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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
or
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 000-23795
EXODUS COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
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<S> <C>
Delaware 77-0403076
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
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2831 Mission College Blvd.
Santa Clara, CA 95054
(Address of principal executive offices, including zip code)
(408) 346-2200
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section
12(g) of the Act: Common Stock
Preferred Stock Purchase Rights
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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 Registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
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As of February 10, 1999
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Aggregate market value of the voting stock held by
non-affiliates of the Registrant based on the
closing price of such stock: $1,395,174,207
Number of shares of Common Stock outstanding: 20,274,465
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EXODUS COMMUNICATIONS, INC.
1998 ANNUAL REPORT ON FORM 10-K
Table of Contents
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Page
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PART I
Item 1. Business ................................................... 3
Item 2. Properties ................................................. 14
Item 3. Legal Proceedings .......................................... 15
Item 4. Submission of Matters to a Vote of Security Holders ........ 15
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters ........................................ 16
Item 6. Selected Consolidated Financial Data ....................... 17
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations .................................. 18
Item 7A. Quantitative and Qualitative Disclosure About Market Risk... 36
Item 8. Financial Statements and Supplementary Data ................ 36
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure ................................... 36
PART III
Item 10. Directors and Executive Officers of the Registrant ......... 37
Item 11. Executive Compensation ..................................... 41
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 44
Item 13. Certain Relationships and Related Transactions ............. 46
PART IV
Item 14. Exhibits, Financial Statements, Financial Statement
Schedules, and Reports on Form 8-K.......................... 47
Signatures............................................................. 51
Index to Consolidated Financial Statements and Schedule................ F-1
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PART I
This report contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934 and Section 27A of the
Securities Act of 1933. These forward-looking statements involve a number of
risks and uncertainties, including those identified in the section of this
Form 10-K entitled "Factors That May Affect Future Operating Results," which
may cause actual results to differ materially from those discussed in such
forward-looking statements. The forward-looking statements within this Form
10-K are identified by words such as "believes," "anticipates," "expects,"
"intends," "may," "will" and other similar expressions. However, these words
are not the exclusive means of identifying such statements. In addition, any
statements which refer to expectations, projections or other characterizations
of future events or circumstances are forward-looking statements. We undertake
no obligation to publicly release the results of any revisions to these
forward-looking statements which may be made to reflect events or
circumstances occurring subsequent to the filing of this Form 10-K with the
SEC. Readers are urged to carefully review and consider the various
disclosures made by Exodus in this report and in our other reports filed with
the SEC, that attempt to advise interested parties of the risks and factors
that may affect our business.
ITEM 1. BUSINESS
The Company
Exodus is a leading provider of Internet system and network management
solutions for enterprises with mission-critical Internet operations. Our
solutions include Internet Data Centers, network services and managed
services, which together provide the high performance, scalability and
expertise that enterprises need to optimize their Internet operations. Exodus
delivers its services from geographically distributed, state-of-the-art
Internet Data Centers that are connected through a high performance dedicated
and redundant backbone network. Our tailored solutions are designed to
integrate seamlessly with existing enterprise systems architectures and to
enable customers to outsource the monitoring, administration and optimization
of their equipment, applications and overall Internet operations. As of
December 31, 1998, we had more than 800 customers, including installed and
uninstalled customers under contract, and managed over 6,000 customer servers.
Our customers represent a variety of industries, ranging from Internet-centric
companies such as Lycos, Inc., eBay Inc., MSN Hotmail (a subsidiary of
Microsoft Corporation), Yahoo! Inc., Inktomi Corporation and GeoCities, to
media companies such as MSNBC, USA Today Information Network, SportsLine USA,
Inc. and E-Online!, to Fortune 500 customers such as Applied Materials,
Hewlett-Packard Company and National Semiconductor Corporation.
Because Internet usage is growing rapidly, businesses are increasing the
breadth and depth of their Internet product and services offerings. These
Internet operations are mission-critical for virtually all Internet-centric
businesses and are becoming increasingly mission-critical for many mainstream
enterprises. In order to ensure the quality, reliability, availability and
redundancy of these mission-critical Internet operations, corporate IT
departments must make substantial investments in facilities, personnel,
equipment and networks that must be continuously upgraded to reflect changing
technologies and rapidly scale as the enterprise grows. Such a continuing
significant investment of resources is often an inefficient use of overall
resources and, as a result, a significant need exists for outsourcing
arrangements that can increase performance, provide continuous operation of
Internet solutions and reduce Internet operating expenses. We believe a
significant opportunity exists for a highly focused company to provide a
combination of server hosting, Internet connectivity and managed services that
will enable reliable, high performance of mission-critical Internet
operations.
Exodus offers an integrated portfolio of solutions that provide customers
with a scalable, secure and high performance platform for the development,
deployment and proactive management of
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mission-critical Internet operations. Our server hosting and Internet
connectivity services are offered through our Internet Data Centers' national
backbone network of multiple high speed DS-3, OC-3 and OC-12 lines, along with
our public and private network peering interconnections. We continue to
upgrade our network in order to accommodate expected traffic growth. Our
managed services include performance monitoring, site management reports, data
backup and restore services and security services. These services provide the
foundation for high performance, availability, scalability and reliability of
customers' Internet server operations. In addition, we integrate best-of-breed
technologies from leading vendors with our expertise and proprietary
technology.
Our objective is to become the leading provider of Internet system and
network management solutions for enterprises with mission-critical Internet
operations. To achieve this objective, we intend to:
. extend our market leadership and position Exodus as the brand name and
leader in this market;
. focus on enhancing systems and network management and Internet
technology services;
. accelerate our domestic expansion and begin to establish a global
presence;
. leverage our expertise to address new market opportunities such as e-
commerce; and
. continue to establish strategic relationships for distribution and
technology.
We began offering server hosting and Internet connectivity services in late
1995, opened our first dedicated Internet Data Center in August 1996, and
introduced managed services in 1997. We currently operate eight Internet Data
Centers consisting of approximately 200,000 gross square feet, located in six
metropolitan areas: Boston, Los Angeles, New York, San Francisco, Seattle and
Washington, D.C. We also have a server hosting facility in the London
metropolitan area. In 1999, we plan to open additional Internet Data Centers
in the Washington, D.C. and Seattle metropolitan areas, and to open our first
Internet Data Centers in the Chicago and London metropolitan areas.
We recently expanded our solutions and services by acquiring two providers
of Internet technologies, Arca Systems, Inc. ("Arca") and American Information
Systems, Inc. ("AIS"). In October 1998, we purchased Arca, a provider of
advanced network and system security consulting services. In February 1999, to
accelerate our launch into the Chicago metropolitan area, we acquired AIS, a
regional provider of co-location, Web hosting and professional services.
Services
Exodus' Internet solutions and services are designed to provide enterprises
with the high performance, scalability and expertise they need to optimize
their mission-critical Internet operations. We create tailored solutions for
our customers based on their unique business and technical requirements, and
modify the services as the customers' needs evolve. Our service offerings
include server hosting from our Internet Data Centers, network services and
managed services.
Internet Data Centers--Server Hosting Facilities
We deliver our services from geographically distributed, state-of-the-art
Internet Data Centers with uninterruptible power supply and back-up
generators, fire suppression, raised floors, HVAC, separate cooling zones,
seismically braced racks, 24x7 operations and high levels of physical
security. In these facilities, we support leading Internet hardware and
software systems vendor platforms, including those from Compaq Computer
Corporation, Dell Computer Corporation, Hewlett-Packard Company, IBM,
Microsoft Corporation, Silicon Graphics, Inc., Sun Microsystems, Inc. and
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The Santa Cruz Operation, Inc. This multi-vendor flexibility enables the
customer to retain complete control over the technical solution and to
integrate its Internet operations with its existing IT technical architecture.
Because mission-critical Internet operations are typically very dynamic and
often require immediate hardware and software upgrades to maintain targeted
service levels, customers have unlimited 24x7 access to the Internet Data
Centers. Additional space and electrical power can be added as needed,
ensuring that the customer has access to additional server hosting services.
Based upon their business and technical requirements, customers can select
from shared rack facilities within common cage areas, highly secure cabinets,
enclosed cage facilities or vaults. Our server hosting facilities generally
include dedicated electrical power circuits to ensure that each customer's
electrical power requirements are met.
The following chart summarizes the key features of our current server
hosting services:
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Service Description Benefits
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CyberRack 19(inch) or 23(inch) quarter, . Entry-level service,
half or full rack providing economical
solution for customers
that do not need
dedicated environments
. Secured environment
that is shared by
multiple customers
CyberCabinet 19(inch) or 23(inch) . Dedicated, locked
full cabinet cabinet
. A single rack with the
security of a
dedicated environment
. Dedicated power
circuits
Virtual Data Center 7(foot) X 8(foot) cage or . Dedicated, locked cage
customized to order . Flexibility in
designing and
configuring Internet
servers, including
space for multiple
racks and other
customer computing
products
. Dedicated power
circuits
ExodusVault 8(foot) X 8(foot) or . Dedicated, enclosed
8(foot) X 12(foot) vault or security area
customized to order . Additional security
for sensitive Internet
transactions by
financial institutions
and on-line merchants
. Biometric
identification for
entry and exit, motion
and temperature
detectors, cameras,
high impact glass, and
secured data and
electrical lines
. Dedicated power
circuits
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Network Services--Internet Connectivity
Exodus connects its Internet Data Centers through a high performance,
dedicated and redundant backbone ring with multiple high speed DS-3, OC-3 and
OC-12 lines, along with our public and private network peering
interconnections. Our network services are designed to deliver the
scalability, high availability and performance required for high-volume,
mission-critical Internet operations. Since our customers' mission-critical
Internet operations often experience network traffic spikes due to promotions
or events, we have a policy of providing sufficient excess network capacity
for our customers.
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To meet customers' requirements of near 100% availability, our network is
designed to minimize the likelihood of any single point of failure. Each
Internet Data Center has multiple physical fiber paths into the facility. We
maintain multiple network links from multiple vendors into each Internet Data
Center and regularly check that our fiber backbone is traversing physically-
separated paths. Customers may also enhance their Internet site's availability
by physically duplicating their site at multiple Internet Data Centers, and
synchronizing applications and content through our private fiber backbone
network. This network architecture optimizes the availability of a customer's
site, even in the event of a link failure.
Our network services are also designed to consistently deliver low-latency
and peak network performance. By the end of 1998, our network exchanged a
sustained 2.7 gigabits per second volume of traffic with the Internet during
peak periods. Our backbone engineering personnel continuously monitor traffic
patterns and congestion points throughout our network and at our
interconnection points, and dynamically reroute traffic flows to optimize end-
user response times. We also provide peak network performance by maintaining a
large number of direct public and private network peering interconnections.
Our network includes private peering interconnections with 36 national ISPs,
as well as public peering interconnections with over 120 ISPs.
Managed Services
We provide managed services to our customers, including detailed
monitoring, reporting and management tools to control their hardware, network,
software and application environments. Through our system and network
management framework, a customer can manage mission-critical Internet
operations housed at our Internet Data Centers as well as at the customer's
site. We believe this provides an important advantage to enterprises seeking
to outsource a portion of their Internet operations and to link the management
of the outsourced operations with in-house operations. Our proactive service
methodology focuses on identifying and resolving potential problems before
they ever affect an Internet site's availability or performance. Our
sophisticated Internet system and network management solutions enable us to
identify and to begin to resolve hardware, software, network and application
problems, frequently before the customer is even aware that a problem exists.
We offer the services summarized in the following chart:
Service Description Benefit
Managed . A package of 24x7 monitoring . Real time monitoring,
Monitoring and management solutions for notification and
Services system and database reporting for server and
applications that includes database alarms and
SystemHealth, Database problems
Health, and HeadsUp Site
Monitoring services
SystemHealth . 24x7 proactive monitoring of . Maximizes availability
Monitoring Internet server process of customers' mission-
Service . 24x7 rebooting of servers critical Internet
. Monthly and daily reports operations by
available via the Web identifying potential
. An Exodus system problems proactively
administrator that performs . Allows customers to
problem resolution and leverage Exodus' systems
automated process restarts expertise
(optional) . Offload problem
resolution to Exodus
(optional)
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Service Description Benefit
DatabaseHealth . 24x7 proactive monitoring of . Maximizes availability
Monitoring SQL server processes of customers' database
Service . Automated customer resources by identifying
notification of database potential problems
problems proactively
. Monthly and daily reports . Offload problem
available via the Web resolution to Exodus
. Exodus system administrator (optional)
who performs problem
resolution (optional)
. Automated process restarts
(optional)
HeadsUp Site . A password protected, HTML- . Displays a variety of
Monitor based tool for reporting data including bandwidth
real-time and historical reports, current
system and network information on network
information as well as events, and URL data
bandwidth usage data
Site Management . Bandwidth usage reports, . Assists in capacity
Reports graphic and tabular planning and management
statistics delivered to of network resources
customers via the Internet
on an hourly, daily and
semi-monthly basis
Internet . Tape management services to . Maximizes the
Disaster restore sites after a system availability of
Recovery failure Distributed load customers' applications;
balancing services to provides additional
seamlessly re-route user redundancy in the event
traffic to an alternate site of Internet site failure
in the event of a failure
Internet . Assigned project manager . Assures a smooth
Systems accountable for developing a transition to an Exodus
Integration migration plan, managing the Internet Data Center
site's installation, and along with ongoing
providing ongoing account support
support
. Exodus acts as value-added
reseller of Cisco and F5
Labs, Inc. products,
primarily routers, hubs and
switching equipment, in
connection with server
hosting services
Data Vault . Fully-managed on site back- . Maintains regular data
up and restore provided in back-up and fast network
partnership with Sun restore capability for
Microsystems, utilizing mission-critical
Veritas NetBackup solution Internet sites
and DLT tape storage
technology
Exodus SAFE . Full range of perimeter . Enhances site security
(Secure Access firewall security, and integrity
from Exodus) penetration testing,
automated intrusion
detection, site security
auditing, and consulting
services
. Potential intruders
identified and blocked from
customer's site
. Site's security probed and
tested 24x7 and audit
reports generated on
potential security risks
. Proactive agendas developed
before site integrity is
comprised
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Service Description Benefit
Exodus
MultiPath Site . Site requests intelligently . Increases availability
balanced across multiple and performance for
servers located within a multi-server, mission-
single Internet Data Center critical Internet sites
Exodus . Intelligent routing . Maximizes availability
Multipath Net services that and performance for
geographically distribute Internet sites located
end-user requests across multiple Internet
. Traffic routed based upon Data Centers
server performance and . Optimizes end-user
availability, Internet response time
traffic patterns, and the . Provides sophisticated
geographic locations of the Internet site redundancy
requesters
The following chart summarizes the key features of an additional managed
service we are developing:
Service Description Benefit
Caching . Deployment of Inktomi . Provides customers with a
network caching technology cost-effective option to
through our network of geographically distribute
Internet Data Centers, that their content, thereby
will facilitate the enabling them to reach a
distribution of customer wider range of their
content Internet end-users
. Expected to become
available by the end of
1999
We also offer professional services and intend to expand such services to
assist our customers in planning their strategies for managing mission-critical
Internet operations, transitioning such operations to our Internet Data Centers
and managing certain aspects of their Internet operations. These services can
be layered to allow customers to outsource an increasing portion of the
management of their Internet operations.
Customers
We have established a diversified base of customers in a wide range of
industries, including finance, entertainment, high technology, education,
healthcare and publishing. As of December 31, 1998, we had over 800 customers
(including installed and uninstalled customers under contract). The following
is a representative list of our Internet Data Center customers which generated
aggregate revenues for us in 1998 in excess of $15 million. These customers
represented in the aggregate approximately 30% of our 1998 revenues, and none
of such customers individually represented in excess of 10% of 1998 revenues.
Applied Materials Fujitsu National Semiconductor
Beyond.com GeoCities NextCard
CondeNet Hearst New Media & Onsale
Cybercash Technology priceline.com
DoubleClick Hewlett-Packard SF Gate--The Chronicle
eBay Inktomi Publishing Company
Eidos Interactive Kelley Blue Book Sony Online Ventures
E-Loan Lycos SportsLine USA
eShare Technologies Macromedia United Media
France Telecom North MSNBC Interactive News USA Today Information
America MSN Hotmail Network
FreeRealTime.com
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Sales and Marketing
Our sales and marketing objective is to achieve broad market penetration
within our target market of enterprises that depend upon the Internet for
mission-critical operations. As of December 31, 1998, we had 166 employees
engaged in sales and marketing.
We sell our services to enterprises directly through our sales force and
indirectly through our channel partners. We are actively seeking to increase
our sales and distribution capabilities and coverage in the United States and
to expand internationally as new Internet Data Centers are installed outside
of the United States, commencing with our Internet Data Center in London,
England. Currently, most of our sales are derived through the efforts of our
direct sales force.
Sales Force
Our sales force is organized into four distinct groups, consisting of field
sales, strategic accounts, channel sales and telesales, each of which is
further divided into geographical regions within the United States. There is
also a new sales organization in London that began to staff in October 1998.
Systems engineers and project managers support our sales force, providing pre-
and post-sales support to ensure that customers' services are implemented
properly and efficiently.
Channel Program
Our channel program includes relationships with At Home Corporation,
Hewlett-Packard Company, Silicon Graphics, Inc. and Sun Microsystems, Inc. The
various levels of channel program partner participation are summarized below:
. Solutions Integrators play a sales representative role for us, and
receive a one-time payment, based on the monthly recurring charges from
opportunities brought into us. They are typically consultants,
independent Web developers, content developers, developers of small- to
medium-sized applications, and regional VARs.
. Alliance Partners market our services, and receive a monthly residual
income for opportunities introduced to us. Alliance Partners are
typically larger regional or national systems integrators, Web
developers, hardware and software resellers, consulting organizations
and ISPs.
. Technology Partners market software or hardware solutions, working
together with us to offer superior services and innovative products.
Through product promotions and bundled solutions, technology partners
can offer their customers new value-added services and greater pricing
incentives.
. Resellers market co-branded Exodus services. They commit to a certain
volume level to resell as part of their application or niche-focused
service offering to their customer base.
Marketing
Our marketing organization is responsible for product marketing management,
public relations and marketing communications. Product marketing management
includes defining the product roadmap and bringing to market the portfolio of
services and programs that will address customer needs. These activities
include product strategy and definition, pricing, competitive analysis,
product launches, channel program management and product lifecycle management.
We stimulate product demand through a broad range of marketing communications,
public relations, industry event sponsorship, as well as through our Web site.
Public relations focuses on cultivating industry analyst
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and media relationships with the goal of securing broad media coverage and
public recognition of our leadership position in the market for Internet
system and network management solutions.
Customer Service
We offer superior customer service by understanding the technical
requirements and business objectives of our customers and by fulfilling their
needs proactively on an individual basis. Working closely with our customers,
we optimize the performance of our customers' Internet operations, avoid
downtime, resolve problems that may arise, and make appropriate adjustments in
services as customer needs change over time. In December 1998, to enhance our
customer service delivery and increase operating efficiencies 24x7, we
launched a centralized call center for our three San Francisco Internet Data
Centers. We intend to roll out a similar program to our other Internet Data
Centers. Partnering with our customers, we also solicit feedback to ensure
that we continue to offer the highest quality of service. We use advanced
software tools to aid in customer monitoring and service efforts. Many of our
customer service personnel have been specifically trained and certified by the
vendors of our software tools, including Sun Microsystems, Inc., Microsoft
Corporation, Oracle Corporation and Computer Associates.
We also provide customer service and technical support during the
installation phase, including a transition team and project management
support. Our customer service continues after installation, through customer
advocacy representatives who are responsible for resolving customer problems.
In addition, we provide system integration services between the customer's
Internet site and legacy systems. After installation, primary customer support
is coordinated through each Internet Data Center's Network Control Center.
These centers are operated 24x7 by engineers who monitor site and network
operations, and activate teams to solve problems that arise. To solve complex
problems, we draw on the collective expertise at all of our Internet Data
Centers, creating a nationwide engineering pool. Our customer service
personnel are also available to assist customers whose operations require
specialized procedures.
We employ network engineers and systems administrators who work with
customers to design and maintain their Internet operations. Our network
engineers and system administrators are trained specialists who support
Windows NT, Solaris, Linux and other UNIX platforms. They are also trained to
support Cisco routers and switches. They also serve as the second level of
support for customer issues that cannot be resolved by the Network Control
Center. We also employ a group of backbone engineers who are accountable for
designing and operating the dynamic network that connects our Internet Data
Centers. This group constantly monitors the network design and effectiveness
to optimize performance for customers, rerouting and redesigning traffic as
conditions require.
Our contracts with customers generally cover the provision of services by
us for a one year period and may contain, among other things, certain service
level warranties. These service agreements entered into prior to August 1997
typically included service level warranties which provided that, if we failed
to provide Internet Data Center services to a customer for more than 24
consecutive hours, such customer's account would be credited for the charges
the customer paid for services it did not receive during such period. Between
August 1997 and July 1998, our service agreements typically included service
level warranties which provide that, if we fail to provide Internet Data
Center services to a customer for more than two consecutive hours, such
customer's account would be credited for one day of service and, if for more
than eight consecutive hours, one week of service, with each customer limited
to one credit per month. Since July 1998, our service agreements have
typically included service level warranties which provide that, if we fail to
provide Internet Data Center services to a customer for more than 15 minutes,
such customer's account would be credited for one day of service, up to a
maximum of seven days in any month. In addition, we provide additional credits
for packet loss and transmission latency. Certain customers have received more
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favorable terms than those described above. To date, only a limited number of
customers have been entitled to these warranties to receive a credit for a
period of free service. As we did not open our first dedicated Internet Data
Center until August 1996, we have had Internet Data Center customers for only
a short period of time. Accordingly, many of our customers are within the
first year of their service contracts. We have had limited experience with
customers whose initial one year service contract terms have been completed
and whose contracts are therefore eligible for renewal.
As of December 31, 1998, we had 214 employees dedicated to customer
service, professional services and network engineering.
Network Design
Our high performance server network is designed to provide the highest
possible availability and reliability for our customers' Internet operations.
The network comprises our eight Internet Data Centers that are interconnected
by a high-performance backbone network that is connected to the Internet
through public and private peering interconnections. Within each Internet Data
Center, a virtual LAN environment provides redundant, high-speed internal
connectivity.
Our Internet Data Centers are located near most of the major Internet
exchange points ("IXPs") and are connected to their local IXPs by multiple DS-
3 or OC-3 lines, provisioned by Teleport Communications Group Inc., MFS
Communications Company, Inc., Brooks Fiber Properties, Inc. and the Regional
Bell Operating Companies. These links to the local exchange points, combined
with private exchanges with ISPs, connect the customers' traffic to the
Internet.
In order to provide a high level of redundancy, performance, and capacity,
along with real-time content replication or caching across our Internet Data
Centers, we have multiple DS-3, OC-3 and OC-12 lines. We engineer our backbone
with a geographically diverse fiber path to provide high availability, even in
the event of a link failure. We regularly upgrade our network in order to
accommodate expected traffic growth. For customers with servers located at
multiple Internet Data Centers, we provide dynamic response time and load
balancing technologies for optimal routing of traffic.
Within each Internet Data Center, we deploy a virtual LAN environment to
increase reliability and performance and to provide customers with redundant
connectivity to our backbone and the Internet. DS-3, OC-3 and OC-12 lines are
strategically placed on different routers to avoid any single points of
failure. We also use a combination of public and private peering
interconnections to achieve fast and reliable delivery of content. We have
private peering interconnections with 36 national ISPs and public peering
interconnections with over 120 ISPs. We also have a presence at each of the
major U.S. IXPs.
We will continue to work with ISPs to establish direct private peering
interconnections at each of our Internet Data Centers, thus enhancing content
delivery. Our broad combination of private and public peering interconnections
provides customers with the reliability and redundancy that they need to
ensure their content reaches its intended destination. We seek to provide
significant unutilized network capacity for our LAN, WAN and public and
private peering links to allow for spikes in demand or line outages.
Product Development
Our product development group is accountable for evaluating and integrating
best-of-breed technologies to enhance our service offerings that support the
customers' mission-critical Internet operations. We are also developing
proprietary technologies that will be integrated with such best-of-breed
technologies. We believe that establishing relationships with technology
leaders enables us to
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leverage these enterprises' research and development expertise. These
relationships enable us to gain quicker access to innovative technologies and
thus provide more creative value-added solutions for our customers. For
example, we have worked very closely with Computer Associates to develop
certain of our management services using Computer Associates' Unicenter TNG
technology. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Factors Affecting Future Results--We Depend on
Third Party Equipment and Software Suppliers."
Our product development personnel have continued to develop strategic
vendor and technology relationships, such as the one with Computer Associates.
Other key partners include: Checkpoint Software Technologies Limited, Cisco
Systems, Inc., Raptor Systems, Inc. and Sun Microsystems, Inc. Additionally,
we are developing a caching service with Inktomi Corporation. To the extent
that we are unable to obtain the technology necessary to meet customers' needs
from a third party, we may develop the technology ourself. As of December 31,
1998, we employed 18 persons in product development.
Exodus incurred $444,000, $1.6 million and $3.2 million in product
development expenses during 1996, 1997 and 1998, respectively.
Competition
Our market is intensely competitive. There are few substantial barriers to
entry, and we expect that we will face additional competition from existing
competitors and new market entrants in the future. The principal competitive
factors in this market include:
. Internet system engineering and other technical expertise;
. customer service;
. network capability, reliability, quality of service and scalability;
. the variety of services offered;
. access to network resources, including circuits and equipment;
. broad geographic presence;
. price;
. the ability to maintain and expand distribution channels;
. brand name;
. the timing of introductions of new services;
. network security; and
. financial resources.
There can be no assurance that we will have the resources or expertise to
compete successfully in the future. Our current and potential competitors in
the market include:
. providers of server hosting services;
. national and regional ISPs;
. global, regional and local telecommunications companies and Regional
Bell Operating Companies; and
. large IT outsourcing firms.
12
<PAGE>
Many of our competitors have substantially greater resources, more
customers, longer operating histories, greater name recognition and more
established relationships in the industry. As a result, these competitors may
be able to develop and expand their network infrastructures and service
offerings more quickly, devote greater resources to the marketing and sale of
their products and adopt more aggressive pricing policies. In addition, these
competitors have entered and will likely continue to enter into business
relationships to provide additional services competitive with those we
provide.
Some of our competitors may be able to provide customers with additional
benefits in connection with the Internet system and network management
solutions, including reduced communications costs, which could reduce the
overall costs of their services relative to ours. We may not be able to offset
the effects of any such price reductions. In addition, we believe our market
is likely to encounter consolidation in the near future, which could result in
increased price and other competition.
Intellectual Property Rights
We rely on a combination of copyright, trademark, service mark and trade
secret laws and contractual restrictions to establish and protect certain
proprietary rights in our products and services. We have no patented
technology that would preclude or inhibit competitors from entering our
market. Although we have entered into confidentiality agreements with our
employees, contractors, suppliers, distributors and appropriate customers to
limit access to and disclosure of our proprietary information, these may prove
insufficient to prevent misappropriation of our technology or to deter
independent third-party development of similar technologies. In addition, the
laws of certain foreign countries may not protect our products, services or
intellectual property rights to the same extent as do the laws of the United
States.
In addition to licensing technologies from third parties, we are developing
and acquiring additional proprietary intellectual property. Third parties may
try to claim that our products or services infringe their intellectual
property. We expect that participants in our markets will be increasingly
subject to infringement claims. Any such claim, whether meritorious or not,
could be time consuming, result in costly litigation, cause product
installation delays or require us to enter into royalty or licensing
agreements. Such royalty or licensing agreements might not be available on
terms acceptable to us or at all.
Government Regulation and Legal Uncertainties May Adversely Affect Our
Business
Laws and regulations directly applicable to communications and commerce
over the Internet are becoming more prevalent. The United States Congress has
recently considered Internet laws regarding children's privacy, copyrights,
taxation and the transmission of sexually explicit material. The European
Union also recently enacted its own privacy regulations. The law of the
Internet, however, remains largely unsettled, even in areas where there has
been some legislative action. It may take years to determine whether and how
existing laws such as those governing intellectual property, privacy, libel
and taxation apply to the Internet. In addition, the growth and development of
the market for online commerce may prompt calls for more stringent consumer
protection laws, both in the United States and abroad, that may impose
additional burdens on companies conducting business online. The adoption or
modification of laws or regulations relating to the Internet could adversely
affect our business. We provide services over the Internet in all states in
the United States and in many foreign countries, and we facilitate the
activities of our customers in these jurisdictions. As a result, we may be
required to qualify to do business, or be subject to taxation, or be subject
to other laws and regulations, in these jurisdictions even if we do not have a
physical presence or employees or property in these jurisdictions. The
application of these multiple sets of laws and regulations is uncertain, but
we could find that Exodus is subject to regulation, taxation, enforcement or
other liability in unexpected ways, which could materially adversely affect
our business.
13
<PAGE>
There are Risks Involved with the Information Disseminated through Our Network
The law relating to the liability of online services companies and Internet
access providers for information carried on or disseminated through their
networks is currently unsettled. The Child Online Protection Act of 1998
prohibits and imposes criminal penalties and civil liability on anyone engaged
in the business of selling or transferring, by means of the World Wide Web,
material that is harmful to minors without restricting access to such material
by persons under seventeen years of age. Numerous states have adopted or are
currently considering similar types of legislation. The imposition upon us and
other Internet network providers of potential liability for information
carried on or disseminated through systems could require us to implement
measures to reduce exposure to liability, which may require the expenditure of
substantial resources, or to discontinue certain service or product offerings.
Further, the costs of defending against such claims and potential adverse
outcomes of such claims could have a material adverse effect on our business.
While we carry professional liability insurance, it may not be adequate to
compensate or may not cover us in the event we become liable for information
carried on or disseminated through our networks.
Certain businesses, organizations and individuals have in the past sent
unsolicited commercial e-mails advertising sites hosted at our facilities to
massive numbers of people, typically to advertise products or services. This
practice, known as "spamming," has led to some complaints against us. In
addition, certain ISPs and other online services companies could deny network
access to us if we allow undesired content or spamming to be transmitted
through our networks. Although we prohibit customers by contract from
spamming, there can be no assurance that customers will not engage in this
practice, which could have a material adverse effect on our business.
Employees
As of December 31, 1998, Exodus had 472 employees, including 166 employees
in sales and marketing, 18 employees in product development, 214 employees in
customer service, professional services and network engineering and 74
employees in finance and administration. We believe that our future success
will depend in part on our continued ability to attract, hire and retain
qualified personnel. The competition for such personnel is intense, and there
can be no assurance that we will be able to identify, attract and retain such
personnel in the future. None of our employees is represented by a labor
union, and management believes that our employee relations are good. See
"Management's Discussion and Analysis of Financial Condition and Operating
Results--Factors Affecting Future Results--We Must Manage Growth Effectively"
and "--We Depend on Our Key Personnel."
ITEM 2. PROPERTIES
Our executive offices are located in Santa Clara, California and consist of
approximately 147,000 square feet that are leased pursuant to an agreement
that expires in 2008. We lease the facilities for our current Internet Data
Centers in the following metropolitan areas and specific cities, which cover
an aggregate of approximately 240,000 gross square feet and expire in the
years indicated below:
<TABLE>
<CAPTION>
Metropolitan
Area City and State Lease Expiration
------------ -------------- ----------------
<S> <C> <C>
San Francisco Santa Clara, CA 2009
Santa Clara, CA 2002
Santa Clara, CA 2007
New York Jersey City, NJ 2007
Seattle Seattle, WA 2007
Los Angeles Irvine, CA 2007
Washington, D.C. Herndon, VA 2004
Boston Waltham, MA 2010
</TABLE>
14
<PAGE>
Most of our leases provide for a renewal option upon the expiration of the
initial term. We currently maintain sales offices in unutilized space in our
Internet Data Centers. We also have a server hosting facility in the London
metropolitan area. By the end of 1999, we plan to expand domestically and
internationally. This includes additional Internet Data Centers in the
Washington, D.C. and Seattle metropolitan areas. We also intend to open our
first Internet Data Centers in the Chicago and London metropolitan areas. We
have recently entered into leases for the space needed for additional sites in
the Washington, D.C. metropolitan area which covers approximately 88,000
square feet (which we will expand to approximately 120,000 square feet when we
build an additional floor) and expires in 2008, in the Seattle metropolitan
area which covers approximately 99,000 square feet and expires in 2009, in the
Chicago metropolitan area which covers approximately 48,000 square feet and
expires in 2010, and in the London metropolitan area which covers
approximately 41,000 square feet and expires in 2023.
ITEM 3. LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders in the fourth
quarter of 1998.
15
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market for Registrant's Common Equity.
Our Common Stock is traded on the Nasdaq National Market under the symbol
"EXDS." The following table sets forth the range of the high and low closing
sale prices of our Common Stock by quarter as reported on the Nasdaq National
Market since March 19, 1998, the date our Common Stock commenced trading.
<TABLE>
<CAPTION>
Quarter High Low
------- ------ ------
<S> <C> <C>
1998 Fourth Quarter........................................... $66.75 $19.31
1998 Third Quarter............................................ 48.88 17.00
1998 Second Quarter........................................... 47.88 30.50
1998 First Quarter (commencing March 19, 1998)................ 28.56 27.19
</TABLE>
As of February 10, 1999, the number of stockholders of record was 284.
Because many of our shares are held by brokers and other institutions on
behalf of stockholders, we are unable to estimate the total number of
beneficial stockholders represented by these record holders.
We have never declared or paid any cash dividends on our stock. We
currently intend to retain any earnings for use in our business and do not
anticipate paying any cash dividends in the foreseeable future.
Use of Proceeds from Sales of Registered Securities.
Our initial public offering of Common Stock was effected through a
Registration Statement on Form S-1 (File No. 333-44469) that was declared
effective by the SEC on March 18, 1998 and pursuant to which we sold an
aggregate of 5,125,000 shares of our Common Stock.
As of December 31, 1998, we had used the estimated aggregate net proceeds
of $69.8 million from our initial public offering as follows:
<TABLE>
<S> <C>
Construction of plant, building and facilities: $1.0 million
Purchase and installation of machinery and equipment: 1.7 million
Purchases of real estate: --
Acquisition of other businesses: 5.8 million
Repayment of indebtedness: 6.5 million
Working capital: 38.8 million
Temporary investments (short term, interest bearing treasury
securities): 16.0 million
Other purposes: --
</TABLE>
The foregoing amounts represent our best estimate of our use of proceeds
for the period indicated. No such payments were made to our directors or
officers or their associates, holders of 10% or more of any class of our
equity securities or to our affiliates.
16
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following consolidated selected financial data should be read in
conjunction with our Consolidated Financial Statements and Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Form 10-K. The consolidated statement
of operations data for each of the years in the three-year period ended
December 31, 1998, and the consolidated balance sheet data as of December 31,
1997 and 1998, are derived from consolidated financial statements that have
been audited by KPMG LLP, independent auditors, and are included elsewhere in
this Form 10-K. The consolidated balance sheet data as of December 31, 1994,
1995 and 1996 and the consolidated statement of operations data for the year
ended December 31, 1995 are derived from consolidated financial statements
that have been audited by KPMG LLP that are not included herein. The
consolidated statement of operations data for the year ended December 31, 1994
are derived from unaudited consolidated financial statements that are not
included herein. The unaudited consolidated financial statements have been
prepared on substantially the same basis as the audited consolidated financial
statements and, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results of operations for such periods. Historical results
are not necessarily indicative of the results to be expected in the future.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1995 1996 1997 1998
------- ------- -------- --------
(in thousands, except per share
data)
<S> <C> <C> <C> <C>
Consolidated Statement of Operations
Data:
Revenues:
Service revenues........................ $ 1,068 $ 2,454 $ 11,588 $ 49,808
Equipment revenues...................... 340 676 820 2,930
------- ------- -------- --------
Total revenues........................ 1,408 3,130 12,408 52,738
------- ------- -------- --------
Cost and expenses:
Cost of service revenues................ 846 2,538 16,228 59,261
Cost of equipment revenues.............. 282 452 640 2,298
Marketing and sales..................... 1,056 2,734 12,702 28,778
General and administrative.............. 427 1,056 5,983 15,865
Product development..................... 70 444 1,647 3,221
------- ------- -------- --------
Total cost and expenses............... 2,681 7,224 37,200 109,423
------- ------- -------- --------
Operating loss........................ (1,273) (4,094) (24,792) (56,685)
Interest income.......................... -- 68 193 7,137
Interest expense......................... (38) (107) (699) (16,894)
------- ------- -------- --------
Net loss.............................. (1,311) (4,133) (25,298) (66,442)
Cumulative dividends and accretion on
redeemable convertible preferred
stock.................................. -- -- (1,413) (2,014)
------- ------- -------- --------
Net loss attributable to common
stockholders......................... $(1,311) $(4,133) $(26,711) $(68,456)
======= ======= ======== ========
Basic and diluted net loss per share
(1)..................................... $ (1.00) $ (2.16) $ (13.85) $ (4.38)
======= ======= ======== ========
Shares used in computing basic and
diluted net loss per share (1).......... 1,315 1,914 1,928 15,643
======= ======= ======== ========
Consolidated Statement of Cash Flows
Data:
Net cash used for operating activities... $ (453) $(3,116) $(15,518) $(46,498)
Net cash used for investing activities... (77) (3,877) (23,864) (92,746)
Net cash provided by financing
activities.............................. 692 10,545 45,937 279,865
Other Data:
EBITDA (2)............................... $(1,208) $(3,633) $(20,274) $(41,125)
Depreciation and amortization............ 65 461 3,429 12,997
Capital expenditures..................... 69 3,499 22,489 44,564
Deficiency of earnings available to cover
fixed charges (3)....................... (1,311) (4,133) (25,298) (66,442)
</TABLE>
- -------
(1) See Note 1 of Notes to Consolidated Financial Statements for an
explanation of the determination of the number of shares used in computing
per share data.
(2) Represents loss before net interest expense, income taxes, depreciation,
amortization (including amortization of deferred stock compensation) and
other noncash charges ("EBITDA"). Although EBITDA should not be used as an
alternative to operating loss or net cash provided by (used for) operating
activities, investing activities or financing activities, each as measured
under generally accepted accounting principles, and, although EBITDA may
not be comparable to other similarly titled information from other
companies, our management believes that EBITDA is an additional meaningful
measure of performance and liquidity.
(3) Earnings consist of income (loss) before provision for income taxes plus
fixed charges. Fixed charges consist of interest charges and amortization
of debt expense and discount or premium related to indebtedness, whether
expensed or capitalized, and that portion of rental expense we believe to
be representative of interest.
17
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, 1994
----------------------------
(in thousands, except ratio
and per share data)
<S> <C>
Consolidated Statement of Operations Data (1):
Revenues......................................... $ 977
Operating income................................. 143
Net income....................................... 144
Basic and diluted net income per share........... $0.14
Shares used in computing basic and diluted net
income per share................................ 1,000
Ratio of earnings to fixed charges (2)........... 26x
</TABLE>
- --------
(1) We are the successor to a Maryland corporation that was formed in August
1992 to provide computer consulting services. We began to offer Internet
connectivity services to enterprises in October 1994 and server hosting
services in late 1995. In August 1996, we opened our first dedicated
Internet Data Center and refocused our business strategy on providing
Internet system and network management solutions for enterprises with
mission-critical Internet operations.
