998 he served as
President, Chief Executive Officer, and a director of e.spire Communications,
Inc., an integrated communications provider. Prior to e.spire, ▇▇. ▇▇▇▇▇ held
various senior management positions with Ameritech and MCI Communications. ▇▇.
▇▇▇▇▇ is currently both a director and Compensation Committee member of Orius
Corporation, a national telecommunications services and systems integration
company. Since January 2001, he has served as President, Chief Executive
Officer, and a director of One, Inc., an e-business professional services firm.
▇▇. ▇▇▇▇▇ was named the Chairman of the Board of One, Inc. in April 2001.
EXECUTIVE OFFICERS
The names of the current executive officers of Digex, their ages as of
March 31, 2001, other than ▇▇. ▇▇▇▇▇ who is also a member of the Board of
Directors, and certain biographical information for each of them is set forth
below:
NAME AGE POSITION
---- --- --------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇................ 41 Chief Financial Officer
▇▇▇▇ ▇. ▇▇▇▇▇▇▇................. 50 Senior Vice President, Sales
▇▇▇▇ ▇. ▇▇▇▇▇▇▇................. 57 Senior Vice President, Business Operations
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇................ 37 Senior Vice President, Digex Europe
▇▇▇▇▇ ▇. ▇▇▇▇▇.................. 44 Senior Vice President and General Counsel
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇............... 29 Vice President, Strategy and Business Development
▇▇▇▇▇▇▇ ▇▇▇▇.................... 37 President, Product Management, Engineering and
Marketing Group
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇................. 52 Vice President, Human Resources
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ has served as Chief Financial Officer of Digex since
January 2000. From April 1997 to January 2000, he held various management
positions at GTE Internetworking and BBN Planet Corporation, prior to its
acquisition by GTE Internetworking, including Vice President of Operations and
Circuits Management, Vice President of Business Operations and Vice President of
Finance. From May 1989 to April 1997, he held various financial positions with
Trans National Group Services, including Chief Financial Officer of Trans
National Communications from January 1995 to April 1997. ▇▇. ▇▇▇▇▇ holds a B.S.
in accounting from ▇▇▇▇▇▇ State University in Kentucky and an M.B.A. from Boston
University. ▇▇. ▇▇▇▇▇ is also a certified public accountant.
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇ has served as Senior Vice President of Sales of Digex since
March 2001. From September 1997 to March 2001, he served as Senior Vice
President of Sales at WorldCom, Inc., a global telecommunications company, where
he managed all aspects of sales, service and strategic planning of the National
Accounts division. ▇▇. ▇▇▇▇▇▇▇ held various management positions at MCI
International since 1988 and subsequently with WorldCom, Inc., including
Regional Vice President at WorldCom, Vice President of Sales at IDB WorldCom,
and Director of Sales for the metropolitan New York region at TC WorldCom. ▇▇.
▇▇▇▇▇▇▇ holds a B.A. from Brooklyn College, as well as extensive marketing
education at Columbia University and New York University.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ has served as Senior Vice President of Business Operations
of Digex since July 2000. ▇▇. ▇▇▇▇▇▇▇ has held various positions at Electronic
Data Systems Corporation ("EDS") since 1968 including Chief Information Officer
from January 1993 to December 1998. In that capacity, his primary responsibility
was to ensure that EDS' internal financial and administrative systems needs were
met throughout the world. Other responsibilities included coordinating business
process reengineering, developing data architecture and enterprise wide
information access, and maintaining security requirements for all corporate
systems. EDS is a global provider of strategy, implementation and hosting
services for clients managing the business and technology complexities of the
digital economy. ▇▇. ▇▇▇▇▇▇▇ received a bachelor and master's degree in business
administration from University of North Texas.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ has served as Senior Vice President of the European
division of Digex since April 2000. From October 1998 through April 2000, he
held various management positions with companies within Telia AB, a
telecommunications company in Scandinavia, including the Vice President of Telia
Megacom, Chief Financial Officer of the Telia Business Solutions division, and
President of the Telia New Business division. From January 1996 to October 1998,
he served as Managing Director of Alfa Laval Moatti in France, a subsidiary of
Alfa Laval Group, a process equipment manufacturing company. ▇▇. ▇▇▇▇▇▇▇▇▇ holds
a B.S. in finance from ▇▇▇ ▇▇▇▇▇ Gymnasium in Sweden and a M.B.A. from the
Stockholm School of Economics.
▇▇▇▇▇ ▇. ▇▇▇▇▇ has served as Senior Vice President and General Counsel of
Digex since July 2000. From March 2000 to July 2000, he served as Vice President
and General Counsel for Onesoft Corporation, an e-commerce software company.
From January 1999 to February 2000, he served as General Counsel for Madison
River Communications, a telecommunications company formed by ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and other investors to acquire and operate rural telephone
companies. From January 1990 to December 1998 he served as Partner at Mintz,
Levin, Cohn, ▇▇▇▇▇▇, Glovsky and Popeo P.C., a Washington, D.C. and Boston-based
law firm, specializing in antitrust litigation. ▇▇. ▇▇▇▇▇ is a member of the
Illinois, District of Columbia, and Massachusetts bars. He received a B.A. in
public policy sciences from Duke University and a ▇.▇. from Northwestern
University School of Law.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ has served as Vice President of Strategy and Business
Development of Digex since January 2000. From July 1999 to December 1999, he
served as Vice President of Marketing of Digex. From September 1998 to June 1999
he served as Vice President of Marketing and Product Development of Digex. He
served as Director of Business Development for Digex from September 1997 through
September 1998. He joined Digex in September 1996, as Senior Manager of Windows
NT Operations. From June 1993 to June 1996, he served as a Senior Consultant for
▇▇▇▇▇▇▇▇ Consulting. ▇▇. ▇▇▇▇▇▇▇ holds a B.S. in management information systems
from ▇▇▇▇▇▇ ▇▇▇▇▇ University.