(2) Earnings consist of income (loss) before provision for income taxes plus
fixed charges. Fixed charges consist of interest charges and amortization
of debt expense and discount or premium related to indebtedness, whether
expensed or capitalized, and that portion of rental expense we believe to
be representative of interest.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1994 1995 1996 1997 1998
---- ------- ------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents............ $ 1 $ 163 $ 3,715 $ 10,270 $150,891
Restricted cash equivalents and
investments......................... -- -- 378 1,753 45,614
Working capital (deficiency)......... 93 (1,170) 1,892 (3,707) 119,693
Total assets......................... 320 840 8,289 40,973 293,286
Equipment loans, line of credit
facilities and capital lease
obligations, less current portion... -- 141 1,449 15,135 27,096
Senior Notes......................... -- -- -- -- 200,000
Total stockholders' equity
(deficit)........................... 169 (1,140) (5,234) (30,600) 19,141
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of our financial condition and results of
operations should be read in conjunction with the Consolidated Financial
Statements and Notes thereto included elsewhere in this Form 10-K. This
discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from those anticipated
in these forward-looking statements. Factors that may cause such differences
include, but are not limited to, those set forth under "--Factors Affecting
Future Results."
Overview
We are a leading provider of Internet system and network management
solutions for enterprises with mission-critical Internet operations. Our
solutions include Internet Data Centers, network services and managed
services, that together provide the high performance, scalability and
expertise that enterprises need to optimize Internet operations. We deliver
our services from our geographically distributed, state-of-the-art Internet
Data Centers that are connected through a redundant high-performance national
Internet backbone ring.
We are the successor to a Maryland corporation that was formed in August
1992 to provide computer consulting services. We began offering server hosting
and Internet connectivity services in late 1995, opened our first dedicated
Internet Data Center in August 1996 and introduced managed services in 1997.
We have derived most of our revenues from customers for which we provide these
services. Each of our Internet Data Center customers initially purchases a
subset of our service offerings to address specific departmental or enterprise
Internet computing needs, and some of these
18
<PAGE>
customers purchase additional services as the scale and complexity of their
Internet operations increase. We sell our services under contracts that
typically have terms of one year. Customers pay monthly fees for the services
utilized, as well as one-time fees for installation and for equipment they
purchase from us.
We opened our first Internet Data Center in the San Francisco metropolitan
area in August 1996. Since that time, we have opened seven additional domestic
Internet Data Centers in the metropolitan areas of New York (March 1997), San
Francisco (second site--August 1997; third site--June 1998), Seattle
(September 1997), Los Angeles (October 1997), Washington, D.C. (December 1997)
and Boston (July 1998), and we have a server hosting facility in London. See
"Business--Facilities." The building of Internet Data Centers has required us
to obtain substantial equity and debt financing. See "--Factors Affecting
Future Results--Our Substantial Leverage and Debt Service Obligations
Adversely Affect Our Cash Flow" and "--Liquidity and Capital Resources" below.
In October 1998, we purchased Arca Systems, Inc. ("Arca"), a provider of
advanced network and system security consulting services. In February 1999, we
acquired American Information Systems, Inc. ("AIS"), a regional provider of
co-location, Web hosting and professional services.
We intend to expand domestically and internationally. We expect to open
additional Internet Data Centers in the Chicago, Washington, D.C., Seattle and
London metropolitan areas in 1999. Prior to building an Internet Data Center
in a new geographic region, we employ various means to evaluate the market
opportunity in a given location, including market research on Internet usage
statistics, the pre-selling of services into the proposed market and analysis
of specific financial criteria. We typically require at least six months to
select the appropriate location for an Internet Data Center, construct the
necessary facilities, install equipment and telecommunications infrastructure,
and hire the operations and sales personnel needed to conduct business at that
site. Expenditures related to an Internet Data Center commence well before the
Internet Data Center opens, and it takes an extended period to approach break-
even capacity utilization at each site. As a result, we expect that individual
Internet Data Centers will experience losses for an excess of one year from
the time they are opened. We experience further losses from sales personnel
hired to test market our services in markets where there is no, and may never
be an, Internet Data Center. As a result, we expect to make investments in
expanding our business rapidly into new geographic regions which, while
potentially increasing our revenues in the long term, will lead to significant
losses for the foreseeable future. See "--Factors Affecting Future Results--
Rapid Expansion Produces a Significant Strain on Our Business" for risks
related to the foregoing forward-looking statements.
Since we began to offer server hosting and Internet connectivity services
in 1995, we have experienced operating losses and negative cash flows from
operations in each quarterly and annual period. As of December 31, 1998, we
had an accumulated deficit of approximately $97 million. The revenue and
income potential of our business and market is unproven, and our limited
operating history makes an evaluation of us and our prospects difficult. We
intend to invest in new Internet Data Centers, product development, sales and
marketing programs, and therefore we believe that we will continue to
experience net losses on a quarterly and annual basis for the foreseeable
future. Companies, such as Exodus, in the new and rapidly evolving market for
Internet system and network management solutions encounter risks, expenses and
difficulties that affect their business and prospects. There can be no
assurance that we will ever achieve profitability on a quarterly or an annual
basis or will sustain profitability if achieved. See "--Factors Affecting
Future Results--Our Short Operating History and Heavy Losses Make Our Business
Difficult to Evaluate" for risks related to the foregoing forward-looking
statements.
19
<PAGE>
Results of Operations for the Years Ended December 31, 1996, 1997 and 1998
The following table sets forth certain statement of operations data as a
percentage of total revenues for the years ended December 31, 1996, 1997 and
1998. This information has been derived from our consolidated audited
financial statements included in this Form 10-K. This information should be
read in conjunction with the Consolidated Financial Statements and Notes
thereto included herein.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Revenues:
Service revenues.......... 78.4% 93.4% 94.4%
Equipment revenues........ 21.6 6.6 5.6
------- ------- -------
Total Revenues.......... 100.0 100.0 100.0
------- ------- -------
Cost and expenses:
Cost of service revenues.. 81.1 130.8 112.3
Cost of equipment
revenues................. 14.4 5.1 4.4
Marketing and sales....... 87.3 102.4 54.6
General and
administrative........... 33.8 48.2 30.1
Product development....... 14.2 13.3 6.1
------- ------- -------
Total cost and
expenses............... 230.8 299.8 207.5
Operating loss.......... (130.8) (199.8) (107.5)
Interest income............. 2.2 1.5 13.5
Interest expense............ (3.4) (5.6) (32.0)
------- ------- -------
Net loss................ (132.0)% (203.9)% (126.0)%
======= ======= =======
</TABLE>
Revenues
Our revenues consist of (i) monthly fees from customer use of Internet Data
Centers, network services and managed services, (ii) revenues from sales of
third-party equipment to customers and (iii) one-time fees for installation.
Currently, substantially all of our revenue is derived from services. Revenues
(other than installation fees and equipment sales to customers) are generally
billed and recognized ratably over the term of the contract, generally one
year. Installation fees are typically recognized at the time the installation
occurs, and equipment revenues are typically recognized when the equipment is
delivered to the customer or placed into service at an Internet Data Center.
We sell third-party equipment to our customers as an accommodation to
facilitate their purchase of services.
Our service revenues increased 372% from $2.5 million in 1996 to $11.6
million in 1997 and increased an additional 330% to $49.8 million in 1998.
This growth in service revenues was primarily the result of opening our
Internet Data Centers, increases in the number of new customers, substantially
all of which were Internet Data Center customers, and increases in revenues
from existing customers. We sell third-party equipment to our customers as an
accommodation to facilitate their purchase of services. Equipment revenues
increased 21% from $676,000 in 1996 to $820,000 in 1997 and 257% to $2.9
million in 1998.
Cost of Revenues
Our cost of revenues is comprised primarily of our costs for our nationwide
backbone network and local telco loops, depreciation, salaries and benefits
for our customer service and operations personnel (customer service personnel,
network engineers and professional services personnel), rent, repairs and
utilities related to our Internet Data Centers and costs of third-party
equipment sold to customers.
20
<PAGE>
Cost of service revenues increased from $2.5 million in 1996 to $16.2
million in 1997 and to $59.2 million in 1998. Our cost of service revenues as
a percentage of revenues increased from 81% in 1996 to 131% in 1997 and
declined to 112% in 1998. The increases in cost of service revenues in
absolute dollars were due to increased costs associated with the build-out and
operation of our increasing number of Internet Data Centers, including
increased costs for our network backbone and local telco loops, depreciation,
salaries and benefits for our customer service and operations personnel, and
rent. The increase in cost of service revenues as a percentage of revenues
from 1996 to 1997 reflects the timing of such investments in Internet Data
Centers and network infrastructure relative to the growth in associated
revenue. The decrease in cost of service revenue as a percentage of revenue
from 1997 to 1998 resulted from revenues from new and existing Internet Data
Centers increasing faster than related costs of revenues. Costs for our
network backbone and local telco loops increased by approximately $3.8 million
from 1996 to 1997 and by approximately $15.2 million from 1997 to 1998.
Depreciation increased by approximately $3.0 million from 1996 to 1997 and by
approximately $8.4 million from 1997 to 1998. Salaries and benefits for our
customer service and operations personnel increased by approximately $3.5
million from 1996 to 1997 and by approximately $6.7 million from 1997 to 1998.
Rent expense increased by approximately $945,000 from 1996 to 1997 and by
approximately $3.1 million from 1997 to 1998. Cost of equipment revenues
increased from $452,000 in 1996 to $640,000 in 1997 and to $2.3 million in
1998. Cost of equipment revenue in absolute dollars varies primarily as a
result of equipment revenues and cost of equipment revenues as a percentage of
revenues varies due to the mix of equipment purchased by customers.
Marketing and Sales
Our marketing and sales expenses are comprised primarily of salaries,
commissions and benefits for our marketing and sales personnel, printing and
advertising costs, public relations costs, consultants' fees and travel and
entertainment expenses.
Our marketing and sales expenses increased from $2.7 million in 1996 to
$12.7 million in 1997 and to $28.8 million in 1998. These increases were
primarily the result of hiring additional marketing and sales personnel,
expanding marketing programs in connection with our expansion of our
operations, including the number and scope of our Internet system and network
management solutions, and in 1998, the charge of $525,000 associated with the
warrant for Common Stock issued to At Home Corporation. Salaries and benefits
for our sales and marketing personnel increased by approximately $6.1 million
from 1996 to 1997 and by approximately $10.4 million from 1997 to 1998, and
costs associated with tradeshows and advertising increased by approximately
$977,000 from 1996 to 1997 and approximately $114,000 from 1997 to 1998. The
increase in marketing and sales expenses as a percentage of revenues from 1996
to 1997 reflects the continued expansion of marketing and sales efforts prior
to the receipt of associated revenues. The decrease in marketing and sales as
a percentage of revenues from 1997 to 1998 was due to revenues growing faster
than marketing and sales expenses.
General and Administrative
Our general and administrative expenses are comprised primarily of salaries
and benefits for our administrative and management information systems
personnel and fees paid for professional services and recruiting.
Our general and administrative expenses increased from $1.1 million in 1996
to $6.0 million in 1997 and to $15.9 million in 1998. These increases were
primarily the result of increased hiring of general and administrative
personnel, costs for consultants and professional services providers, fees
paid for recruiting and amortization of deferred compensation. Salaries and
benefits for general and administrative personnel increased by approximately
$2.0 million from 1996 to 1997 and by approximately $2.6 million from 1997 to
1998. Costs for consultants and professional services providers increased by
approximately $1.1 million from 1996 to 1997 and by approximately $900,000
from 1997 to 1998. Recruiting fees increased by approximately $968,000 from
1996 to 1997 and by
21
<PAGE>
approximately $440,000 from 1997 to 1998. These increased expenses reflected
our need for additional general and administrative personnel to handle the
expansion of our operations. The amortization of deferred compensation
included in general and administrative expenses was $741,000 in 1997 and
$597,000 in 1998, and there was no such expense recorded in 1996. See "--Stock
Compensation Expense" below. The increase in general and administrative
expenses as a percentage of revenues from 1996 to 1997 resulted primarily from
deferred compensation expenses in 1997. The decrease in general and
administrative expenses as a percentage of revenues from 1997 to 1998 was due
to revenues growing faster than general and administrative expenses.
Product Development
Our product development expenses are comprised primarily of salaries and
benefits for our product development personnel and fees paid to consultants.
Our product development expenses increased from $444,000 in 1996 to $1.6
million in 1997 and to $3.2 million in 1998. Our product development expenses
grew between the comparison periods primarily because of the addition of
product development personnel to support our expanded service offerings. The
decrease in product development expenses as a percentage of revenues from 1996
to 1998 resulted from revenues growing faster than product development
expenses.
Net Interest Expense
Our net interest expense increased from $39,000 in 1996 to $506,000 in 1997
and to $9.8 million in 1998. The increases in net interest expense from 1996
to 1997 was primarily the result of substantially increased borrowings as we
entered into equipment loans and lease agreements to finance the construction
of our Internet Data Centers. The increase in net interest expense from 1997
to 1998 was primarily the result of interest expenses associated with our $200
million of senior notes which were issued July 1, 1998, substantially
increased borrowings as we entered into equipment loans and lease agreements
to finance the construction of our Internet Data Centers, and working capital
lines of credit to finance working capital for our operations.
We expect that net interest expense will continue to increase as we enter
into additional equipment leases and loans, obtains additional borrowings and
long term debt and as interest income is reduced resulting from the decline in
our cash reserves to fund working capital and other uses.
Stock Compensation Expense
We had no stock compensation expense in 1996. During 1997, we recorded
deferred stock compensation of approximately $3.5 million in connection with
the grant of certain stock options from March through December 1997. This
amount is generally amortized over the 50 month vesting period of such
options. Of this amount, approximately $1.1 million was amortized in 1997 and
$1.3 million was amortized in 1998. This amortization is being recorded in a
manner consistent with FASB Interpretation No. 28. See Note 5 of Notes to
Consolidated Financial Statements.
EBITDA
Our loss before interest, taxes, depreciation, amortization and other non-
cash charges ("EBITDA") was $3.6 million in 1996, $20.3 million in 1997 and
$41.1 million in 1998. The increases in the level of EBITDA losses between the
comparison periods were primarily due to increased expenditures needed to
support our growth in operations, including salaries and benefits for
additional employees, network costs, rent, utilities and other costs related
to the increase in the number of our Internet Data Centers as well as
increased marketing and sales expenses, consulting fees and professional
services. Although EBITDA should not be used as an alternative to operating
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loss or net cash provided by (used for) operating activities, investing
activities or financing activities, each as measured under generally accepted
accounting principles, our management believes that EBITDA is an additional
meaningful measure of performance and liquidity.
Liquidity and Capital Resources
Since inception and through December 31, 1998, we have financed our
operations primarily through private sales of preferred stock, our initial
public offering in March 1998, our senior notes offering in July 1998 and
through various types of equipment loans and lease lines and working capital
lines of credit. At December 31, 1998, our principal sources of liquidity were
$150.9 million of cash and cash equivalents. As of that date, we also had
equipment loans and lease lines and working capital lines of credit under
which we could borrow up to an additional aggregate of $5.4 million for
purchases of equipment and for working capital. As of December 31, 1998, our
total bank borrowings, equipment loans and lines of credit facilities, capital
lease obligations and senior notes were $246.6 million. See Notes 4 and 6 of
Notes to Consolidated Financial Statements. In addition, we expect to enter
into one or more new credit facilities, under which we will be permitted to
borrow up to approximately $50.0 million upon meeting certain financial tests.
The Credit Facility is expected to be secured by a first priority lien on
substantially all of our assets (subject to certain exceptions) and the assets
and stock of any future subsidiaries. There can be no assurance as to whether,
or on what terms, we will enter into the Credit Facility.
Since we began to offer server hosting services in 1995, we have had
significant negative cash flows from operating activities. Net cash used for
operating activities for the year ended December 31, 1998 was $46.5 million,
primarily due to net losses, offset in part by increases in accrued expenses,
accounts payable and depreciation and amortization. This compares to net cash
used for operating activities for the year ended December 31, 1997 of $15.5
million, primarily due to net losses, offset in part by increases in accrued
expenses, accounts payable and depreciation and amortization.
Net cash used for investing activities for the year ended December 31, 1998
was $92.7 million compared to $23.9 million for the year ended December 31,
1997. Net cash used for investing activities was due to capital expenditures
for the continued construction of Internet Data Centers, the acquisition of
Arca and the investment of funds held in escrow for interest payments on the
senior notes. Cash provided by financing activities for the year ended
December 31, 1998 was $279.9 million, primarily due to the proceeds from our
issuance of $200 million of senior notes and our initial public offering. This
compares to net cash provided by financing activities for the year ended
December 31, 1997 of $45.9 million due to the proceeds of the issuance of
preferred stock and warrants and proceeds from equipment loans and line of
credit facilities.
As of December 31, 1998, we had commitments under capital leases and under
noncancellable operating leases of $19.9 million and $91.1 million,
respectively, through 2010. We intend to make significant expenditures during
the next 12 months primarily for property and equipment, in particular
equipment needed for existing and future Internet Data Centers, as well as
office equipment, computers and telephones. We expect to finance such capital
expenditures primarily through existing and future equipment loans and lease
lines, net proceeds from the senior notes and borrowings under the expected
Credit Facility. We expect to meet our working capital and capital expenditure
requirements over the next 12 months with existing cash and cash equivalents
and short-term investments, borrowings under the expected Credit Facility,
cash from sales of services and proceeds from existing and future working
capital lines of credit. We may enter into additional equipment loans and
capital leases. We may also seek to raise additional funds through public or
private financing, strategic relationships or other arrangements. There can be
no assurance that we will be successful generating sufficient cash flows from
operations or raising capital in sufficient amounts on terms acceptable to us.
See "--Factors Affecting Future Results--Rapid Expansion Produces a
Significant Strain on Our Business."
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Factors Affecting Future Results
Our Short Operating History and Heavy Losses Make Our Business Difficult to
Evaluate
Our limited operating history makes an evaluation of our business
operations and our prospects difficult. We began offering server hosting and
Internet connectivity services in 1995 and opened our first dedicated Internet
Data Center in August 1996. With such a short operating history, our business
model is still in an emerging state. We have incurred operating losses and
negative cash flows each quarter and year since 1995. Our accumulated deficit
was approximately $97.0 million at December 31, 1998. We anticipate making
significant investments in new Internet Data Centers and network
infrastructure, product development, sales and marketing programs and
personnel. We believe that we will continue to experience net losses on a
quarterly and annual basis for the foreseeable future. We may also use
significant amounts of cash to acquire complementary businesses, products,
services or technologies. Although we have experienced significant growth in
revenues in recent periods, we do not believe that this growth rate is
necessarily indicative of future operating results. It is possible that we may
never achieve profitability on a quarterly or an annual basis.
Our Operating Results Have Fluctuated Widely and We Expect This to Continue
We have experienced significant fluctuations in our results of operations
on a quarterly and an annual basis. We expect to continue to experience
significant fluctuations due to a variety of factors, many of which are
outside of our control, including:
. demand for and market acceptance of our services;
. reliable continuity of service and network availability;
. the ability to increase bandwidth as necessary, both on our network and
at our interconnection points with other networks;
. costs related to the acquisition of network capacity and arrangements
for interconnections with third-party networks;
. customer retention and satisfaction;
. capacity utilization of our Internet Data Centers;
. the timing, magnitude and integration of acquisitions of complementary
businesses and assets;
. the timing of customer installations;
. the provision of customer discounts and credits;
. the mix of services sold by us;
. the timing and success of marketing efforts and service introductions by
us and our competitors;
. the timing and magnitude of capital expenditures, including construction
costs relating to the expansion of operations;
. the timely expansion of existing Internet Data Centers and completion of
new Internet Data Centers;
. the introduction by third parties of new Internet and networking
technologies;
. changes in our pricing policies and those of our competitors; and
. fluctuations in bandwidth used by customers.
In addition, a relatively large portion of our expenses are fixed in the
short-term, particularly with respect to telecommunications, depreciation,
certain substantial interest expenses, real estate and personnel. Therefore,
our results of operations are particularly sensitive to fluctuations in
revenues. Also, if our agreement with Computer Associates were to terminate
and we continued to require Computer Associates' software, the license fees
paid by us could increase fixed costs. Furthermore, if we were to
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become unable to continue leveraging third party products in our services
offerings, our product development costs could increase significantly.
Finally, many of our customers are in an emerging stage, and there is the
possibility that we will not be able to collect receivables on a timely basis.
Rapid Expansion Produces a Significant Strain on Our Business
The expansion of our network through the opening of additional Internet
Data Centers in geographically diverse locations is one of our key strategies.
We currently have eight Internet Data Centers located in six metropolitan
areas: Boston, San Francisco, New York, Los Angeles, Seattle and Washington,
D.C., and we have a server hosting facility in the London metropolitan area.
We expect to open additional Internet Data Centers in 1999. To successfully
expand, we must be able to assess markets, locate and secure new Internet Data
Center sites, install facilities and establish additional peering
interconnections with Internet service providers in a timely manner and at a
reasonable cost. To manage this expansion effectively, we must continue to
improve our operational and financial systems and expand, train and manage our
employee base. Our inability to establish additional Internet Data Centers or
effectively manage our expansion would have a material adverse effect upon our
business.
We expect to expend substantial resources for leases of real estate,
significant improvements of facilities, purchase of complementary businesses,
assets and equipment, implementation of multiple telecommunications
connections and hiring of network, administrative, customer support and sales
and marketing personnel with the establishment of each new Internet Data
Center. Moreover, we expect to make significant investments in sales and
marketing and the development of new services as part of our expansion
strategy. The failure to generate sufficient cash flows or to raise sufficient
funds may require us to delay or abandon some or all of our development and
expansion plans or otherwise forego market opportunities, making it difficult
for us to respond to competitive pressures.
It usually takes us at least six months to select the appropriate location
for a new Internet Data Center, construct the necessary facilities, install
equipment and telecommunications infrastructure, and hire operations and sales
personnel. Expenditures commence well before the Internet Data Center opens,
and it takes an extended period for us to approach break-even capacity
utilization. As a result, we expect that individual Internet Data Centers will
experience losses for in excess of one year from the time they are opened. We
experience further losses from sales personnel hired to test market our
services in markets where there is no Internet Data Center. Growth in the
number of our Internet Data Centers is likely to increase the amount and
duration of losses. In addition, if we do not attract customers to new
Internet Data Centers in a timely manner, or at all, our business would be
materially adversely affected.
We Must Manage Growth Effectively
We are experiencing, and expect to continue experiencing, rapid growth with
respect to the building of our Internet Data Centers and network
infrastructure expansion of our customer base and increase in the number of
employees. This growth has placed, and if it continues, will place, a
significant strain on our financial, management, operational and other
resources, including our ability to ensure customer satisfaction. This
expansion also requires significant time commitment from our senior management
and places a significant strain on their ability to manage the existing
business. In addition, we may be required to manage multiple relationships
with a growing number of third parties as we seek to complement our service
offerings. Our ability to manage our growth effectively will require us to
continue to expand operating and financial procedures and controls, to replace
or upgrade our operational, financial and management information systems and
to attract, train, motivate and retain key employees. We have recently hired
many key employees and officers, and as a result, our entire management team
has worked together for only a brief time. If our executives are unable to
manage growth effectively, our business could be materially adversely
affected.
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Risks Associated with Acquisitions
In October 1998 we acquired the assets of Arca and in February 1999 we
acquired AIS. We continue to expend resources integrating these new businesses
and the personnel hired in connection with such acquisitions. We believe that
our future growth depends, in part, upon the acquisition of complementary
businesses, products, services or technologies. If we buy a company, we could
have difficulty in assimilating that company's technology, personnel and
operations. In addition, the key personnel of the acquired company may decide
not to work for us. These difficulties could disrupt our ongoing business,
distract our management and employees and increase our expenses. In addition,
future acquisitions by us may result in the incurrence of additional debt,
large one-time write-offs and the creation of goodwill or other intangible
assets that could result in amortization expenses.
Our Substantial Leverage and Debt Service Obligations Adversely Affect Our
Cash Flow
We have substantial amounts of outstanding indebtedness. There is the
possibility that we may be unable to generate cash sufficient to pay the
principal of, interest on and other amounts due in respect of our indebtedness
when due. As of December 31, 1998, we had indebtedness of approximately $246.6
million and available borrowings of up to an additional $5.4 million. We
expect to enter into a new secured credit facility under which we could borrow
up to $50.0 million. We also expect to add additional equipment loans and
lease lines to finance capital expenditures for our Internet Data Centers and
may obtain additional long term debt, working capital lines of credit and
lease lines. There can be no assurance that any such financing arrangements
will be available.
Our substantial leverage could have significant negative consequences,
including:
. increasing our vulnerability to general adverse economic and industry
conditions;
. limiting our ability to obtain additional financing;
. requiring the dedication of a substantial portion of our expected cash
flow from operations to service our indebtedness, thereby reducing the
amount of our expected cash flow available for other purposes, including
capital expenditures;
. limiting our flexibility in planning for, or reacting to, changes in our
business and the industry in which we compete; and
. placing us at a possible competitive disadvantage vis-a-vis less
leveraged competitors and competitors that have better access to capital
resources.
We Are Subject to Restrictive Covenants That Limit Our Flexibility
Our Senior Notes contain various restrictions on our ability to incur
indebtedness, pay dividends or make other restricted payments, sell assets,
enter into affiliate transactions and take other actions. Furthermore, certain
of our existing financing arrangements are, and future financing arrangements
are likely to be, secured by substantially all of our assets. The existing
financing arrangements require, and future financing arrangements are likely
to require, that we maintain certain financial ratios and comply with
covenants restricting our ability to incur indebtedness, pay dividends or make
other restricted payments, sell assets, enter into affiliate transactions or
take other actions.
We Compete With Much Larger Companies and There Are Few Barriers to Entry
Our market is intensely competitive. There are few substantial barriers to
entry, and we expect to face additional competition from existing competitors
and new market entrants in the future. The principal competitive factors in
this market include:
. Internet system engineering and other expertise;
. customer service;
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. network capability, reliability, quality of service and scalability;
. the variety of services offered;
. access to network resources, including circuits and equipment;
. broad geographic presence;
. price;
. the ability to maintain and expand distribution channels;
. brand name;
. the timing of introductions of new services;
. network security; and
. financial resources.
There can be no assurance that we will have the resources or expertise to
compete successfully in the future. Our current and potential competitors in
the market include:
. providers of server hosting services;
. national and regional ISPs;
. global, regional and local telecommunications companies and Regional
Bell Operating Companies; and
. large IT outsourcing firms.
Many of our competitors have substantially greater resources, more
customers, longer operating histories, greater name recognition and more
established relationships in the industry. As a result, these competitors may
be able to develop and expand their network infrastructures and service
offerings more quickly, devote greater resources to the marketing and sale of
their products and adopt more aggressive pricing policies. In addition, these
competitors have entered and will likely continue to enter into business
relationships to provide additional services competitive with those we
provide.
Some of our competitors may be able to provide customers with additional
benefits in connection with their Internet system and network management
solutions, including reduced communications costs, which could reduce the
overall costs of their services relative to ours. We may not be able to offset
the effects of any such price reductions. In addition, we believe our market
is likely to encounter consolidation in the near future, which could result in
increased price and other competition.
Our Market Is New and Our Services May Not Be Generally Accepted
The market for Internet system and network management solutions has only
recently begun to develop, is evolving rapidly and is characterized by an
increasing number of market entrants. This market may not prove to be viable
or, if it becomes viable, may not continue to grow. Our future growth depends
on the willingness of enterprises to outsource the system and network
management of their mission-critical Internet operations and our ability to
market our services in a cost-effective manner to a sufficiently large number
of customers. If this market fails to develop, or develops more slowly than
expected, or if our services do not achieve market acceptance, our business
would be materially and adversely affected. In addition, in order to be
successful we must be able to differentiate ourselves from our competition
through our service offerings.
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System Failures Could Lead to Significant Costs
We must protect our network infrastructure and customers' equipment against
damage from human error, physical or electronic security breaches, power loss
and other facility failures, fire, earthquake, flood, telecommunications
failure, sabotage, vandalism and similar events. Despite precautions we have
taken, a natural disaster or other unanticipated problems at one or more of
our Internet Data Centers could result in interruptions in our services or
significant damage to customer equipment. In addition, failure of any of our
telecommunications providers, such as MCI WorldCom or Qwest Communications
Corporation, to provide consistent data communications capacity could result
in interruptions in our services. Any damage to or failure of our systems or
service providers could result in reductions in, or terminations of, services
supplied to our customers, which could have a material adverse effect on our
business. In the past, we have experienced interruptions in specific circuits
within our network resulting from events outside our control, which led to
short-term degradation in the level of performance of our network.
Customer Satisfaction is Critical to Our Success
Our customer contracts generally provide a limited service level warranty
related to the continuous availability of service on a 24 hours per day, seven
days per week basis. This warranty is generally limited to a credit consisting
of free service for a short period of time for disruptions in Internet
transmission services. To date, only a limited number of customers have been
entitled to this warranty. If we incur significant warranty obligations in
connection with system downtime, our liability insurance may not be adequate
to cover such expenses. As customers outsource more mission-critical
operations to us, we may be subject to increased liability claims and customer
dissatisfaction should our systems fail or our customers otherwise become
unsatisfied.
Our Ability to Expand Our Network Is Unproven
To satisfy customer requirements, we must continue to expand and adapt our
network infrastructure. We are dependent on MCI WorldCom and Qwest and certain
other telecommunications providers for our backbone capacity, including our
dedicated clear channel network and transit access to ISPs. The expansion and
adaptation of our telecommunications infrastructure will require substantial
financial, operational and management resources as we negotiate
telecommunications capacity with network infrastructure suppliers. Due to the
limited deployment of our services to date, our ability to connect and manage
a substantially larger number of customers at high transmission speeds is
unknown. We have yet to prove our network's ability to be scaled up to higher
customer levels while maintaining superior performance. Furthermore, it may be
difficult for us to quickly increase our network capacity in light of current
necessary lead times within the industry to purchase circuits and other
critical items. If we fail to achieve or maintain high capacity data
transmission circuits, consumer demand could shrink because of possible
degradation of service. In addition, as we upgrade our telecommunications
infrastructure to increase bandwidth available to our customers, we expect to
encounter equipment or software incompatibility which may cause delays in
implementation.
We Depend on Certain Network Interconnections
We rely on a number of public and private network interconnections,
commonly referred to as peering relationships, to allow our customers to
connect to other networks. If our peering partners were to discontinue their
support for the peering relationships, our ability to exchange traffic would
be significantly constrained. Furthermore, our business will be adversely
affected if these peering partners do not add more bandwidth to accommodate
increased traffic. Many of the companies with which we maintain private
peering interconnections are our competitors. There is nothing to prevent any
peering partners, many of which are significantly larger than us, from
charging high usage fees or
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denying access. In the future, private peering partners could refuse to
continue to interconnect directly with us, might impose significant costs on
us or limit our customers access to their networks. If we were unable on a
cost-effective basis to access alternative networks to exchange our customers'
traffic or if we were unable to pass through to our customers any additional
costs of utilizing these networks, our business could be materially adversely
affected.
Risks Associated with International Operations
A component of our strategy is to expand into international markets,
including Europe and Japan, and we currently have a server hosting site in the
London metropolitan area. We expect to open an Internet Data Center in the
London metropolitan area in the second quarter of 1999. In order to expand
international operations, we may enter into joint ventures or outsourcing
agreements with third parties, acquire rights to high-bandwidth transmission
capability, acquire complementary businesses or operations, or establish and
maintain new operations outside of the United States. Thus, we will depend on
third parties to be successful in our international operations. In addition,
the rate of development and adoption of the Internet has been slower outside
of the United States, and the cost of bandwidth has been higher, which may
adversely affect our ability to expand operations and may increase our cost of
operations internationally. The risks inherent in conducting business
internationally include:
. unexpected changes in regulatory requirements, export restrictions,
tariffs and other trade barriers;
. challenges in staffing and managing foreign operations;
. differences in technology standards;
. employment laws and practices in foreign countries;
. longer payment cycles and problems in collecting accounts receivable;
. political instability;
. fluctuations in currency exchange rates and imposition of currency
exchange controls; and
. potentially adverse tax consequences.
Rapid Technological Change and Evolving Industry Standards
Our future success will depend on our ability to offer services that
incorporate leading technology and address the increasingly sophisticated and
varied needs of our current and prospective customers. Our market is
characterized by rapidly changing and unproven technology, evolving industry
standards, changes in customer needs, emerging competition and frequent new
service introductions. Future advances in technology may not be beneficial to,
or compatible with, our business, and we may not be able to incorporate
advances on a cost-effective and timely basis. Moreover, technological
advances may have the effect of encouraging certain of our current or future
customers to rely on in-house personnel and equipment to furnish the services
we currently provide. In addition, keeping pace with technological advances
may require substantial expenditures and lead time.
We believe that our ability to compete successfully is also dependent upon
the continued compatibility and interoperability of our services with
products, services and architectures offered by
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various vendors. Although we work with various vendors in testing newly
developed products, these products may not be compatible with our
infrastructure or adequate to address changing customer needs. For instance,
existing networking hardware may not be immediately compatible with leading
edge telecommunications infrastructure services and therefore may require us
to make significant investments to achieve compatibility. Although we intend
to support emerging standards, industry standards may not be established or we
may not be able to timely conform to new standards. Our failure to conform to
a prevailing standard, or the failure of a common standard to emerge, could
have a material adverse effect on our business.
System Security Risks Could Disrupt Our Services
The ability to provide secure transmissions of confidential information
over networks accessible to the public is a significant barrier to electronic
commerce and communications. Certain of our services rely on encryption and
authentication technology licensed from third parties. Despite a variety of
network security measures taken by us, we cannot assure that unauthorized
access, computer viruses, accidental or intentional actions and other
disruptions will not occur. Our Internet Data Centers have experienced and may
in the future experience delays or interruptions in service as a result of the
accidental or intentional actions of Internet users, current and former
employees or others. Furthermore, such inappropriate use of the network by
third parties could also jeopardize the security of confidential information,
such as customer and Exodus passwords as well as credit card and bank account
numbers, stored in our computer systems or those of our customers. This could
result in liability to us and the loss of existing customers or the deterrence
of potential customers. The costs required to eliminate computer viruses and
alleviate other security problems could be prohibitively expensive and the
efforts to address such problems could result in interruptions, delays or
cessation of service to our customers.
We Depend on Third-Party Equipment and Software Suppliers
We depend on vendors to supply certain key components of our
telecommunications infrastructure and system and network management solutions.
Some of the telecommunications services and networking equipment is available
only from sole or limited sources. For instance, the routers, switches and
modems we use are currently supplied primarily by Cisco Systems, Inc. We
typically purchase or lease all of our components under purchase orders placed
from time to time. We do not carry significant inventories of components and
have no guaranteed supply arrangements with vendors. Our failure to obtain
required products or services on a timely basis and at an acceptable cost
would have a material adverse effect on our business. In addition, the failure
of our sole or limited source suppliers to provide products or components that
comply with evolving Internet and telecommunications standards or that
interoperate with other products or components we use could have a material
adverse effect on our business. In addition, we expect to depend for a time on
third parties to deliver our services from and manage our international
operations, including our site in London.
We also license certain software from Computer Associates that allows us to
monitor our customers' Internet operations and assist in resolving performance
issues that arise from time to time. Under the agreement with Computer
Associates, if we desire to offer a service that has a substantially similar
functionality to that provided by Computer Associates' Unicenter(R) TNG(TM)
family of software, or its ARCserve or InocuLAN products, we must generally
utilize Computer Associates products as long as they meet our requirements. In
addition, we are a beta test site for new versions of Computer Associates
products and we must, upon commercial deployment, replace existing software
with new Computer Associates products if they are substantially similar in
functionality. During the term of the agreement, we are obligated to pay
Computer Associates a royalty equal to one percent of our gross revenues.
Either party may terminate this agreement upon 60 days' prior written notice
with no
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penalties. Should this agreement be terminated, we have the right to continue
licensing software from Computer Associates at a forty percent discount for
five years and we would no longer be obligated to pay a royalty to Computer
Associates.
Government Regulation and Legal Uncertainties May Adversely Affect Our
Business
Laws and regulations directly applicable to communications and commerce
over the Internet are becoming more prevalent. The United States Congress has
recently considered Internet laws regarding children's privacy, copyrights,
taxation and the transmission of sexually explicit material. The European
Union also recently enacted its own privacy regulations. The law of the
Internet, however, remains largely unsettled, even in areas where there has
been some legislative action. It may take years to determine whether and how
existing laws such as those governing intellectual property, privacy, libel
and taxation apply to the Internet. In addition, the growth and development of
the market for online commerce may prompt calls for more stringent consumer
protection laws, both in the United States and abroad, that may impose
additional burdens on companies conducting business online. The adoption or
modification of laws or regulations relating to the Internet could adversely
affect our business. We provide services over the Internet in all states in
the United States and in many foreign countries, and we facilitate the
activities of our customers in these jurisdictions. As a result we may be
required to qualify to do business, or be subject to taxation, or be subject
to other laws and regulations, in these jurisdictions even if we do not have a
physical presence or employees or property in these jurisdictions. The
application of these multiple sets of laws and regulations is uncertain, but
we could find that Exodus is subject to regulation, taxation, enforcement or
other liability in unexpected ways, which could materially adversely affect
our business.
There are Risks Involved with the Information Disseminated through Our
Network
The law relating to the liability of online services companies and Internet
access providers for information carried on or disseminated through their
networks is currently unsettled. The Child Online Protection Act of 1998
imposes criminal penalties and civil liability on anyone engaged in the
business of selling or transferring material that is harmful to minors, by
means of the World Wide Web, without restricting access to such material by
underage persons. Numerous states have adopted or are currently considering
similar types of legislation. The imposition upon us and other Internet
network providers of potential liability for information carried on or
disseminated through systems could require us to implement measures to reduce
exposure to liability, which may require the expenditure of substantial
resources, or to discontinue certain service or product offerings. Further,
the costs of defending against any such claims and potential adverse outcomes
of such claims could have a material adverse effect on our business. While we
carry professional liability insurance, it may not be adequate to compensate
or may not cover us in the event we become liable for information carried on
or disseminated through our networks.
Certain businesses, organizations and individuals have in the past sent
unsolicited commercial e-mails advertising sites hosted at our facilities to
massive numbers of people. This practice, known as "spamming," has led to some
complaints against us. In addition, certain ISPs and other online services
companies could deny network access to us if we allow undesired content or
spamming to be transmitted through our networks. Although we prohibit
customers by contract from spamming, there can be no assurance that customers
will not engage in this practice, which could have a material adverse effect
on our business.
We Depend on Our Key Personnel
Our success depends in significant part upon the continued services of our
key technical, sales and senior management personnel. Although certain of our
executive officers participate in our executive employment policy, none of our
officers is a party to an employment agreement. Any officer
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or employee can terminate his or her relationship at any time. The loss of the
services of one or more of our key employees or our failure to attract
additional qualified personnel could have a material adverse effect on our
business. We do not carry key-person life insurance for any of our employees.
We Depend on the Internet and Internet Infrastructure Development
Our success will depend in large part on continued growth in the use of the
Internet. Critical issues concerning the commercial use of the Internet,
including security, reliability, cost, ease of access, quality of service and
necessary increases in bandwidth availability, remain unresolved and are
likely to affect the development of the market for our services. In addition,
the rate of development and adoption of the Internet has been slower outside
of the United States and the cost of bandwidth has been higher. The recent
growth in the use of the Internet has caused frequent periods of performance
degradation, requiring the upgrade of routers and switches, telecommunications
links and other components forming the infrastructure of the Internet by ISPs
and other organizations with links to the Internet. Any perceived degradation
in the performance of the Internet as a whole could undermine the benefits of
our services. Consequently, the emergence and growth of the market for our
services is dependent on improvements being made to the entire Internet
infrastructure to alleviate overloading and congestion.
Risks Associated with Protection and Enforcement of Intellectual Property
Rights
We rely on a combination of copyright, trademark, service mark and trade
secret laws and contractual restrictions to establish and protect certain
proprietary rights in our products and services. We have no patented
technology that would preclude or inhibit competitors from entering our
market. Although we have entered into confidentiality agreements with our
employees, contractors, suppliers, distributors and appropriate customers to
limit access to and disclosure of our proprietary information, these may prove
insufficient to prevent misappropriation of our technology or to deter
independent third-party development of similar technologies. In addition, the
laws of certain foreign countries may not protect our products, services or
intellectual property rights to the same extent as do the laws of the United
States.
In addition to licensing technologies from third parties, we are developing
and acquiring additional proprietary intellectual property. Third parties may
try to claim that our products or services infringe their intellectual
property. We expect that participants in our markets will be increasingly
subject to infringement claims. Any such claim, whether meritorious or not,
could be time consuming, result in costly litigation, cause product
installation delays or require us to enter into royalty or licensing
agreements. Such royalty or licensing agreements might not be available on
terms acceptable to us or at all.
Volatility of Our Stock Price
The market price of our common stock has fluctuated in the past and is
likely to continue to fluctuate. In addition, the securities markets,
particularly with respect to Internet stocks, have experienced significant
price and volume fluctuations.
Risk Related to the Year 2000 Problem
The Year 2000 problem stems from the use of a two digit date to represent
the year (e.g., 85 = 1985) in computer software and firmware. As a result,
many currently installed computer systems are not capable of distinguishing
dates beginning with the year 2000 from dates prior to the year 2000. Software
so created may be unable to properly address dates after 1999. As a result,
computer systems or applications used by many companies in a wide variety of
industries may experience operating difficulties unless the systems or
applications are modified to process information related
32
<PAGE>
to the date change adequately. Significant uncertainty exists in the software
and other industries concerning the scope and magnitude of problems associated
with the century change. To the extent Year 2000 issues cause significant
delay in, or cancellation of decisions to purchase products or product
support, due to the reallocation of resources to address Year 2000 issues or
otherwise, our business could be materially adversely affected. In addition,
any costs of defending and resolving any Year 2000 related disputes, and any
liability for Year 2000-related damages, including consequential damages,
could have a material adverse effect on our business.
We recognize the need to ensure our operations will not be adversely
impacted by Year 2000 issues. We have put into place a comprehensive Year 2000
Risk Management initiative that is adequately funded, staffed and managed.
This initiative's scope covers both our information technology (IT) systems
and non-IT systems and addresses all areas of the Year 2000 issues as defined
by the Information Technology Association of America (ITAA). The program has
several phases that overlap, all of which will be completed with issues
identified to be resolved by the end of the third quarter of 1999. Our
internal inventory audit was completed January 1999. In addition, we plan to
have an independent review of our Year 2000 assessment completed in the second
quarter of 1999, with final Year 2000 compliance expected in the third quarter
of 1999.
In addition, we may acquire businesses or assets which contain systems that
must be made Year-2000 compliant. For instance, with respect to our
acquisition of AIS we plan to remedy any identified Year 2000 issues and test
the solutions adopted during the second quarter of 1999.
We have established procedures for evaluating and managing the risks and
costs associated with this problem. Funding and execution for this initiative
is within our existing business units and operating budgets and is not viewed
as material. Based on our current assessment, we believe the costs, excluding
employee personnel time and effort, to resolve Year 2000 issues, other than
unanticipated liabilities, should not exceed $500,000. We further estimate
that the time and effort required of our personnel to resolve Year 2000 issues
will not be material.
Our Year 2000 initiative specifically addresses processes and methods in
eleven focused areas:
Assess Situation
. Understand the scope and magnitude of Year 2000 problems to our
organizational systems and operations.
. Define our objective for Year 2000 compliance, develop an inventory
of our systems, assess the impact of Year 2000 on these systems, and
identify candidate solutions for addressing Year 2000 problems.
Analyze Candidate Solution
. Perform studies and analyses resulting in the selection of a solution
to meet the Year 2000 problem and its defined constraints.
. Define approach and evaluation criteria for the analysis, select the
candidate solutions, and implementation.
Plan Technical Effort
. Establish plans that provide the basis for scheduling, costing,
controlling, tracking and negotiating the nature and scope of
technical work involved in transitioning a system to Year 2000
compliance.
. Develop estimates for the work to be performed, obtain necessary
commitments from interfacing groups, and define plan to perform the
work.
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Monitor and Control Technical Effort
. Provide adequate visibility into actual progress and risks.
. Involves directing, tracking, and reviewing the project's
accomplishments, results and risks against its documented estimates,
commitments and plans.
Ensure Quality
. Address not only the quality of Year 2000 compliant systems but also
the quality of the process used to produce those systems.
. Involves objective verification of a project's activities with
respect to its plans and work products (e.g., code) to our
standards.
Manage Configurations
. Maintain data on identified configuration units and analyze and
control changes to the systems and its configuration units.
. Provide accurate and current configuration data to internal
personnel and external vendors for all work products placed under
configuration management.
(Re)Engineer Products/Data
. Consistently perform a well-defined engineering process that
integrates all engineering activities involved in
developing/converting products/services meeting the requirements for
Year 2000 compliance as defined by us.
. Specify change requirements for Year 2000 compliant systems, develop
designs to accommodate those requirements, implement the
corresponding designs in software and perform testing of those
implementations.
Integrate Systems
. Ensure that system elements, and the system as a whole, will
function in accordance with requirements when the elements operate
in conjunction with each other and with other external systems.
. Identify, define and control interfaces.
. Verify system functions whose successful operation involves more
than one system element throughout the entire product life cycle.
Verify and Validate Systems
. Ensure that the development/supplier team performs increasingly
comprehensive evaluations to ensure evolving work products meet all
requirements.
. Scope covers development of the full system/service, as well as its
production, operation, delivery and support.
. Measures customer loyalty on the basis of the customer's operational
needs and continues throughout product/service life.
Oversee and Manage Subcontracts
. Ensure that acquisition (outsourcing) of services for development of
Year 2000 compliant software keeps risks to an acceptable minimum.
. Ensure that both the operation of the software resulting from such
contracts and the data processing by the products under such
contracts meets our requirements for Year 2000 compliance.
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Oversee and Manage Acquisitions
. Ensure that acquisitions of commercial off-the-shelf tools and/or
software for Year 2000 compliance keeps risks to an acceptable
minimum.
. Ensure that both operation of the software resulting from such
contracts and the data processed by the products under such
contracts meets our requirements for Year 2000 compliance.
The above eleven focus areas provide an instrument for analyzing our
organizational process to assure our preparedness for Year 2000 business
operations. It also reviews both technical and managerial practices to ensure
effective management of the Year 2000 conversion or compliant-product
development process. Lastly, we see this as an effective process for
identifying our strengths and weaknesses with respect to Year 2000 practices.
Results of our YEAR 2000 initiative to date in specific target area is as
follows.
Our Services and Products. We have determined that our Internet Data Center
equipment is either currently Year 2000 compliant or that a funded
replacement/upgrade plan is in place to resolve known issues. Likewise, based
on the on-going assessment relative to our current software service offerings,
we believe that the current versions of these products are either "Year 2000
compliant" or will not require substantial effort or cost to make them Year
2000 compliant by the end of the third quarter of 1999. We are also in the
process of a complete asset inventory and final asset analysis assessment.
This review is being conducted to re-validate previous Year 2000 assessments
conducted by the management of our individual departments. These departmental
programs and assessments are now part of a coordinated unified company-wide
Year 2000 initiative.
Our Vendor Relations. Our Year 2000 initiative also addresses vendor
relationships (both IT and non-IT) and their readiness/preparedness relating
to Year 2000 issues. IT vendors include software providers, hardware
providers, service providers, off the shelf software publishers and IT
consultants. Non-IT providers include electric power suppliers, vendors of
uninterruptable power supplies and generators, telecommunications service
providers, business partners, facilities maintainers and other non-IT service
contractors. We recognize that we face additional risk to the extent that
suppliers of products, services and systems purchased by us and others with
whom we transact business are not Year 2000 compliant. In the event that third
parties cannot provide us with products, services or systems that are Year
2000 compliant on a timely basis, our business, could be materially adversely
affected.
To date, we have not discovered nor do we anticipate any material issues
with vendors and service providers. Evaluation of vendor Year 2000
preparedness is an on-going process. As our Year 2000 evaluation does not
evaluate our vendors' vendors nor our vendors' customer base viability issues,
we will be developing contingency plans to address specific vendor/service
provider concerns.
Internal Operations. We have reviewed, and continue to review, internal
management information and other systems in order to identify and modify those
products, services or systems that may not be Year 2000 compliant. Based on
our assessment to date, we believe that internal management information and
other systems are either Year 2000 compliant or will not require substantial
effort or cost to make them Year 2000 compliant. We do not foresee any issues
with internal IT and internal non-IT systems being Year 2000 compliant by the
end of the third quarter of 1999.
Customer Risks. Many of our customers maintain their Internet operations on
servers which may be impacted by Year 2000 complications. The failure of our
customers to ensure that their servers are Year 2000 compliant could have a
material adverse effect on our customers, which in turn
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<PAGE>
could have a material adverse effect on our business, if our customers are
forced to cease or interrupt Internet operations or experience malfunctions
related to their equipment.
Year 2000 Risk Summary. While we believe our Year 2000 initiative to be
prudent, properly funded and staffed and well-managed, there can be no
assurance that we will identify and remedy all Year 2000 problems in a timely
fashion, that any remedial efforts in this regard will not involve significant
time and expense, or that such problems will not have a material adverse
effect on our business.
Recent Accounting Pronouncements
In March 1998, the AICPA issued SOP No. 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. SOP No. 98-1
requires entities to capitalize certain costs related to internal-use software
once certain criteria have been met. We expect that the adoption of
SOP No. 98-1 will not have a material impact on our financial position,
results of operations or cash flows. We will be required to implement SOP No.
98-1 for the year ending December 31, 1999.
In April 1998, the AICPA issued SOP No. 98-5, Reporting on the Costs of
Start-Up Activities. SOP No. 98-5 requires that all start-up costs related to
new operations must be expensed as incurred. In addition, all start-up costs
that were capitalized in the past must be written off when SOP No. 98-5 is
adopted. We expect that the adoption of SOP No. 98-5 will not have a material
impact on our financial position, results of operations or cash flows. We will
be required to implement SOP No. 98-5 for the year ending December 31, 1999.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133
establishes methods for derivative financial instruments and hedging
activities related to those instruments, as well as other hedging activities.
Because we do not currently hold any derivative instruments and do not engage
in hedging activities, we expect that the adoption of SFAS No. 133 will not
have a material impact on our financial position, results of operations or
cash flows. We will be required to implement SFAS No. 133 for the year ending
December 31, 2000.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We have limited exposure to financial market risks, including changes in
interest rates. The fair value of our investment portfolio or related income
would not be significantly impacted by a 100 basis point increase or decrease
in interest rates due mainly to the short-term nature of the major portion of
our investment portfolio. An increase or decrease in interest rates would not
significantly increase or decrease interest expense on debt obligations due to
the fixed nature of our debt obligations. We do not have any significant
foreign operations and thus are not materially exposed to foreign currency
fluctuations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The index to our Consolidated Financial Statements, Financial Schedules,
and the Report of the Independent Auditors appears in Part IV of this Form 10-
K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding our executive
officers and directors:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
K.B. Chandrasekhar........... 38 Chairman of the Board of Directors
Ellen M. Hancock............. 55 Chief Executive Officer, President and
Director
Richard S. Stoltz............ 54 Executive Vice President, Finance, Chief
Operating Officer and Chief Financial
Officer
Sam S. Mohamad............... 39 Executive Vice President, Worldwide Sales
and Professional Services
James J. McInerney........... 46 Executive Vice President, Engineering
Herbert Dollahite............ 47 Vice President, Customer Services and
Support and Quality
Susan R. Farber.............. 47 Vice President, Marketing and Strategy
Frederick W.W. Bolander (1).. 37 Director
John R. Dougery (2).......... 58 Director
Mark Dubovoy (3) (4)......... 52 Director
Max D. Hopper (1) (4)........ 64 Director
Peter A. Howley (1).......... 58 Director
Daniel C. Lynch (3).......... 57 Director
Thadeus J. Mocarski (3) (4).. 37 Director
Kanwal S. Rekhi (2).......... 52 Director
</TABLE>
- --------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
(3) Member of the Finance Committee
(4) Member of the Corporate Governance Committee
Each director will hold office until the next Annual Meeting of
Stockholders and until his successor is elected and qualified or until his
earlier resignation or removal. Each officer serves at the discretion of the
Board of Directors (the "Board").
K.B. Chandrasekhar, a co-founder of Exodus, has served as our Chairman of
the Board of Directors since Exodus' incorporation in California in February
1995, as President from such incorporation until March 1998 and as Chief
Executive Officer from such incorporation until September 1998. From 1992 to
May 1995, he served as President and a director of Fouress, Inc., a network
software design and development firm and Exodus' predecessor, which he co-
founded. Mr. Chandrasekhar holds a B.S. degree in physics from Madras
University and a B.Tech. degree in electronics and communications from the
Madras Institute of Technology.
Ellen M. Hancock has served as our President since March 1998 and our Chief
Executive Officer since September 1998 and has been a director since April
1998. She has also served as the acting Vice President, Marketing from July
1998 to October 1998. From July 1996 to July 1997, she served as Executive
Vice President for Research and Development and Chief Technology Officer of
Apple Computer, Inc. From September 1995 to May 1996, Mrs. Hancock served as
an Executive Vice President and Chief Operating Officer of National
Semiconductor Corporation. From 1966 to February 1995, she served in various
staff, managerial and executive positions at International Business
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Machines Corporation, most recently as Senior Vice President and Group
Executive. Mrs. Hancock is also a director of Colgate-Palmolive Company and
Aetna Inc. She holds a B.A. degree in mathematics from The College of New
Rochelle and an M.A. degree in mathematics from Fordham University.
Richard S. Stoltz, a co-founder of Exodus, has served as our Executive Vice
President, Finance since December 1998, and our Chief Operating Officer and
Chief Financial Officer since October 1995 and was a director from January
1996 to October 1996. From February 1994 to September 1995, he was an
independent consultant specializing in financial and management information
system issues. From 1992 to January 1994, Mr. Stoltz served as Vice President
of Finance, Treasurer and Chief Financial Officer of Radius Inc., a computer
hardware company. Mr. Stoltz holds a B.S.B.A. degree in marketing and an
M.B.A. degree from The American University.
Sam S. Mohamad has served as our Executive Vice President, Worldwide Sales
and Professional since December 1998 and as our Vice President, Worldwide
Sales from February 1997 to December 1998. From March 1996 to January 1997, he
served as Vice President of Sales and Marketing of Genuity, Inc., a provider
of data center products and services. From 1987 to February 1996, Mr. Mohamad
held various positions at Oracle Corporation, most recently as Vice President
of Direct Sales and Marketing.
James J. McInerney has served as our Executive Vice President, Engineering
since February 1999 and served as our Vice President, Engineering from October
1998 to February 1999. From November 1995 to October 1998, he served as Vice
President of Software Engineering at Synopsys, Inc., a provider of software
tools for electronic design automation. From 1974 to October 1995,
Mr. McInerney served in various research, managerial and executive positions
at International Business Machines Corporation, most recently as Director,
Intelligent Communication Services. He holds B.S. and M.S. degrees in
mathematics from Polytechnic University in New York.
Herbert Dollahite has served as our Vice President, Customer Services and
Support and Quality since November 1998, and served as our Vice President,
Quality from June 1998 to November 1998. From August 1994 to June 1998, he
served as Senior Engineer/Scientist II, Senior Manager, Central Quality,
Director, Integration Quality, and Senior Director, Global Quality Engineering
of Apple Computer Inc. Dr. Dollahite holds a B.S. degree in Engineering from
Cornell University, an M.B.A. degree from University of Virginia, and a Ph.D.
degree in Computer Science from University of Alabama--Huntsville.
Susan R. Farber has served as our Vice President, Marketing and Strategy
since November 1998. From April 1998 to October 1998, she served as Chief
Operating Officer of Fusion Telecommunications. From July 1996 to April 1998,
Ms. Farber served as Vice President, Business Markets, for GTE. From 1994 to
July 1996, she served as Consultant, International Technology Practice for
Heidrick & Struggles. From 1993 to 1994, Ms. Farber served as Vice President,
Marketing for Nielsen Europe. Ms. Farber holds a B.A. degree from Georgetown
University and an M.B.A. degree from George Washington University.
Frederick W. W. Bolander has served as a director since October 1996. He
has been associated with Apex Investment Partners, a venture capital firm, in
various capacities since October 1994 and has been a general partner of the
firm since April 1996. From May 1993 to September 1993, Mr. Bolander was a
consultant to the African Communications Group, a venture capital and project
management firm, and from September 1985 to September 1992, Mr. Bolander held
the position of manager for AT&T Corporation. Mr. Bolander is also a director
of Concord Communications, Inc. Mr. Bolander holds B.S. and M.S. degrees in
electrical engineering from the University of Michigan and an M.B.A. degree
from Harvard University.
John R. Dougery has served as a director since February 1996. He has been
President of Dougery Ventures, a venture capital firm, since January 1998.
Prior to that he was a general partner
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<PAGE>
of Dougery & Wilder, a venture capital firm, from 1981 to December 1997. Mr.
Dougery is also a director of Printronix, Inc. Mr. Dougery holds an A.B.
degree in mathematics from the University of California, Berkeley and an
M.B.A. degree from Stanford University.
Mark Dubovoy has served as a director since October 1996. He was a founder
and has served as a general partner of Information Technology Ventures since
September 1994. Prior to that time, he was a general partner of Grace/Horn
Ventures from 1991 to August 1994. Mr. Dubovoy holds a B.S. degree in physics
from the National University of Mexico and M.A. and Ph.D. degrees in physics
from the University of California, Berkeley.
Max D. Hopper has served as a director since January 1998. Mr. Hopper has
been the Chief Executive Officer of Max D. Hopper Associates, Inc., an IS
management consulting firm, since January 1995. From 1985 to January 1995, he
served in various positions at American Airlines, a subsidiary of AMR
Corporation, most recently as Senior Vice President, Information Systems and
Chairman of the SABRE Group. Mr. Hopper is also a director of Gartner Group,
Inc., USData Corporation, VTEL Corporation, Worldtalk Corporation, Metrocall,
Inc., Payless Cashways, Inc. and United Stationers, Inc. From April 1996 to
August 1997, he served as a director of BBN Corporation. From March 1995 to
February 1998, he served as a director of Centura Software Corporation. From
August 1994 to February 1998, he served as a director of Computer Language
Research, Inc. He holds a B.S. degree in mathematics from the University of
Houston.
Peter A. Howley has served as a director since September 1996. Mr. Howley
has been a private consultant since May 1994. From 1985 until April 1994, he
served as Chairman of the Board, Chief Executive Officer and President of
Centex Telemanagement, Inc., a telecommunications management company, which
was acquired. Mr. Howley is also a director of FaxSAV, Inc. and WorldPort
Communications, Inc. Mr. Howley holds a B.I.E. degree and an M.B.A. degree
from New York University.
Daniel C. Lynch has served as director since January 1998. Mr. Lynch has
been the owner of Lynch Enterprises, a venture capital firm, since August
1993. From April 1994 to August 1996, he was a director of UUNet Technologies,
Inc., an Internet service provider. From 1991 to August 1993, he was the
Chairman of the Board of Interop, a conference and trade show company, which
he founded and which is now a division of ZD Comdex Forums. Mr. Lynch is a
director of Cybercash, Inc., which he founded. He holds a B.S. degree in
mathematics from Loyola Marymount University and an M.A. degree in mathematics
from the University of California, Los Angeles.
Thadeus J. Mocarski has served as a director since June 1997. Mr. Mocarski
has been an officer of various entities affiliated with Fleet Equity Partners
since January 1994. Prior to joining Fleet Equity Partners, Mr. Mocarski was
an attorney with the law firm of Edwards & Angell from 1989 to January 1994.
Mr. Mocarski holds a B.A. degree in economics and government from Colby
College and a J.D. degree from the Washington College of Law.
Kanwal S. Rekhi has served as a director since December 1995. Mr. Rekhi was
the Chief Executive Officer of Cybermedia Inc., a consumer software company,
from May 1998 until September 1998. He was retired from January 1995 to May
1998. He served as Executive Vice President and a director at Novell Inc., a
network software company, from 1989 to December 1994. Mr. Rekhi holds a
B.Tech. degree in electrical engineering from the Indian Institute of
Technology, Bombay and an M.S. degree in electrical engineering from Michigan
Technology Institute.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive
officers, and persons who own more than 10% of our Common Stock ("10%
Stockholders"), to file with the SEC initial reports
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<PAGE>
of ownership on a Form 3 and reports of changes in ownership of our Common
Stock and other equity securities on a Form 4 or Form 5. Such executive
officers, directors and 10% Stockholders are required by SEC regulations to
furnish us with copies of all Section 16(a) forms they file. Based solely on
our review of the copies of such forms furnished to us and written
representations from the executive officers and directors, we believe that all
of our executive officers, directors and 10% Stockholders made all the
necessary filings under Section 16(a) during 1998, except that the following
individuals had late filings in 1998: K.B. Chandrasekhar (Form 4 for sale of
stock), John R. Dougery (Form 4 for exercise of warrants and purchase of
stock), Mark Dubovoy (Form 4 for exercise of warrants and purchase of stock),
Max D. Hopper (Form 4 for purchase of stock), Peter A. Howley (Form 4 for
exercise of warrants and purchase of stock), Daniel C. Lynch (Form 4 for
purchase of stock) and Kanwal S. Rekhi (Form 4 for exercise of warrants).
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<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Officer Compensation
The following table sets forth all compensation awarded to, earned by or
paid for services rendered to Exodus in all capacities during the years ended
December 31, 1997 and 1998 by (i) each person who served as our chief
executive officer in 1998, (ii) the three other most highly compensated
executive officers other than the chief executive officer who were serving as
executive officers as of December 31, 1998, and (iii) two other individuals
who were executive officers during 1998 (collectively, the "Named Executive
Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
--------------------------------------- ------------
Securities
Other Annual Underlying
Year Salary ($) Bonus ($) Compensation ($) Options ($)
---- ---------- --------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Ellen M. Hancock........ 1998 $156,213 -- -- 871,981
President and Chief
Executive Officer (1)
K.B. Chandrasekhar...... 1998 211,101 $75,000 $9,689(2) 483,334
Chairman of the Board of 1997 160,000 75,000 5,373(2) 250,002
Directors (1)
Sam S. Mohamad.......... 1998 381,546(3) -- 5,000(2) 60,000
Executive Vice 1997 273,626(3) 70,000 -- 166,668
President, Worldwide
Sales and Professional
Services
Richard S. Stoltz....... 1998 160,839 100,000 -- 135,000
Executive Vice 1997 147,500 40,000 -- 58,334
President, Finance,
Chief Operating Officer
and Chief Financial
Officer
B.V. Jagadeesh.......... 1998 150,787 85,000 -- 110,000
Chief Technical Officer 1997 135,000 40,000 -- 58,334
(4)
Robert V. Sanford III... 1998 150,787 65,000 -- 50,000
Vice President, 1997 101,250 35,000 -- 91,667
Operations (4)
Herbert Dollahite....... 1998 95,192 6,000 -- 110,000
Vice President, Customer 1997 -- -- -- --
Services and Support and
Quality (5)
</TABLE>
- --------
(1) Mr. Chandrasekhar ceased serving as our President in March 1998 and as our
Chief Executive Officer in September 1998 when Ellen M. Hancock was
appointed to those positions. Mr. Chandrasekhar remains as Chairman of the
Board of Directors.
(2) Represents a car allowance.
(3) Includes sales commissions of $209,366 in 1998 and $130,542 in 1997.
(4) No longer an executive officer.
(5) Mr. Dollahite joined us in June 1998.
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<PAGE>
The following table sets forth further information regarding option grants
to each of the Named Executive Officers during 1998. In accordance with the
rules of the Securities and Exchange Commission, the table sets forth the
hypothetical gains or "option spreads" that would exist for the options at the
end of their respective ten-year terms. These gains are based on assumed rates
of annual compound stock price appreciation of 5% and 10% from the date the
option was granted to the end of the option terms.
Option Grants in 1998
<TABLE>
<CAPTION>
Potential Realizable
Number of Percentage Value at Assumed
Securities of Total Annual Rates of Stock
Underlying Options Price Appreciation for
Options Granted to Option Term (2)
Granted Employees Exercise Price Expiration ----------------------
Name (#) (1) in 1998 Per Share ($) Date 5% 10%
---- ---------- ---------- -------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Ellen M. Hancock........ 721,981 18.4% $ 9.000 03/10/08 $4,086,450 $10,355,866
10,416 0.3 40.000 12/08/08 262,023 664,017
139,584 3.6 40.000 12/08/08 3,511,345 8,898,438
K.B. Chandrasekhar...... 166,667 4.2 9.000 01/27/08 943,344 2,390,618
166,667 4.2 18.000 01/27/08 1,886,688 4,781,237
6,195 0.2 40.000 12/08/08 155,840 394,929
143,805 3.7 40.000 12/08/08 3,617,528 9,167,525
Sam S. Mohamad.......... 8,133 0.2 40.000 12/08/08 204,592 518,476
51,867 1.3 40.000 12/08/08 1,304,755 3,306,506
Richard S. Stoltz....... 49,600 1.3 7.650 02/17/08 238,628 604,730
10,400 0.3 7.650 02/17/08 50,035 126,798
75,000 1.9 40.000 12/08/08 1,886,684 4,781,227
B.V. Jagadeesh.......... 49,600 1.3 7.650 02/17/08 238,628 604,730
10,400 0.3 7.650 02/17/08 50,035 126,798
50,000 1.3 40.000 12/08/08 1,257,789 3,187,485
Robert V. Sanford III... 9,587 0.2 40.000 12/08/08 241,169 611,168
40,413 1.0 40.000 12/08/08 1,016,621 2,576,317
Herbert Dollahite....... 20,963 0.5 19.875 09/08/08 262,022 664,016
29,037 0.7 19.875 09/08/08 362,942 919,765
60,000 1.5 40.000 12/08/08 1,509,347 3,824,982
</TABLE>
- --------
(1) These options were generally granted at fair market value, except for the
option granted to Mr. Chandrasekhar with an exercise price per share of
$18.00, which was above fair market value. The options generally vest over
a 50-month period so long as the individual is employed by us, except that
the two options granted to Mr. Chandrasekhar, each for 166,667 shares of
Common Stock at per share exercise prices of $9.00 and $18.00,
respectively, vest in full upon the third and fifth anniversaries of the
date of grant (January 27, 1998), respectively. Both options will
accelerate and become fully vested if we are acquired or sell all or
substantially all of our assets or if Mr. Chandrasekhar is terminated
other than for cause.
(2) The 5% and 10% assumed annual rates of stock price appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent our estimate or projection of future Common Stock prices.
42
<PAGE>
The following table sets forth the number of shares acquired upon the
exercise of stock options during 1998 and the number of shares covered by both
exercisable and unexercisable stock options held by each of the Named
Executive Officers at December 31, 1998. Also reported are values of
unexercised "in-the-money" options, which represent the positive spread
between the respective exercise prices of outstanding stock options and the
fair market value of our Common Stock on December 31, 1998 ($64.25 per share).
Aggregated Option Exercises in 1998 and Year-End Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Shares Value Options at Year-End Year-End
Acquired on Realized ------------------------- -------------------------
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ellen M. Hancock........ 115,517 $1,523,376 14,440 742,024 $ 797,810 $36,346,826
K.B. Chandrasekhar...... -- -- 62,500 670,835 3,977,375 32,470,703
Sam S. Mohamad.......... 52,000 1,847,609 6,667 168,000 424,705 8,332,414
Richard S. Stoltz....... -- -- 29,533 153,301 1,786,103 6,471,488
B.V. Jagadeesh.......... -- -- 40,033 128,301 2,454,034 5,865,238
Robert V. Sanford III... 47,833 982,701 5,500 88,334 351,388 3,660,134
Herbert Dollahite....... -- -- 6,001 103,999 266,294 3,407,456
</TABLE>
Executive Employment Policy. In December 1997, the Board adopted a form of
Executive Employment Policy (the "Policy") to be entered into between us and
each of our executive officers and certain of our other employees (together,
the "Executives"). Pursuant to the Policy, in the event of a "Termination" (as
defined in the Policy) resulting from a "Change of Control" (as defined in the
Policy), each Executive's base salary and medical benefits would continue for
18 months for the Chairman, Chief Executive Officer and President, and up to
12 months for other Executives. In addition, in the event of a Change in
Control, each Executive's options would become exercisable with respect to 50%
of such Executive's remaining unvested shares subject to such options. In the
event of an "Involuntary Termination" (as defined in the Policy), base salary
and medical benefits would generally continue for shorter time periods than
those set forth above and the Executive's options would continue to vest
during such period. An Executive that "Voluntarily Terminates" (as defined in
the Policy) or is terminated for "Cause" (as defined in the Policy) would
generally not receive any compensation, additional stock option vesting or
other benefits after the date of termination. Pursuant to the Policy, during
the term of any payments made to an Executive after termination, such
Executive would not be permitted to manage, operate, control, participate in
the management, operation or control of or be employed by any other person or
entity that is engaged in providing services that are directly competitive
with the services offered by us.
Director Compensation
Our directors do not receive cash compensation for their services as
directors but are reimbursed for their reasonable expenses in attending
meetings of the Board. Under our 1998 Directors Stock Option Plan, each member
of the Board who is not our employee is automatically granted an option for
20,000 shares upon joining the Board, which will vest as to 33 1/3% of the
total shares on each annual anniversary of the date of grant provided the
optionee is still a member of the Board or a consultant to us. In 1998,
directors Lynch and Hopper each received an option for 20,000 shares at an
exercise price of $15.00 per share. At each annual meeting of stockholders,
each eligible director will automatically be granted an additional option for
5,000 shares, which will vest as to 25% of the total shares on each annual
anniversary of the date of grant provided the optionee is still a member of
the Board or a consultant to us. In May 1998, directors Bolander, Dougery,
Dubovoy, Hopper,
43
<PAGE>
Howley, Lynch, Mocarski and Rekhi each received an option for 5,000 shares at
an exercise price of $30.688 per shares.
In February 1998, we sold shares of Series D Preferred Stock convertible
into 33,333 and 5,848 shares of Common Stock at a purchase price per share of
$8.55 to directors Lynch and Hopper, respectively. Such shares have since been
converted into Common Stock.
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee of the Board, consisting
of directors Bolander, Howley and Mocarski, was at any time during 1998 an
officer or employee of Exodus. No executive officer of Exodus served during
1998 or serves as a member of the board of directors or compensation committee
of any entity that has one or more executive officers serving on our Board or
our Compensation Committee.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of February 10,
1999, with respect to the beneficial ownership of our Common Stock by (i) each
stockholder known by us to be the beneficial owner of more than 5% of our
Common Stock, (ii) each director, (iii) each person who served as our chief
executive officer in 1998, (iv) the three other most highly compensated
executive officers who were executive officers as of December 31, 1998 and
earned more than $100,000 in 1998, (v) two additional individuals who were
executive officers during 1998, and (vi) all current directors and executive
officers as a group.
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address of Beneficial Owner Beneficial Ownership(1) Percent of Class
- ------------------------------------ ----------------------- ----------------
<S> <C> <C>
K.B. Chandrasekhar (2)............... 739,742 3.6%
B.V. Jagadeesh (3)................... 416,570 2.0
John R. Dougery (4).................. 373,127 1.8
Kanwal S. Rekhi (5).................. 349,554 1.7
Ellen M. Hancock (6)................. 250,680 1.2
Frederick W.W. Bolander
Apex Funds (7)...................... 243,373 1.2
Mark Dubovoy
ITV Partnerships (8)................ 209,563 1.0
Thadeus J. Mocarski
Fleet Funds (9)..................... 185,061 *
Richard S. Stoltz (10)............... 183,014 *
Peter A. Howley (11)................. 123,669 *
Robert V. Sanford III (12)........... 58,715 *
Daniel C. Lynch (13)................. 46,000 *
Sam S. Mohamad (14).................. 24,801 *
Herbert Dollahite (15)............... 14,801 *
Max D. Hopper (16)................... 12,515 *
All current executive officers and
directors as a group (15 persons)
(17)................................ 2,770,900 13.5%
</TABLE>
- --------
* Represents less than 1% of our outstanding Common Stock.
(1) Unless otherwise indicated below, the persons and entities named in the
table have sole voting and sole investment power with respect to all
shares beneficially owned, subject to community property laws where
applicable. Shares of Common Stock subject to options that are currently
exercisable or exercisable within 60 days of February 10, 1999 are deemed
to be outstanding
44
<PAGE>
and to be beneficially owned by the person holding such options for the
purpose of computing the percentage ownership of such person but are not
treated as outstanding for the purpose of computing the percentage
ownership of any other person.
(2) Includes 73,998 shares held by Mr. Chandrasekhar and his wife as trustees
for three trusts for their minor children, 2,038 shares held by the K.B.
Chandrasekhar Family Foundation, of which Mr. Chandrasekhar is a trustee,
and 92,835 shares subject to options exercisable within 60 days of
February 10, 1999. Mr. Chandrasekhar is our Chairman of the Board of
Directors.
(3) Includes 234,832 shares held by Mr. Jagadeesh and his wife as trustees
for the Jagadeesh Family Trust, 28,238 shares held by Mr. Jagadeesh and
his wife as trustees for two trusts for their minor children and 53,500
shares subject to options exercisable within 60 days of February 10,
1999. Mr. Jagadeesh, a co-founder of Exodus, served as our Vice
President, Engineering until October 26, 1998 and is currently our Chief
Technology Officer.
(4) Represents 219,804 shares held in the Dougery Revocable Trust, of which
Mr. Dougery and his wife are the trustees, 111,774 shares held by Mr.
Dougery as trustee of three trusts for his children, 26,150 shares held
by Mr. Dougery's wife as trustee for a separate trust, and 15,399 shares
held by Dougery Ventures LLC, of which Mr. Dougery is President. Mr.
Dougery is a director.
(5) Represents 290,208 shares held by Mr. Rekhi and his wife as trustees for
the Rekhi Family Trust, 4,998 shares held by Mr. Rekhi as custodian for
minor children, and 54,348 shares held by Mr. Rekhi, his wife and one
other individual as trustees for two other trusts. Mr. Rekhi is a
director.
(6) Represents 198,361 shares held by Mrs. Hancock and her husband and 52,319
shares subject to options exercisable within 60 days of February 10,
1999. Mrs. Hancock is our Chief Executive Officer, President and a
director.
(7) Includes 232,542 shares held by Apex Investment Fund III, L.P. and 10,392
shares held by Apex Strategic Partners, L.L.C. Mr. Bolander, a director
of Exodus, is a general partner of the general partner of Apex Investment
Fund III, L.P. and a managing member of Apex Management III, L.L.C., the
manager of Apex Strategic Partners, L.L.C.
(8) Includes 189,547 shares held by Information Technology Ventures, L.P.,
4,552 shares held by ITV Affiliates Fund, L.P., and 180 shares held by
ITV Management, LLC. Mr. Dubovoy, a director of Exodus, is a managing
member of ITV Management, LLC, the general partner of Information
Technology Ventures, L.P. and ITV Affiliates Fund, L.P.
(9) Represents 100,877 shares held by Fleet Venture Resources, Inc., 43,233
shares held by Fleet Equity Partners VI, L.P., 36,702 shares held by
Chisholm Partners III, L.P., and 4,249 shares held by Kennedy Plaza
Partners. Mr. Mocarski, a director of Exodus, is a Senior Vice President
of each of (i) Fleet Venture Resources, Inc., (ii) Fleet Growth Resources
II, Inc., a general partner of Fleet Equity Partners VI, L.P. and (iii)
Silverado III, Corp., the general partner of Silverado III, L.P., the
general partner of Chisholm Partners III, L.P. Mr. Mocarski is also a
general partner of Kennedy Plaza Partners. Mr. Mocarski may be deemed to
share investment and voting power in the aforementioned securities with
Mr. Robert M. Van Degna and Mr. Habib Y. Gorgi in their capacities as
Chairman and Chief Executive Officer, and President, respectively, of
each of (i) Fleet Venture Resources, Inc., (ii) Fleet Growth Resources
II, Inc. and (iii) Silverado III, Corp. and as managing general partners
of Kennedy Plaza Partners. Messrs. Mocarski, Van Degna and Gorgi disclaim
beneficial ownership of such securities except to the extent of their
respective pecuniary interests therein.
(10) Represents 138,014 shares held by Mr. Stoltz and his wife and 45,000
shares subject to options exercisable within 60 days of February 10,
1999. Mr. Stoltz is our Executive Vice President, Finance, Chief
Operating Officer and Chief Financial Officer.
(11) Includes 12,000 shares subject to options exercisable within 60 days of
February 10, 1999. Mr. Howley is a director.
45
<PAGE>
(12) Includes 16,834 shares subject to options exercisable within 60 days of
February 10, 1999. Mr. Sanford is our Vice President, Operations.
(13) Includes 6,667 shares subject to options exercisable within 60 days of
February 10, 1999. Mr. Lynch is a director.
(14) Represents 24,801 shares subject to options exercisable within 60 days of
February 10, 1999. Mr. Mohamad is our Executive Vice President, Worldwide
Sales and Professional Services.
(15) Represents 14,801 shares subject to options exercisable within 60 days of
February 10, 1999. Mr. Dollahite is our Vice President, Customer Services
and Support and Quality.
(16) Includes 6,667 shares subject to options exercisable within 60 days of
February 10, 1999. Mr. Hopper is a director.
(17) Includes 270,090 shares subject to options exercisable within 60 days of
February 10, 1999 held by our executive officers and directors. Does not
include shares or options owned by Mr. Jagadeesh and Mr. Sanford.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From January 1, 1998 to the present, there have been no (and there are no
currently proposed) transactions in which the amount involved exceeded $60,000
to which we or any of our subsidiaries was (or is to be) a party and in which
any executive officer, director, 5% beneficial owner of our Common Stock or
member of the immediate family of any of the foregoing persons had (or will
have) a pecuniary interest, except as described in Item 11 above.