▇▇▇▇▇▇▇ ▇▇▇▇ has served as President of the Product Management, Engineering
and Marketing Group of Digex since July 1999. From March 1991 to June 1999, she
held various management positions at GTE Internetworking and BBN Planet
Corporation, prior to its acquisition by GTE Internetworking, including most
recently Vice President of Product Management and Engineering of the Web hosting
and electronic commerce business unit of GTE Internetworking. ▇▇. ▇▇▇▇ holds a
B.S. in computer technology from Northeastern University and an M.S. in computer
science from Boston University.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ has served as Vice President of Human Resources of Digex
since November 2000. From March 1992 to November 2000, he served as Managing
Consultant for ▇▇▇▇▇▇ ▇▇▇▇▇ Worldwide, a global human resources consulting firm.
Prior to joining ▇▇▇▇▇▇ ▇▇▇▇▇, he held various positions at Aetna Life
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Insurance and also worked as an attorney for Drinker, ▇▇▇▇▇▇ and ▇▇▇▇▇ L.L.P, a
Philadelphia-based law firm. ▇▇. ▇▇▇▇▇▇▇▇ holds a B.S. from Ohio University, a
M.S. in Anthropology from the University of Michigan and a ▇.▇. from Georgetown
University School of Law.
No family relationship exists between any of our directors and executive
officers.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires each of our directors and
executive officers, and persons who beneficially own more than 10% of the issued
and outstanding shares of our common stock, to file reports of beneficial
ownership and changes in beneficial ownership with the SEC. Directors, executive
officers and greater than 10% stockholders are required by SEC regulation to
furnish us copies of all Section 16(a) forms they file.
Based solely on a review of the copies of the forms furnished to us or
written representations by reporting persons, all of the filing requirements
applicable to our officers, directors and greater than 10% stockholders were
complied with during the fiscal year ended December 31, 2000, except for:
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ each of whom
failed to file a Form 3 on a timely basis and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, former Chief
Financial Officer of Digex and no longer an employee of the company, who failed
to file a Form 4 on a timely basis.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation of our Chief
Executive Officer and each of our four most highly compensated executive
officers whose total salary and bonus for 2000 exceeded $100,000 (each a "named
executive officer" and, collectively, the "named executive officers").
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------------- -----------------------------------------
SECURITIES SECURITIES
OTHER ANNUAL UNDERLYING UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(6) COMPENSATION OPTIONS(7) OPTIONS(8) COMPENSATION(9)
--------------------------- ---- -------- -------- ------------ ---------- ---------- ---------------
▇▇▇▇ ▇. ▇▇▇▇▇(1)............ 2000 $275,000(1) $200,616 $120,591(10) 200,000 -- $5,250
President and Chief 1999 125,000 -- -- 500,000 100,000 --
Executive Officer
▇▇▇▇▇ ▇. ▇▇▇▇▇▇(2).......... 2000 237,500(2) 162,500 -- 75,000 -- --
President, Sales and 1999 225,000 225,000 125,000(11) 300,000 100,000 --
Service Delivery Group 1998 11,105 50,000 -- -- -- --
▇▇▇▇▇▇▇ ▇▇▇▇(3)............. 2000 225,000(3) 148,767 140,912(11) 75,000 -- 2,583
President, Product 1999 91,667 50,000 15,810(11) 250,000 50,000 --
Management, Engineering
and Marketing Group
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇(4)......... 2000 216,967(4) 75,000 95,723(10) 90,000 -- 4,040
Vice President and 1999 -- -- -- 250,000 -- --
Chief Financial Officer
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇(5)......... 2000 205,000(5) 48,616 -- 25,000 -- 2,583
Senior Vice President, 1999 173,750 -- 140,587(12) 400,000 3,259
Sales, Distribution and 1998 95,000 -- 166,108(12) -- -- --
Client Services
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(1) ▇▇. ▇▇▇▇▇ commenced employment with Digex in July 1999. ▇▇. ▇▇▇▇▇'▇ current
annual base salary is $300,000 after a salary adjustment effective July 1,
2000. He has a target annual bonus opportunity equal to 60% of his base
salary.
(2) ▇▇. ▇▇▇▇▇▇ served as President and Chief Executive Officer from December
1998 to June 1999 and as President of the Sales and Service Delivery Group
from June 1999 to March 2001, when she resigned from Digex.
(3) ▇▇. ▇▇▇▇ commenced employment with Digex in July 1999. Her current annual
base salary is $250,000 after a salary adjustment effective July 1, 2000.
She has a target annual bonus opportunity equal to 50% of her base salary.
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(4) ▇▇. ▇▇▇▇▇ commenced employment with Digex in January 2000. His current
annual base salary is $250,000 after salary adjustments during 2000. He has
a target annual bonus opportunity equal to 50% of his base salary.
(5) ▇▇. ▇▇▇▇▇▇▇ resigned in March 2001.
(6) Amounts represent bonuses paid during the listed fiscal year for prior
fiscal year performance and/or signing bonuses.
(7) Represents the number of shares of Class A common stock of Digex underlying
options granted to the named executive officers.
(8) Represents the number of shares of common stock of Intermedia underlying
options granted to the named executive officers.
(9) Amounts represent the matching contribution paid by ▇▇▇▇▇ and/or Intermedia
to the 401(k) plan on behalf of the participant.
(10) Amount represents taxable fringe benefits received primarily for temporary
housing and the reimbursement of taxes associated with these fringe
benefits by Digex.
(11) Amount represents relocation expense.
(12) Amount represents commission payments.
OPTIONS GRANTED DURING FISCAL YEAR 2000
The following table sets forth certain information regarding grants of
stock options to purchase Digex Class A common stock to our named executive
officers during fiscal year 2000. Options covering 25% of the options set forth
below vest one year following the date of grant and the balance will vest in
equal quarterly installments over the next three years. The per-share exercise
price of the options equals the market price on date of the grant.
OPTION GRANTS
IN LAST FISCAL YEAR
------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE OR TERM(1)
OPTIONS EMPLOYEES IN BASE PRICE ------------------------------
NAME GRANTED FISCAL YEAR PER SHARE EXPIRATION DATE 5% 10%
---- ---------- ------------ ----------- --------------- ----------- ------------
▇▇▇▇ ▇. ▇▇▇▇▇........ 200,000 4.42% $74.94 7/10/10 $9,426,000 $23,887,000
▇▇▇▇▇ ▇. ▇▇▇▇▇▇...... 75,000 1.66% 74.94 7/10/10 3,535,000 8,958,000
▇▇▇▇▇▇▇ ▇▇▇▇......... 75,000 1.66% 74.94 7/10/10 3,535,000 8,958,000
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇..... 15,000 0.33% 60.13 4/12/10 567,000 1,437,000
75,000 1.66% 74.94 7/10/10 3,535,000 8,958,000
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇..... 25,000 0.55% 74.94 7/10/10 1,178,000 2,986,000
---------------
(1) Potential realizable values are net of exercise prices before taxes, and
are based on the assumption that our Class A common stock appreciates at
the annual rate shown, compounded annually, from the date of grant until
the expiration of the ten-year term and that the option is exercised at the
exercise price and sold on the last day of its term at the appreciated
price. These numbers are calculated based on the Securities and Exchange
Commission requirements and do not reflect any projection or estimate of
future stock price growth.
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AGGREGATE OPTION EXERCISES IN FISCAL 2000 AND FISCAL YEAR-END OPTION VALUES
The following table shows the number of shares received upon exercise,
aggregate dollar value realized upon exercise, the number of unexercised shares
of Digex Class A common stock as of December 31, 2000 and the year-end value of
unexercised in-the-money options to purchase shares of Digex Class A common
stock as of December 31, 2000 for each named executive officer.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 2000 DECEMBER 31, 2000
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------- ----------- ------------- ----------- -------------
▇▇▇▇ ▇. ▇▇▇▇▇........... -- $ -- 156,250 543,750 $1,796,875 $3,953,125
▇▇▇▇▇ ▇. ▇▇▇▇▇▇......... 37,500 1,406,281 56,250 281,250 871,875 2,371,875
▇▇▇▇▇▇▇ ▇▇▇▇............ -- -- 78,125 246,875 898,438 1,976,563
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇........ -- -- 62,500 277,500 156,250 468,750
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇........ 25,795 948,603 99,205 300,000 1,532,628 3,987,500
EMPLOYMENT AGREEMENTS
▇▇▇▇ ▇. ▇▇▇▇▇. ▇▇. ▇▇▇▇▇'▇ employment letter agreement provides for an
initial annual base salary of $250,000, which is subject to annual review, and
an annual bonus opportunity of 60% of his initial annual base salary that will
be based on the achievement of certain corporate and individual objectives. The
agreement also provides ▇▇. ▇▇▇▇▇ with stock options to purchase 100,000 shares
of Intermedia common stock, at an exercise price of $33.31, which are subject to
the terms and conditions of the Intermedia 1996 Long-Term Incentive Plan, to
vest in equal monthly installments over the 60-month period commencing on his
date of employment. On July 29, 1999, ▇▇. ▇▇▇▇▇ was granted options to purchase
500,000 shares of our Class A common stock. 250,000 of these options will be
exercisable at $5.00 per share and the balance will be exercisable at the
initial public offering price of $17.00 per share. Options covering 25% of the
500,000 shares of our Class A common stock vested one year following the date of
grant and the balance vests in equal quarterly installments over the three years
beginning July 29, 2000. Following a change of control of Digex or Intermedia,
one-half of ▇▇. ▇▇▇▇▇'▇ then unvested Digex options will vest immediately, and
the remainder will vest on the first anniversary of the change of control if ▇▇.