46
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements.
The following Consolidated Financial Statements and Report of Independent
Auditors are incorporated by reference to pages F-1 through F-19 of this Form
10-K:
The consolidated balance sheets for the years ended December 31, 1997
and 1998, and the consolidated statements of operations, statements of
stockholders' (deficit) equity and cash flows for each of the years in the
three year period ended December 31, 1998, together with the notes thereto.
(a) (2) Financial Statement Schedule.
The following financial statement schedule is incorporated by reference to
page S-1 of this Form 10-K:
Schedule II--Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Exhibit
Number Title
------- -----
<C> <S>
2.01 Agreement and Plan of Merger between Fouress, Inc. and Registrant
dated April 26, 1995. (Incorporated by reference from Exhibit 2.01
from the Registrant's Registration Statement on Form S-1 (File No.
333-44469), as amended, declared effective by the Securities and
Exchange Commission on March 18, 1998 (the "Form S-1")).
2.02 Form of Agreement and Plan of Merger by and between Registrant and
Exodus. (Incorporated by reference from Exhibit 2.20 to the Form S-
1).
3.01 Registrant's Restated Certificate of Incorporation. (Incorporated by
reference from Exhibit 3.07 to Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1998 (the "March 1998 Form 10-
Q")).
3.02 Certificate of Designations specifying the terms of the Series A
Junior Participating Preferred Stock of the Registrant, as filed with
the Delaware Secretary of State on January 28, 1999 (Incorporated by
reference from Exhibit 3.02 to the Registrant's Registration
Statement on Form 8-A filed with the Commission on January 29, 1999
(the "1999 Form 8-A")).
3.03 Registrant's Bylaws. (Incorporated by reference from Exhibit 3.06 to
the Form S-1).
4.01 Form of Specimen Certificate for Registrant's Common Stock.
(Incorporated by reference from Exhibit 4.01 to the Form S-1).
4.02 Form of Note for Registrant's 11 1/4% Senior Notes (Incorporated by
reference from Exhibit 4.02 to Registrant's Registration Statement on
Form S-4 (File No. 333-62413) declared effective by the Commission on
November 10, 1998 (the "Form S-4")).
4.03 Indenture between Exodus Communications, Inc. as Issuer and Chase
Manhattan Bank and Trust Company, National Association, as Trustee
dated July 1, 1998. (Incorporated by reference from Exhibit 10.30 to
the Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998 (the "June 1998 Form 10-Q")).
4.04 Rights Agreement dated January 27, 1999 between Registrant and
BankBoston, N.A., as Rights Agent (Incorporated by reference from
Exhibit 4.04 to the 1999 Form 8-A).
10.01 Amended and Restated Investors Rights Agreement, dated as of June
25, 1997 between the Registrant and certain investors, as amended
December 15, 1997. (Incorporated by reference from Exhibit 10.01 to
the Form S-1).
10.02+ Registrant's 1995 Stock Option Plan and related forms of agreements.
(Incorporated by reference from Exhibit 10.02 to the Form S-1).
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Title
------- -----
<C> <S>
10.03+ Registrant's 1995 Stock Purchase Plan and related forms of
agreements. (Incorporated by reference from Exhibit 10.03 to the
Form S-1).
10.04+ Registrant's 1997 Equity Incentive Plan and related forms of
agreements. (Incorporated by reference from Exhibit 10.04 to the
Form S-1).
10.05+ Registrant's 1998 Equity Incentive Plan and related forms of
agreements. (Incorporated by reference from Exhibit 10.05 to the
Form S-1).
10.06+ Registrant's 1998 Directors Stock Option Plan and related forms of
agreements. (Incorporated by reference from Exhibit 10.06 to the
Form S-1).
10.07+ Registrant's 1998 Employee Stock Purchase Plan. (Incorporated by
reference from Exhibit 10.07 to the Form S-1).
10.08+ Form of Indemnification Agreement entered into by Registrant with
each of its directors and executive officers, as amended.
(Incorporated by reference from Exhibit 10.08 to the Form S-1).
10.09 Facility Lease between Washcop Associates Limited Partnership and
the Registrant dated April 18, 1996. (Incorporated by reference from
Exhibit 10.09 to the Form S-1).
10.10 Facility Lease between Cal-Harbor II & III Urban Renewal Associates
and Registrant dated December 30, 1996, as amended April 29, 1997
and January 27, 1998. (Incorporated by reference from Exhibit 10.10
to the Form S-1).
10.11 Facility Lease between McCandless-San Tomas N. 2 and Registrant
dated April 18, 1997. (Incorporated by reference from Exhibit 10.11
to the Form S-1).
10.12 Facility Lease between Sabey Corporation and Registrant dated April
24, 1997. (Incorporated by reference from Exhibit 10.12 to the Form
S-1).
10.13 Facility Lease between The Manufacturers Life Insurance Company and
Registrant dated June 27, 1997. (Incorporated by reference from
Exhibit 10.13 to the Form S-1).
10.14 Facility Lease between JBG/Spring Park Limited Partnership and
Registrant dated June 30, 1997. (Incorporated by reference from
Exhibit 10.14 to the Form S-1).
10.15 Application for Data Services between WorldCom, Inc. and the
Registrant dated September 18, 1997. (Incorporated by reference from
Exhibit 10.15 to the Form S-1).
10.16 Software License and Marketing Agreement between Computer Associates
International, Inc. and the Registrant dated April 1997.
(Incorporated by reference from Exhibit 10.16 to the Form S-1).
10.17+ Form of Executive Employment Policy to be entered into between the
Registrant and certain officers. (Incorporated by reference from
Exhibit 10.17 to the Form S-1).
10.18 Equipment Lease Line of Credit between Transamerica Business Credit
Corporation and Registrant dated August 28, 1997. (Incorporated by
reference from Exhibit 10.18 to the Form S-1).
10.19 Loan and Security Agreement between Silicon Valley Bank and
Registrant dated June 14, 1996, as amended on March 25, 1997, June
13, 1997, November 24, 1997 and December 8, 1997. (Incorporated by
reference from Exhibit 10.19 to the Form S-1).
10.20 Loan and Security Agreement among MMC/GATX Partnership No. 1,
Transamerica Business Credit Corporation and Registrant dated
December 31, 1997. (Incorporated by reference from Exhibit 10.20 to
the Form S-1).
10.21 Equipment Lease Line of Credit between Venture Lending & Leasing II,
Inc. and Registrant dated December 23, 1997. (Incorporated by
reference from Exhibit 10.21 to the Form S-1).
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Title
------- -----
<C> <S>
10.22 Equipment Lease Line of Credit Commitment ("Commitment Letter")
between Finova Technology Finance, Inc. ("Finova") and Registrant
dated December 17, 1997; Master Lease Agreement ("Master Lease")
between Finova and Registrant dated December 19, 1997; and
Modification to Commitment Letter and Master Lease between Finova
and Registrant dated February 6, 1998. (Incorporated by reference
from Exhibit 10.22 to the Form S-1).
10.23 Sublease Agreement dated January 12, 1998 between Amdahl Corporation
and Registrant. (Incorporated by reference from Exhibit 10.23 to the
Form S-1).
10.24+ Nonqualified Stock Option Agreements between Registrant and K.B.
Chandrasekhar dated January 27, 1998. (Incorporated by reference
from Exhibit 10.24 to the Form S-1).
10.25+ Form of Nonqualified Stock Option Agreement between Registrant and
Ellen M. Hancock dated March 10, 1998. (Incorporated by reference
from Exhibit 10.25 to the Form S-1).
10.26+ Form of Agreement used to sell stock to certain directors and an
officer of the Registrant. (Incorporated by reference from Exhibit
10.26 to the Form S-1).
10.27 Facility Lease between 600 Winter Street, L.L.C. and Registrant,
dated as of December 23, 1997. (Incorporated by reference from
Exhibit 10.27 to the March 1998 Form 10-Q). Certain exhibits to this
agreement have been omitted from this filing and will be furnished
supplementally to the Securities and Exchange Commission upon
request.
10.28 Amendment to Loan and Security Agreement between Silicon Valley Bank
and Registrant dated June 14, 1996. (Incorporated by reference from
Exhibit 10.28 to the March 1998 Form 10-Q.)
10.29 First Amendment to Loan and Security Agreement, dated as of February
20, 1998, by and between the Registrant and MMC/GATX Partnership No.
1 and Transamerica Business Credit Corporation. (Incorporated by
reference from Exhibit 10.29 to the amendment on Form 10-Q/A
amending the March 1998 Form 10-Q).
10.30 Exchange and Registration Rights Agreement among Exodus
Communications, Inc., Goldman, Sachs & Co., Donaldson Lufkin &
Jenrette Securities Corporation, BT Alex. Brown Incorporated and
NationsBanc Montgomery Securities LLC dated July 1, 1998.
(Incorporated by reference from Exhibit 10.31 to the June 1998 Form
10-Q).
10.31 Escrow Agreement among Chase Manhattan Bank and Trust Company,
National Association, as escrow agent, Chase Manhattan Bank and
Trust Company, National Association, as trustee, and Exodus
Communications, Inc., dated July 1, 1998. (Incorporated by reference
from Exhibit 10.32 to the June 1998 Form 10-Q).
10.32 Purchase Agreement among Exodus Communications, Inc., Goldman, Sachs
& Co., Donaldson Lufkin & Jenrette Securities Corporation, BT Alex.
Brown Incorporated and NationsBanc Montgomery Securities LLC, dated
June 26, 1998. (Incorporated by reference from Exhibit 10.33 to the
June 1998 Form 10-Q).
10.33 Form of Notice of Debt Offering and Waiver of Registration Rights
among the Registrant and certain holders of stock of the Registrant.
(Incorporated by reference from Exhibit 10.34 to the June 1998 Form
10-Q).
10.34 Amended and Restated Master Loan and Security Agreement between
Exodus Communications, Inc. and Transamerica Business Credit
Corporation dated June 30, 1998. (Incorporated by reference from
Exhibit 10.35 to the June 1998 Form 10-Q).
10.35 Agreement between Cisco Systems Capital Corporation and Exodus
Communications, Inc., dated June 1, 1998. (Incorporated by reference
from Exhibit 10.36 to the June 1998 Form 10-Q.)
10.36* Qwest Communications Private Line Service Agreement Business
Services, between Qwest Communications Corporation and the
Registrant, dated as of July 17, 1998. (Incorporated by reference
from Exhibit 10.37 to the June 1998 Form 10-Q).
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Title
------- -----
<C> <S>
10.37 Consent and Second Amendment to the Second Amended and Restated
Investors' Rights Agreement. (Incorporated by reference from Exhibit
10.37 to the Form S-4).
10.38 Lease Agreement dated August 31, 1998 between Reynolds Metals
Development Company and Registrant. (Incorporated by reference from
Exhibit 10.38 to the Form S-4).
10.39 Building Lease dated September 22, 1998 between Centerpoint
Properties Trust and Registrant. (Incorporated by reference from
Exhibit 10.39 to the Form S-4).
10.40 Sublease Agreement dated September 4, 1998 between S3, Incorporated
and Registrant. (Incorporated by reference from Exhibit 10.40 to the
Form S-4).
10.41+ Registrant's 1999 Stock Option Plan and related forms of agreements.
(Incorporated by reference to Exhibit 4.04 to the Registrant's
Registration Statement on Form S-8 (File No. 333-72525), filed with
the SEC on February 17, 1999 (the "February 1999 Form S-8").
10.42+ Form of Non-Plan Stock Option Agreement for option granted to James
J. McInerney. (Incorporated by reference to Exhibit 4.06 to the
February 1999 Form S-8).
10.43+ Form of Non-Plan Stock Option Agreement for option granted to Susan
R. Farber. (Incorporated by reference from Exhibit 4.07 to the
February 1999 Form S-8).
10.44+ Offer Letter dated September 30, 1998 between the Registrant and
Susan Farber.
10.45 Agreement for Lease dated December 24, 1998 among Helios (Park
Royal) Limited, Lloyds Bank PLC, Exodus Internet Limited, and Exodus
Communications, Inc. Certain exhibits to this agreement have been
omitted from this filing and will be furnished supplementally to the
Securities and Exchange Commission upon request.
10.46 First Amendment to Lease Agreement dated January 1999 between
Washcop Associates Limited Partnership and Exodus Communications,
Inc.
10.47 First Amendment of Lease dated December 4, 1998 between David A.
Sabey and Sandra L. Sabey and Exodus Communications, Inc.
21.01 Subsidiaries of the Registrant.
23.02 Consent of KPMG LLP, independent auditors.
24.01 Power of Attorney. (See page 51 of this Form 10-K).
27.01 Financial Data Schedule.
</TABLE>
- --------
* Confidential treatment has been granted for certain portions of this
document pursuant to an application for confidential treatment sent to the
Securities and Exchange Commission. Such portions have been redacted and
marked with a triple asterisk. The non-redacted version of this document
has been sent to the Securities and Exchange Commission.
+ Management contracts or compensatory plans required to be filed as
exhibits to Form 10-K.
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K for the quarter ended
December 31, 1998.
(c) Exhibits. See (a) (3) above.
(d) Financial Statement Schedule. See (a) (2) above.
50
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Exodus Communications, Inc.
/s/ Richard S. Stoltz February 21, 1999
By___________________________________
Richard S. Stoltz
Executive Vice President, Finance,
Chief Operating Officer and Chief
Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Ellen M.
Hancock and Richard S. Stoltz, jointly and severally, his or her true and
lawful attorneys-in-fact, each with the power of substitution, for him or her
in any and all capacities, to sign amendments to this Report on Form 10-K, and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact, or his or her substitute or
substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities 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:
Signatures Title Date
Principal Executive Officer:
/s/ Ellen M. Hancock President and Chief February 21,
- ------------------------------------- Executive Officer 1999
Ellen M. Hancock and Director
Principal Financial Officer and Principal Accounting Officer:
/s/ Richard S. Stoltz Executive Vice February 21,
- ------------------------------------- President, Finance, 1999
Richard S. Stoltz Chief Operating
Officer and Chief
Financial Officer
Additional Directors:
/s/ K.B. Chandrasekhar Chairman of the February 21,
- ------------------------------------- Board of Directors 1999
K.B. Chandrasekhar
51
<PAGE>
Name Title Date
Additional Directors:
/s/ Frederick W.W. Bolander Director February 21,
- ------------------------------------- 1999
Frederick W.W. Bolander
/s/ John R. Dougery Director February 21,
- ------------------------------------- 1999
John R. Dougery
/s/ Mark Dubovoy Director February 21,
- ------------------------------------- 1999
Mark Dubovoy
/s/ Max D. Hopper Director February 21,
- ------------------------------------- 1999
Max D. Hopper
/s/ Peter A. Howley Director February 21,
- ------------------------------------- 1999
Peter A. Howley
/s/ Daniel C. Lynch Director February 21,
- ------------------------------------- 1999
Daniel C. Lynch
/s/ Thadeus J. Mocarski Director February 21,
- ------------------------------------- 1999
Thadeus J. Mocarski
/s/ Kanwal S. Rekhi Director February 21,
- ------------------------------------- 1999
Kanwal S. Rekhi
52
<PAGE>
EXODUS COMMUNICATIONS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<S> <C>
Report of KPMG LLP, Independent Auditors.................................. F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998.............. F-3
Consolidated Statements of Operations for the years ended December 31,
1996, 1997 and 1998...................................................... F-4
Consolidated Statements of Stockholders' (Deficit) Equity for the years
ended December 31, 1996, 1997 and 1998................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1997 and 1998...................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
Schedule II--Valuation and Qualifying Accounts............................ S-1
</TABLE>
F-1
<PAGE>
REPORT OF KPMG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Exodus Communications, Inc.:
We have audited the consolidated financial statements of Exodus
Communications, Inc. and subsidiaries (the Company) as listed in the
accompanying index. In connection with our audits of the consolidated
financial statements, we have also audited the financial statement schedule as
listed in the accompanying index. These consolidated financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Exodus
Communications, Inc. and subsidiaries as of December 31, 1997 and 1998, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1998, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG LLP
Mountain View, California
January 26, 1999
F-2
<PAGE>
EXODUS COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
December 31,
-----------------
1997 1998
------- --------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.................................... $10,270 $150,891
Accounts receivable, net of allowance for doubtful accounts
of $691 and $1,821 as of December 31, 1997 and 1998,
respectively 1,837 11,174
Prepaid expenses and other current assets.................... 1,377 4,677
------- --------
Total current assets....................................... 13,484 166,742
Property and equipment, net.................................... 25,170 68,306
Restricted cash equivalents and investments.................... 1,753 45,614
Other assets................................................... 566 12,624
------- --------
$40,973 $293,286
======= ========
Liabilities, Redeemable Convertible Preferred Stock
and Stockholders' (Deficit) Equity
Current liabilities:
Bank borrowings.............................................. $ 3,000 --
Current portion of equipment loans and line of credit
facilities.................................................. 3,777 14,367
Current portion of capital lease obligations................. 1,143 5,140
Accounts payable............................................. 6,252 9,208
Accrued expenses............................................. 3,019 6,771
Accrued interest payable..................................... -- 11,563
------- --------
Total current liabilities.................................. 17,191 47,049
Equipment loans and line of credit facilities, less current
portion....................................................... 12,693 15,695
Capital lease obligations, less current portion................ 2,442 11,401
Senior Notes................................................... -- 200,000
------- --------
Total liabilities.......................................... 32,326 274,145
------- --------
Redeemable convertible preferred stock and warrants, $0.001 par
value: 74,960,124 and no shares authorized as of December 31,
1997 and 1998, respectively; 34,117,371 and no shares issued
and outstanding as of December 31, 1997, and 1998,
respectively; aggregate liquidation preference of $39,640 as
of December 31, 1997.......................................... 39,247 --
------- --------
Commitments and contingencies
Stockholders' (deficit) equity:
Preferred stock, $0.001 par value: No and 5,000,000 shares
authorized as of December 31, 1997 and 1998, respectively,
and no shares issued or outstanding as of December 31, 1997
and 1998.................................................... -- --
Common stock, $0.001 par value: 53,281,579 and 50,000,000
shares authorized as of December 31, 1997 and 1998,
respectively; 2,067,253 and 20,067,352 shares issued and
outstanding as of December 31, 1997 and 1998, respectively.. 2 20
Additional paid-in capital................................... 2,508 117,220
Notes receivable from stockholders........................... (140) --
Deferred stock compensation.................................. (2,393) (1,080)
Accumulated deficit.......................................... (30,577) (97,019)
------- --------
Total stockholders' (deficit) equity....................... (30,600) 19,141
------- --------
$40,973 $293,286
======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
EXODUS COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1996 1997 1998
------- -------- --------
<S> <C> <C> <C>
Revenues:
Service revenues............................... $2,454 $11,588 $49,808
Equipment revenues............................. 676 820 2,930
------- -------- --------
Total revenues............................... 3,130 12,408 52,738
------- -------- --------
Costs and expenses:
Cost of service revenues....................... 2,538 16,228 59,261
Cost of equipment revenues..................... 452 640 2,298
Marketing and sales............................ 2,734 12,702 28,778
General and administrative..................... 1,056 5,983 15,865
Product development............................ 444 1,647 3,221
------- -------- --------
Total costs and expenses..................... 7,224 37,200 109,423
------- -------- --------
Operating loss............................... (4,094) (24,792) (56,685)
Interest income.................................. 68 193 7,137
Interest expense................................. (107) (699) (16,894)
------- -------- --------
Net loss..................................... (4,133) (25,298) (66,442)
Cumulative dividends and accretion on redeemable
convertible preferred stock..................... -- (1,413) (2,014)
------- -------- --------
Net loss attributable to common
stockholders................................ $(4,133) $(26,711) $(68,456)
======= ======== ========
Basic and diluted net loss per share............. $ (2.16) $ (13.85) $ (4.38)
======= ======== ========
Shares used in computing basic and diluted net
loss per share.................................. 1,914 1,928 15,643
======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
EXODUS COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
(in thousands)
<TABLE>
<CAPTION>
Notes Total
Common Stock Additional Receivable Deferred Stockholders'
-------------- Paid-In from Stock Accumulated (Deficit)
Shares Amount Capital Stockholders Compensation Deficit Equity
------ ------ ---------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances as of December
31, 1995................ 1,821 $ 2 $ 199 $(195) $ -- $ (1,146) $ (1,140)
Issuance of common
stock................... 134 -- 32 -- -- -- 32
Issuance of common stock
in connection with stock
purchase plan and
exercise of stock
options................. 16 -- 4 (3) -- -- 1
Repurchase of common
stock................... (25) -- (6) 6 -- -- --
Repayment of notes
receivable from
stockholders............ -- -- -- 6 -- -- 6
Net loss................ -- -- -- -- -- (4,133) (4,133)
------ --- -------- ----- ------- -------- --------
Balances as of December
31, 1996................ 1,946 2 229 (186) -- (5,279) (5,234)
Issuance of common stock
in connection with
exercise of stock
options and warrants.... 172 -- 222 -- -- -- 222
Repurchase of common
stock................... (51) -- (12) 12 -- -- --
Repayment of notes
receivable from
stockholders............ -- -- -- 34 -- -- 34
Deferred stock
compensation related to
stock option grants..... -- -- 3,482 -- (3,482) -- --
Amortization of deferred
stock compensation...... -- -- -- -- 1,089 -- 1,089
Accrual of cumulative
dividends on Series C
and D redeemable
convertible preferred
stock................... -- -- (750) -- -- -- (750)
Accretion on Series C
and D redeemable
convertible preferred
stock................... -- -- (663) -- -- -- (663)
Net loss................ -- -- -- -- -- (25,298) (25,298)
------ --- -------- ----- ------- -------- --------
Balances as of December
31, 1997................ 2,067 2 2,508 (140) (2,393) (30,577) (30,600)
Issuance of common stock
in connection with
employee stock purchase
plan and exercise of
stock options and
warrants................ 838 1 2,252 -- -- -- 2,253
Issuance of common stock
in conjunction with
initial public offering,
net of offering costs of
$7,062.................. 5,125 5 69,813 -- -- -- 69,818
Issuance of common stock
to an officer for cash.. 50 -- 450 -- -- -- 450
Issuance of common stock
and common stock
warrants................ -- -- 786 -- -- -- 786
Repayment of notes
receivable from
stockholders............ -- -- -- 140 -- -- 140
Conversion of redeemable
convertible preferred
stock into common
stock................... 11,987 12 43,425 -- -- -- 43,437
Amortization of deferred
stock compensation...... -- -- -- -- 1,313 -- 1,313
Accrual of cumulative
dividends on Series C
and D redeemable
convertible preferred
stock................... -- -- (462) -- -- -- (462)
Accretion on Series C
and D redeemable
convertible preferred
stock................... -- -- (1,552) -- -- -- (1,552)
Net loss................ -- -- -- -- -- (66,442) (66,442)
------ --- -------- ----- ------- -------- --------
Balances as of December
31, 1998................ 20,067 $20 $117,220 $ -- $(1,080) $(97,019) $ 19,141
====== === ======== ===== ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
EXODUS COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1996 1997 1998
------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss......................................... $(4,133) $(25,298) $(66,442)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization................... 461 3,429 12,997
Loss on disposal of property and equipment...... -- -- 464
Noncash common stock and warrant expense........ -- -- 786
Amortization of deferred stock compensation..... -- 1,089 1,313
Amortization of debt issuance costs............. -- -- 846
Interest accretion on restricted cash
equivalents and investments.................... -- -- (1,088)
Changes in operating assets and liabilities:
Accounts receivable............................ (265) (1,316) (8,301)
Prepaid expenses and other assets.............. (189) (748) (4,086)
Accounts payable............................... 671 5,089 2,791
Accrued expenses............................... 339 2,237 2,659
Accrued interest payable....................... -- -- 11,563
------- -------- --------
Net cash used for operating activities........ (3,116) (15,518) (46,498)
------- -------- --------
Cash flows from investing activities:
Capital expenditures............................. (3,499) (22,489) (44,564)
Proceeds from sale of property and equipment..... -- -- 245
Business acquired, net of cash received.......... -- -- (5,654)
Restricted cash and investments.................. (378) (1,375) (42,773)
------- -------- --------
Net cash used for investing activities........ (3,877) (23,864) (92,746)
------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of redeemable convertible
preferred stock and warrants.................... 9,409 23,320 2,176
Proceeds from issuance of common stock, net...... 32 222 72,521
Proceeds from issuance of bridge financing
convertible notes............................... -- 3,975 --
Repayment of notes receivable from stockholders.. 7 34 140
Bank borrowings, net............................. (100) 3,000 (3,000)
Proceeds from sale-leaseback transactions........ 552 932 4,035
Payments on capital leases obligations........... (154) (720) (2,999)
Proceeds from equipment loans and line of credit
facilities...................................... 1,296 16,480 18,611
Repayment of equipment loans and line of credit
facilities...................................... (497) (1,306) (5,019)
Proceeds from senior notes, net of discounts and
offering costs.................................. -- -- 193,400
------- -------- --------
Net cash provided by financing activities..... 10,545 45,937 279,865
------- -------- --------
Net increase in cash and cash equivalents......... 3,552 6,555 140,621
Cash and cash equivalents at beginning of year.... 163 3,715 10,270
------- -------- --------
Cash and cash equivalents at end of year.......... $ 3,715 $ 10,270 $150,891
======= ======== ========
Supplemental disclosures of cash flow information:
Cash paid -- interest............................ $ -- $ 699 $ 4,917
======= ======== ========
Non cash investing and financing activities:
Assets recorded under capital leases............ $ 27 $ 2,700 $ 11,709
======= ======== ========
Conversion of note payable to stockholder to
preferred stock................................ $ 200 $ -- $ --
======= ======== ========
Cumulative dividends and accretion on Series C
and D redeemable convertible preferred stock... $ -- $ 1,413 $ 2,014
======= ======== ========
Deferred compensation on grants of stock
options........................................ $ -- $ 3,482 $ --
======= ======== ========
Warrants issued for financing commitments....... $ -- $ 730 $ --
======= ======== ========
Conversion of bridge financing convertible notes
to redeemable convertible preferred stock...... $ -- $ 3,975 $ --
======= ======== ========
Conversion of redeemable convertible preferred
stock to common stock.......................... $ -- $ -- $ 43,437
======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
EXODUS COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1997 and 1998
(1) Summary of the Company and Significant Accounting Policies
The Company
Exodus Communications, Inc. ("Exodus" or "the Company") is a leading
provider of Internet system and network management solutions for enterprises
with mission-critical Internet operations.
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Revenue Recognition
Revenues consist of (i) monthly fees from customer use of Internet Data
Centers and related services and installation, and (ii) equipment sales to
customers. Revenues (other than installation fees and equipment sales to
customers) are billed monthly and recognized ratably over the term of the
contract, generally one year. Installation fees are typically recognized at
the time that installation occurs, and equipment sales are typically
recognized when the equipment is delivered to the customer or placed into
service at the Internet Data Center.
Cash Equivalents and Investments
Cash equivalents consist of highly liquid investments with original
maturities of 90 days or less. As of December 31, 1998, cash equivalents
consisted principally of money market funds at two financial institutions.
The Company classifies its investments as "held-to-maturity." As of
December 31, 1998, such investments consist of United States Treasury Notes
and are recorded at amortized cost.
The components of restricted cash equivalents and investments as of
December 31, 1998, are as follows (in thousands):
<TABLE>
<S> <C>
United States Treasury Notes:
Due within one year............................................. $10,733
Due after one year through two years............................ 20,594
Money market funds................................................ 11,049
Cash collateral related to leases................................. 3,238
-------
Total restricted cash equivalents and investments................. $45,614
=======
</TABLE>
See Notes 4 and 6 for additional information regarding restricted cash
equivalents and investments.
F-7
<PAGE>
EXODUS COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
Financial Instruments and Concentration of Credit Risk
The carrying value of the Company's financial instruments, including cash
and cash equivalents, investments, accounts receivable, bank borrowings and
debt approximates fair market value. Financial instruments that potentially
expose the Company to a concentration of credit risk principally consist of
cash and cash equivalents, investments and accounts receivable.
The Company's customer base is primarily composed of businesses throughout
the United States. The Company performs ongoing credit evaluations of its
customers and maintains reserves for potential losses.
Property and Equipment
Property and equipment are stated at cost and depreciated on a straight-
line basis over their respective estimated useful lives, which are generally
three to five years. Equipment recorded under capital leases and leasehold
improvements are amortized using the straight-line method over the shorter of
the respective lease term or estimated useful life of the asset.
Software Development Costs
The Company capitalizes software development costs incurred to develop
certain of the Company's collaborative systems management services that are
included in the Company's co-location services in accordance with SFAS No. 86,
Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed. Costs are capitalized after technological feasibility is achieved;
generally upon the development of a working model. To date, software
development costs capitalizable under SFAS No. 86 have not been material.
Income Taxes
The Company uses the asset and liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax bases of
assets and liabilities using enacted tax rates in effect for the year in which
the differences are expected to affect taxable income. Valuation allowances
are established when necessary to reduce deferred tax assets to the amounts
expected to be recovered.
Stock-Based Compensation
The Company uses the intrinsic value-based method to account for all of its
employee stock-based compensation plans. Expense associated with stock-based
compensation is being amortized consistent with the method described in FASB
Interpretation No. 28 over the vesting period of the individual options.
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company evaluates its long-lived assets, including goodwill and certain
identifiable intangibles, for impairment whenever events or changes in
circumstances indicate that the carrying amount of such assets or intangibles
may not be recoverable. Recoverability of assets to be held and
F-8
<PAGE>
EXODUS COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
used is measured by a comparison of the carrying amount of an asset to future
net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceed the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.
Goodwill and Other Intangible Assets
Goodwill and other intangible assets are comprised of amounts recorded in
the acquisition of Arca Systems, Inc. ("Arca") and are included in other
assets on the accompanying 1998 consolidated balance sheet (see Note 2). These
amounts are being amortized on a straight-line basis over 10 years.
Net Loss Per Share
Basic and diluted net loss per share has been computed by dividing the net
loss attributable to common stockholders by the weighted-average number of
shares of common stock outstanding during the period. Diluted net loss per
share does not include the effect of the following common equivalent shares as
the effect of their inclusion is antidilutive during each period (in
thousands):
<TABLE>
<CAPTION>
Year Ended December
31,
-------------------
1996 1997 1998
------ ------ -----
<S> <C> <C> <C>
Shares issuable under stock options.................... 292 1,709 4,786
Shares issuable pursuant to warrants to purchase common
and redeemable convertible preferred stock............ 637 2,813 181
Shares of redeemable convertible preferred stock on an
"as if converted" basis............................... 15,537 34,117 --
</TABLE>
Comprehensive Loss
There are no differences between consolidated net loss and comprehensive
loss for any period presented.
(2) Business Combination
On October 2, 1998, the Company purchased substantially all of the assets,
including customer agreements, and assumed certain liabilities of, Arca, a
wholly owned subsidiary of Cyberguard Corporation. Arca, which has been in
business for more than ten years, is a provider of advanced network and system
security consulting services and designs and develops security technology
solutions for complex and sensitive information systems. Arca operates as a
wholly owned subsidiary of the Company. Total consideration paid, including
direct acquisition costs, aggregated approximately $5,800,000. The acquisition
was accounted for as a purchase with the results of Arca included from the
acquisition date. The excess of the purchase price over the fair value of
tangible net assets acquired amounted to approximately $5,000,000 and was
attributed primarily to workforce in place ($2,500,000) and goodwill
($2,400,000).
F-9
<PAGE>
EXODUS COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
The following summary, prepared on an unaudited pro forma basis, combines
the Company's consolidated results of operations with Arca's results of
operations, as if Arca had been acquired on January 1, 1997 (in thousands,
except per share data):
<TABLE>
<CAPTION>
Year ended
December 31,
------------------
1997 1998
-------- --------
<S> <C> <C>
Revenues................................................ $ 16,643 $ 55,901
Net loss attributable to common stockholders............ $(27,297) $(69,207)
Basic and diluted net loss per share.................... $ (14.16) $ (4.42)
Shares used in pro forma per share computation.......... 1,928 15,643
</TABLE>
The pro forma results are not necessarily indicative of what would have
occurred if the acquisition had been in effect for the periods presented. In
addition, they are not intended to be a projection of future results and do
not reflect any synergies that might be achieved from combined operations.
(3) Financial Statement Components
Property and Equipment
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------
1997 1998
------- -------
<S> <C> <C>
Data centers and related equipment......................... $16,316 $43,959
Furniture, fixtures, computer equipment and other.......... 12,815 32,887
Construction in progress................................... -- 8,497
------- -------
29,131 85,343
Less accumulated depreciation and amortization............. 3,961 17,037
------- -------
$25,170 $68,306
======= =======
</TABLE>
Computer equipment and certain data center infrastructure are recorded
under capital leases that aggregated $4,492,000 and $20,236,000 as of December
31, 1997 and 1998, respectively. Accumulated amortization on the assets
recorded under capital leases aggregated $722,000 and $4,426,000 as of
December 31, 1997 and 1998, respectively.
Accrued Expenses
Accrued expenses consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
-------------
1997 1998
------ ------
<S> <C> <C>
Accrued payroll and related expenses.......................... $1,183 $2,956
Other......................................................... 1,836 3,815
------ ------
$3,019 $6,771
====== ======
</TABLE>
(4) Bank Borrowings and Debt
The Company has a $7,000,000 bank line of credit bearing interest at the
bank's prime rate. As of December 31, 1998, no amount was outstanding under
the line of credit. The line of credit expires in March 1999.
F-10
<PAGE>
EXODUS COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
A summary of equipment loans and line of credit facilities follows (in
thousands):
<TABLE>
<CAPTION>
December 31,
---------------
1997 1998
------- -------
<S> <C> <C>
$850,000 equipment term loan with a financial institution;
interest rate of prime plus 2.5%.............................. $ 178 $ --
$1,800,000 equipment line of credit facility; effective
interest rate of 16.4%; principal and interest due April 2000
through September 2000; collateralized by equipment........... 1,393 981
$3,000,000 equipment line of credit facility-April 1997;
effective interest rate of 12.9%; principal and interest due
monthly through July 2001; collateralized by equipment........ 2,756 2,080
$6,500,000 equipment line of credit facility; effective
interest rate of 15.9%; principal and interest due monthly
through July 2001; collateralized by equipment................ 6,312 4,842
$3,000,000 equipment line of credit facility-August 1997;
effective interest rate of 16.2%; principal and interest due
monthly through May 2001; collateralized by equipment......... 2,787 2,192
$5,000,000 equipment line of credit facility; effective
interest rate of 16.4%; principal and interest due monthly
through July 2001; collateralized by equipment................ 3,044 3,084
$10,000,000 equipment line of credit facility; effective
interest rate of 13.8%; principal and interest due monthly
through July 2002; collateralized by equipment................ -- 8,883
$8,000,000 line of credit facility; interest rate of 12.95%;
principal and interest due March 1999; collateralized by all
of the Company's assets....................................... -- 8,000
------- -------
16,470 30,062
Less current portion........................................... 3,777 14,367
------- -------
Equipment loans and line of credit facilities, less current
portion....................................................... $12,693 $15,695
======= =======
</TABLE>
Aggregate maturities for outstanding equipment loans and line of credit
facilities for fiscal 1999, 2000, 2001 and 2002 are $14,367,000, $7,342,000,
$5,943,000 and $2,410,000, respectively.
On July 1, 1998, the Company issued $200,000,000 of 11-1/4% Senior Notes
due 2008 for aggregate net proceeds of approximately $193,400,000 (net of
discounts to the initial purchasers and offering expenses). Interest is
payable semi annually on January 1 and July 1 of each year commencing January
1, 1999. As of December 31, 1998 restricted cash equivalents and investments
include approximately $42,400,000 deposited with an escrow agent that will be
used to pay the first four semiannual interest payments when due. An interest
payment of $11,250,000 was made in January 1999. Subject to significant
exceptions, the Senior Notes Indenture restricts, among other things, the
Company's ability to incur additional indebtedness and the use of proceeds
there from, pay dividends, make certain other restricted payments, incur
certain liens to secure indebtedness or engage in merger transactions.
F-11
<PAGE>
EXODUS COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
(5) Redeemable Convertible Preferred Stock and Stockholders' (Deficit) Equity
Redeemable Convertible Preferred Stock and Warrants
In February and March 1996, the Company issued 7,798,483 shares of Series A
redeemable convertible preferred stock at $0.413 per share. In October 1996,
the Company issued 7,738,095 shares of Series B redeemable convertible
preferred stock at $0.84 per share. In March and June 1997, the Company
received a total of approximately $3,975,000 in cash in exchange for bridge
financing convertible promissory notes. In June 1997, the Company issued
15,789,868 shares of Series C redeemable convertible preferred stock for
$1.362 per share in exchange for approximately $17,500,000 in cash and the
conversion of the bridge financing notes. In December 1997, the Company issued
2,631,579 shares of Series D redeemable convertible preferred stock at $2.85
per share for aggregate cash proceeds of $7,500,000.
In 1996, in connection with various financing arrangements, the Company
issued warrants to purchase an aggregate of 17,157 shares of the Company's
common stock at prices ranging from $2.40 to $2.67 per share. Also in 1996, in
connection with various lease agreements and other matters, the Company issued
warrants to purchase 329,167 shares of the Company's Series B1 redeemable
convertible preferred stock at $0.84 per share.
In March and June 1997, in connection with the bridge financing convertible
promissory notes discussed above, the Company issued warrants to purchase
198,697 shares of the Company's Series B redeemable convertible preferred
stock at $0.84 per share. In April 1997, in connection with the $3,000,000
equipment line of credit, the Company issued warrants to purchase 196,429
shares of the Company's Series B1 redeemable convertible preferred stock at
$0.84 per share. In June 1997, in connection with the issuance of the
Company's Series C redeemable convertible preferred stock, the Company issued
warrants to purchase 1,579,011 shares of the Company's Series C redeemable
convertible preferred stock at $1.362 per share. In August and September 1997,
in connection with the $3,000,000 and the $6,500,000 equipment lines of
credit, the Company issued warrants to purchase a total of 271,598 shares of
the Company's Series C1 redeemable convertible preferred stock at $1.362 per
share. In December 1997, in connection with the $8,000,000 line of credit
facility and the $5,000,000 equipment line of credit, the Company issued
warrants to purchase 247,826 and 125,000 shares, respectively, of the
Company's Series D1 redeemable convertible preferred stock at $2.85 per share.
In March 1998, in connection with a strategic alliance, the Company issued
warrants to purchase an aggregate of 60,000 shares of the Company's common
stock at a price of $15.00 per share.
The fair value of all warrant issuances, calculated using the Black-Scholes
option pricing module, with the following assumptions: dividends--none;
expected life--contractual term; risk-free interest rates--5.7% to 6.7%;
volatility--60%, was not material except as follows:
. The 1,579,011 warrants issued in connection with the sale of the Series
C redeemable convertible preferred stock for which the fair value was
determined to be $1,200,000. This amount was recorded as a reduction in
the carrying value of the Series C redeemable convertible preferred
stock and recorded as the carrying value of the Series C warrants.
. The 247,826 and 125,000 warrants issued in connection with the
$8,000,000 line of credit facility and $5,000,000 equipment line of
credit, respectively, for which the values were determined to be
$530,000 and $200,000, respectively. These amounts will be amortized on
a straight-line basis through the commitment periods of the credit
facilities.