▇▇▇▇▇ continues to be employed by Digex at that date, or upon termination by
Digex of ▇▇. ▇▇▇▇▇'▇ employment (other than for cause), if earlier. Following a
change of control of Intermedia, one-half of ▇▇. ▇▇▇▇▇'▇ then unvested
Intermedia options will vest immediately, and the remainder will vest on the
first anniversary of the change of control if ▇▇. ▇▇▇▇▇ continues to be employed
by Digex or Intermedia or any of its subsidiaries at that date, or upon
termination by Digex and, if applicable, Intermedia of ▇▇. ▇▇▇▇▇'▇ employment
(other than for cause), if earlier.
If ▇▇. ▇▇▇▇▇ is terminated by Intermedia or us for any reason other than
for cause, we or Intermedia will pay his base salary as in effect at the time of
termination through the later of July 1, 2001, or the first anniversary of the
date of termination. ▇▇. ▇▇▇▇▇'▇ entitlement to receive payments will terminate
if he directly or indirectly knowingly hires, within six months following his
date of termination, any employee of director-level or above who was employed by
Intermedia or Digex on the date of his termination.
The letter agreement also provides ▇▇. ▇▇▇▇▇ with a relocation allowance of
up to $100,000 in the form of a loan which will be forgiven in equal monthly
installments over a 12-month period commencing on the date of the last
relocation reimbursement.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇. ▇▇. ▇▇▇▇▇▇'▇ employment letter agreement provides for an
initial annual base salary of $225,000, which is subject to annual review, and
an annual bonus opportunity of 50% of her initial annual base salary that will
be based on the achievement of certain corporate and individual objectives. The
agreement provided ▇▇. ▇▇▇▇▇▇ with a signing bonus of $275,000, paid in four
installments: $50,000 upon the acceptance of the offer and the remaining balance
at specified dates during 1999.
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8
The agreement also provides ▇▇. ▇▇▇▇▇▇ with stock options to purchase
100,000 shares of Intermedia common stock, at an exercise price of $15.00, which
are subject to the terms and conditions of the Intermedia 1996 Long Term
Incentive Plan, to vest in equal monthly installments over the 60-month period
commencing on her date of employment. On July 29, 1999, ▇▇. ▇▇▇▇▇▇ was granted
options to purchase 300,000 shares of our Class A common stock. 150,000 of these
options will be exercisable at $5.00 per share and the balance will be
exercisable at the initial public offering price of $17.00 per share. Options
covering 25% of the 300,000 shares of our Class A common stock vested one year
following the date of grant and the balance vests in equal quarterly
installments over the three years beginning July 29, 2000. Following a change of
control of Digex or Intermedia, all of ▇▇. ▇▇▇▇▇▇'▇ unvested Digex options will
vest on the first anniversary of the change of control if ▇▇. ▇▇▇▇▇▇ continues
to be employed by Digex at that date, or upon termination by Digex of ▇▇.
▇▇▇▇▇▇'▇ employment (other than for cause), if earlier. Following a change of
control of Intermedia, all of ▇▇. ▇▇▇▇▇▇'▇ Intermedia options will vest on the
first anniversary of the change of control if ▇▇. ▇▇▇▇▇▇ continues to be
employed by Digex or Intermedia or any of its subsidiaries at that date, or upon
termination of ▇▇. ▇▇▇▇▇▇'▇ employment (other than for cause), if earlier.
The letter agreement also provides ▇▇. ▇▇▇▇▇▇ with a relocation allowance
of up to $125,000 in the form of a loan which will be forgiven in equal monthly
installments over a 12-month period commencing on the date of the last
relocation reimbursement.
▇▇. ▇▇▇▇▇▇ resigned in March 2001.
▇▇▇▇▇▇▇ ▇▇▇▇. ▇▇. ▇▇▇▇'▇ employment letter agreement provides for an
initial annual base salary of $200,000, which is subject to annual review, and
an annual bonus opportunity of 50% of her initial annual base salary that will
be based on the achievement of certain corporate objectives. The agreement
provided ▇▇. ▇▇▇▇ with a signing bonus of $100,000, paid in two equal
installments: upon commencement of employment with us, and after six months of
employment. The agreement also provided ▇▇. ▇▇▇▇ with stock options to purchase
50,000 shares of Intermedia common stock, at an exercise price of $33.31, which
are subject to the terms and conditions of the Intermedia 1996 Long-Term
Incentive Plan, to vest in equal monthly installments over the 60-month period
commencing with the day the option grant was approved. On July 29, 1999, ▇▇.
▇▇▇▇ was granted stock options to purchase 250,000 shares of our Class A common
stock. 125,000 of these options will be exercisable at $5.00 per share and the
balance will be exercisable at the initial public offering price of $17.00 per
share. Options covering 25% of the 250,000 shares of our Class A common stock
vested one year following the date of grant and the balance vests in equal
quarterly installments over the three years beginning July 29, 2000. Following a
change of control of Digex or Intermedia, all of ▇▇. ▇▇▇▇'▇ unvested Digex
options will vest on the first anniversary of the change of control if ▇▇. ▇▇▇▇
continues to be employed by Digex at that date, or upon termination by Digex of
▇▇. ▇▇▇▇'▇ employment (other than for cause), if earlier. Following a change of
control of Intermedia, all of ▇▇. ▇▇▇▇'▇ Intermedia options will vest on the
first anniversary of the change of control if ▇▇. ▇▇▇▇ continues to be employed
by Digex or Intermedia or any of its subsidiaries at that date, or upon
termination by Digex of ▇▇. ▇▇▇▇'▇ employment (other than for cause), if
earlier.