F-12
<PAGE>
EXODUS COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
. The 60,000 warrants issued in connection with the strategic alliance
for which the value was determined to be $525,000. This amount was
recorded as marketing and sales expense in the accompanying
consolidated statement of operations for the year ended December 31,
1998.
Redeemable convertible preferred stock and related warrants issued and
outstanding as of December 31, 1997 was as follows:
<TABLE>
<CAPTION>
Redeemable convertible preferred stock
-------------------------------------------- Warrants
--------------------------
Shares Issued and Carrying Issued and Carrying
Series Designated Outstanding Value Outstanding Value
------ ---------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
A 7,798,483 7,798,483 $ 3,168,000 -- $ --
A1 7,798,483 -- -- -- --
B 8,600,000 7,775,930 6,473,000 160,862 --
B1 8,600,000 65,524 55,000 466,072 --
C 17,850,000 15,845,855 20,333,000 1,523,024 1,242,000
C1 17,850,000 -- -- 271,598 --
D 3,231,579 2,631,579 7,246,000 -- --
D1 3,231,579 -- -- 372,826 730,000
---------- ---------- ----------- ---------- ----------
74,960,124 34,117,371 $37,275,000 $2,794,382 $1,972,000
========== ========== =========== ========== ==========
</TABLE>
As of December 31, 1997 and 1998, the Company has 18,663 and 181,085
warrants to purchase common stock outstanding, respectively.
Initial Public Offering
On March 24, 1998, the Company completed its initial public offering
("IPO") of 5,125,000 shares of its common stock. Net proceeds to the Company,
after deducting underwriting discounts and commissions and offering expenses,
aggregated approximately $69,800,000. At the closing of the IPO, all
redeemable convertible preferred stock was converted to common stock and all
warrants to purchase redeemable convertible preferred stock were converted to
warrants to purchase common stock on a one-for-three basis. In connection with
the IPO, certain warrant holders exercised their warrants to purchase
redeemable convertible preferred stock (which converted into common stock),
which resulted in additional proceeds of $1,842,000.
Stock Purchase And Stock Option Plans
During 1995, the Company adopted a Stock Purchase Plan under which 366,667
shares of common stock were authorized. Awards totaling 107,368 shares of
common stock were granted to individuals through 1996, at a price of $0.24 per
share, the estimated fair market value of the shares on the date of the award.
No awards were granted during the years ended December 31, 1997 and 1998.
Generally, the shares are subject to a 50-month vesting period. As of December
31, 1998, 4,301 shares remained unvested. Unvested shares are subject to
repurchase, at the Company's option, at the original purchase price upon a
participant's termination. Of the shares granted, 46,301 had been repurchased
by the Company as of December 31, 1998.
In January 1998, the Company adopted the 1998 Employee Stock Purchase Plan
(the "Purchase Plan") and reserved a total of 600,000 shares of the Company's
common stock for issuance thereunder. The Purchase Plan permits eligible
employees to purchase common stock through payroll deductions at a purchase
price of 85% of the lower of the fair market value of the common stock on the
first day of the offering period or on the last day of the purchase period.
During 1998, 54,566 shares were issued under the Purchase Plan at a weighted-
average purchase price of $13.36 per share.
F-13
<PAGE>
EXODUS COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
In January 1997, the Company adopted the 1997 Equity Incentive Plan (the
"1997 Plan"), which served as the successor to the Company's 1995 Stock Option
Plan (the "1995 Plan"). Options granted under the 1995 Plan before its
termination continue to remain outstanding in accordance with their terms, but
no further options may be granted under the 1995 Plan. Options granted under
the 1995 Plan were granted with exercise prices not less than fair market
value at the date of grant as determined by the Board of Directors, generally
vested 12% after six months from the date of grant and 2% per month
thereafter, and generally are exercisable for a term of ten years after the
date of grant. Under the 1997 Plan, the Company reserved 2,200,000 shares of
its common stock for issuance to employees and consultants to be granted as
either incentive or nonqualified stock options. Options granted under the 1997
Plan generally vest 12% after six months from the date of grant and 2% per
month thereafter and are generally exercisable for a term of ten years after
the date of grant.
In January 1998, the Company adopted the 1998 Equity Incentive Plan (the
"1998 Plan"). On the effective date of the Company's IPO, the 1998 Plan became
effective as the successor to the 1997 Plan. The Company has reserved
1,500,000 shares of common stock for issuance under the 1998 Plan in addition
to the shares that remain from the 1997 Plan. The 1998 Plan permits the grant
of either incentive or nonqualified stock options. Options granted under the
1998 Plan will have a maximum term of ten years and generally will vest over
50 months. The 1998 Plan will terminate in January 2008.
In January 1998, the Company adopted the 1998 Directors Stock Option Plan
(the "Directors Plan") and reserved a total of 200,000 shares of the Company's
common stock for issuance thereunder. Each nonemployee director who is or
becomes a member of the Board of Directors on or after the effective date of
the Company's IPO, with certain limited exceptions, will initially be granted
an option for 20,000 shares of the Company's common stock and, thereafter, an
option to purchase an additional 5,000 shares of the Company's common stock
annually. Initial options granted under the Directors Plan will vest as to 33
1/3% of the shares on each annual anniversary of the date of grant. Annual
grants will vest 25% on each annual anniversary of the date of grant. The
exercise price of the options granted under the Directors Plan will be at the
fair market value of the Company's common stock on the date of grant.
In January 1998, the Company granted stock options to purchase 333,334
shares of common stock to an officer of the Company, of which half have an
exercise price of $9.00 per share and vest 100% after three years and half
have an exercise price of $18.00 per share and vest 100% after five years. The
stock options accelerate and become fully vested if the Company is acquired or
sells all or substantially all of its assets.
In March 1998, the Company granted a stock option to an officer of the
Company to purchase 721,981 shares of common stock with an exercise price of
$9.00 per share (fair market value on the date of grant) that vests as to 12%
of such shares in September 1998 and vests as to an additional 2% per month
thereafter.
In January 1999, the Company adopted the 1999 Stock Option Plan ("the 1999
Plan"). Under the 1999 Plan, the Company has reserved 2,000,000 shares of
common stock for issuance to employees, consultants, and to be used for
acquisitions, to be granted as nonqualified stock options.
F-14
<PAGE>
EXODUS COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
Options granted under the 1999 Plan generally will vest over 50 months and are
generally exercisable for a term of ten years from the date of grant.
Fair Value Disclosures
The Company uses the intrinsic value method in accounting for its employee
stock-based compensation plans. Accordingly, no compensation cost has been
recognized for any of its stock options because the exercise price of each
option equaled or exceeded the fair value of the underlying common stock as of
the grant date for each stock option, except for stock options granted from
March through December 1997. With respect to the stock options granted from
March to December 1997, the Company recorded deferred stock compensation of
$3,482,000 for the difference at the grant date between the exercise price and
the fair value of the common stock underlying the options. This amount is
being amortized consistent with the method described in FASB Interpretation
No. 28 over the vesting period of the individual options, generally 50 months.
Had compensation cost been determined in accordance with SFAS No. 123 for all
of the Company's stock-based compensation plans, net loss attributable to
common stockholders and net loss per share would have been changed to the
amounts indicated below (in thousands except per share data):
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1996 1997 1998
------- -------- --------
<S> <C> <C> <C>
Net loss applicable to common stockholders:
As reported.................................. $(4,133) $(26,711) $(68,456)
Pro forma.................................... $(4,133) $(26,711) $(76,134)
Basic and diluted net loss per share:
As reported.................................. $ (2.16) $ (13.85) $ (4.38)
Pro forma.................................... $ (2.16) $ (13.85) $ (4.87)
</TABLE>
The fair value of each stock option is estimated on the date of grant using
the minimum value method prior to the IPO and the Black-Scholes option pricing
model after the IPO, with no expected dividends and the following weighted-
average assumptions:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Expected life............................... 2.55 years 2.59 years 3.09 years
Risk-free interest rate..................... 6.28% 5.81% 4.98%
Volatility.................................. -- -- 80%
</TABLE>
The fair value of purchase rights granted under the Purchase Plan is
estimated on the date of grant using the Black-Scholes option pricing model
with the following weighted-average assumptions for grants in 1998: no
expected dividends, expected volatility of 80%, risk-free interest rate of
5.26%, and expected life of 1.33 years. The weighted-average fair value of
purchase rights granted under the Purchase Plan during 1998 was $9.94 per
share.
F-15
<PAGE>
EXODUS COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
A summary of the Company's stock option plans is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------
1996 1997 1998
------------------ -------------------- --------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 125,083 $0.24 292,033 $0.25 1,709,286 $ 0.76
Granted............... 224,734 0.26 1,611,800 0.82 3,911,101 22.86
Forfeited............. (52,850) 0.24 (105,860) 0.64 (288,969) 8.18
Exercised............. (4,934) 0.25 (88,687) 0.32 (545,879) 2.65
------- --------- ---------
Outstanding at end of
period................. 292,033 0.25 1,709,286 0.76 4,785,539 18.11
======= ========= =========
Exercisable at end of
year................... 80,667 0.25 223,950 0.45 384,590 4.86
======= ========= =========
Weighted average fair
value of options
granted during the year
at market.............. 224,734 0.04 333,267 0.04 3,570,101 12.54
Weighted average fair
value of options
granted during the year
at less than market.... -- -- 1,278,533 2.30 7,667 33.87
Weighted average fair
value of options
granted during the year
at greater than
market................. -- -- -- -- 333,334 4.22
</TABLE>
The following table summarizes information about stock options outstanding
as of December 31, 1998:
<TABLE>
<CAPTION>
Outstanding Exercisable
------------------------------------ -----------------
Weighted- Weighted-
Weighted-Average Average Number Average
Number of Remaining Exercise of Exercise
Range of Exercise Prices Shares Contractual Life Price Shares Price
------------------------ --------- ---------------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
$0.24 to 0.75........... 1,060,536 8.47 years $ 0.51 249,086 $ 0.49
$3.75 to 9.00........... 1,170,077 9.13 8.29 103,267 7.28
$15.00 to 24.25......... 1,241,210 9.64 21.35 10,318 19.83
$30.69 to 40.00......... 1,313,716 9.84 38.01 21,919 36.01
--------- -------
4,785,539 9.31 18.11 384,590 4.86
========= =======
</TABLE>
Stockholder Rights Plan
In January 1999, the Company adopted a Stockholder Rights Plan ("the Rights
Plan"). The Rights Plan is designed to protect the long-term value of the
Company for its stockholders during any future unsolicited acquisition
attempt. In connection with the Rights Plan, the Company declared a dividend
of one preferred share purchase right for each share of the Company's common
stock outstanding on February 11, 1999 ("Record Date") and further directed
the issuance of one such right with respect to each share of the Company's
common stock that is issued after the Record Date, except in certain
circumstances.
F-16
<PAGE>
EXODUS COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
(6) Commitments and Contingencies
Leases
The Company has entered into a number of operating leases for its
facilities. The leases expire from 1998 through 2010. As of December 31, 1998,
the Company had collateralized letters of credit aggregating $3,238,000 for
these leases. The related funds are included in restricted cash equivalents
and investments on the accompanying consolidated balance sheet. The Company
also leases certain data center infrastructure and equipment under capital
leases. Certain of these capital leases were entered into as sales-leaseback
transactions. No gain or loss was recorded in any such transaction due to the
short holding period from the time the assets were purchased until the time of
the sale-leaseback. Future minimum lease payments as of December 31, 1998 are
as follows (in thousands):
<TABLE>
<CAPTION>
Capital Operating
Year Ending December 31, Leases Leases
------------------------ ------- ---------
<S> <C> <C>
1999....................................................... $ 6,354 $ 9,065
2000....................................................... 6,604 9,726
2001....................................................... 5,920 9,803
2002....................................................... 676 9,325
2003....................................................... -- 9,176
Thereafter................................................. -- 43,994
------- -------
Total minimum lease payments............................... 19,554 $91,089
=======
Less amount representing imputed interest.................. 3,013
-------
Present value of minimum lease payments.................... 16,541
Less current portion....................................... 5,140
-------
Capital lease obligations, less current portion............ $11,401
=======
</TABLE>
The Company's rent expense was $248,000, $1,764,000 and $5,554,000 for the
years ended December 31, 1996, 1997 and 1998, respectively.
Telecommunications Agreements
In September 1997, the Company entered into an agreement to obtain
telecommunications services for a period of 60 months with a minimum
commitment of $230,000 per month. In January 1999, this original agreement was
replaced with a new agreement for a period of 60 months with a minimum
commitment of $1,000,000 per month.
In July 1998, the Company entered into an agreement to obtain
telecommunication services for a period of 36 months with a minimum commitment
of approximately $500,000 per month.
Royalty Agreement
In April 1997, the Company entered into an agreement with a software
company under which the Company licensed certain software for a royalty based
on 1% of the Company's gross revenues. Royalty expenses related to this
agreement have not been significant to date.
F-17
<PAGE>
EXODUS COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
Contingencies
The Company is engaged in certain legal actions arising in the ordinary
course of business. The Company believes that it has adequate legal defenses
and that the ultimate outcome of these actions will not have a material effect
on the Company's financial position and results of operations.
(7) Income Taxes
The following table reconciles the expected corporate federal income tax
expense (benefit) (computed by multiplying the Company's loss before taxes by
34%) to the Company's actual income tax expense (benefit) (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
Expected income tax benefit................... $(1,405) $(8,602) $(22,591)
Permanent differences......................... 2 15 81
Net operating loss not benefited.............. 1,403 8,587 22,510
------- ------- --------
Actual income tax expense (benefit)......... $ -- $ -- $ --
======= ======= ========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities as of December 31, 1997 and
1998, are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards........................ $ 10,941 $ 34,807
Difference between book and tax depreciation............ -- 2,284
Reserves and accruals................................... 195 1,234
Research and experimentation credit carryforwards....... 113 548
Deferred compensation................................... 437 957
Other................................................... 41 6
-------- --------
Total gross deferred tax assets........................ 11,727 39,836
Less valuation allowance................................ (11,708) (39,836)
-------- --------
19 --
Deferred tax liabilities:
Difference between book and tax depreciation............ $ (19) --
-------- --------
Net deferred tax assets.............................. $ -- $ --
======== ========
</TABLE>
As of December 31, 1998, the Company has a net operating loss carryforward
for federal and California purposes of $94,087,000 and $48,316,000,
respectively. The difference between the federal and California net operating
loss carryforward is due to the 50% limitation of net operating loss
carryforwards for California purposes. The federal net operating loss
carryforward will expire from 2011 through 2018. The California net operating
loss carryforward will expire from 2001 through 2003.
Gross deferred tax assets as of December 31, 1998 include approximately
$3,430,000 relating to the exercise of stock options, which will be credited
to equity when realized.
F-18
<PAGE>
EXODUS COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
The net change in the valuation allowance was an increase of $9,654,000 and
$28,128,000 for the years ended December 31, 1997 and 1998, respectively.
Federal and California tax laws impose significant restrictions on the
utilization of net operating loss carryforwards in the event of a shift in the
ownership of the Company, which constitutes an "ownership change" as defined
by Internal Revenue Code, Section 382. The Company has not determined if an
ownership change, as defined, has occurred. The Company plans to compute exact
limitations upon realization of taxable earnings and associated utilization of
the net operating loss carryforwards.
(8) Segment Information
The Company currently operates eight Internet Data Centers throughout the
United States. The Company establishes these Internet Data Centers using a
consistent investment and operating model. As a result, the expected long term
economic characteristics and financial performance are similar. In particular,
each data center provides the same Internet related services to a similar type
of customer who may locate their servers in multiple data centers. As a
result, the Company believes these data centers represent one reportable
segment under the aggregation criteria of Statement of Financial Accounting
Standards ("SFAS") No. 131, Disclosures About Segments of an Enterprise and
Related Information.
The total revenues of the Internet Data Centers is the same as the
Company's total consolidated revenues for all periods presented in the
accompanying consolidated statements of operations. Segment profit or loss for
the Internet Data Centers is measured by total revenues less cost of revenues
and marketing and sales expenses. Other operating expenses as well as net
interest expense are not allocated.
As of December 31, 1998, over 75% of property and equipment relates to the
Internet Data Centers. No other assets of the Company are allocated to the
Internet Data Centers.
(9) Subsequent Event--Unaudited
In February 1999, the Company acquired American Information Systems, Inc.
for approximately $20,000,000 in cash. This acquisition will be accounted for
under the purchase method of accounting.
F-19
<PAGE>
EXODUS COMMUNICATIONS, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
Balance at Balance
Beginning at End of
Classification of Year Additions Deductions Year
-------------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1996....... $ -- $ 15 $ -- $ 15
Year ended December 31, 1997....... 15 742 (66) 691
Year ended December 31, 1998....... 691 1,410 (280) 1,821
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Title
------- -----
<C> <S>
10.44+ Offer Letter dated September 30, 1998 between the Registrant and
Susan Farber.
10.45 Agreement for Lease dated December 24, 1998 among Helios (Park
Royal) Limited, Lloyds Bank PLC, Exodus Internet Limited, and
Exodus Communications, Inc. Certain exhibits to this agreement have
been omitted from this filing and will be furnished supplementally
to the Securities and Exchange Commission upon request.
10.46 First Amendment to Lease Agreement dated January 1999 between
Washcop Associates Limited Partnership and Exodus Communications,
Inc.
10.47 First Amendment of Lease dated December 4, 1998 between David A.
Sabey and Sandra L. Sabey and Exodus Communications, Inc.
21.01 Subsidiaries of the Registrant.
23.02 Consent of KPMG LLP, independent auditors.
24.01 Power of Attorney. (See page 51 of this Form 10-K).
27.01 Financial Data Schedule.
</TABLE>
- --------
+ Management contracts or compensatory plans required to be filed as
exhibits to Form 10-K.
<PAGE>
EXHIBIT 10.44
September 30, 1998
Susan R. Farber
342 West 85th Street, #2C
New York, NY 10024
Dear Susan,
I am pleased to extend to you an offer as Vice President, Marketing and Strategy
reporting to Ellen Hancock. Your initial base salary will be $16,666.67 per
month, which is equivalent to $200,000.00 per year. You will be eligible to
participate in the company Executive Bonus Program, initially at 75% of your
base salary and fully guaranteed for the first year. You will be covered by the
attached Executive Employment Policy with the addendum as noted. You also will
be eligible to participate in our health and dental insurance, 401K and other
employee benefits established by the Company.
This offer includes a one-time hire bonus of $75,000.00. This bonus is payable
after the completion of 90 days of employment and shall be repaid to Exodus
should you voluntarily terminate employment with Exodus within one year of your
start date.
We will recommend to the Compensation Committee of the Company that you be
granted options to purchase up to 150,000 shares of Exodus Communications, Inc.
common stock under the Exodus' Equity Incentive Plan. The options, if approved
by the Committee, will be granted at the first Compensation Committee meeting
after your date of hire. The exercise price will be the closing price of the
common stock on the date of the Compensation Committee meeting. The options have
a vesting period of 50-months beginning on your date of hire. Six months of
continuous employment is required before you vest. At the conclusion of six
months from your employment date you will be 12% vested. You will then vest at a
rate of 2% per month of completed service until your grant is fully vested.
As an employee of Exodus Communications, Inc., you will have access to certain
Company confidential information and you may, during the course of your
employment, develop certain information or inventions, which will become the
property of Exodus. You will need to sign the Company's standard "Proprietary
Information and Invention Agreement" as a condition of your employment. We wish
to impress upon you that we do not wish you to bring with you any confidential
or proprietary material of any former employer or to violate any other
obligation to your former employers. Also, you represent that you are not
subject to any restrictions that prevent you from working for Exodus.
Your employment with Exodus is conditioned upon your providing verification of
your eligibility for employment in the U.S., which meets the requirements of the
U.S. Department of Justice and passing our background investigation.
<PAGE>
You will be an at-will employee of the Company, which means the employment
relationship is voluntarily entered into by mutual consent of the employee and
employer, is not for a specified period of time and can be terminated by either
the employee or the Company for any reason or at any time, with or without
cause.
We look forward to your becoming a part of the Exodus Team. Please confirm your
acceptance of this offer at the earliest possible date. Also, please return the
original offer signed to the attention of Human Resources and keep copies for
your records. You may also fax a copy of each to Human Resources at (408) 346-
2202. This offer expires 7 days after the issue date.
Your signature will acknowledge that you have read, understood and agreed to the
terms and conditions of this offer.
Sincerely,
/s/ Richard Stolz
Richard Stoltz
Chief Operating Officer
OFFER ACCEPTED AS OUTLINED ABOVE. No further commitments were made to me as a
condition of employment.
/s/ Susan R. Farber 4 Oct 98 2 Nov 98
_________________________ __________ My start date will be____________
Signature Date
<PAGE>
EXHIBIT 10.45
DATED 24TH DECEMBER, 1998
HELIOS (PARK ROYAL) LIMITED
and
LLOYDS BANK PLC (AS TRUSTEE OF THE
SCHRODER EXEMPT PROPERTY UNIT TRUST)
and
EXODUS INTERNET LIMITED
and
EXODUS COMMUNICATIONS INC
--------------------------------------
AGREEMENT FOR LEASE
relating to
UNITS 5, 6 AND 7 PHASE 1 MATRIX PARK,
CORONATION ROAD, PARK ROYAL
LONDON NW10
-------------------------------------
WILDE SAPTE
1 Fleet Place
London EC4M 7WS
Tel. 0171 246 7000
Fax. 0171 246 7777
REF. SJG/PY0397894.06
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Clause Heading Page
<S> <C>
1. DEFINITIONS AND INTERPRETATION............................ 1
1.1 Definitions............................................... 1
1.2 Interpretation............................................ 5
2. EXECUTION OF THE WORKS.................................... 6
2.1 Execution................................................. 6
2.2 Alterations............................................... 6
2.3 Fixtures and Fittings..................................... 7
2.4 Prohibited Materials...................................... 7
2.5 Liability for Design...................................... 7
2.6 CDM Regulations........................................... 7
3. TIME FOR COMPLETION OF THE WORKS.......................... 8
4. WARRANTIES................................................ 8
5. INFORMATION............................................... 8
5.1 Information as to Progress................................ 8
5.2 Monthly Progress Meetings................................. 8
5.3 Inspection................................................ 9
6. INSPECTION OF LANDLORD'S WORKS............................ 9
6.1 Inspection................................................ 9
6.2 Representations to Employer's Agent....................... 9
7. PRACTICAL COMPLETION...................................... 10
7.1 Inspection of the Works................................... 10
7.2 Further Inspection(s)..................................... 10
7.3 Snagging List............................................. 10
7.4 Copy Certificate and Snagging List........................ 10
8. TENANT'S WORKS............................................ 10
8.1 Tenant's Access........................................... 10
8.2 Consents and Tenant's Works............................... 11
8.3 No Interference with Works................................ 11
8.4 Tenant's Responsibility................................... 11
8.5 Indemnity................................................. 12
9. INSURANCE................................................. 12
9.1 Insurance of Works under Building Contract................ 12
9.2 Insurance of Works under Leases........................... 12
9.3 Insurance of Tenant's Works............................... 12
9.4 Evidence of Cover......................................... 13
10. GRANT OF LEASE, PARKING AREA DEED AND RENT DEPOSIT DEEDS.. 13
10.1 Grant..................................................... 13
10.2 Acceptance................................................ 13
10.3 Lease Terms............................................... 13
10.4 Completion................................................ 14
</TABLE>
<PAGE>
<TABLE>
<S> <C>
11. NOT USED.................................................. 14
12. OCCUPATION................................................ 14
12.1 Not used.................................................. 14
12.2 Occupation................................................ 14
13. RENT...................................................... 15
14. INSURANCE AND SERVICE CHARGE.............................. 15
15. DEFECTS................................................... 15
16. TENANT'S OBLIGATIONS...................................... 16
17. VAT....................................................... 16
18. INTEREST.................................................. 16
19. TITLE..................................................... 16
20. MATTERS AFFECTING THE LEASE............................... 17
20.1 Matters................................................... 17
20.2 No Requisitions........................................... 17
21. USER...................................................... 17
22. NON-MERGER................................................ 18
23. FORFEITURE AND TERMINATION................................ 18
24. ACKNOWLEDGEMENTS.......................................... 18
24.1 Acknowledgements.......................................... 18
24.2 Entire Contract........................................... 19
25. NOTICES................................................... 19
26. DISPUTES.................................................. 20
26.1 Disputes generally........................................ 20
26.2 Disputes over construction of Agreement................... 20
26.3 Disputes regarding Determination.......................... 20
26.4 Appointment of Expert..................................... 20
27. LANDLORD'S LIABILITY...................................... 21
27.1 Personal Obligations...................................... 21
27.2 Right to Assign........................................... 21
27.3 Assignment................................................ 21
28. GUARANTOR'S COVENANT...................................... 22
29. JURISDICTION.............................................. 23
29.1 English Law............................................... 23
29.2 English Courts............................................ 23
</TABLE>
<PAGE>
<TABLE>
<S> <C>
29.3 Service of Notices on Guarantor........................... 23
SCHEDULE 1 - Prohibited Materials................................. 25
ANNEXURES......................................................... 26
</TABLE>
<PAGE>
THIS AGREEMENT FOR LEASE is made the 24th of December 1998
BETWEEN:
(1) HELIOS (PARK ROYAL) LIMITED (Company Number 255294) of 2 Berkeley Square
London W1X 5HG (the "DEVELOPER" which expression shall include any
assignee of the Developer's interest under this Agreement);
(2) LLOYDS BANK PLC (as Trustee for SCHRODER EXEMPT PROPERTY UNIT TRUST) of
71 Lombard Street London EC3P 3BS (the "LANDLORD" which expression shall
include any assignee of the Landlord's interest under this Agreement);
(3) EXODUS INTERNET LIMITED (Company Number 3591136) whose registered office
is at Fountain Precinct Balm Green Sheffield South Yorkshire S1 1RZ (the
"TENANT"); and
(4) EXODUS COMMUNICATIONS INC 2650 San Thomas Expressway, Santa Clara
CA95051, USA and whose address for service in England is Dibb Lupton
Alsop (ref RSS) 125 London Wall London EC2Y 5AE or such other address in
the UK as the Guarantor may from time to time notify in writing to the
Landlord and the Developer (the "GUARANTOR").
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
Where in this Agreement the following words begin with a capital letter
they have the following meanings (unless the context otherwise requires):
"AGREED TERM" means 25 years commencing on the Quarter Day (as defined in
the Leases) immediately preceding the Date of Practical Completion.
"ARCHITECT" means William Gower Partnership or such other professionally
qualified Architect as the Developer may from time to time appoint and
notify to the Tenant in writing.
"BUILDING CONTRACT" means the contract made between the Developer and the
Contractor for the construction of the Works dated 10 March 1998.
"CERTIFICATE OF PRACTICAL COMPLETION" means the certificate of practical
completion or statement of practical completion (as appropriate) issued
pursuant to the Building Contract to indicate that practical completion
has been achieved.
<PAGE>
"CDM REGULATIONS" means the Construction (Design & Management)
Regulations 1994.
"CLAUSE" means a clause in this Agreement.
"COMMON PARTS" are as defined in the Leases.
"COMPLETION DATE" means five Working Days after the Date of Practical
Completion.
"CONDUITS" are as defined in the Leases.
"CONTRACTOR" means Tolent Construction Limited who has entered into the
Building Contract.
"DATE OF PRACTICAL COMPLETION" means the date on which the Works are
practically completed in accordance with the Building Contract being the
date specified in the statement of practical completion issued pursuant
to the Building Contract and the expressions "practical completion" and
"practically completed" shall be construed accordingly and without
reference to:
(a) any works of an unfinished nature which would normally be the
subject of a building contractor's snagging list
(b) any unfinished landscaping works the completion of which is to be
postponed in whole or in part to the next planting season
(c) any defects liability period.
"DEVELOPMENT" means Units 1-7 Phase 1 Matrix Park Coronation Road Park
Royal London NW10.
"DOCUMENTS" means the plans numbered A3159:0:01C, A3159:0:09C,
A3159:0:10D to A3159:0:12D inclusive and A3159:0:18A and the
specification annexed hereto.
"EMPLOYER'S AGENT" means Gleeds Management Limited or such other
professionally qualified employer's agent as the Developer may from time
to time appoint and notify to the Tenant in writing.
<PAGE>
"EMPLOYER'S REPRESENTATIVE" means the Employer's Agent or such other
person as the Developer shall notify to the Tenant in writing from time
to time.
"ESTATE" means the land at Matrix Park Coronation Road Park Royal London
NW10 which is for the purpose of identification only edged green on the
Plan together with such additional land as the Landlord may from time to
time incorporate within the Estate and notify to the Tenant.
"LEASES" means the Unit 5 Lease, the Unit 6 Lease and the Unit 7 Lease to
be granted by the Landlord to the Tenant in the form of the drafts
annexed hereto.
"LICENCE FOR ALTERATIONS" means a licence in the form annexed relating to
the Tenant's Works (or such of them as require Landlord's consent under
the terms of the Leases) with the approved plans and drawings submitted
in accordance with Clause 8.2.1.
"LONG STOP DATE" means the date 30th March 1999 but if such date is not a
Working Day the immediately succeeding Working Day.
"PARKING AREA DEED" means the deed relating to car spaces used in
connection with Unit 5 Unit 6 and Unit 7 in the form annexed.
"PLAN" means the plan numbered A3159/01/38 attached hereto.
"PLANNING ACT" means the Town and Country Planning Act 1990 and any
statutory re-enactment or modification thereof.
"PLANNING PERMISSION" means planning permission number P/1997/0789 dated
26 August 1997.
"PREMISES" means Unit 5, Unit 6 and Unit 7 collectively and, where
relevant, each and every part of the same.
"PROHIBITED MATERIALS" means the materials referred to in Schedule 1.
----------
"RENT COMMENCEMENT DATE" means the date five months after the Date of
Practical Completion.
<PAGE>
"RENT DEPOSIT DEEDS" means the rent deposit deeds each in the form
annexed in respect of (a) Unit 5, (b) Unit 6 and (c) Unit 7.
"REVIEW DATE" means the fifth anniversary of the date upon which the
Agreed Term commences and each fifth anniversary of such date thereafter.
"RPS" means RPS Consultants Limited of 1 Stamford Street London SE1 9NT.
"SCHEDULE" means a schedule to this Agreement.
"STRUCTURAL ENGINEER" means Kennedy Watts or such other professionally
qualified structural engineer as the Developer may from time to time
appoint and notify to the Tenant in writing.
"TENANT'S WORKS" means the fitting out works to the Premises to be
carried out by the Tenant pursuant to Clause 8 comprising the provision
---------
of all such interior fittings and equipment and the carrying out of all
such works as are necessary to enable the Tenant to carry on in the
Premises the Permitted User as defined in the Leases.
"UNIT 5" means that part of the Estate shown for the purpose of
identification only edged red on the plan annexed to the Unit 5 Lease.
"UNIT 5 LEASE" means the lease of Unit 5 to be granted by the Landlord to
the Tenant in the form of the draft annexed hereto.
"UNIT 5 RENT" means (Pounds)121,148 a year and subject to upward review
at the expiration of every fifth year of the Agreed Term.
"UNIT 6" means that part of the Estate shown for the purpose of
identification only edged red on the plan annexed to the Unit 6 Lease.
"UNIT 6 LEASE" means the lease of Unit 6 to be granted by the Landlord to
the Tenant in the form of the draft annexed hereto.
"UNIT 6 RENT" means (Pounds)100,641.50 a year and subject to upward
review at the expiration of every fifth year of the Agreed Term.
<PAGE>
"UNIT 7" means that part of the Estate shown for the purpose of
identification only edged red on the plan annexed to the Unit 7 Lease.
"UNIT 7 LEASE" means the lease of Unit 7 to be granted by the Landlord to
the Tenant in the form of draft annexed hereto.
"UNIT 7 RENT" means (Pounds)100,850.75 a year and subject to upward
review at the expiration of every fifth year of the Agreed Term.
"VAT" means Value Added Tax or other tax of a similar nature.
"WORKING DAY" means a day (other than a Saturday or Sunday) on which
banks are open for business in the City of London.
"WORKS" means the construction of the Premises in accordance with the
Documents which state inter alia that the Works shall be designed and
constructed to comply with all statutory requirements, the Building
Regulations, the Fire Authority Regulations and requirements set out by
the statutory undertakings (i.e. gas, water and electric boards) and the
current edition of the IEE Regulations together with such Conduits and
Common Parts specified in the Documents.
1.2 INTERPRETATION
Save to the extent that the context or the express provisions of this
Agreement otherwise require:
1.2.1 headings and sub-headings are for ease of reference only and shall
not be taken into consideration in the interpretation or
construction of this Agreement;
1.2.2 all references to agreements documents or other instruments
include (subject to all relevant approvals) a reference to that
agreement document or instrument as amended supplemented
substituted novated or assigned from time to time;
1.2.3 all references to any statute or statutory provision shall include
references to any statute or statutory provision which amends
extends consolidates or replaces the same or which has been
amended extended consolidated or replaced by the same and shall
include any orders regulations codes of practice
<PAGE>
instruments or other subordinate legislation made under the
relevant statute or statutory provision;
1.2.4 any reference to time of day shall be a reference to London time;
1.2.5 words importing the singular include the plural and vice versa;
1.2.6 words importing a particular gender include all genders;
1.2.7 "PERSON" includes any individual partnership firm trust body
corporate government governmental body authority agency or
unincorporated body of persons or association;
1.2.8 any reference to a public organisation shall be deemed to include
a reference to any successor to such public organisation or any
organisation or entity which has taken over the functions of such
public organisation;
1.2.9 references to "PARTY" means a party to this Agreement;
1.2.10 obligations and liabilities of a party comprising more than one
person are obligations and liabilities of such persons jointly and
severally;
1.2.11 "Landlord" includes any assignee of the Landlord's interest under
this Agreement.
2. EXECUTION OF THE WORKS
2.1 EXECUTION
The Developer shall carry out the Works in accordance with the Planning
Permission and all other relevant permissions and consents (which the
Developer will use all reasonable endeavours to obtain as soon as
possible) in a good and workmanlike manner with good quality materials
and otherwise in accordance with the terms of this Agreement (but for the
avoidance of doubt the Developer is not obliged to comply with any fire
or other regulations insofar as they concern the Tenant's Works).
<PAGE>
2.2 ALTERATIONS
No alterations to the Documents shall be made without the prior approval
of the Tenant (such approval not to be unreasonably withheld) but such
approval shall not be required:
2.2.1 to an alteration required for the purpose of obtaining any
requisite permissions consents licences and approvals or complying
with any requirements properly made by any competent authority;
2.2.2 for the substitution of materials where those originally specified
are not obtainable either at all or at a reasonable cost or within
a reasonable time and where the substitute materials are of an
equivalent (or better) quality
PROVIDED THAT in any event the Developer shall within 5 Working Days
notify the Tenant of any alterations and provide full details relating
thereto including copy documents and an explanation of the relevant
circumstances.
2.3 FIXTURES AND FITTINGS
All items in the nature of the landlord's fixtures and fittings installed
as part of the Works shall become landlord's fixtures and fittings and
remain the property of the Landlord.
2.4 PROHIBITED MATERIALS
The Developer will not use or permit or suffer to be used in the Works
any Prohibited Materials.
2.5 LIABILITY FOR DESIGN
The Developer shall have the same liability to the Tenant in respect of
the design of the Works whether under statute or otherwise as would an
architect or as the case may be other appropriate professional designer
holding himself out as competent to take on work for such design.
2.6 CDM REGULATIONS
On the Date of Practical Completion the Developer shall give to the
Tenant a copy of the interim Health and Safety file then available
relating to the Works and within 20 Working
<PAGE>
Days following the Date of Practical Completion the Developer shall give
to the Tenant a copy of the final Health and Safety File relating to the
Works prepared pursuant to the CDM Regulations.
3. TIME FOR COMPLETION OF THE WORKS
The Developer shall use all reasonable endeavours to ensure that the
Works are practically completed by 4 December 1998 unless prevented or
delayed by any cause which under the Building Contract entitles the
building contractor to an extension of time or any other cause or
circumstance not within the reasonable control of the Developer in which
case the Developer shall be entitled to an extension of time as shall be
reasonable in all the circumstances.
4. WARRANTIES
The Developer shall procure that prior to the Date of Practical
Completion there shall be delivered to the Tenant collateral agreements
executed as Deeds by each of the Contractor and the Employer's Agent and
within three months of the Date of Practical Completion there shall be
delivered to the Tenant collateral agreements executed as Deeds by each
of the Structural Engineer, the Architect and RPS such collateral
agreements to be substantially in the form of each of the drafts annexed
hereto provided that any amendment to the same shall only be made with
the consent of the Tenant such consent not to be unreasonably withheld or
delayed.
5. INFORMATION
5.1 INFORMATION AS TO PROGRESS
The Developer shall keep the Tenant informed of progress with the Works
and supply such other information in connection with the Works as the
Tenant may reasonably require from time to time.
<PAGE>
5.2 MONTHLY PROGRESS MEETINGS
The Tenant shall be notified by the Developer of all site progress
meetings to which the Tenant shall be entitled to attend. Such
attendance by the Tenant shall be as a silent observer only.
5.3 INSPECTION
The Tenant shall have the right to appoint or nominate its own
representative to make inspections of the Works at its own cost and
subject to Clause 6.
--------
6. INSPECTION OF DEVELOPER'S WORKS
6.1 INSPECTION
Subject to the Tenant giving the Developer or the Employer's
Representative two Working Days' notice the Tenant or its duly authorised
agent shall be allowed at all reasonable times in the company of the
Employer's Representative to view the state and progress of the Works and
to inspect the workmanship and the materials used (but not to test any of
the materials) on the following conditions:
6.1.1 the person inspecting must report to the site office before making
an inspection and act in accordance with the instructions of the
Contractor's representatives;
6.1.2 the person inspecting must comply with all relevant safety and
security precautions and insurance requirements;
6.1.3 every inspection is entirely at the risk of the person inspecting;
6.1.4 there must be no communication with the building contractor about
the Works; and
6.1.5 the progress of the Works must not be impeded.
<PAGE>
6.2 REPRESENTATIONS TO EMPLOYER'S AGENT
If as a result of an inspection the Tenant wishes to make representations
regarding the Works such representations shall be made exclusively to the
Employer's Agent who shall have regard to such representations.
7. PRACTICAL COMPLETION
7.1 INSPECTION OF THE WORKS
The Developer shall procure that the Tenant is given notice in writing of
the date on which the Employer's Representative intends to inspect the
Works with a view to issuing the Certificate of Practical Completion
pursuant to the Building Contract and shall procure that the Tenant is
afforded the opportunity of attending the inspection of the Works and
that the Employer's Representative has regard to any representations made
by or on behalf of the Tenant.
7.2 FURTHER INSPECTION(S)
In the event of the Employer's Representative not issuing the Certificate
of Practical Completion as anticipated the provisions of Clause 7.1 shall
----------
apply mutatis mutandis (except that the period of notice shall be three
Working Days instead of ten) as often as may be necessary until practical
completion of the Works is actually certified.
7.3 SNAGGING LIST
In the event of the Certificate of Practical Completion being issued
subject to a snagging list the Developer shall procure that the Works on
the snagging list are carried out as soon as is reasonably practicable
free of expense to the Tenant.
7.4 COPY CERTIFICATE AND SNAGGING LIST
2 Working Days after the issue thereof the Developer will provide the
Tenant with a copy of the Certificate of Practical Completion and any
snagging list.
<PAGE>
8. TENANT'S WORKS
8.1 TENANT'S ACCESS
As from the Date of Practical Completion but subject to Clause 8.2 the
----------
Tenant shall be afforded access to the Premises for the purpose of
carrying out the Tenant's Works
8.2 CONSENTS AND TENANT'S WORKS
The Tenant shall:
8.2.1 to the extent that it has not already done so submit to the
Landlord for approval (such approval not to be unreasonably
withheld or delayed) within two months of the date hereof plans or
drawings in triplicate of the Tenant's Works and shall not
commence the Tenant's Works until such approval has been obtained
and the Licence for Alterations has been entered into by the
Landlord and the Tenant;
8.2.2 obtain all requisite licences consents and permissions of the
local planning and other authorities for the Tenant's Works and
shall provide copies thereof to the Landlord and shall not
commence the Tenant's Works until all such have been obtained;
8.2.3 carry out the Tenant's Works in a good and substantial manner with
good quality materials in accordance with the said plans and the
terms and conditions of all such licences consents and permissions
and to the reasonable satisfaction of the Landlord; and
8.2.4 permit the Landlord and the Employer's Agent at all reasonable
times to inspect the progress of the Tenant's Works and the
quality of the materials and workmanship used therein.
8.2A Once the plans and drawings of the Tenant's Works have been approved by
the Landlord in accordance with Clause 8.2.1 and subject to completion of
the Leases the Landlord and Tenant shall within 10 Working Days enter
into the Licence for Alterations.
<PAGE>
8.3 NO INTERFERENCE WITH WORKS
The Tenant shall ensure that neither it nor its agents employees or
contractors do anything to impede the progress of the Works or the
Development.
8.4 TENANT'S RESPONSIBILITY
As between the Landlord, the Developer and the Tenant all materials goods
plant machinery equipment and other items used in connection with the
Tenant's Works shall be at the sole risk and responsibility of the Tenant
and all agents employees and contractors engaged in the Tenant's Works
shall be persons for whom the Tenant is responsible.
8.5 INDEMNITY
The Tenant shall be liable for and shall indemnify each of the Landlord
and the Tenant against any expense liability loss claim or proceedings in
respect of personal injury to or the death of any person whomsoever or
injury or damage whatsoever to any property real or personal arising out
of or in the course of or by reason of the carrying out of the Tenant's
Works.
9. INSURANCE
9.1 INSURANCE OF WORKS UNDER BUILDING CONTRACT
Until the Date of Practical Completion the Developer will cause the Works
to be insured in accordance with the Building Contract.
9.2 INSURANCE OF WORKS UNDER LEASES
Thereafter the Landlord will insure the Works or cause the same to be
kept insured against the Insured Risks as defined in the Leases in
accordance with the covenant on its behalf and subject to the conditions
therein contained.
9.3 INSURANCE OF TENANT'S WORKS
Until completion of the Tenant's Works the Tenant shall keep the Tenant's
Works insured (or shall procure such insurance) against the Insured Risks
(as so defined) and on
<PAGE>
completion thereof shall advise the Landlord in writing of the value of
the Tenant's Works and within 14 days of receipt of such written advice
the Landlord shall insure or cause the same (insofar as they are
comprised within the Property as defined in the Leases to be kept insured
against the Insured Risks in accordance with the covenant on its behalf
and subject to the conditions therein contained.
9.4 EVIDENCE OF COVER
Each party will produce to the other whenever reasonably required written
evidence of such insurance cover.
10. GRANT OF LEASE, PARKING AREA DEED AND RENT DEPOSIT DEEDS
10.1 GRANT
Subject to previous compliance by the Tenant with the provisions of this
Agreement the Landlord will grant to the Tenant on the Completion Date
the Unit 5 Lease, Unit 6 Lease and Unit 7 Lease for the Agreed Term and
shall enter into the Parking Area Deed with the Tenant and the Guarantor
and the Rent Deposit Deeds.
10.2 ACCEPTANCE
The Tenant and the Guarantor will accept the Leases, the Parking Area
Deed and the Rent Deposit Deeds and execute counterparts thereof but (for
the avoidance of doubt) it is hereby agreed that neither the Tenant nor
the Guarantor shall be obliged to accept any Lease unless there is a
simultaneous grant of all the Leases and of the Parking Area Deed.
10.2A On the Completion Date the Tenant shall pay over to the Landlord the
deposits payable in accordance with the terms of the Rent Deposit Deeds
but such payments shall not be payable unless there is a simultaneous
grant of all of the Leases and of the Parking Area Deed.
10.3 LEASE TERMS
10.3.1 The Unit 5 Lease shall be at the Unit 5 Rent and otherwise subject in
all respects to the terms and conditions set out in the Unit 5 Lease.
<PAGE>
10.3.2 The Unit 6 Lease shall be at the Unit 6 Rent and otherwise subject in
all respects to the terms and conditions set out in the Unit 6 Lease.
10.3.3 The Unit 7 Lease shall be at the Unit 7 Rent and otherwise subject in
all respects to the terms and conditions set out in the Unit 7 Lease.
10.3.4 The following matters shall include in each of the Leases:
(A) The Review Date to be specified in Clause 1 of the Leases shall be
the Review Date as specified in this Agreement;
(B) The date to be specified in Clause 3(1) of the Leases shall be the
Quarter Day (as defined in the Leases) immediately preceding the
Date of Practical Completion;
(C) The date to be specified in Clause 4(1)(a) of the Leases shall be
the day before the Rent Commencement Date as specified in this
Agreement;
(D) The date to be specified in Clauses 4(1)(b) and 4(2) of the Leases
shall be the Rent Commencement Date specified in this Agreement;
(E) The date to be specified in Clause 5(1) of the Leases shall be the
Date of Practical Completion.
10.4 COMPLETION
Completion of the grant of each of the Leases shall take place at the
offices of the Developer's Solicitors Wilde Sapte of 1 Fleet Place
London EC4M 7WS or elsewhere as they may reasonably direct.
11. NOT USED
<PAGE>
12. OCCUPATION
12.1 NOT USED
12.2 OCCUPATION
As soon as the Tenant shall have completed the Tenant's Works to the
reasonable satisfaction of the Landlord the Tenant shall notwithstanding
that the Leases may not then be completed take up occupation of and
commence trading at the Premises upon the terms and conditions of the
Leases and with the benefit of but subject to the rights (so far as
consistent with the physical state of the Development from time to time)
exceptions and reservations agreements and declarations and provisos
therein contained and the Landlord shall have and be entitled to all
remedies by distress action or otherwise for breach of any of the
covenants or conditions on the part of the Tenant as if the Leases had
actually been granted.
13. RENT
The Tenant shall be liable on and from the Rent Commencement Date until
the Leases shall be granted for the payment to the Landlord on the dates
specified in the Leases (the first payment to be made on the Rent
Commencement Date and to be in respect of the period from that date until
the next following quarter date) of sums equal to the amounts which would
have been payable by way of rent under the covenants of the Leases had
the same actually been granted on the Rent Commencement Date provided
nevertheless that any money so paid shall be set against the rent which
would otherwise be due under the Leases in respect of the same period.
14. INSURANCE AND SERVICE CHARGE
The Tenant shall also be liable on and from the Date of Practical
Completion until the Leases shall be granted for the payment to the
Landlord on the dates specified in the Leases of sums equal to the
amounts which would have been payable by way of insurance and service
charge under the covenants of the Leases had the same actually been
granted on the Date of Practical Completion provided nevertheless that
any money so paid shall be set against the insurance and service charge
which would otherwise be due under the Leases in respect of the same
period.
<PAGE>
15. DEFECTS
Any defects shrinkages or other faults in the Works which shall appear
within the defects liability period or periods provided under the
Building Contract shall be certified by the Tenant in a schedule of
defects to be delivered by the Tenant to the Developer not later than 14
days prior to the date of expiry of each defects liability period and the
Developer shall take all reasonable steps to procure the making good of
all such defects as are covered by the defects liability clause in the
Building Contract and the Tenant shall give reasonable access to the
Contractor for this purpose.
16. TENANT'S OBLIGATIONS
The Tenant agrees to observe and perform the following stipulations:
16.1 Not to enter into possession of the Premises until the Date of
Practical Completion;
16.2 Not to assign or deal with its interest under this Agreement or
any part thereof but to take up occupation of the Premises itself
and commence trading therefrom as hereinbefore provided.
17. VAT
All payments of whatever nature which are payable under this agreement
are exclusive of VAT and the Tenant shall pay and keep each of the
Landlord and the Developer indemnified against all VAT which may from
time to time be charged on any monies payable by the Tenant under this
Agreement.
18. INTEREST
If any sum of money payable by the Tenant under this Agreement remains
unpaid for more than seven days after the date when payment is due the
Tenant shall pay interest on the amount due from time to time at the rate
of four per cent per annum above the base lending
<PAGE>
rate from time to time of the National Westminster Bank PLC from the date
when payment was due until the date of payment (both before and after any
judgment).
19. TITLE
Title has been deduced to the Tenant's Solicitors (as the Tenant hereby
acknowledges) and the Tenant is deemed to have full knowledge thereof and
shall raise no objection or requisition relating thereto.
20. MATTERS AFFECTING THE LEASE
20.1 MATTERS
The Leases will be granted subject to and with the benefit of such of the
following as may apply:
20.1.1 all local land charges (whether registered or not before the date
of this agreement) and all matters capable of registration as a
local land charge or otherwise registrable by any competent
authority or pursuant to statute or like instrument;
20.1.2 all notices served and orders demands proposals or requirements
made by any local or other public or competent authority whether
before or after the date of this Agreement;
20.1.3 all actual or proposed charges notices orders restrictions
agreements conditions or other matters arising under any
enactment relating to Town and Country Planning;
20.1.4 all existing rights and easements and quasi-easements;
20.1.5 all matters in the nature of overriding interests as defined in
Section 70 of the Land Registration Act 1925; and
20.1.6 the matters contained mentioned or referred to in the documents
mentioned in the Leases.
<PAGE>
20.2 NO REQUISITIONS
The Tenant is deemed to have full knowledge of all matters referred to in
Clause 20.1 and shall raise no objection or requisition in relation to
-----------
any such matter.
21. USER
Neither the Landlord nor the Developer warrants that the Premises may
lawfully be used for any purpose authorised under the Leases.
22. NON-MERGER
The provisions of this Agreement so far as not performed prior to
completion of the Leases shall remain in full force and effect
notwithstanding the completion of the Leases.
23. FORFEITURE AND TERMINATION
23.1 If the Tenant commits any substantive breach of the provisions of this
agreement and fails to remedy such breach within twenty-one (21) days
after notice in writing by the Developer or the Landlord to the Tenant
specifying the breach or if an Event of Default (as that term is defined
in the Leases) occurs then in any such case the Developer or the Landlord
may at any time thereafter by notice in writing to the Tenant determine
this Agreement but without prejudice to any claim which the Developer or
the Landlord may have against the Tenant arising before the date of
determination Provided that notwithstanding such determination the Tenant
shall if and to the extent required by the Developer or the Landlord
remove at its own expense any works carried out by or on behalf of the
Tenant to the Building and reinstate the same and if the Tenant shall
default in carrying out any such works of removal and reinstatement
either of the Landlord or the Developer shall be entitled to carry out
such works at the Tenant's expense and all costs so incurred shall be
repaid by the Tenant forthwith upon demand.
23.2 If the Date of Practical Completion does not occur before the Long Stop
Date the Tenant shall have a right during the period of one month
following the Long Stop Date (as to which time shall be of the essence)
to terminate this Agreement by service of notice in
<PAGE>
writing on the Developer and the Landlord. Such determination shall be
without prejudice to the rights or remedies available to any party to
this Agreement in relation to any antecedent breach of this Agreement and
the provisions contained in paragraph 23.1 relating to the removal of
Tenant's Works shall apply.
24. ACKNOWLEDGEMENTS
24.1 ACKNOWLEDGEMENTS
The Tenant hereby acknowledges and admits:
24.1.1 that it has not entered into this Agreement in reliance upon any
representation made by or on behalf of the Landlord and/or the
Developer but not embodied in this Agreement except to the extent
that the Tenant may be entitled to rely on any representation
made by the Developer's solicitors on behalf of the Developer in
any written reply to any enquiry made by the Tenant's solicitors
on behalf of the Tenant; and
24.1.2 that it has satisfied itself on all matters relating to user
under the Planning Act and accepts that it shall be deemed to
take the Premises with full knowledge thereof and shall raise no
requisition or objection in relation thereto.
24.2 ENTIRE CONTRACT
The parties agree that this Agreement constitutes the entire contract
between them and may not be varied except by written agreement between
them or their respective solicitors.
25. NOTICES
25.1 All notices requests demands approvals consents and other communications
under this Agreement shall be in writing and shall be deemed to be duly
given if delivered personally or sent by telex or facsimile or by prepaid
registered or recorded delivery mail to a party at its address set forth
above or at such other address as such party may specify from time to
time by written notice to the others and if by facsimile shall be deemed
to be given at the time of receipt and if by mail then shall be deemed to
be given on the second Working Day after the day of posting.
<PAGE>
25.2 During such period that the Estate is vested in the trustee of Schroder
Exempt Property Unit Trust no notice shall be deemed to be validly served
on the Landlord unless a copy of such notice is also served on Schroder
Property Investment Management Limited at 31 Gresham Street, London EC2V
7QA or such other address as the Landlord shall notify to the Tenant and
the Developer.
26. DISPUTES
26.1 DISPUTES GENERALLY
Any dispute or difference arising between the parties hereto as to their
respective rights duties and obligations hereunder or as to any matter
arising out of or in connection with the subject matter of this Agreement
(excluding any dispute or difference referred to in Clause 26.3) shall be
-----------
referred to and determined by an independent person who has been
professionally qualified in respect of the subject matter of the dispute
or difference for not less than ten years and who is a specialist in
relation to such subject matter such independent person to be agreed
between the parties or failing such agreement to be nominated by the
President or Vice-President or other duly authorised officer of the Royal
Institution of Chartered Surveyors on the application of any party
hereto.
26.2 DISPUTES OVER CONSTRUCTION OF AGREEMENT
Any dispute or difference arising between the parties hereto over the
meaning or construction of this Agreement (and also any dispute as to
whether a particular dispute or difference should be dealt with under
Clause 26.1) shall be referred to an independent solicitor or barrister
-----------
agreed between the parties hereto or failing such agreement nominated by
the President or the Vice-President or other duly authorised officer of
the Law Society on the application of any party hereto.
26.3 DISPUTES REGARDING DETERMINATION
Clauses 26.1 and 26.2 do not apply to disputes relating to the
---------------------
determination or purported determination of this Agreement under Clause
------
23.
--
<PAGE>
26.4 APPOINTMENT OF EXPERT
Whenever a person is to be appointed under this Clause 26 the following
---------
provisions shall have effect:
26.4.1 the person shall act as an expert and not as an arbitrator and
his decision shall be final and binding upon the parties hereto;
26.4.2 the person shall consider (inter alia) any written
representations on behalf of any party (if made promptly) but
shall not be bound thereby;
26.4.3 the parties shall use all reasonable endeavours to procure that
the person gives his decision as speedily as possible;
26.4.4 the costs of appointing the person and his costs and
disbursements in connection with his duties under this agreement
shall be shared between the parties in such proportions as the
person shall determine or in the absence of such determination
equally between them; and
26.4.5 if the person becomes unable or unwilling to act then the
procedure hereinbefore contained for appointment of an expert may
be repeated as often as necessary.
27. LANDLORD'S LIABILITY
27.1 PERSONAL OBLIGATIONS
The obligations on the part of the Developer contained in this Agreement
shall be personal to the Developer and shall not be binding on the
Landlord nor the owner for the time being of the reversion to the
interest to be granted pursuant to the Leases.
27.2 RIGHT TO ASSIGN
The Landlord shall have the right to assign the benefit of this Agreement
by way of absolute legal assignment or by way of security or otherwise.
The Landlord shall within 10 Working Days after such assignment give
written notice (or procure that the assignee
<PAGE>
gives such notice) to the Tenant of such assignment and setting out full
details of the assignee and its address for service.
27.3 ASSIGNMENT
If the Landlord assigns the benefit of this Agreement and the assignee
gives notice of such assignment to the Tenant the Tenant shall forthwith
following receipt of the notice of assignment acknowledge receipt of the
same and shall also acknowledge to the assignee that it shall not treat
this Agreement as repudiated by reason of any act or omission on the part
of the Landlord named in this Agreement without first giving not less
than 10 Working Days notice in writing to the assignee and allowing the
assignee a reasonable opportunity to remedy or procure remediation of the
breach (where capable of remedy).
28. GUARANTOR'S COVENANT
The Guarantor covenants with the Landlord and as a separate covenant with
the Developer that:
28.1 during the continuance of this agreement the Tenant shall observe
and perform the obligations covenants and conditions on the
Tenant's part contained in this agreement and in case of default
the Guarantor will observe and perform the obligations covenants
and conditions in respect of which the Tenant is in default and
make good to each of the Landlord and the Developer on demand and
indemnify each of the Landlord and the Developer against all
losses damages costs and expenses thereby arising or incurred by
the Landlord or the Developer (as appropriate);
28.2 the liability of the Guarantor under Clause 28.1 shall not be
-----------
affected in any way by:
28.2.1 any neglect or forbearance of the Landlord or the
Developer in enforcing the observance or performance of
the obligations covenants and conditions on the
Tenant's part;
28.2.2 any time or indulgence given to the Tenant by the
Landlord or the Developer;
<PAGE>
28.2.3 any variation in the terms of this Agreement;
28.2.4 the death of the Tenant (if an individual) or the
dissolution of the Tenant or the Tenant otherwise
ceasing to exist; or
28.2.5 any other act matter or thing or the release of any
person apart from the express release in writing of the
Guarantor;
28.3 if during the continuance of this Agreement the Tenant (being a
company) is dissolved or if the liquidator of the Tenant or (if
the Tenant is an individual) the trustee in bankruptcy of the
Tenant disclaims this agreement the Guarantor shall upon written
notice from the Landlord given within three months after the date
of dissolution or disclaimer enter into an agreement for Lease of
the Premises (as tenant) upon the same terms as in this Agreement
(without however requiring any other person to act as guarantor)
such new agreement to take effect from the date of dissolution or
disclaimer and to be granted at the cost of the Guarantor who
shall execute and deliver to the Landlord a counterpart of it.
29. JURISDICTION
29.1 ENGLISH LAW
This Agreement shall be governed by and construed in accordance with
English law.
29.2 ENGLISH COURTS
Each party to this Agreement submits to the exclusive jurisdiction of the
English courts in respect of all matters arising out of this Agreement
but the Landlord shall have the right to bring proceedings in the courts
of any other jurisdiction for the purpose of enforcing a judgment.
29.3 SERVICE OF NOTICES ON GUARANTOR
The Guarantor appoints Dibb Lupton Alsop (ref RSS) of 125 London Wall
London EC2Y 5AE as its agents (or such other person in the UK as the
Guarantor may from time to time nominate by written notice to the
Landlord and to the Developer) to accept on its behalf
<PAGE>
service of all notices served in accordance with the provisions of this
agreement and to accept service of process in respect of all proceedings
arising out of this agreement.
AS WITNESS the hands of duly authorised signatories for the Landlord, the
Developer and the Tenant and executed as a deed by the Guarantor
<PAGE>
SIGNED by )
for and on behalf of the DEVELOPER )
SIGNED by )
for and on behalf of the LANDLORD )
SIGNED by )
for and on behalf of the TENANT )
SIGNED as a DEED )
by the GUARANTOR acting by Richard Stoltz its )
Authorised Signatory in accordance with the )
constitution of the company and the country in )
which it is incorporated
Authorised Signatory
<PAGE>
SCHEDULE 1
(PROHIBITED MATERIALS)
The materials identified in the publication entitled "Good Practice in the
Selection of Construction Materials" produced by the British Council for Offices
and the British Property Federation
<PAGE>
ANNEXURES
Annexure 1 - Documents
Annexure 2 - Unit 5 Lease
Annexure 3 - Unit 6 Lease
Annexure 4 - Unit 7 Lease
Annexure 5 - Plan
Annexure 6 - Contractor's Warranty
Annexure 7 - Employer's Agent's Warranty
Annexure 8 - Structural Engineer's Warranty
Annexure 9 - Architect's Warranty
Annexure 10 - RPS's Warranty
Annexure 11 - Rent Security Deposit Deed relating to Unit 5
Annexure 12 - Rent Security Deposit Deed relating to Unit 6
Annexure 13 - Rent Security Deposit Deed relating to Unit 7
Annexure 14 - Licence for Alterations
Annexure 15 - Parking Area Deed
<PAGE>
DATED 24th December 1998
LLOYDS BANK PLC
(as trustee of Schroder Exempt Property Unit Trust)
- and -
EXODUS INTERNET LIMITED
- and -
EXODUS COMMUNICATIONS INC
---------------------------------
L E A S E
of property known as
Unit 5 Phase 1 Matrix Park,
Coronation Road, Park Royal, London NW10
---------------------------------
ALLEN & OVERY
London
PY0407170.03
<PAGE>
H.M. LAND REGISTRY
Land Registration Acts 1925-1988
County & District: London Boroughs & Ealing and Brent
Title Number: AGL54738
Property: Unit 5 Phase 1 Matrix Park, Coronation Road, Park Royal,
London NW10
THIS LEASE is made on 24th December, 1998
BETWEEN:
(1) LLOYDS BANK PLC (registered number 2065) (as trustee of Schroder Exempt
Property Unit Trust) whose registered office is at 71 Lombard Street,
London EC3P 3BS (the "LANDLORD");
(2) EXODUS INTERNET LIMITED (registered number 3591136) whose registered office
is at Fountain Precinct Balm Green Sheffield South Yorkshire S1 1RZ
(the "TENANT"); and
(3) EXODUS COMMUNICATIONS INC of 2650 San Thomas Expressway, Santa Clara
CA95051, USA (the "GUARANTOR").
This Lease is a new tenancy for the purposes of section 1 of the Landlord and
Tenant (Covenants) Act 1995.
THIS DEED WITNESSES as follows:
1. DEFINITIONS
In this Lease:
"AUTHORISED GUARANTEE AGREEMENT" means an authorised guarantee agreement as
defined in section 16 of the Landlord and Tenant (Covenants) Act 1995;
"BUSINESS DAY" means a day (other than a Saturday or Sunday) on which banks
are generally open in London for normal business;
"CAR SPACES" means the 20 parking spaces within the areas shown edged green
on the Plan from time to time designated by the Landlord for the Tenant's
use;
"CLEARING BANK" means a bank which is a member of CHAPS Clearing Company
Limited;
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<PAGE>
"COMMON PARTS" means the roads, footpaths, service areas, car parks,
loading bays, landscaped and open areas, entrances and other areas from
time to time during the Term provided by the Landlord for common use by the
tenants of the Estate (but shall not include any such items as may
exclusively serve and be demised to a tenant of any Unit) but for the
avoidance of doubt the common parts shall always include the road coloured
brown on the Plan and the Car Spaces and shall afford the Tenant access to
and from the Property and the Car Spaces;
"CONDUITS" includes those for sewage, water, gas, electricity,
telecommunications and data processing;
"DEFAULT INTEREST RATE" means four per centum per annum above the Interest
Rate;
"END OF THE TERM" includes the expiry of the Term by effluxion of time or
the determination of the Term by forfeiture, surrender, merger, notice or
in any other way;
"ESTATE" means Phases 1 and 3 Matrix Park Coronation Road Park Royal London
NW10 the present extent of which is shown edged green on the Estate Plan
but such expression shall mean such greater or lesser area which shall
include the Property and which shall from time to time be managed by the
Landlord as a single estate (including all buildings and other structures
on and all parts of such estate);
"ESTATE PLAN" means the plan numbered A3159/0/38 annexed to this Lease;
"GUARANTOR" includes the person named in this Lease as guarantor, if any,
and any other person who is for the time being a guarantor in respect of
the Tenant's obligations under this Lease and his personal representatives
and successors;
"INSURED RISKS" means fire, lightning, explosion, earthquake, aircraft and
other aerial devices and articles dropped from them, escape of oil, impact
by vehicles or animals, riot, civil commotion, strikes and labour
disturbances, storm, flood, bursting and overflowing of water tanks,
apparatus or pipes and other risks against which the Landlord reasonably
decides from time to time to insure and any other risks that the Tenant
shall reasonably require to be included and which the insurers shall accept
subject to such exclusions, limitations and excesses as are imposed by its
insurers and to the extent to which the risks mentioned in this definition
are insurable with the Landlord's insurers but shall include loss or damage
by acts of terrorism if and only to the extent that the Landlord has
insured against acts of terrorism;
"INTEREST RATE" means the base rate for the time being of Lloyds Bank Plc
or of another Clearing Bank designated from time to time by the Landlord or
if there is no such base rate the rate from time to time prescribed under
section 32 of the Land Compensation Act 1961;
"LANDLORD" includes the person for the time being entitled to the reversion
immediately expectant on the End of the Term;
"LEASE" means this lease, all deeds varying this lease and all licences and
consents granted under this lease or under any deed of variation;
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<PAGE>
"LETTABLE AREAS" means all buildings on the Estate designed to be let for
commercial use;
"PARKING AREA" means the car parking areas forming part of the Estate
including the Car Spaces;
"PLAN" means the plan annexed to this Lease numbered A3159:0:01;
"PLANNING ACTS" means the Town and Country Planning Act 1990, the Planning
(Listed Building and Conservation Areas) Act 1990, the Planning (Hazardous
Substances) Act 1990, the Planning (Consequential Provisions) Act 1990 and
the Planning and Compensation Act 1991;
"PROPERTY" means the property described in Schedule 1 and every part of it
and all additions and alterations to it and includes (without limitation):
(a) every part of all buildings and other structures now or during the
Term on the property including walls, roofs, foundations, load-bearing
parts, doors, windows and Conduits exclusively serving the Property;
(b) landlord's fixtures and fittings including floor coverings;
(c) electrical and mechanical installations, plant, equipment and
machinery including (without limitation) lifts, heating plant, air
conditioning plant and ventilation plant and radiators;
(d) one half (severed vertically) of any wall separating the Property from
any adjoining Unit;
(e) service areas, loading bays and landscaped and open areas; and
(f) boundary walls and fences (if any);
"QUARTER DAYS" means 25th March, 24th June, 29th September and 25th
December in every year;
"RENT" includes all sums reserved as rent by this Lease and any interim
rent determined under the Landlord and Tenant Act 1954;
"RETAINED AREAS" means the whole of the Estate other than the Units;
"REVIEW DATE" means 29th September in the year 2003 and in every fifth
year after that year for so long as the Term continues;
"REVIEW PERIOD" means the period starting with any Review Date up to the
next Review Date or starting with the last Review Date up to the End of the
Term;
"TENANT" includes the Tenant's successors in title;
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<PAGE>
"TERM" means the term granted by this Lease and any statutory or other
continuation or extension of it or any holding over;
"TERM COMMENCEMENT DATE" means the date of commencement of the Term
specified in clause 3(1);
"UNITS" means the units of accommodation on the Estate that are let or
otherwise exclusively occupied or designed or intended for letting or
exclusive occupation and "Unit" shall mean any one of them;
"VAT" means value added tax and any imposition or levy of a like nature;
and
"VATA 1994" means the Value Added Tax Act 1994.
2. INTERPRETATION
(1) Where there are two or more persons included in the expressions "the
Landlord", "the Tenant" or "the Guarantor" each reference to the Landlord,
the Tenant or the Guarantor includes a separate reference to each of those
persons.
(2) Any reference, express or implied, to an enactment includes references to:
(a) that enactment as amended, extended or applied by or under any other
enactment (before or after this Lease);
(b) any enactment which that enactment re-enacts (with or without
modification);
(c) any subordinate legislation made (before or after this Lease) under
that enactment, as amended, extended or applied as described in
paragraph (a) above or under any enactment referred to in paragraph
(b) above; and
(d) any consents, licences and permissions given (before or after this
lease) under that enactment, as amended, extended or applied as
described in paragraph (a) above or under any enactment referred to in
paragraph (b) above or under that subordinate legislation and any
conditions contained in those consents, licences and permissions.
(3) Any reference, express or implied, to enactments generally includes
subordinate legislation and any legislation of the European Union that is
directly applicable in the United Kingdom and includes existing enactments
and those that come into effect during the Term.
(4) Sub-clauses (1) to (3) above apply unless the contrary intention appears.
(5) The headings in this Lease do not affect its interpretation.
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<PAGE>
3. LEASE
(1) The Landlord lets the Property to the Tenant together with the rights set
out in Schedule 2 but except and reserving to the Landlord the rights set
out in Schedule 3 for the term of twenty five years commencing on and
including 29th September 1998 subject to all rights and covenants
affecting the Property including (without prejudice to the generality of
the foregoing) the matters contained or referred to in Schedule 4 at a
yearly rent ascertained in accordance with clause 4.
(2) The rights granted to the Tenant are granted in common with the Landlord,
any person authorised by the Landlord and everyone else having the like or
similar rights.
(3) This Lease does not include any rights other than those set out in Schedule
2.
(4) The rights excepted and reserved to the Landlord are also excepted and
reserved to those authorised by the Landlord and everyone else entitled to
them.
4. RENT AND RENT REVIEW
(1) RENT
The yearly rent shall be:-
(a) until 16th May 1999 the rent of one peppercorn (if demanded);
(b) from and including 17th May 1999 until the first Review Date the rent
of one hundred and twenty one thousand one hundred and forty eight
pounds ((Pounds)121,148); and
(c) during each successive Review Period a rent equal to the rent
previously payable under this Lease (or the rent which would be
payable but for any abatement or suspension of rent under this Lease)
or the revised rent ascertained in accordance with this clause,
whichever is the greater.
(2) RENT PAYMENT DATES
The yearly rent is payable without any deduction by equal quarterly
payments in advance on the Quarter Days. The first payment (which is an
apportioned sum) is to be made 17th May 1999, in respect of the period
commencing on 17th May 1999 and ending on 23rd June 1999.
(3) RENT REVIEW - METHOD
The revised rent for any Review Period may be agreed in writing at any time
between the Landlord and the Tenant or (in the absence of agreement)
determined not earlier than the relevant Review Date by an independent
valuer (acting as an expert and not as an arbitrator) of recognised
standing and having experience in letting and valuing property of a like
kind and character to the Property.
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<PAGE>
(4) NOMINATION
The independent valuer may be nominated in the absence of agreement by or
on behalf of the president for the time being of the Royal Institution of
Chartered Surveyors on the application of either the Landlord or the Tenant
made not earlier than three months before the relevant Review Date.
(5) RENT REVIEW - AMOUNT
In the case of valuation the revised rent to be determined by the valuer
shall be such as he shall decide is the yearly rent at which the Property
might reasonably be expected to be let at the relevant Review Date
(a) after the expiry of a rent free period or a concessionary rent period
given for fitting-out purposes only of such length and the giving of
such other inducements (including, without limitation, any rental
concession, capital payment or contribution to fitting out-costs)
given for fitting out purposes only as in either case would be
negotiated in the open market between a willing landlord and a willing
tenant so that the yearly rent is that payable after the expiry of any
such rent free period or concessionary rent period and after the
giving of such inducement; and
(b) on the assumptions set out in sub-clause (6) but disregarding the
matters set out in sub-clause (7).
(6) ASSUMPTIONS
The assumptions are that at the relevant Review Date:
(a) the Property:
(i) is available to let on the open market by a willing landlord to
a willing tenant by one lease without a premium from either
party and with vacant possession for a term of 10 years or a
term equal to the residue then unexpired of the Term (whichever
be the longer) but in either event commencing on the relevant
Review Date with the rent payable from then;
(ii) is to be let as a whole on a lease which is to contain the same
terms as this Lease (other than the amount of the rent referred
to in sub-clause (1)(a) and (b) and any rent free or reduced
rent period allowed to the Tenant but including the provisions
for review of that rent at the same intervals as those in this
Lease) the first Review Date in that lease being the fifth
anniversary of the relevant Review Date;
(iii) is fit and available for immediate occupation and use with
connections to all mains services independently of any other
Unit and is ready to be fitted out for the incoming tenant's use
as authorised by this Lease; and
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<PAGE>
(iv) may be used for any of the purposes permitted by this Lease
including any purpose which falls within the same use class
(under the Town & Country Planning (Use Classes) Order for the
time being in force) as the purpose permitted by this Lease;
(b) all the covenants in this Lease by the Landlord and the Tenant have
been performed and observed; and
(c) no work has been carried out to the Property which has diminished the
rental value and in case the Property has been destroyed or damaged it
has been fully restored.
(7) Disregards
The matters to be disregarded are:
(a) any effect on rent of the fact that the Tenant, its subtenants or
their respective predecessors in title have been in occupation of the
Property;
(b) any goodwill attached to the Property by reason of the carrying on at
it of the business of the Tenant, its subtenants or their predecessors
in title in their respective businesses; and
(c) any increase in rental value of the Property attributable to the
existence at the relevant Review Date of any improvement carried out
with consent of the Landlord (where required) but not under an
obligation to the Landlord or its predecessors in title to the
Property carried out by and at the cost of the Tenant, its subtenants
or their respective predecessors in title during the Term or during
any earlier period of occupation arising out of an agreement to grant
the Term.
(8) VALUER
In the case of determination by a valuer:
(a) the fees and expenses of the valuer including the cost of his
appointment shall be borne as he shall decide or in the absence of any
decision equally by the Landlord and the Tenant who shall otherwise
each bear their own costs;
(b) the valuer shall afford the Landlord and the Tenant an opportunity to
make representations to him; and
(c) if the valuer dies, delays or becomes unwilling or incapable of acting
or if for any other reason the president for the time being of the
Royal Institution of Chartered Surveyors or the person acting on his
behalf thinks fit he may discharge the valuer and appoint another in
his place.
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<PAGE>
(9) MEMORANDUM
When the revised rent has been ascertained memoranda of it shall be signed
by or on behalf of the Landlord and the Tenant and annexed to this Lease
and the counterpart of it and the Landlord and the Tenant shall bear their
own costs in respect of the memoranda.
(10) INTEREST
If the revised rent payable with effect from any Review Date has not been
agreed by that Review Date rent shall continue to be payable at the rate
previously payable. Forthwith on the revised rent being ascertained the
Tenant shall pay to the Landlord any shortfall between the rent and the
revised rent payable up to and on the preceding quarter day together with
interest at the Interest Rate compounded quarterly on each part of the
shortfall from the date or respective dates on which each part would have
been due for payment had the revised rent been ascertained before the
relevant Review Date until the date of payment.
For the purpose of this clause the revised rent shall be deemed to have
been ascertained on the date when it has been agreed between the Landlord
and the Tenant or the date of the determination by the valuer.
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<PAGE>
(11) COSTS
If either the Landlord or the Tenant fails to pay the relevant part of the
fees and expenses of the valuer under sub-clause (8) within 15 Business
Days of the same being demanded by the valuer the other shall be entitled
to pay the same and the amount so paid shall be repaid on demand by the
party chargeable and recoverable from that party as a debt due.
(12) TIME NOT OF THE ESSENCE
Time shall not be of the essence for the purposes of this clause 4.
5. SERVICE CHARGE
(1) The Tenant shall pay to the Landlord the Provisional Service Charge without
any deduction by equal quarterly payments in advance on the Quarter Days.
The first payment (which is an apportioned sum) is to be made on the date
hereof in respect of the period commencing 17th December 1998 and ending on
the next following Quarter Day.
(2) As soon as possible after every Accounting Date the Landlord shall prepare
and supply to the Tenant an account:
(a) showing the Gross Expenses, the Income and the Net Expenses for the
Financial Year referred to in the account;
(b) containing a fair summary of the items referred to in it; and
(c) certified by the Landlord or its agents (who may be the managing
agents for the Estate).
The account shall be conclusive evidence of all matters of fact referred to
it in it (save in the case of manifest error) and the Tenant shall be
afforded on request reasonable facilities for inspecting and taking copies
of the accounts and receipts and other documents supporting the account.
(3) In the case of the first Accounting Date after the date for commencement of
payment of the Provisional Service Charge specified in clause 5(1), if the
proportion of the Tenant's Share of the Net Expenses shown in the account
apportioned on a daily basis for the period from that date to the
Accounting Date:
(a) exceeds the amount already paid as Provisional Service Charge before
the first Accounting Date, the Tenant shall pay the excess to the
Landlord within 14 days of written demand; and
(b) is less than the amount already paid as Provisional Service Charge
before the first Accounting Date, the Landlord shall credit the excess
to the Tenant against the next quarterly payment of Provisional
Service Charge.
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<PAGE>
(4) In the case of every subsequent Accounting Date, if the Tenant's Share of
the Net Expenses shown in the account for the period beginning on the day
after the previous Accounting Date and ending on that Accounting Date:
(a) exceeds the amount paid as Provisional Service Charge during that
period, the Tenant shall pay the excess to the Landlord within 14 days
of written demand; and
(b) is less than the amount paid as Provisional Service Charge during that
period, the Landlord shall credit the excess to the Tenant against the
next quarterly payment of Provisional Service Charge or repay the
excess in respect of the last year of the Term.
(5) If the Landlord fails to include in any account for a Financial Year a sum
expended or liability incurred in that year the Landlord may include such
sum or the amount of such liability in an account for any subsequent
Financial Year.
(6) All sums payable under this clause shall be reserved as rent.
(7) In this clause:
"ACCOUNTING DATE" means 31st December or any other date that the Landlord
may nominate;
"FINANCIAL YEAR" means a year ending on an Accounting Date;
"GROSS EXPENSES" means all the expenses incurred by the Landlord in
connection with the Estate including, without limitation, the matters
referred to in Schedule 7;
"GROSS INTERNAL AREA" has the meaning ascribed to that expression in the
Code of Measuring Practice published by the Royal Institution of Chartered
Surveyors and the Incorporated Society of Valuers and Auctioneers (4th
Edition);
"INCOME" means:
(a) any insurance money received under an insurance policy which the
Landlord was obliged to effect under this Lease where the Landlord has
incurred expenses in making good the insured loss itself; and
(b) any money received from any person (other than the service charge paid
by the tenants in the Estate) who was liable to contribute to the cost
of compliance with the Landlord's obligations under this Lease where
the Landlord has itself incurred the expense towards which that person
contributed;
"NET EXPENSES" means the amount by which Gross Expenses exceeds Income;
"PROVISIONAL SERVICE CHARGE" means:
(a) in respect of the period from the 17th December 1998 to the next
following Accounting Date, the annual sum of (Pounds)4,689.60; and
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(b) in respect of each subsequent Financial Year, the sum fixed from time
to time by the Landlord or its agents acting reasonably (who may be
the managing agents for the Estate) as being a reasonable estimate of
the Tenant's Share of the Net Expenses for the relevant Financial
Year;
"TENANT'S SHARE" means the same proportion of the Net Expenses as the Gross
Internal Area of the Property from time to time bears to the Gross Internal
Area of the Lettable Areas at such time provided always that if the
Landlord shall consider that having regard to the nature and degree of use
by the Tenant or other tenants on the Estate of the facilities covered by
the Gross Expenses or any other factors which the Landlord may reasonably
consider relevant some other proportion ought properly to be payable by the
Tenant the Landlord may substitute such other percentage as it shall
consider reasonable either with regard to all or any items making up the
Net Expenses provided that the proportion of the Net Expenses payable by
the Tenant shall not be increased by reason solely or in part of any
Lettable Areas being vacant or unlet.