If ▇▇. ▇▇▇▇ is terminated by Digex for any reason other than for cause, we
will pay her base salary as in effect at the time of termination through the
later of January 1, 2002, or the first anniversary of the date of termination.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇. ▇▇. ▇▇▇▇▇' employment letter agreement provides for an
initial annual base salary of $210,000, which is subject to annual review, and
an annual bonus opportunity of 50% of his initial annual base salary that will
be based on the achievement of certain corporate objectives. ▇▇. ▇▇▇▇▇ is also
entitled to receive a $75,000 signing bonus, paid in two equal installments:
upon commencement of employment with us, and after six months of employment.
The agreement also provides ▇▇. ▇▇▇▇▇ with options to purchase 250,000
shares of our Class A common stock. 50,000 of these options will be exercisable
at $10.00 per share and the balance will be exercisable at $34.00 per share.
Options covering 25% of the 250,000 shares of our Class A common stock vested
one year following the date of grant and the balance vests in equal quarterly
installments over the three years beginning December 1, 2000. Following a change
of control of Digex or Intermedia, all of ▇▇. ▇▇▇▇▇' unvested Digex
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options will vest on the first anniversary of the change of control if ▇▇. ▇▇▇▇▇
continues to be employed by ▇▇▇▇▇ at that date, or upon termination by Digex of
▇▇. ▇▇▇▇▇' employment (other than for cause), if earlier.
▇▇▇▇▇ ▇▇▇▇▇▇▇. ▇▇. ▇▇▇▇▇▇▇'▇ employment letter agreement provides for an
initial annual base salary of $200,000, which is subject to annual review, and
an annual bonus opportunity of 60% of his annual base salary that will be based
on the achievement of certain corporate objectives.
On July 29, 1999, ▇▇. ▇▇▇▇▇▇▇ was granted options to purchase 400,000
shares of our Class A common stock. 300,000 of these options will be exercisable
at $5.00 per share and the balance will be exercisable at the initial public
offering price of $17.00 per share. Options covering 25% of the 400,000 shares
of our Class A common stock vested one year following the date of grant and the
balance vests in equal quarterly installments over the three years beginning
July 29, 2000. In the event his employment is terminated by Digex for any reason
other than for cause prior to July 9, 2001, his options covering an aggregate of
200,000 shares (including any installments previously vested) will vest
immediately on the date of termination, of which 150,000 will be those
exercisable at $5.00 and 50,000 exercisable at $17.00 per share. Following a
change of control of Digex or Intermedia, all of ▇▇. ▇▇▇▇▇▇▇'▇ unvested options
will vest on the first anniversary of the change of control if ▇▇. ▇▇▇▇▇▇▇
continues to be employed by ▇▇▇▇▇ at that date, or upon termination by Digex of
▇▇. ▇▇▇▇▇▇▇'▇ employment (other than for cause), if earlier.
▇▇. ▇▇▇▇▇▇▇ resigned in March 2001.
DIRECTOR COMPENSATION
Our directors who are not employed by either Digex or Intermedia receive an
annual fee of $16,000 and a fee of $1,000 for each meeting (or $500 for each
telephonic meeting) of the Board of Directors or committees of the Board of
Directors attended in addition to reimbursement of actual out-of-pocket expenses
incurred in connection with attending these meetings. Each such director is also
granted stock options in accordance with the terms of the Digex Long-Term
Incentive Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2000, the Compensation Committee was comprised of Messrs. ▇▇▇▇▇▇ and
▇▇▇▇▇. No member of the Compensation Committee was at any time an officer or
employee of Digex or any of its subsidiaries. ▇▇. ▇▇▇▇▇▇ is the President and
Chief Executive Officer and a director of Intermedia, our parent. For a
description of certain relationships between Digex and Intermedia, see "Certain
Relationships and Related Transactions."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
DIGEX
The following table provides information regarding:
- beneficial ownership of our common stock by each person or entity
known to us to be a beneficial owner of more than 5% of the
outstanding shares of our common stock, as of March 31, 2001;
- beneficial ownership of our common stock by each of our directors
and named executive officers, as of March 31, 2001; and
- beneficial ownership of our common stock by all of our directors and
executive officers as a group, as of March 31, 2001.
The percentage of Digex common stock beneficially owned was calculated
based on 24,624,090 shares of Class A common stock and 39,350,000 shares of
Class B common stock outstanding on March 31, 2001. Except as otherwise
indicated, the stockholders listed in the table have sole voting and investment
power with respect to the common stock owned by them. All of the Class B shares
are owned by Intermedia. Class B common stock entitles the holder to 10 votes
per share, while Class A common stock entitles the holder to one
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vote per share. Each share of Class B common stock is convertible at the option
of the holder into one share of Class A common stock.