6. TENANT'S COVENANTS
(1) INTRODUCTION
The Tenant covenants with the Landlord to comply with its obligations set
out in this clause and in clauses 5, 8 and 9.
(2) RENT
The Tenant shall:
(a) pay the yearly rent to the Landlord at the times and in the manner
referred to in clause 4 without any deduction; and
(b) not exercise or seek to exercise any right or claim to withhold rent
or any right or claim to legal or equitable set-off.
(3) OUTGOINGS
The Tenant shall:
(a) pay all present and future Outgoings assessed, charged or imposed on,
or payable in respect of the Property or the Car Spaces or assessed,
charged or imposed on, or payable by the owner or occupier of the
Property or the Car Spaces;
(b) pay the proportion properly attributable to the Property or the Car
Spaces of all Outgoings assessed, charged or imposed on or payable in
respect of the Property and other properties or the Car Spaces and
other car spaces or assessed, charged or imposed on or payable by the
owner or occupier of the Property and other properties or the Car
Spaces and other car spaces;
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(c) pay all charges for the supply to and consumption at the Property of
water, gas and electricity and all charges for telecommunications
(including equipment rents) and observe and perform all regulations of
the supply authorities;
(d) where such charges as are referred to in paragraph (c) are made in
relation to the Property and other properties or upon the owner or
occupier of the Property and other properties, pay the suppliers and
indemnify the Landlord against the proportion of those charges
properly attributable to the Property or its owner or occupier; and
(e) if the Landlord loses rating relief because it has been allowed to the
Tenant or any other person deriving title under the Tenant during the
Term, make good that loss to the Landlord.
Provided that the Tenant shall not be obliged to pay such sums referred to
above to the extent that the same have been recovered by the Landlord under
Clause 5.
In this sub-clause "OUTGOINGS" means rates, taxes, duties, charges,
assessments, impositions and outgoings whether parliamentary, parochial,
local or of any other description and whether of the nature of capital or
revenue and even though of a wholly novel character and the proportion
referred to in paragraphs (b) and (d) shall be determined by the Landlord
acting reasonably and shall be conclusive save as to questions of law and
save in cases of manifest error.
(4) REPAIR
The Tenant shall:
(a) put and keep the Property in good repair and condition, but shall not
be obliged to repair damage caused by an Insured Risk save where:
(i) the damage is not insured because of an exclusion, limitation or
excess imposed by the insurers; or
(ii) and to the extent that the insurance monies are irrecoverable in
whole or in part because of the act, default or omission of the
Tenant, any person deriving title under the Tenant or anyone at
the Property with the express or implied authority of any of
them;
(b) replace all the Landlord's fixtures and fittings in the Property which
become beyond repair during the Term with those of no lesser quality;
(c) keep all windows and other glass in the Property (both inside and
outside) clean, cleaning them at least once a month and more
frequently where necessary;
(d) keep any open area within the Property adequately surfaced (where
appropriate) in good condition, properly cultivated (where landscaped)
and free from weeds;
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(e) enter into and maintain throughout the Term fully comprehensive
maintenance contracts in respect of all plant, equipment and machinery
forming part of the Property with a reputable company or companies and
produce the contracts to the Landlord on demand with evidence that any
payments due under them are paid up to date;
(f) ensure that the electrical circuits within the Property comply with
the then current regulations of the Institute of Electrical Engineers
or other amended standards or recommended current codes of practice
(save that this shall not obligate the Tenant to upgrade the existing
circuits within the Property save where it is unlawful not to do so);
and
(g) notify the Landlord of all defects in the Property which are relevant
defects for the purpose of section 4 of the Defective Premises Act
1972.
(5) REDECORATION
The Tenant shall redecorate the exterior of the Property in every third
year and in the last year of the Term and the interior of the Property in
every fifth year and in the last year of the Term in colours and patterns
which, in the case of external decorations, shall be first approved by the
Landlord at all times during the Term and, in the case of internal
decorations, shall be first approved by the Landlord in the last year of
the Term. The Tenant shall also have all parts of the Property requiring
treatment for their preservation and protection treated in accordance with
the best approved manner for preserving and protecting them. All works
under this sub-clause shall be carried out in a good and workmanlike manner
and with suitable, good quality materials.
In this sub-clause the "last year of the Term" means the period of 12
months ending at the End of the Term and all approvals shall not be
unreasonably withheld or delayed by the Landlord.
(6) ENTRY BY THE LANDLORD
The Tenant shall:
(a) permit the Landlord to enter the Property to examine its condition and
take inventories;
(b) permit the Landlord to enter the Property to exercise any of the
rights reserved to the Landlord by this Lease and for any other
reasonable purpose connected with the management of the Estate subject
to the Landlord making good to the Tenant all damage to the Property
but not being obliged to compensate the Tenant for any loss suffered
by the Tenant or for any nuisance, annoyance, inconvenience, noise or
vibration;
(c) permit the Landlord and any person acting as valuer under clause 4 to
enter the Property and inspect and measure the Property for all
purposes connected with insurance of the Property, any action under
the Landlord and Tenant Act 1954 Part II, or the implementation of
clause 4; and
(d) furnish all information relevant for those purposes as the Landlord or
anyone having a right of entry under this sub-clause may reasonably
request.
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Except in case of emergency the Landlord shall give the Tenant reasonable
prior written notice before exercising the right of entry and shall comply
with the Tenant's reasonable security and confidentiality requirements.
After notice or in case of emergency the Landlord may break into the
Property. Such rights shall be exercised in a reasonable manner and in
such a way so far as reasonably practicable as not to prevent the Tenant's
beneficial user and enjoyment of the Property and to use reasonable
endeavours not to damage or interfere with any equipment or machinery or
data transmission and storage facilities in the Property and shall make
good any damage caused.
(7) REMEDY BREACHES
The Tenant shall remedy all breaches of covenant notified by the Landlord
to the Tenant which the Tenant is liable to remedy under this Lease as soon
as possible and in any event within three months or sooner if appropriate
after service of the notice. If the Tenant fails to do so the Landlord may
enter the Property and remedy the breach and such entry shall be subject to
the same conditions as referred to in clause 6(6). All costs and expenses
incurred by the Landlord shall be paid by the Tenant within 14 days of
written demand.
(8) ALTERATIONS
Subject to the rights granted to the Tenant in Schedule 2 to this Lease the
Tenant shall:
(a) not make any alteration or addition to the Property (other than the
erection, alteration or removal of internal, non structural,
demountable partitioning) save as permitted by paragraph (b);
(b) not make any non-structural alteration to the Property (other than as
mentioned in paragraph (a)) without the prior consent of the Landlord
which shall not be unreasonably withheld or delayed; and
(c) before the End of the Term if required to do so by the Landlord but
not otherwise, remove any alteration or addition (including any made
before the beginning of the Term) and make good all damage caused by
the removal.
In this sub-clause a non-structural alteration is one which does not affect
the roof, foundations or exterior of the Property or any load-bearing part
of it.
(9) SIGNS
The Tenant shall:
(a) not display on the Property any signs visible from outside the
Property except those which in the Landlord's opinion are reasonably
necessary in connection with the business carried on at the Property
and which are in a form approved by the Landlord and are affixed in
positions approved by the Landlord (such approvals not to be
unreasonably withheld or delayed);
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(b) at the End of the Term remove all signs (including any erected before
the beginning of the Term) and make good all damage caused by their
removal; and
(c) not affix to the Property any external radio, television or other
aerial or satellite dish or any pole, mast, flag or wire save with
the prior written consent of the Landlord such consent not to be
unreasonably withheld or delayed and in making such decision the
Landlord shall have due regard to the Tenant's use of the Property.
In this sub-clause "signs" includes signs, hoardings, posters, placards,
advertisements, letters, bills and inscriptions.
(10) USE
The Property shall not be used for any purpose other than a use within
Class B1, Class B2 or Class B8 of the schedule to the Town and Country
Planning (Use Classes) Order 1987 as that Order is in force at the date of
this Lease.
(11) USE OBLIGATIONS
The Tenant shall:
(a) use any open area within the Property only for the purpose for which
it is designed and not keep any caravan or temporary building on it;
(b) not leave the Property unoccupied for more than a month without
notifying the Landlord and providing the security arrangements
reasonably required by the Landlord and its insurers;
(c) not do anything on the Property which may become a nuisance or damage
to the Landlord or any nearby owner or occupier;
(d) not allow to pass into the Conduits serving the Property anything
that may obstruct them or cause damage, danger or pollution or
anything poisonous or radioactive;
(e) not bring onto or keep in the Property anything dangerous,
inflammable, explosive, or noxious save for materials ordinarily and
properly used in connection with alternative power generation
provided that such materials are safely stored and are otherwise in
accordance with all statutory requirements and the reasonable
requirements of insurers;
(f) not use the Property for any illegal purpose or for any dangerous,
noxious, or noisy occupation;
(g) not use the Property for the holding of public meetings or auction
sales or as a residence or sleep at the Property or keep any animal
on it;
(h) not overload the Property or its Conduits;
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(i) remove all refuse on a reasonably frequent basis but no less than
once a week and keep the Property clean, tidy and in good order;
(j) not obstruct any road or footpath on the Estate and not do anything
as a result of which reasonable use of the Common Parts by others may
be impeded; and
(k) not park vehicles on or load or unload goods onto or from vehicles
save in those parts of the Property or the Common Parts designated by
the Landlord for that purpose.
(12) STATUTORY REQUIREMENTS
The Tenant shall comply with every enactment and with the requirements and
recommendations of every authority relating to or affecting the Property
or its use or the employment of anyone at the Property or any equipment or
chattels in the Property and whether applicable to the owner, landlord,
tenant or occupier of the Property save that this obligation shall not
include responsibility for compliance with anything relating to
remediation of any contamination affecting the Property which was caused
before the date hereof.
In this sub-clause "authority" includes every government department, local
or other authority and court of competent jurisdiction.
(13) NOTICES
The Tenant shall:
(a) give the Landlord a copy of every notice or order or any proposal for
a notice or order issued to the Tenant, its sub-tenants or any
occupier of the Property or left at the Property relating to the
Property or the Tenant's its sub-tenants or any occupiers use thereof
within five Business Days of its service;
(b) (if it is the Tenant's responsibility to so comply in accordance with
the terms of this Lease) take all steps necessary to comply with
every notice or order without delay; and
(c) at the request and cost of the Landlord make or join with the
Landlord in making such objections or representations in respect of
the notice, order or proposal as the Landlord shall reasonably
require.
(14) FIRE AUTHORITY REQUIREMENTS
The Tenant shall comply with all requirements and recommendations of the
appropriate authority and the Landlord's insurers and all reasonable
requirements of the Landlord as to means of escape from the Property in
case of fire or other emergency and as to the provision and maintenance of
fire detection equipment, fire alarm equipment and fire fighting
equipment.
(15) PLANNING ACTS
The Tenant shall:
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(a) comply with the Planning Acts in relation to the Property, any
operations carried out at the Property and its use and not commit any
breach of planning control (as defined in the Planning Acts);
(b) obtain from the local planning authority planning permission for the
carrying out of any operation on the Property or the institution or
continuance of any use which may constitute development within the
meaning of the Planning Acts;
(c) not make any application for planning permission without the
Landlord's prior consent (which shall not be unreasonably withheld or
delayed) to the making of the application, indemnify the Landlord
against all charges payable in respect of the application and repay to
the Landlord all reasonable and proper professional fees and expenses
properly incurred by the Landlord in connection with the application;
(d) forthwith after the grant or refusal of any application give the
Landlord a copy of the permission or the refusal;
(e) not make any alteration or addition to or change of use of the
Property (being an alteration or addition or change of use which is
prohibited by or for which the consent of the Landlord must be
obtained under this Lease and for which a planning permission must be
obtained) before planning permission for it has been produced to the
Landlord and acknowledged by the Landlord as satisfactory to it but so
that the Landlord may refuse to express satisfaction with the planning
permission on the grounds that anything contained in it or omitted
from it in the reasonable opinion of the Landlord would be or be
likely to be materially prejudicial to the Landlord's interest in the
Property during the Term or after the End of the Term such
acknowledgement from the Landlord shall not be unreasonably delayed;
(f) pay any charge imposed under the Planning Acts in respect of the
carrying out of any operation or the institution or continuance of any
use;
(g) unless the Landlord directs otherwise, carry out before the End of the
Term all works required to be carried out as a condition of any
planning permission which may have been granted and implemented during
the Term whether or not the date by which the planning permission
requires those works to be carried out falls within the Term;
(h) pay to the Landlord within 14 days of written demand a fair and
reasonable proportion of any compensation received by the Tenant
because of a restriction on the use of the Property under the Planning
Acts, any dispute as to the proportion to be referred to arbitration;
(i) produce to the Landlord all drawings, documents and other evidence
reasonably required by the Landlord to satisfy itself that this sub-
clause has been complied with;
(j) not implement any planning permission without providing reasonable
security if reasonably required for compliance with the conditions
imposed by that permission;
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(k) not serve any purchase notice under the Planning Acts requiring any
authority to purchase the Tenant's interest in the Property without
first offering to surrender this Lease at the price which might
reasonably be expected to be obtained from the authority under the
purchase notice, any dispute as to the amount of the price to be
referred to arbitration;
(l) not to make any objection or adverse representation in respect of any
planning application made by or with the consent of the Landlord:
(i) within 12 months before the date specified in clause 15 of this
Lease if the Tenant has served the notice referred to in that
clause; or
(ii) within 12 months before the End of the Term unless the Tenant
has exercised its rights to take a new lease under the
provisions of the Landlord and Tenant Act 1954;
and in either case this clause shall not prevent the Tenant making
such objections if it is entitled to do so under a lease of another
Unit on the Estate.
(16) OBSTRUCTION
The Tenant shall not:
(a) stop up, darken or obstruct any window or opening belonging to the
Property save as part of the Tenant's usual security measures; or
(b) give to any third party any acknowledgement that the Tenant enjoys
the access of light or air to any of the windows or openings in the
Property by the consent of a third party; or
(c) pay to any third party any sum of money or enter into any agreement
with any third party for the purpose of inducing or binding him to
abstain from obstructing the access of light or air to any windows or
openings.
(17) OBSTRUCTION PROCEEDINGS
If any of the owners or occupiers of nearby land or buildings do or
threaten to do anything which obstructs the access of light or air to any
of the windows or openings in the Property the Tenant shall:
(a) notify the same forthwith to the Landlord; and
(b) permit and afford all reasonable assistance to the Landlord to bring
proceedings in the name of the Tenant and at the joint cost of the
Landlord and Tenant against any of the owners or occupiers of the
nearby land or buildings in respect of the obstruction.
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(18) ACQUISITION OF RIGHTS
The Tenant shall not allow any easement to be acquired over the Property.
If any such easement is acquired or attempted to be acquired, the Tenant
shall give immediate notice of it to the Landlord and at the request of
the Landlord but at the cost of the Tenant adopt the course reasonably
required by the Landlord for preventing the acquisition of the easement.
(19) PARTY MATTERS
The Tenant shall pay a fair proportion of all costs and expenses payable
in respect of repairing, lighting, cleansing and maintaining anything used
in common by the Property and any other property to the extent that those
costs and expenses are not recovered under clause 5. The proportion shall
be determined by the Landlord and shall be conclusive save as to questions
of law and save in the case of manifest error.
(20) NEW GUARANTOR
If a guarantor's event of default occurs, the Tenant shall give notice to
the Landlord of the event within ten Business Days of its occurrence. If
the Landlord serves notice on the Tenant under this sub-clause within
thirty Business Days of service of the Tenant's notice, the Tenant shall
procure that guarantors reasonably acceptable to the Landlord shall
covenant by deed with the Landlord in the form set out in Schedule 5.
In this sub-clause a guarantor's event of default is any of the following:
(a) in the case of a Guarantor who is an individual:
(i) the death of the individual;
(ii) the individual being regarded as a patient under the Mental
Health Act 1983 section 94;
(iii) an application being made for an interim order in respect of
the individual or an interim order being made under the Act;
(iv) the making by the individual of a proposal for a voluntary
arrangement;
(v) a petition being presented for a bankruptcy order to be made
against the individual or a bankruptcy order being made;
(b) in the case of a Guarantor which is a company:
(i) a proposal being made to the company and to its creditors for a
voluntary arrangement;
(ii) a petition being presented for an administration order in
respect of the company or an administration order being made;
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(iii) the company having an administrative or other receiver or a
manager appointed of the whole or any part of its property;
(iv) the company passing a resolution for winding up or a petition
being presented for the winding up of the company or a winding
up being made or the company being dissolved other than (in any
such case) a voluntary winding up of a solvent company for the
purposes of amalgamation or reconstruction;
(v) the company, having been registered as an unlimited company,
being re-registered as a limited company without the previous
consent of the Landlord;
(c) in the case of a Guarantor who is an individual or which is a company:
(i) the individual or the company entering into any kind of
composition, scheme of arrangement, compromise or arrangement
for the benefit of creditors or any class of creditors or
permitting or suffering any distress or execution to be levied
on his goods at the Property which remains unsatisfied for more
than 21 days;
(ii) there occurring in relation to the individual or the company in
any country or territory in which he carries on business or to
the jurisdiction of whose courts he or any of his property is
subject any event which corresponds in that country or
territory with any of those mentioned in paragraphs (a)(iii) to
(v) or (b) above or the individual or the company otherwise
becoming subject in any such country or territory to any law
relating to insolvency, bankruptcy or winding up.
(21) COSTS
The Tenant shall pay the reasonable and proper costs and expenses incurred
by the Landlord:
(a) in or in contemplation of any proceedings relating to the Property
under the Law of Property Act 1925 sections 146 and 147, or the
Leasehold Property (Repairs) Act 1938, the preparation and service of
any notice under those sections or the taking of steps subsequent to
such notice notwithstanding that forfeiture is avoided otherwise than
by relief granted by the Court;
(b) in the preparation and service of any notice to repair or any schedule
of dilapidations at any time during the Term or after the End of the
Term;
(c) in connection with the recovery of arrears of Rent or other sums due
to the Landlord under this Lease including the levy or attempted levy
of any distress; and
(d) in respect of any application for consent required by this Lease
whether or not the consent is granted (including any inspection of
works authorised by the consent and of any re-instatement of those
works).
Where the Landlord could recover the cost of services or advice under the
first part of this sub-clause if they were undertaken by a third party but
those services or that advice are provided by
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the Landlord or by a company which is a member of the same group as the
Landlord (within the meaning of section 42 of the Landlord and Tenant Act
1954), the Tenant shall pay to the Landlord or to that company a reasonable
sum (plus VAT if payable) for such services or advice but not more than the
amount payable by the Tenant if those services or that advice had been
provided by a third party
(22) INDEMNITY
The Tenant shall:
(a) pay and make good to the Landlord every loss and damage incurred or
sustained by the Landlord as a consequence of every breach or non-
observance of the Tenant's covenants contained in this Lease and shall
indemnify the Landlord against all actions, claims, liabilities, costs
and expenses arising by reason of the breach; and
(b) indemnify and keep the Landlord indemnified from liability in respect
of all loss, damage, actions, proceedings, claims, demands, costs,
damages and expenses in respect of any injury to or the death of any
person or damage to any property or in respect of the infringement,
disturbance or destruction of any right by reason of or arising in any
way directly or indirectly out of:
(i) the state of repair or condition of the Property;
(ii) the act, omission or default of the Tenant, any person deriving
title under the Tenant or any person at the Property with the
express or implied authority of any of them;
(iii) the construction or existence of any additions or alterations
to the Property;
(iv) the use of the Property;
(v) anything now or in the future attached to or on the Property;
(vi) the use of vehicles on the Property;
(vii) the omission of the Tenant to give written notice to the
Landlord of any defects or items requiring repair of which the
Tenant is aware or ought reasonably to be aware; and
(viii) any breach by the Tenant or by any person deriving title under
the Tenant of any covenant by the Tenant or any condition
contained in this Lease.
Provided that the Tenant shall not be obliged to indemnify the
Landlord in respect of such matters to the extent that such damage
arises out of the Landlord's wilful misconduct or negligence.
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(23) NOTICES FOR SALE AND RE-LETTING
The Tenant shall:
(a) permit (at a suitable location which does not materially interfere
with or obstruct the access of light to the Property) the Landlord
during the six months before the End of the Term to affix to the
Property a notice (of a suitable size and nature) for re-letting it;
(b) permit (at a suitable location which does not materially interfere
with or obstruct the access of light to the Property) the Landlord at
any time during the Term to affix to the Property a notice (of a
suitable size and nature) for dealing with the Landlord's interest in
the Property; and
(c) permit all persons with written authority from the Landlord or the
Landlord's agent to view the Property upon the Landlord giving at
least 24 hours prior written notice and subject to such person
complying with the Tenant's reasonable security and confidentiality
requirements.
(24) REGULATIONS
The Tenant shall observe all reasonable regulations made by the Landlord
for the proper management of the Estate.
(25) CAR SPACES
The Tenant shall:
(a) not use the Car Spaces otherwise than for the purpose of the parking
of one private motor car in each Car Space and not to keep anything
else in the Parking Area including, without limitation, plant,
equipment, materials, containers of any description or any skip or
other receptacle for refuse or any caravan or temporary building;
(b) not without the express permission of the Landlord carry out any
repairs to any vehicle whilst it is in the Parking Area and if
permission is granted ensure that any repairs are carried out in such
manner as not to cause any nuisance, annoyance, inconvenience or
disturbance to the Landlord or any tenant or occupier of the Estate or
other user of the Parking Area;
(c) keep the Car Spaces and the surrounding area clean, tidy and free from
deposits of oil or grease;
(d) not cause any obstruction in the Parking Area;
(e) take all reasonable and proper precautions against fire occurring in
any vehicle using the Car Spaces;
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(f) not do anything in the Parking Area which causes nuisance, annoyance,
inconvenience or disturbance to the Landlord or any tenant or occupier
of the Estate or other user of the Parking Area.
(26) FREEHOLD COVENANTS
The Tenant shall observe and perform the covenants contained in or referred
to in the documents specified in Schedule 4 so far as they relate to the
Property and are still subsisting and capable of taking effect and shall
indemnify and keep indemnified the Landlord from and against any non-
observance or non-performance of the same.
(27) YIELD UP
The Tenant shall:
(a) yield up the Property (except tenant's or trade fixtures including
those of the type listed on annexed schedule) to the Landlord at the
End of the Term with vacant possession and in accordance with the
Tenant's covenants contained in this Lease; and
(b) make good to the satisfaction of the Landlord all damage occasioned by
the removal of any tenant's or trade fixtures.
(28) RELEASE OF LANDLORD
If the Landlord or any former landlord applies for release of a covenant
under section 8 of the Landlord and Tenant (Covenants) Act 1995:
(a) the Tenant shall not object unreasonably to the release of the
Landlord or the former landlord; and
(b) if, following such an application, the Tenant serves notice objecting
to the release, but the Court makes a declaration that it is
reasonable for the covenant to be released, the Tenant shall indemnify
the Landlord and any former landlord against all loss, damage, costs
and expenses incurred or sustained by any of them as a result of the
objection of the Tenant.
7. LANDLORD'S COVENANTS
(1) INTRODUCTION
The Landlord covenants with the Tenant to comply with its obligations set
out in this clause and in clauses 5 and 9.
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(2) QUIET ENJOYMENT
For so long as the Tenant pays the Rent and performs and observes the
covenants by the Tenant and the conditions contained in this Lease the
Tenant may peaceably and quietly hold and enjoy the Property during the
Term without any lawful interruption by the Landlord or any person claiming
under or in trust for the Landlord.
(3) SERVICES
The Landlord shall use all reasonable endeavours to:
(a) maintain in good working order and repair all Conduits in, under or
upon the Estate which serve the Property (other than those which
exclusively serve the Property); and
(b) keep the surfaces of the Common Parts in good repair and cleaned at
regular intervals and reasonably well lit.
The Landlord will not be liable to the Tenant for any breach of these
obligations unless the Tenant has given the Landlord notice of the breach
and the Landlord is aware or should reasonably be aware of the breach and
has failed to remedy the breach within a reasonable time of service of the
notice.
8. ALIENATION
(1) RESTRICTIONS ON ALIENATION
The Tenant shall not:
(a) save to the extent permitted by the following sub-clauses of this
clause, part with possession of the whole or any part of the Property
or part with or share occupation of the whole or any part of the
Property or permit occupation by a licensee of the whole or any part
of the Property or hold on any trust the whole or any part of the
Property; nor
(b) if it is an unlimited company, incorporate itself as a limited company
without the prior consent of the Landlord (such consent not to be
unreasonably withheld or delayed).
(2) ASSIGNMENT
The Tenant shall not:
(a) assign part of the Property; nor
(b) assign the whole of the Property without the prior consent of the
Landlord which, subject to sub-clauses (3) and (4), shall not be
unreasonably withheld or delayed.
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(3) AGREEMENT AS TO CIRCUMSTANCES
The Landlord and the Tenant agree that the Landlord may withhold its
consent to an assignment if any one or more of the following circumstances
(which are specified for the purposes of section 19(1A) of the Landlord and
Tenant Act 1927) exist and it shall not be regarded as unreasonably
withholding its consent if it does so:
(a) any rent payable pursuant to clause 4(1) of this Lease agreed service
charge, insurance and VAT on such sums payable in accordance with this
Lease due from the Tenant under this Lease is unpaid;
(b) the Landlord reasonably determines that the proposed assignee is not a
person who is likely to be able both to comply with the tenant's
covenants in this Lease and to continue to be such a person following
the assignment;
(c) the proposed assignee or any proposed guarantor for it (other than any
guarantor under an authorised guarantee agreement) has the benefit of
state or diplomatic immunity or the Landlord determines that it is
likely to acquire that immunity;
(d) the proposed assignee is a company which is a member of the same group
(within the meaning of section 42 of the Landlord and Tenant Act 1954)
as the Tenant; and
(e) the proposed assignee or any proposed guarantor for it (other than any
guarantor under an authorised guarantee agreement) is a corporation
registered in or an individual resident in a jurisdiction in which a
judgement obtained in the courts of England and Wales will not
necessarily be enforced without any re-examination of the merits of
the case.
(4) AGREEMENT AS TO CONDITIONS
The Landlord and the Tenant agree that the Landlord may grant consent to an
assignment subject to any one or more of the following conditions (which
are specified for the purposes of section 19(1A) of the Landlord and Tenant
Act 1927) and it shall not be regarded as giving consent subject to
unreasonable conditions if it does so:
(a) that before the assignment the Tenant enters into and unconditionally
delivers to the Landlord an authorised guarantee agreement, such
agreement to be a deed and to contain the provisions in Schedule 6 or
at the Landlord's absolute discretion) such other provisions as the
Landlord shall reasonably prescribe and (in either case) such
ancillary provisions as the Landlord shall reasonably prescribe;
(b) that before the assignment any person (other than a former Tenant) who
at the time of the application for the consent is guaranteeing the
obligations and liabilities under this Lease of the Tenant covenants
by deed with the Landlord that the Tenant shall perform its
obligations under the authorised guarantee agreement required under
paragraph (a), the deed to contain provisions equivalent to those
contained in paragraphs 1 to 4 and 9 of Schedule 5 and an obligation
on the part of the covenantor (in the event of default on the
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part of the Tenant) to perform any obligation entered into by the
Tenant in the authorised guarantee agreement to take up a new lease,
and otherwise to be in such form as the Landlord reasonably requires;
(c) that before the assignment, if the Landlord determines it to be
necessary, one or more guarantors acceptable to the Landlord, acting
reasonably, covenant by deed with the Landlord in the form set out in
Schedule 5 (with "ASSIGNEE" substituted for "TENANT" in paragraphs 1
to 9 inclusive and with such other provisions as the Landlord
reasonably requires) in respect of the period during which the
assignee is bound by the tenant's covenants and the conditions in this
Lease;
(d) that all rent payable pursuant to clause 4(1) of this Lease agreed
service charge, insurance and VAT on such sums payable in accordance
with this Lease due from the Tenant under this Lease as at the date of
the assignment has been paid;
(e) that the assignment is completed and registered with the Landlord in
accordance with sub-clause (14) within three months of the date of the
consent and that if it is not, the consent shall be void but any of
the guarantees referred to in paragraphs (a) to (c) shall nevertheless
remain in full force and effect.
(5) FURTHER AGREEMENT
The Landlord and the Tenant agree that:
(a) the Landlord may withhold consent to an assignment in circumstances
which are not referred to in sub-clause (3) if it is reasonable to do
so and may grant consent subject to conditions which are not specified
in sub-clause (4) if the conditions are reasonable; and
(b) any power on the part of the Landlord to determine any matter for the
purposes of sub-clauses (3) or (4) shall be exercised reasonably.
(6) UNDERLETTING
The Tenant shall not:
(a) underlet part only of the Property;
(b) underlet the whole of the Property:
(i) without complying with the provisions of sub-clauses (7) to (11);
and
(ii) without the prior consent of the Landlord, which shall not be
unreasonably withheld or delayed.
(7) UNDERLETTING CONDITIONS
Not to underlet the whole of the Property without producing to the
Landlord:
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(a) an order of the Court under section 38(4) of the Landlord and Tenant
Act 1954 authorising the inclusion in the intended underlease of an
agreement excluding sections 24 to 28 of that Act; and
(b) a written undertaking by the Tenant not to release the intended
undertenant from or otherwise waive or modify the agreement authorised
by the order
and without including the agreement in the intended underlease.
(8) COVENANTS ON UNDERLETTING
The Tenant shall procure that any intended undertenant covenants by deed
with the Landlord:
(a) to pay the rent to be reserved by and the other sums to be payable
under the underlease and to perform and observe, the tenant's
covenants and the conditions to be contained in the underlease
throughout the period during which the undertenant is bound by the
tenant's covenants and conditions in the underlease;
(b) without prejudice to paragraph (a), not to assign the underlet
property without:
(i) first obtaining a deed of covenant from the intended assignee in
favour of the Landlord in the same form (with the necessary
changes) as the deed referred to in this sub-clause, including
(without limitation) the covenants in this paragraph (b); and
(ii) if the Landlord reasonably requires, first obtaining a deed from
one or more guarantors acceptable to the Landlord, acting
reasonably, in favour of the Landlord guaranteeing the due and
punctual payment and performance of all the obligations and
liabilities of the intended assignee under the deed referred to
in sub-paragraph (i), the deed to contain provisions equivalent
to those contained in paragraphs 1 to 4 and 9 of Schedule 5 and
otherwise to be in such form as the Landlord reasonably requires.
(9) GUARANTEE ON UNDERLETTING
If the Landlord reasonably requires, the Tenant shall procure that, before
the underlease is granted, one or more guarantors acceptable to the
Landlord, acting reasonably, guarantee (by way of deed) to the Landlord, in
respect of the period during which the undertenant is bound by the tenant's
covenants and the conditions in the underlease, the due and punctual
payment and performance of all the obligations and liabilities of the
intended undertenant, the guarantee to contain provisions equivalent to
those contained in paragraphs 1 to 4 and 9 of Schedule 5 and otherwise to
be in such form as the Landlord reasonably requires.
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(10) FORM OF UNDERLEASE
The Tenant shall procure that every underlease shall:
(a) contain the same tenant's covenants and other terms and conditions as
are contained in this Lease subject only to:
(i) such amendments as may be provided for in paragraphs (b) to (d);
and
(ii) such amendments as may reasonably be required by the Tenant,
having regard only to the duration of the proposed underlease,
and as may be approved by the Landlord, such approval not to be
unreasonably withheld;
(b) not permit any assignment, underlease or other dealing or disposal of
the Property which is prohibited by the terms of this Lease and
prohibit any further underletting of the whole or any part of the
Property;
(c) provide that where the underlease requires the undertenant to obtain
the landlord's consent, the undertenant shall be required to obtain
also the consent of the Landlord (such consent not to be unreasonably
withheld or delayed);
(d) contain provisions that require a review of the rent payable under the
underlease to open market rent in accordance with the provisions and
at the dates for review of the rent payable under this Lease, but this
paragraph shall not prohibit an underlease of the Property upon terms
that require review of the rent payable under the underlease at dates
additional to the dates for review of the rent payable under this
Lease;
(11) UNDERLEASE REQUIREMENTS
The Tenant shall:
(a) not grant any underlease at a fine or premium;
(b) not grant any underlease at a rent which at the time of the grant of
the underlease is less than the open market rent of the Property;
(c) not vary the terms of any underlease or release the undertenant from
any covenant or condition in the underlease without the prior consent
of the Landlord such consent not to be unreasonably withheld or
delayed and shall notify the Landlord of any surrender of any
underlease;
(d) not waive any breach of any of the covenants on the part of the
undertenant and the conditions contained in any underlease but take
all such reasonable steps as are lawfully available to the Tenant
(including re-entry) to enforce such covenants and conditions;
(e) procure that the rent reserved by any underlease is reviewed in
accordance with the provisions of the underlease but not agree any
revised rent with the undertenant without
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the prior consent of the Landlord (such consent not to be unreasonably
withheld), and if on any rent review under any underlease the revised
rent is to be determined by an independent third party, procure that
any reasonable representations which the Landlord may wish to make
concerning the revised rent are put forward to the third party at the
same time as the representations of the Tenant and as though they were
representations made by the Tenant; and
(f) procure that on any assignment of any underlease the outgoing
undertenant enters into an authorised guarantee agreement and, where
appropriate, guarantors enter into a contractual guarantee in each
case with the landlord under the underlease in accordance with the
provisions of the underlease.
In paragraphs (c) to (f) of this sub-clause an underlease includes any
lease where, by virtue of the grant of this Lease, the Tenant under this
Lease becomes the holder of the immediate reversion to that lease.
(12) ASSOCIATED COMPANIES
The Tenant may share the occupation of any part of the Property with a
company which is a member of the same group as the Tenant (within the
meaning of section 42 of the Landlord and Tenant Act 1954) for so long as
both companies remain members of that group and provided that:
(a) no relationship of landlord and tenant is created between the two
companies and no security of tenure is conferred upon the occupier;
and
(b) within 15 Business Days of the commencement of the sharing the Tenant
gives to the Landlord notice of the company sharing occupation and the
address of its registered office.
(13) CHARGING
The Tenant shall not
(a) charge part of the Property; or
(b) charge the whole of the Property by way of fixed security without the
prior consent of the Landlord, which shall not be unreasonably
withheld.
(14) REGISTRATION OF DEALINGS
Within 15 Business Days of every assignment, transfer, underlease or charge
of the Property or the creation or transfer of any interest derived out of
the Term or any devolution of the interest of the Tenant or any person
deriving title under the Tenant, the Tenant shall produce a certified copy
of the assignment, transfer, underlease or charge or (in the case of a
devolution) the document evidencing or under which the devolution arises
and pay the Landlord a registration fee of a reasonable amount, being not
less than (Pounds)25, in respect of each assignment, transfer, underlease,
charge or devolution.
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9. INSURANCE
(1) LANDLORD'S INSURANCE OBLIGATIONS
Unless the insurance is vitiated by any act, default or omission of the
Tenant, any person deriving title under the Tenant or any person at the
Property with the express or implied authority of any of them the Landlord
shall keep the Property (other than plate glass and tenant's or trade
fixtures) insured with insurers or underwriters selected by the Landlord in
accordance with the provisions of this clause to the extent to which the
Property is insurable and subject to all exclusions, limitations and
excesses imposed by the insurers.
(2) SUM AND RISKS INSURED
The Property shall be insured in a sum not less than its full reinstatement
cost (as determined from time to time by the Landlord) against loss or
damage by the Insured Risks.
(3) FEES
The insurance shall extend to:
(a) architects' and other professional fees in relation to the
reinstatement of the Property for a minimum sum of 15% of the amount
insured in respect of the Property;
(b) the costs of demolition and removal of debris; and
(c) loss of rent for such period as the Landlord may decide in an amount
which takes into account the Landlord's estimate of potential
increases in rent.
(4) PRODUCTION OF POLICY
Whenever reasonably required to do so by the Tenant and at the Tenant's
cost, but not more often than twice a year, the Landlord shall produce to
the Tenant at the Landlord's office a copy of the insurance policy or other
evidence of it and evidence of payment of the last premium.
(5) REINSTATEMENT
Subject to sub-clause (13) if the Property is destroyed or damaged by any
of the Insured Risks, then unless the insurance is vitiated by any act,
default or omission of the Tenant, any person deriving title under the
Tenant or any person at the Property with the express or implied authority
of any of them, the Landlord shall use reasonable endeavours to:
(a) obtain all consents and permissions necessary for reinstatement as
soon as reasonably possible;
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(b) subject to obtaining those consents and permissions, lay out as soon
as practicable all insurance monies received by the Landlord (other
than for fees and loss of rent) in reinstating the Property; and
(c) subject to the Tenant complying with its obligations in sub-clauses
(6)(a)(iii), (7) and(9) make good out of the Landlord's own monies any
deficiency (other than one arising from an exclusion, limitation or
excess imposed by the insurers).
(6) TENANT'S INSURANCE OBLIGATIONS
(a) The Tenant shall pay to the Landlord on demand:
(i) every premium payable by the Landlord (including any part of it
which the Landlord is entitled to retain by way of commission)
for insuring the Property in accordance with its obligations in
sub-clause (1) and for effecting insurance in respect of
liability to third parties including members of the public and
such other insurances as the Landlord reasonably considers
desirable;
(ii) where the policy includes the Property and other properties, the
proportion properly attributable to the Property of every
premium payable by the Landlord (including any part of it which
the Landlord is entitled to retain by way of commission) for
insuring the Property and the other properties in accordance
with its obligations in sub-clause (1) and for effecting (in
relation to the Property and the other properties) the other
insurances referred to in sub-paragraph (i), the proportion to
be determined by the Landlord whose determination shall be
conclusive save as to questions of law and save in case of
manifest error;
(iii) the amount of any excess deducted or deductible by the insurers
on any claim made by the Landlord; and
(iv) all costs and expenses reasonably incurred by the Landlord in
obtaining a valuation of the Property for insurance purposes
(provided this is limited to one such valuation every two
years).
All sums payable by the Tenant under paragraph (a)(i) shall be
reserved as rent.
(b) The Tenant shall insure all plate glass in the Property against all
risks with an insurance company approved by the Landlord in the joint
names of the Landlord and the Tenant and, on demand, produce a copy of
the insurance policy and evidence of payment of the last premium to
the Landlord.
(7) VITIATION
The Tenant shall not use the Property or carry on any business at the
Property or do or omit to do at the Property anything which may make void
or voidable any policy for the insurance of the Property or any nearby
property of the Landlord.