PERCENTAGE
NUMBER OF PERCENTAGE OF VOTING
SHARES OF CLASS POWER OF
BENEFICIALLY BENEFICIALLY COMMON
BENEFICIAL OWNER OWNED OWNED STOCK
---------------- ------------ ------------ -------------
PRINCIPAL STOCKHOLDERS:
Intermedia Communications Inc........................... 39,350,000(2) 100.0% 94.1%
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Massachusetts Financial Services Co..................... 2,514,013(3) 10.2% *
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Oak Associates, LTD..................................... 2,109,000(4) 8.6% *
3875 Embassy Parkway
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ Investments, LLC................................. 1,878,200(5) 7.6% *
One Post Office Square
Boston, MA 02109
Capital Research & Management Co........................ 1,805,000(6) 7.3% *
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ & Co. ....................... 1,602,533(7) 6.5% *
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Microsoft Corporation................................... 1,263,494(8) 5.1% *
One Microsoft Way
Redmond, Washington 98052
CPQ Holdings, Inc.(1)................................... 1,263,494(9) 5.1% *
20555 SH 249
Houston, Texas 77070
DIRECTORS AND EXECUTIVE OFFICERS:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇......................................... 21,875(10) * *
▇▇▇▇ ▇. ▇▇▇▇▇........................................... 218,750(10) * *
▇▇▇▇▇ ▇. ▇▇▇▇▇▇......................................... 75,000(10) * *
▇▇▇▇▇▇▇ ▇▇▇▇............................................ 109,375(10) * *
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇........................................ 81,875(10) * *
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇........................................ 106,705(10) * *
▇▇▇▇ ▇. ▇▇▇▇▇........................................... 26,667(10) * *
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇...................................... 26,667(10) * *
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇....................................... 26,667(10) * *
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇....................................... 21,875(10) * *
▇▇▇▇ ▇. ▇▇▇▇▇........................................... 31,667(11) * *
All directors and executive officers as a group (15
persons).............................................. 584,518(12) 2.4% *
---------------
* Less than 1%
(1) CPQ Holdings, Inc. is a wholly-owned subsidiary of Compaq Computer
Corporation.
(2) These shares are owned by Intermedia through its indirect wholly-owned
subsidiary, Intermedia Financial Company. As a result of the Intermedia -
WorldCom Merger, WorldCom will beneficially own all of our Class B common
stock and will have voting control of Digex. The merger is expected to be
consummated in the second quarter of 2001.
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(3) Based upon information set forth in a Schedule 13G/A filed with the SEC on
February 12, 2001. Massachusetts Financial Services Co. has sole voting
power of 2,473,813 shares and sole dispositive power of all shares.
(4) Based upon information set forth in a Schedule 13G filed with the SEC on
February 13, 2001. Oak Associates, LTD. has sole voting power and shared
dispositive power of all shares.
(5) Based upon information set forth in a Schedule 13G filed with the SEC on
February 15, 2001. ▇▇▇▇▇▇ Investments, LLC has shared voting power of 5,800
shares and shared dispositive power of all shares.
(6) Based upon information set forth in a Schedule 13G/A filed with the SEC on
February 13, 2001.
(7) Based upon information set forth in a Schedule 13G/A filed with the SEC on
February 7, 2001. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ & Co. has shared voting power
of 1,594,633 shares and shared dispositive power of all shares.
(8) Based upon information set forth in a Schedule 13G filed with the SEC on
January 21, 2000. Consists of 730,994 shares of Class A common stock
issuable upon conversion of shares of Series A Preferred Stock and 532,500
shares of Class A common stock issuable upon exercise of presently
exercisable warrants.
(9) Based upon information set forth in a Schedule 13G filed with the SEC on
January 24, 2000. Consists of 730,994 shares of Class A common stock
issuable upon conversion of shares of Series A Preferred Stock and 532,500
shares of Class A common stock issuable upon exercise of presently
exercisable warrants.
(10) Constitutes shares subject to options exercisable as of March 31, 2001 or
within 60 days thereafter.
(11) Includes 5,000 shares of Class A common stock and 26,667 shares subject to
options exercisable as of March 31, 2001 or within 60 days thereafter.
(12) Includes 5,350 shares of Class A common stock and 579,168 shares subject to
options exercisable as of March 31, 2001 or within 60 days thereafter.
INTERMEDIA
The following table provides information regarding:
(i) those persons or groups known to us to be the beneficial owners of
more than five percent of the common stock of our parent, Intermedia;
(ii) beneficial ownership of common stock of our parent, Intermedia,
by each of our directors and named executive officers, as of December 31,
2000; and
(iii) beneficial ownership of common stock of our parent, Intermedia,
by all of our directors and executive officers as a group, as of December
31, 2000.
The percentage of Intermedia common stock beneficially owned was calculated
based on 55,138,703 shares outstanding on December 31, 2000.
PERCENTAGE OF
NUMBER OF INTERMEDIA
SHARES COMMON STOCK
BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER OWNED OWNED
---------------- ------------ -------------
ICI Ventures LLC............................................ 7,859,329(1) 12.6%
c/o Kohlberg Kravis ▇▇▇▇▇▇▇ & Co., L.P.
▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Massachusetts Financial Services Corp....................... 4,540,542(2) 7.3%
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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PERCENTAGE OF
NUMBER OF INTERMEDIA
SHARES COMMON STOCK
BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER OWNED OWNED
---------------- ------------ -------------
DIRECTORS AND EXECUTIVE OFFICERS OF DIGEX:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇............................................. 1,245,676(3) 2.3%
▇▇▇▇ ▇. ▇▇▇▇▇............................................... 31,667(4) *
▇▇▇▇▇ ▇. ▇▇▇▇▇▇............................................. 43,334(5) *
▇▇▇▇▇▇▇ ▇▇▇▇................................................ 15,833(6) *
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇............................................ 32,348(7) *
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇............................................ -- --
▇▇▇▇ ▇. ▇▇▇▇▇............................................... 84,228(8) *
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.......................................... 30,000(9) *
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇........................................... -- --
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇........................................... 400,565(10) *
▇▇▇▇ ▇. ▇▇▇▇▇............................................... 500(11) *
All directors and executive officers as a group (15
persons).................................................. 1,813,581(12) 3.3%
---------------
* Less than 1%
(1) Consists of 5,555,556 shares of Intermedia common stock issuable upon
conversion of shares of Series G Junior Convertible Participating Preferred
Stock, 2,000,000 shares of Intermedia common stock issuable upon exercise
of presently exercisable warrants and 303,773 Intermedia common shares
owned. ICI Ventures is a limited liability company of which KKR 1996 Fund
L.P. is the managing member. KKR 1996 GP L.L.C. is the sole general partner
of KKR Associates 1996 L.P., which is the sole general partner of KKR 1996
Fund L.P. KKR 1996 GP L.L.C. is a limited liability company, the managing
members of which are Messrs. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, and the
other members of which are Messrs. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and ▇▇▇▇▇▇▇▇ ▇▇▇▇. ▇▇. ▇▇▇▇▇▇ is a
director of Intermedia. Each of the individuals who are members of KKR 1996
GP L.L.C. may be deemed to share beneficial ownership of any shares
beneficially owned by KKR 1996 GP L.L.C. Each of such individuals disclaim
beneficial ownership. ▇▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇., a director of Intermedia,
is also a director of KKR and a limited partner of KKR Associates 1996 L.P.
▇▇. ▇▇▇▇▇ disclaims that he is the beneficial owner of securities
beneficially owned by KKR Associates 1996 L.P. KKR Partners II, L.P. owns
less than a 4% membership interest in ICI Ventures LLC.
(2) Based upon information set forth in a Schedule 13G filed with the SEC on
February 14, 2001.
(3) Includes 186,216 shares of common stock, 62,784 shares subject to certain
vesting requirements and 996,676 shares subject to options exercisable as
of December 31, 2000 or within 60 days thereafter. Excludes 693,324 shares
subject to options that are not exercisable within 60 days of December 31,
2000.
(4) Includes 31,667 shares subject to options exercisable as of December 31,
2000 or within 60 days thereafter. Excludes 68,333 shares subject to
options that are not exercisable within 60 days of December 31, 2000.
(5) Includes 43,334 shares subject to options exercisable as of December 31,
2000 or within 60 days thereafter. Excludes 56,666 shares subject to
options that are not exercisable within 60 days of December 31, 2000.
(6) Includes 15,833 shares subject to options exercisable as of December 31,
2000 or within 60 days thereafter. Excludes 34,167 shares subject to
options that are not exercisable within 60 days of December 31, 2000.
(7) Includes 32,348 shares subject to options exercisable as of December 31,
2000 or within 60 days thereafter. All exercisable options were exercised
as of March 31, 2001.
(8) Includes 54,228 shares of common stock and 30,000 shares subject to options
exercisable as of December 31, 2000 or within 60 days thereafter.
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(9) Includes 30,000 shares subject to options exercisable as of December 31,
2000 or within 60 days thereafter.
(10) Includes 36,792 shares of common stock, 28,608 shares subject to certain
vesting requirements and 335,165 shares subject to options exercisable as
of December 31, 2000 or within 60 days thereafter. Excludes 357,665 shares
subject to options that are not exercisable within 60 days of December 31,
2000.
(11) Includes 500 shares of common stock.
(12) Includes 277,736 shares of common stock, 91,392 shares subject to certain
vesting requirements and 1,444,453 shares subject to options exercisable as
of December 31, 2000 or within 60 days thereafter. Excludes 1,156,093
shares subject to options that are not exercisable within 60 days of
December 31, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have entered into several agreements with Intermedia, including the
general and administrative services agreement, three network services
agreements, and financing agreements. In addition, we have entered into
agreements with Microsoft and Compaq, beneficial holders of more than 5% of
Digex Class A common stock.
GENERAL AND ADMINISTRATIVE SERVICES AGREEMENT
On April 30, 1999, we entered into a general and administrative services
agreement with Intermedia. Under the terms of this agreement, as amended to
date, Intermedia provided Digex with back office and administrative services
such as human resources, finance and accounting, tax services, investor
relations, treasury, and information management services during 2000. This
agreement has an initial term of two years and expires in April 2001. The charge
for these services was $15.0 million in 2000.
Intermedia has advised us that the fees payable by Digex to Intermedia
under this agreement are intended to approximate Intermedia's estimated costs of
providing the covered services to Digex. Because it is not practical to obtain
quotes for all of these services from third parties, we cannot determine
whether, and there can be no assurance that, the terms of this agreement are as
favorable to us as would result from an arm's length negotiation with an
unrelated third party.
NETWORK SERVICES AGREEMENTS
Pursuant to three network services agreements between Intermedia and Digex
entered into in July 1999, Intermedia has been providing us with east and west
coast Internet transit, Internet access and managed firewall services. These
agreements have an initial term of two years and expire in July 2001. The charge
for these services amounted to $5.0 million in 2000.
The two Internet transit service agreements provide, among other things,
that:
- we will purchase, and Intermedia will provide us with, certain data
transit capacity;
- we will be treated as a most-favored customer entitled to rates and
fees as low as those granted by Intermedia to any other customer
purchasing substantially similar services;
- the agreements will have an initial term of two years which will be
automatically renewed for successive one year periods unless either
we or Intermedia elects not to renew by giving 30-days prior notice;
- Intermedia has made certain service level commitments to us covering
both network availability and performance; and
- if we do not renew the agreements for at least one renewal term, we
will be liable to Intermedia for any termination charges assessed
against Intermedia by local access providers for the early
termination of local access circuits purchased by Intermedia for the
provision of services to us.
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The managed firewall reseller agreement provided, among other things, for:
- certain service level commitments covering both service availability
and performance; and
- continuous access by Intermedia to any equipment owned by Intermedia
deployed at any of our facilities.
We believe the terms of the network services agreements are at least as
favorable to us as they would be under similar arrangements between Digex and an
unrelated third party.
ASSET MIGRATION AGREEMENT
On June 1, 2000, we entered into an asset migration agreement with
Intermedia. Under the terms of the agreement, we purchased certain assets,
including certain licensed third-party software, machinery, and equipment from
Intermedia at cost to provide independent managed firewall services. In
connection with the purchase of firewall-related assets from Intermedia, the
managed firewall services agreement between Digex and Intermedia was terminated.
We paid a purchase price of $4.5 million for the net book value of these assets
and services on June 30, 2000, the closing date of the agreement. Under the
asset migration agreement, we paid $0.9 million for Intermedia's support and
consultation for the six months ended December 31, 2000.
EXPENSE SHARING AND INDEMNITY ARRANGEMENTS
On January 24, 2000, we agreed with Intermedia to allocate and pay the
expenses of our February 2000 public offering, including any amounts arising
from any indemnification or contribution obligations, in proportion to the
number of shares of Class A common stock sold by us and by Intermedia. Expenses
of $0.3 million were allocated to Digex in 2000 and were netted against offering
proceeds.
SALE OF TELECOMMUNICATIONS RELATED ASSETS TO INTERMEDIA
We are subject to certain restrictions under the Intermedia indentures. Due
to these restrictions, we were required to use all of the net proceeds of our
equity offerings to purchase telecommunications related assets, in each case
within 270 days of the offering. We entered into three Use of Proceeds
Agreements with Intermedia on June 2, 1999, January 11, 2000, and January 24,
2000, respectively, to sell to Intermedia certain telecommunications related
assets that were purchased by us with the net proceeds of certain offerings of
Digex securities and the cash proceeds of the investments by Microsoft and
Compaq. The assets were sold to Intermedia at Digex's cost. The proceeds from
the sale of telecommunications related assets to Intermedia were approximately
$33.7 million in 2000. These proceeds were unrestricted and used to fund our
operating expenses. Net proceeds from the equity offerings were fully used as of
December 31, 2000.
GUARANTY AGREEMENT
On October 31, 2000, Intermedia increased the commitments available to it
under its revolving credit facility from $100.0 million to $350.0 million. As a
subsidiary of Intermedia, we will be a limited guarantor under the credit
facility to the greater of $90.0 million or the amounts borrowed by Digex. The
credit facility is also fully guaranteed by WorldCom. At December 31, 2000,
Intermedia had $113.0 million outstanding under its credit facility.
SOFTWARE, EQUIPMENT AND SERVICES PURCHASED FROM MICROSOFT AND COMPAQ
We have in the past purchased and expect to continue to purchase computer
hardware, software and certain consulting services from both Microsoft and
Compaq pursuant to certain arrangements negotiated prior to or in connection
with the investment by Microsoft and Compaq in Digex. We purchased $2.7 million
and $26.6 million (excluding $2.7 million of equipment credits) in 2000 for
products and services provided by Microsoft and Compaq, respectively.
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REIMBURSEMENT OF LEGAL EXPENSES
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇ incurred legal fees and expenses
of approximately $243,000 in the aggregate in 2000 in connection with litigation
in which they were named as defendants in their capacities as directors of Digex
(and in the case of ▇▇. ▇▇▇▇▇, an officer of Digex). We have reimbursed, or will
reimburse them, for these fees and expenses.
DIRECTOR COMPENSATION
In 2000, aggregate fees of $76,000 each were payable to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and
▇▇▇▇ ▇▇▇▇▇ for their services as directors of Digex (including the annual fee
and fees for attending meetings, including meetings of the special committee of
the board of directors).
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: April 27, 2001
DIGEX, INCORPORATED
(Registrant)
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive
Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
PRINCIPAL EXECUTIVE OFFICER:
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇ Director, President and Chief April 27, 2001
---------------------------------------------- Executive Officer
▇▇▇▇ ▇. ▇▇▇▇▇
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICERS:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Chief Financial Officer April 27, 2001
----------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Vice President and Controller April 27, 2001
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▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
DIRECTORS:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Chairman of the Board April 27, 2001
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇ Director April 27, 2001
----------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Director April 27, 2001
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Director April 27, 2001
----------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Director April 27, 2001
----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇ Director April 27, 2001
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▇▇▇▇ ▇. ▇▇▇▇▇
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