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(8) INCREASED PREMIUM
The Tenant shall:
(a) not without the prior consent of the Landlord use the Property or
carry on any business at the Property or do or omit to do at the
Property anything which may increase the premium payable for the
insurance; and
(b) if consent is given, repay on demand to the Landlord any resulting
increased insurance premium payable by the Landlord.
(9) IRRECOVERABLE REINSTATEMENT COST
If the Property is destroyed or damaged by any of the Insured Risks and the
insurance money under any insurance effected by the Landlord is wholly or
partly irrecoverable because of any act, default or omission of the Tenant,
any person deriving title under the Tenant or any person at the Property
with the express or implied authority of any of them the Tenant shall pay
to the Landlord within 14 days of written demand the whole or the
appropriate proportion of the cost of reinstating the Property. Any
dispute as to the amount of such proportion shall be referred to
arbitration.
(10) NOTICE OF DAMAGE
If the Property is destroyed or damaged by any of the Insured Risks the
Tenant shall give notice to the Landlord as soon as the destruction or
damage comes to the notice of the Tenant.
(11) DOUBLE INSURANCE
The Tenant shall not effect any insurance relating to the Property against
any of the Insured Risks. If the Tenant is entitled to the benefit of any
insurance in respect of the Property, the Tenant shall pay to the Landlord
all monies received by virtue of the insurance to enable the Landlord to
apply them in making good the loss or damage in respect of which they have
been received.
(12) CESSER OF RENT
If the Property or any part of it (or the means of access to or egress from
it) is destroyed or damaged by any of the Insured Risks so as to be unfit
for occupation or use the rent or a fair proportion of it according to the
nature and extent of the damage sustained shall be suspended until the
Property (or the means of access to or egress from it) has been reinstated
and made fit for occupation and use or until the end of three years from
the date of the destruction or damage, whichever first occurs. Any dispute
as to the amount of the proportion shall be referred to arbitration. This
sub-clause does not apply if and to the extent that the insurance monies in
respect of loss of rent are wholly or partially irrecoverable solely or
partly because of the act, default or omission of the Tenant or any person
deriving title under the Tenant or any person at the Property with the
express or implied authority of any of them.
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(13) PREVENTION OF REINSTATEMENT
The Landlord shall not be obliged to reinstate the Property in accordance
with sub-clause (5) while prevented by a supervening event. If the
Landlord is unable to commence reinstatement within twenty four months from
the date of destruction or damage because of a supervening event and the
Property or a substantial part of it is unfit for occupation or use either
party may determine the Term by serving notice on the other party at any
time within six months of the end of the twenty four month period. On
service of the notice the Term will cease but without prejudice to any
rights that any party may have against another for breach of any of their
respective covenants or the conditions contained in this Lease and all
insurance monies shall belong to the Landlord.
In this sub-clause a supervening event means any of the following:
(a) inability of the Landlord to obtain the consents and permissions
referred to in sub-clause (5) despite using all reasonable endeavours
to do so;
(b) grant of any of the consents or permissions subject to a lawful
condition with which it would be unreasonable to expect the Landlord
to comply or the Landlord being requested as a precondition to
obtaining any of the consents or permissions to enter into an
agreement with the planning authority or any other authority
containing conditions with which it would be unreasonable to expect
the Landlord to comply;
(c) some defect in the site upon which reinstatement is to take place so
that it could not be undertaken or could be undertaken only at a cost
unacceptable to the Landlord (acting reasonably);
(d) inability of the Landlord to obtain access to the site to reinstate;
(e) prevention of reinstatement by any cause beyond the control of the
Landlord.
10. RE-ENTRY
(1) If an Event of Default occurs then notwithstanding the waiver of any
previous right of re-entry the Landlord may re-enter the Property or any
part of it when the Term shall cease but without prejudice to any rights or
remedies which may then have accrued to any party against another in
respect of any antecedent breach (including the breach in respect of which
re-entry is made) of any of the covenants or obligations contained in this
Lease.
(2) In this clause an Event of Default is any one of the following:
(a) the Rent or any part of it is in arrear and unpaid for seven Business
Days after becoming payable (whether formally demanded or not); or
(b) a breach by the Tenant of any of the covenants by the Tenant in this
Lease; or
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(c) the Tenant (being a company) is deemed unable to pay its debts under
section 123 of the Insolvency Act 1986 or the Tenant or any Guarantor
(being a company) passes a resolution for winding-up or the directors
of any of them present a petition for winding-up or an order for the
winding-up of the Tenant or any Guarantor is made (other than (in any
such case) a voluntary winding-up of a solvent company for the
purposes of amalgamation or reconstruction) or the Tenant or any
Guarantor is dissolved; or
(d) the Tenant (being a company) has an administrative or other receiver
or a manager appointed of the whole or any part of its property or a
petition is presented for an administration order or an administration
order is made in respect of the Tenant or any Guarantor; or
(e) the Tenant (being a company) being registered as an unlimited company
is re-registered as a limited company without the previous consent of
the Landlord; or
(f) the Tenant (being an individual) presents a petition for a bankruptcy
order to be made against him or a bankruptcy order is made against the
Tenant or any Guarantor; or
(g) in relation to the Tenant (whether an individual or a company) a
proposal is made or the Tenant (whether a company or an individual)
enters into any kind of composition, scheme of arrangement, compromise
or arrangement for the benefit of creditors or any class of creditors
or permits or suffers any distress or execution to be levied on his
goods; or
(h) there occurs in relation to the Tenant in any country or territory in
which any of them carries on business or to the jurisdiction of whose
courts any of them or any of the property of any of them is subject to
any event which corresponds in that country or territory with any of
those mentioned in paragraphs (c) to (g) above or the Tenant
otherwise becomes subject in any such country or territory to any law
relating to insolvency, bankruptcy or winding up.
11. GUARANTEE
The Guarantor covenants with the Landlord in the terms set out in Schedule
5 in respect of the period during which Exodus Internet Limited is bound by
the Tenant's covenants and conditions in this Lease and any additional
period during which Exodus Internet Limited is liable under an authorised
guarantee agreement.
12. VALUE ADDED TAX
(1) If any VAT is chargeable on any supply made to the Tenant under the terms
of this Lease, the Tenant shall pay by way of additional consideration the
amount of that VAT and the Landlord shall provide a valid VAT invoice in
relation to such VAT to the Tenant.
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(2) Without limiting sub-clause (1) above, each sum reserved or payable by the
Tenant under the terms of this Lease is exclusive of VAT (if any) and is
accordingly to be construed as a reference to that sum plus any VAT in
respect of it, and where any sum is reserved as rent, the VAT is also
reserved as rent.
(3) If VAT is chargeable on any supply made by the Landlord to the Tenant for
which a sum is not reserved or payable under the terms of this Lease, the
Tenant shall pay that VAT to the Landlord against issue of a VAT invoice
five Business Days before the Landlord has to pay the VAT to Customs.
(4) Where under the terms of this Lease the Tenant is obliged:
(a) to make any payment to the Landlord or any other person (including,
without limitation, by way of service charge, indemnity or
reimbursement) by reference to any amount incurred or which will or
may be incurred by the Landlord or any other person; or
(b) otherwise to pay all or part of the consideration for any supply made
to the Landlord or any other person,
then without prejudice to sub-clauses (1) to (3) above, the Tenant shall
not be obliged to pay any amount in respect of VAT to the extent that it is
recoverable by the Landlord or any other person as appropriate.
(5) For the purposes of sub-clause (3) above, VAT is recoverable by a person,
if that person (or any company treated as a member of the same VAT Group as
that person) is entitled to credit for it as input tax under sections 25
and 26 VATA 1994. For the avoidance of doubt, VAT is not recoverable by a
person only because he could elect to waive exemption, but has not done so.
(6) Where for the purposes of this Lease it is necessary to calculate or
estimate the cost or value of anything, including any building, structure,
work, item, act or service, the cost or value shall be calculated or
estimated so as to include any VAT which will or may be incurred in
addition.
(7) This clause shall not affect the generality of clause 6(3) (Outgoings).
(8) Where the Tenant pays to the Landlord VAT in respect of any supply by the
Landlord to the Tenant, the Landlord shall issue the Tenant with a proper
VAT invoice in respect of that VAT.
(9) If the Landlord wishes to make an election to waive the exemption in
respect of the Property under paragraph 2 of Schedule 10, VATA 1994, the
Landlord shall notify the Tenant, no less than 20 Business Days before the
election is to take effect, of the election and the date on which it is
intended to take effect.
(10) If for any reason the election referred to in sub-clause (9) above is
validly revoked within three months after coming into effect, the Landlord
shall repay to the Tenant any VAT paid by the Tenant, five Business Days
after receipt by the Landlord from Customs of acknowledgement of the
revocation.
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13. TRUSTEE LIABILITY PROVISION
(1) Lloyds Bank Plc has entered into this Lease in its capacity as trustee of
Schroder Exempt Property Unit Trust ("SEPUT") and therefore notwithstanding
any other provision contained in this Lease neither Lloyds Bank Plc nor any
successor trustee of SEPUT shall be obliged to meet any liability or claim
hereunder save to the extent that the same can be met by it out of the
Trust Assets.
(2) For the purposes of this clause "TRUST ASSETS" means the assets for the
time being held upon the trusts of SEPUT.
14. GENERAL
(1) INTEREST AND POWERS OF RECOVERY
If any Rent or other sum payable under this Lease is not paid on the day
falling 7 days after the date on which it is due it shall bear interest
from the date on which it is due until the date of payment at the Default
Interest Rate compounded quarterly. Every amount payable under this Lease
shall be reserved as rent and shall be recoverable as rent in arrear.
(2) DISPUTES
In relation to disputes:
(a) any statement in this Lease that any dispute shall be referred to
arbitration means that the dispute shall be determined by a single
arbitrator agreed by the Landlord and the Tenant and failing agreement
by a single arbitrator appointed by the president or his deputy for
the time being of the Royal Institution of Chartered Surveyors in
accordance with the Arbitration Acts 1950 to 1979 and 1996; and
(b) any dispute between the Tenant and any tenant or occupier of any other
property owned or leased by the Landlord about any right in connection
with the use of the Property and the other property or about any
boundary structure separating the Property from the other property
shall be determined by the Landlord acting reasonably.
(3) COMPENSATION
Subject to the provisions of section 38(2) of the Landlord and Tenant Act
1954 neither the Tenant nor any person deriving title under the Tenant
shall be entitled on quitting the Property to any compensation under
section 37 of that Act.
(4) JOINT AND SEVERAL LIABILITY
Where the Tenant or any Guarantor is more than one person:
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(a) those persons shall be jointly and severally responsible in respect of
every obligation undertaken by them under this Lease; and
(b) the Landlord may release or compromise the liability of any of those
persons under this Lease or grant any time or other indulgence without
affecting the liability of any other of them.
(5) WHOLE AGREEMENT
This Lease contains the whole agreement between the parties relating to the
transaction contemplated by this Lease and supersedes all previous
agreements between the parties relating to the transaction.
(6) REPRESENTATIONS
The Tenant acknowledges that in agreeing to enter into this Lease, the
Tenant has not relied on any representation, warranty, collateral contract
or other assurance. The Tenant waives all rights and remedies which, but
for this sub-clause, might otherwise be available to it in respect of any
such representation, warranty, collateral contract or other assurance, but
nothing in this sub-clause shall limit or exclude any liability for fraud.
(7) RIGHTS OF ENTRY
All rights of entry exercisable by the Landlord extend to include (without
limitation) its employees, agents, surveyors, contractors and licensees
with or without plant, equipment, appliances and materials.
(8) INTERPRETATION OF COVENANTS
Any covenant by the Tenant not to do or omit anything shall be construed as
though the covenant was in addition a covenant not to permit or suffer to
be done or omitted that thing.
(9) TENANT'S POSSESSIONS
If after the Tenant has vacated the Property at the End of the Term any of
the Tenant's possessions remain on the Property and the Tenant fails to
remove them within fifteen Business Days after being requested to do so by
the Landlord then:
(a) the Landlord may dispose of the possessions as agent for the Tenant;
(b) (if disposal is by sale) subject to paragraph (c) the Landlord shall
hold the proceeds of sale after deducting the costs and expenses of
removal, storage and sale incurred by it to the order of the Tenant;
(c) if the Tenant fails to claim the proceeds of sale within sixty
Business Days of the date of the sale, the Landlord may keep them;
(d) the Tenant indemnifies the Landlord against:
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(i) any liability incurred by the Landlord to any third party whose
possessions have been sold by the Landlord in the mistaken
belief (which shall be presumed) that the possessions belonged
to the Tenant;
(ii) any damage caused to the Property by the possessions; and
(iii) all loss, damage, actions, proceedings, claims, demands, costs,
damages and expenses properly incurred or suffered by or brought
or awarded against the Landlord as a result of the presence of
the possessions on the Property after the Tenant has left it at
the End of Term.
(10) OTHER LAND
Nothing contained in or implied by this Lease shall:
(a) impose or be deemed to impose any restriction on the use of any land
or buildings not comprised in this Lease; or
(b) give the Tenant:
(i) the benefit of or the right to enforce or to have enforced or to
prevent the release or modification of any covenant, lease,
condition or stipulation entered into by any purchaser or tenant
from the Landlord in respect of any property not comprised in
this Lease; or
(ii) the right to prevent or restrict in any way the development of
any land not comprised in this Lease.
(11) SEVERANCE
To the extent that any provision of this Lease is rendered void by section
25 of the Landlord and Tenant (Covenants) Act 1995, that provision shall be
severed from the remainder of this Lease which shall remain in full force
and effect. In this sub-clause "provision" includes a clause, a sub-clause
or a schedule or any part of any of them.
(12) PERPETUITY PERIOD
The perpetuity period applicable to this Lease is 80 years beginning on the
date of this Lease and whenever in this Lease either the Landlord or the
Tenant is granted a future interest it must vest within that period and if
it has not it will be void for remoteness.
(13) NOTICES IN WRITING
Every notice, consent, approval or direction given under this Lease shall
be in writing.
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<PAGE>
(14) COUNTERPARTS
This lease may be executed in any number of counterparts, all of which,
taken together, shall constitute one and the same lease and any party may
enter into this lease by executing a counterpart.
15. BREAK CLAUSE
The Tenant may terminate this Lease on 29th September 2013 (the
"Termination Date") by giving to the Landlord not less than one year and
one day's prior written notice subject, to the Tenant:
(1) paying any arrears of rent payable pursuant to Clause 4(1) and VAT
thereon on or before the Termination Date;
(2) giving up vacant possession of the Property by the Termination Date
In such case the Term shall cease on the Termination Date and no party
shall have any further rights or obligations under this Lease, but this
shall not affect any rights or remedies which may have accrued at the
Termination Date to any party against the other in respect of any prior
breach of any of the covenants and conditions contained in the lease.
16. NOTICES
(1) Any notice or other document served under this Lease may be served in any
way in which a notice required or authorised to be served under section 196
of the Law of Property Act 1925 may be served.
(2) During such period that the reversion to this Lease is vested in the
trustee of Schroder Exempt Property Unit Trust no notice shall be deemed to
be validly served on the Landlord unless a copy of such notice is also
served on Schroder Property Investment Management Limited at 31 Gresham
Street, London EC2V 7QA or such other address as the Landlord shall notify
to the Tenant.
17. GOVERNING LAW AND JURISDICTION
(1) This Lease is governed by and shall be construed in accordance with English
law.
(2) The Tenant and the Guarantor submit to the jurisdiction of the English
courts for all purposes relating to this Lease and appoint Dibb Lupton
Alsop (ref RSS) 125 London Wall London EC2Y 5AE (or such other person in
the UK as the Guarantor and the Tenant may from time to time nominate by
written notice to the Landlord) as agent of each of them for service of
process and so that each appointment shall be irrevocable until such time
as the Guarantor and the Tenant have given written notice to the Landlord
of an alternative person in the UK to accept service of process on their
behalf
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<PAGE>
I N W I T N E S S of which this Lease has been executed as a deed and has been
delivered on the date which first appears on page 1.
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SCHEDULE 1
THE PROPERTY
Land on the north side of Coronation Road, Park Royal London NW10 which for the
purpose of identification only is shown edged red on the Plan with the building
on it having a Gross Internal Area (as defined in the Code) of 15,632 square
feet and known as Unit 5, Phase 1 Matrix Park, Coronation Road, Park Royal,
London, NW10. In this Schedule the Code means the fourth edition of the Code of
Measuring Practice published by the Royal Institution of Chartered Surveyors and
the Incorporated Society of Valuers and Auctioneers.
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SCHEDULE 2
RIGHTS GRANTED TO THE TENANT
1. The right to use the Common Parts for all reasonable and appropriate
purposes connected with the use and enjoyment of the Property pursuant to
this Lease (subject to temporary interruption for repair and maintenance).
2. The right to park 20 motor cars in the Car Spaces.
3. The right to use the Conduits in the Estate which serve the Property
(subject to temporary interruption for repair, alteration or replacement).
4. The right of support and protection from the other parts of the Estate as
now enjoyed by the Property.
5. Subject to obtaining the prior written consent of the Landlord (such
consent not to be unreasonably withheld or delayed but which consent may be
made subject to reasonable requirements and conditions of the Landlord) the
right to lay within the Common Parts but along routes reasonably specified
by the Landlord additional Conduits to serve the Property.
6. Subject to the giving of reasonable prior notice to the Landlord and to
compliance with all reasonable requirements of the Landlord the right to
enter the Common Parts in order to maintain, repair, replace or alter any
Conduits now or hereafter exclusively serving the Property the Tenant
causing to others as little inconvenience and disturbance as practicable
and making good without delay all damage thereby occasioned.
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SCHEDULE 3
RIGHTS RESERVED TO THE LANDLORD
1. The right to use the Conduits in the Property which serve other parts of
the Estate, the right to install new Conduits for the benefit of the
remainder of the Estate and the right to repair, maintain and renew
existing and new Conduits.
2. The right to enter the Property to exercise any of the rights referred to
in this Schedule or for the purposes set out in clause 6(6) PROVIDED THAT
such right shall only be exercised (except in case of emergency) by giving
reasonable prior notice to the Tenant and by complying with the Tenant's
reasonable security and confidentiality requirements.
3. All rights of light or air or other easements or rights over or belonging
to any other land or buildings (including other parts of the Estate).
4. The right to build, re-build or carry out any works on any other land or
buildings (including other parts of the Estate) even if it interferes with
the passage of light or air to the Property or causes nuisance, damage,
annoyance or inconvenience to the Tenant or occupier of the Property by
noise, dust, vibration or otherwise provided that it does not materially
affect the ability of the Tenant or the occupier to use the Property for
any purpose permitted by this Lease.
5. The support and protection from the Property enjoyed by other parts of the
Estate.
6. The right to build, alter and install and afterwards to maintain buildings,
structures and fixtures on, into or projecting over or under or taking
support from the Property (but those buildings, structures and fixtures
shall not become part of the Property).
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<PAGE>
SCHEDULE 4
MATTERS AFFECTING THE FREEHOLD
All matters registered or pending registration as at the date hereof in the
Property and Charges Registers of Title Number AGL54738 maintained by HM Land
Registry (with the exception of Financial charges, if any) and the Deed dated
7th August 1998 made between the Landlord and Railtrack insofar as such matters
affect the Property still subsist and are capable of enforcement.
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<PAGE>
SCHEDULE 5
GUARANTEE PROVISIONS
1. The Guarantor guarantees to the Landlord the due and punctual payment and
performance by the Tenant of all the tenant's obligations and liabilities
under this Lease and shall indemnify the Landlord against all losses,
damages, costs and expenses arising or incurred by the Landlord as a result
of the non-payment or non-performance of those obligations or liabilities.
2. The obligations of the Guarantor under this Lease:
(a) constitute a direct, primary and unconditional liability to pay on
demand to the Landlord any sum which the Tenant is liable to pay under
this Lease and to perform on demand by the Landlord any obligation of
the Tenant under this Lease without the need for any recourse on the
part of the Landlord against the Tenant;
(b) will not be affected by:
(i) any time or indulgence granted to the Tenant by the Landlord;
(ii) any legal limitation, disability or other circumstances
relating to the Tenant or any irregularity, unenforceability or
invalidity of any obligations of the Tenant under this Lease;
(iii) any licence or consent granted to the Tenant or any variation
in the terms of this Lease save as provided in section 18 of
the Landlord and Tenant (Covenants) Act 1995;
(iv) the release of one or more of the parties defined as the
Guarantor (if more than one); or
(v) any other act, omission, matter, event or thing whereby (but
for this provision) the Guarantor would be exonerated in whole
or in part from the guarantee other than a release by deed
given by the Landlord.
3. So long as this guarantee remains in force the Guarantor shall not:
(a) in the event of any bankruptcy, liquidation, rehabilitation,
moratorium or other insolvency proceedings relating to the Tenant,
claim or prove as creditor in competition with the Landlord; or
(b) be entitled to claim or participate in any security held by the
Landlord in respect of the obligations of the Tenant under this Lease;
or
(c) exercise any right of set-off against the Tenant.
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<PAGE>
4. If the Landlord brings proceedings against the Tenant, the Guarantor shall
be bound by any findings of fact, interim or final award or interlocutory
or final judgment made by an arbitrator or the court in those proceedings
in so far as the same relate to the subject matter of this Lease PROVIDED
THAT the Landlord shall have served a copy of the writ summons petition or
similar process which initiated such proceedings on the Guarantor before
the expiry of 7 days after such proceedings were initiated.
5. If:
(a) the Tenant (being a company) enters into liquidation and the
liquidator disclaims this Lease; or
(b) the Tenant (being a company) is dissolved and the Crown disclaims this
Lease; or
(c) the Tenant (being an individual) becomes bankrupt and the trustee in
bankruptcy disclaims this Lease; or
(d) this Lease is forfeited,
then within six months after the disclaimer or forfeiture the Landlord may
require the Guarantor by notice to accept a lease of the Property for a
term equivalent to the residue which would have remained of the Term if
there had been no disclaimer or forfeiture at the same rents and subject to
the same covenants and conditions (including those as to the review of
rent) as are reserved by and contained in this Lease (with the exception of
this Schedule).
6. The new lease and the rights and liabilities under it shall take effect as
from the date of the disclaimer or forfeiture and the Guarantor shall be
liable for all payments due under the new lease as from the date of
disclaimer or forfeiture as if the new lease had been granted on the date
of disclaimer or forfeiture.
7. The Guarantor or his personal representatives shall pay the Landlord's
costs of and accept the new lease and shall execute and deliver to the
Landlord a counterpart of it.
8. If the Landlord does not require the Guarantor to take a Lease of the
Property, the Guarantor shall pay to the Landlord on demand a sum equal to
the rent that would have been payable under this Lease but for the
disclaimer or forfeiture in respect of the period from the date of the
disclaimer or forfeiture until the date which is six months after the date
of the disclaimer or forfeiture or the date on which the Property has been
re-let by the Landlord, whichever first occurs.
9. If any VAT is payable by the Tenant to the Landlord under the terms of the
Lease, the Guarantor's obligation shall extend to that VAT. If the
Guarantor makes any payment in respect of VAT, the Landlord's obligation to
issue a VAT invoice to the Tenant under the Lease in respect of that VAT
shall not be affected, and the Landlord shall not be under any obligation
to issue a VAT invoice to the Guarantor in respect of that VAT.
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SCHEDULE 6
AUTHORISED GUARANTEE PROVISIONS
1. The Guarantor guarantees to the Landlord the performance by the Assignee
throughout the Guarantee Period of each of the covenants falling to be
complied with by the tenant under this Lease and shall indemnify the
Landlord against all losses, damages, costs and expenses arising or
incurred by the Landlord as a result of such non-performance.
2. The obligations of the Guarantor under this guarantee will not be affected
by:
(a) any time or indulgence granted to the Assignee by the Landlord;
(b) any legal limitation, disability or other circumstances relating to
the Assignee or any irregularity, unenforceability or invalidity of
any obligations of the Assignee under this Lease;
(c) any licence or consent granted to the Assignee or any variation in the
terms of this Lease save as provided in section 18 of the Act;
(d) the release of one or more of the parties defined as the Guarantor (if
more than one); or
(e) any other act, omission, matter, event or thing whereby (but for this
provision) the Guarantor would be exonerated in whole or in part from
the guarantee other than a release under seal given by the Landlord.
3. The Guarantor is liable to the Landlord under this guarantee as sole or
principal debtor and the obligations of the Guarantor under this guarantee
constitute a direct, primary and unconditional liability to pay on demand
to the Landlord any sum which the Assignee is liable to pay under this
Lease and to perform on demand by the Landlord any obligation of the
Assignee under this Lease without the need for any recourse on the part of
the Landlord against the Assignee. If the Landlord brings proceedings
against the Assignee, the Guarantor shall be bound by any findings of fact,
interim or final award or interlocutory or final judgment made by an
arbitrator or the court in those proceedings.
4. If during the Guarantee Period the Assignee (being a company) enters into
liquidation and the liquidator disclaims this Lease, or the Assignee (being
a company) is dissolved and the Crown disclaims this Lease, or the Assignee
(being an individual) becomes bankrupt and the trustee in bankruptcy
disclaims this Lease, then within six months after the disclaimer the
Landlord may require the Guarantor by notice to enter into a new lease of
the Property for a term equivalent to the residue which would have remained
of the term granted by this Lease if there had been no disclaimer at the
same rents and subject to the same covenants and conditions (including as
to the review of rent) as are reserved by and contained in this Lease.
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<PAGE>
5. The new lease and the rights and liabilities under it shall take effect as
from the date of the disclaimer and the Guarantor shall be liable for all
payments due under the new lease as from the date of disclaimer as if the
new lease had been granted on the date of disclaimer.
6. The Guarantor shall pay the Landlord's costs of and accept the new lease
and shall execute and deliver to the Landlord a counterpart of it.
7. If the Landlord does not require the Guarantor to take a new lease of the
Property the Guarantor shall pay to the Landlord on demand a sum equal to
the rents that would have been payable under this Lease but for the
disclaimer in respect of the period from the date of the disclaimer until
the date which is six months after the date of the disclaimer or the date
on which the Property has been re-let by the Landlord, whichever first
occurs.
8. During the Guarantee Period the Guarantor shall not;
(a) in the event of any bankruptcy, liquidation, rehabilitation,
moratorium or other insolvency proceedings relating to the Assignee
claim or prove as creditor in competition with the Landlord; or
(b) be entitled to claim or participate in any security held by the
Landlord in respect of the Assignee's obligations to the Landlord
under this Lease; or
(c) exercise any right of set off against the Assignee.
9. To the extent that any provision of this guarantee does not conform with
section 16 of the Act, that provision shall be severed from the remainder
of this guarantee and this guarantee shall have effect as if it excluded
that provision.
10 If any VAT is payable by the Tenant to the Landlord under the terms of the
Lease, the Guarantor's obligation shall extend to that VAT. If the
Guarantor makes any payment in respect of VAT, the Landlord's obligation to
issue a VAT invoice to the Assignee under the Lease in respect of that VAT
shall not be affected, and the Landlord shall not be under any obligation
to issue a VAT invoice to the Guarantor in respect of that VAT.
11. In this Schedule:
"ACT" means the Landlord and Tenant (Covenants) Act 1995;
"ASSIGNEE" means [INSERT NAME OF ASSIGNEE IN RESPECT OF WHOM THE TENANT IS
ENTERING INTO THE AUTHORISED GUARANTEE AGREEMENT];
"GUARANTEE PERIOD" means the period during which the Assignee is bound by
the covenants by the Tenant in this Lease; and
"GUARANTOR" means the outgoing Tenant.
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<PAGE>
SCHEDULE 7
SERVICE CHARGE COSTS
1. The cost of inspecting, repairing, maintaining, cleaning, decorating and
lighting the whole of the Retained Areas (including any party walls
separating Lettable Areas) including any retaining walls situate on the
Estate and the boundary walls and fences of the Estate and all Conduits
serving the Estate (excluding those serving solely any of the Lettable
Areas).
2. The cost of providing the services referred to in clause 7(3).
3. The cost of the maintenance (including planting) of all open and landscaped
areas within the Retained Area.
4. The cost of the erection and maintenance of directional or other signs or
notice boards relating to the Estate or it occupiers.
5. The cost of the establishment and enforcement of regulations for the
benefit or better ordering of the Estate or any part of the Estate.
6. The cost of providing caretaking and security services to the Estate.
7. The cost of marking out the roads, footpaths, service areas, loading bays
and all other relevant parts of the Retained Areas.
8. The cost of refuse disposal.
9. The cost of all fuel for the functions referred to in the other paragraphs
of this Schedule.
10. All Outgoings (as defined in clause 6(3)) assessed, charged or imposed on
the Estate as a whole and the Retained Areas.
11. Any amount which the Landlord may be called upon to pay as a contribution
towards the expense of making, repairing, maintaining, cleaning or lighting
anything used by the Estate and any nearby property.
12. The cost of complying with, making representations against or contesting
the incidence of any enactment relating or alleged to relate to the Estate.
13. All professional fees reasonably and properly incurred by the Landlord in
connection with the administration and the general management of the Estate
including (without limitation):
(a) the Landlord's agent's fees in connection with management of the
Estate (excluding rent collection); and
(b) fees payable in connection with the service charge account.
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<PAGE>
14. The reasonable fees of the Landlord or any company associated with the
Landlord where the Landlord or that company, rather than a third party,
undertakes any obligations under this Lease or other function referred to
in this Schedule.
15. The interest and fees on borrowing any money to finance any of the
functions referred to in this Schedule.
16. Any other sum properly incurred by the Landlord in connection with the
management of the Estate.
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<PAGE>
SIGNED as a deed by )
Michael Colin Warner Trust Manager )
as attorney for LLOYDS BANK PLC )
in the presence of: )
Witness' /s/ A.G. Schofield
Signature: ..........................
Name : ........A.G. Schofield........
Address : Lloyds Bank
Securities Service
Hay's Lane House
1, Hay's Lane
London SE1 2HA
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<PAGE>
LLOYDS BANK SECURITIES SERVICES
-------------------------------
POWER OF ATTORNEY FOR EXECUTION OF DOCUMENTS
--------------------------------------------
By this power of attorney given on the eigth day of July 1998 Lloyds Bank Plc
whose registered office is at 71 Lombard Street, London EC3P 3BS ("the bank")
hereby appoints:
Julian Maxwell Ansell
Christopher Baldwin
Ian Martin Bransgrove
Paul Burgess
Martin Robert Clark
Sheila Mary Colley
David Croker
Andrew Donner
Steven Michael Dugay
Christopher John Edmeades
Colin Grant
Anthony Charles Jennings
Lesley Kean Kings
Wayne Paul Kitcat
John Willis Lamb
Graham Paul Lisle
Donald Patrick McIver
Jacqueline Kay Morley
Iain Christopher Mylchreest
Keith William Parker
Ronald Llewellyn Porter
Graham David Reeve
Stephen Harold Robson
Michael Edward Tomlin
Paul Arthur Turner
Richard Andrew Vesey
David James Watson
David Albert Charles Evans
Andrew Robert Gooding
Alison Pearce
Thomas Richard Pool
Mark Charles Thatcher
Paul Andrew Vickery
Richard William Warrington
Michael Colin Warner
Frank Michael Welpa
all of Lloyds Bank Securities Services, jointly and severally, to be attorneys
of the bank in its capacity as trustee, personal representative, nominee,
mortgagee or chargee, only for the purpose of carrying into effect matters
determined upon by the bank in any of these capacities, to sign, seal, execute
and deliver any deed or document considered necessary or desirable:
(1) to convey, transfer, assign, lease, let, underlet, surrender, sell or grant
options, rights of preemption or any other rights over any real or personal
property;
(3) to postpone, defer, subordinate or otherwise regulate the priority or
ranking of any mortgage, charge, debenture or other security;
(4) to vary, alter, amend, modify, revise, replace or substitute any deed or
document to which the bank is a party;
(5) to transfer any stocks, shares or other securities held by or registered in
the name or under the control of the bank and to authorise any person to
exercise any rights attached in any such stocks, shares or other
securities;
(6) to give such indemnities as may be necessary in favour of any person or
body of persons including without limitation indemnities in respect of
lost, destroyed or mislaid certificates, allotment letters or other
documents relating to stocks, shares or other securities;
(7) to grant easements or any other rights over or impose covenants or any
other restrictions on or consent to the letting, underletting, assignment,
surrender or alteration of any freehold or leasehold property;
(8) to assent to the vesting in any person of any real or personal property;
(9) to declare, constitute, regulate, record, vary, alter, amend or modify any
trust, settlement or family arrangement and to appoint or retire any
trustee, including the bank, of any trust, settlement or family
arrangement;
(10) to purchase, lease, acquire or otherwise take into the name of the bank or
under its control any real or personal property whatsoever or wheresoever
or any options, rights of preemption or any other rights over real or
personal property; and
(11) to manage, develop, refurbish, repair, reinstate or otherwise carry out any
works upon any real property whatsoever or wheresoever.
and generally for all or any of the purposes aforesaid to act as attorneys of
the bank. The common seal of the bank was affixed to this deed the date and
year first above written. Given under the common seal of Lloyds Bank Plc as a
deed.
Authorised signatory
Authorised counter signatory
<PAGE>
Schedule referred to in Clause 6(27)
1. Permanent and temporary generator systems including enclosures and fuel
tanks with the associated electronic and manual switch gear.
2. Mechanical Systems ie. Air Conditioning, and condenser systems, air
handlers and electrical dampers.
3. Raised Flooring, Racking, Cage materials, cabinets and patch panels,
Mezzanine flooring.
4. UPS Battery Systems including electrical switch gear.
5. Any customer satellite dishes installed on roof or parking lot areas.
6. FM200 fire suppression canisters, piping and nozzles.
7. VESDA or smoke sensor stations in ceiling or floor area.
8. Inside or outside security cameras, access card reader stations, VCR,
multiplexer, monitors and computers.
9. Parition and conference room furniture systems and freestanding,
cabinets, storage units.
10. Telephone and voice mail system with desk stations and receptionist,
computers, servers, printers, phone sets.
11. Fibre Muxes or other Telco equipment installed in MPOE rooms.
12. Emergency distribution board and telephone backboard with connectors.
13. Maintenance bypass electronic and manual switch gear.
14. Transformers and Power Distributions Units installed on premises.
15. Kitchen appliances like microwaves, refrigerators and vending machines.
16. Console monitors, screen projection and screens in command centre.
17. Bulletproof/resistant glass.
18. Satellite dishes or other communications equipment installed on roof or
in parking lot.
<PAGE>
DATED 24th December 1998
LLOYDS BANK PLC
(as trustee of Schroder Exempt Property Unit Trust)
-and-
EXODUS INTERNET LIMITED
-and-
EXODUS COMMUNICATIONS INC
-----------------------
L E A S E
of property known as
Unit 6 Phase 1 Matrix Park,
Coronation Road, Park Royal, London NW10
-----------------------
ALLEN & OVERY
London
PY0407171.03
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<PAGE>
H.M. LAND REGISTRY
Land Registration Acts 1925-1988
County & District: London Boroughs & Ealing and Brent
Title Number: AGL54738
Property: Unit 6 Phase 1 Matrix Park, Coronation Road, Park Royal,
London NW10
THIS LEASE is made on 24th December 1998
BETWEEN:
(1) LLOYDS BANK PLC (registered number 2065) (as trustee of Schroder Exempt
Property Unit Trust) whose registered office is at 71 Lombard Street,
London EC3P 3BS (the "LANDLORD");
(2) EXODUS INTERNET LIMITED (registered number 3591136) whose registered office
is at Fountain Precinct Balm Green Sheffield South Yorkshire S1 1RZ
(the "TENANT"); and
(3) EXODUS COMMUNICATIONS INC of 2650 San Thomas Expressway, Santa Clara
CA95051, USA (the "GUARANTOR").
This Lease is a new tenancy for the purposes of section 1 of the Landlord and
Tenant (Covenants) Act 1995.
THIS DEED WITNESSES as follows:
1. DEFINITIONS
In this Lease:
"AUTHORISED GUARANTEE AGREEMENT" means an authorised guarantee agreement as
defined in section 16 of the Landlord and Tenant (Covenants) Act 1995;
"BUSINESS DAY" means a day (other than a Saturday or Sunday) on which banks
are generally open in London for normal business;
"CAR SPACES" means the 17 parking spaces within the areas shown edged green
on the Plan from time to time designated by the Landlord for the Tenant's
use;
"CLEARING BANK" means a bank which is a member of CHAPS Clearing Company
Limited;
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<PAGE>
"COMMON PARTS" means the roads, footpaths, service areas, car parks,
loading bays, landscaped and open areas, entrances and other areas from
time to time during the Term provided by the Landlord for common use by the
tenants of the Estate (but shall not include any such items as may
exclusively serve and be demised to a tenant of any Unit) but for the
avoidance of doubt the common parts shall always include the road coloured
brown on the Plan and the Car Spaces and shall afford the Tenant access to
and from the Property and the Car Spaces;
"CONDUITS" includes those for sewage, water, gas, electricity,
telecommunications and data processing;
"DEFAULT INTEREST RATE" means four per centum per annum above the Interest
Rate;
"END OF THE TERM" includes the expiry of the Term by effluxion of time or
the determination of the Term by forfeiture, surrender, merger, notice or
in any other way;
"ESTATE" means Phases 1 and 3 Matrix Park Coronation Road Park Royal London
NW10 the present extent of which is shown edged green on the Estate Plan
but such expression shall mean such greater or lesser area which shall
include the Property and which shall from time to time be managed by the
Landlord as a single estate (including all buildings and other structures
on and all parts of such estate);
"ESTATE PLAN" means the plan numbered A3159/0/38 annexed to this Lease;
"GUARANTOR" includes the person named in this Lease as guarantor, if any,
and any other person who is for the time being a guarantor in respect of
the Tenant's obligations under this Lease and his personal representatives
and successors;
"INSURED RISKS" means fire, lightning, explosion, earthquake, aircraft and
other aerial devices and articles dropped from them, escape of oil, impact
by vehicles or animals, riot, civil commotion, strikes and labour
disturbances, storm, flood, bursting and overflowing of water tanks,
apparatus or pipes and other risks against which the Landlord reasonably
decides from time to time to insure and any other risks that the Tenant
shall reasonably require to be included and which the insurers shall accept
subject to such exclusions, limitations and excesses as are imposed by its
insurers and to the extent to which the risks mentioned in this definition
are insurable with the Landlord's insurers but shall include loss or damage
by acts of terrorism if and only to the extent that the Landlord has
insured against acts of terrorism;
"INTEREST RATE" means the base rate for the time being of Lloyds Bank Plc
or of another Clearing Bank designated from time to time by the Landlord or
if there is no such base rate the rate from time to time prescribed under
section 32 of the Land Compensation Act 1961;
"LANDLORD" includes the person for the time being entitled to the reversion
immediately expectant on the End of the Term;
"LEASE" means this lease, all deeds varying this lease and all licences and
consents granted under this lease or under any deed of variation;
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"LETTABLE AREAS" means all buildings on the Estate designed to be let for
commercial use;
"PARKING AREA" means the car parking areas forming part of the Estate
including the Car Spaces;
"PLAN" means the plan annexed to this Lease numbered A3159:0:01;
"PLANNING ACTS" means the Town and Country Planning Act 1990, the Planning
(Listed Building and Conservation Areas) Act 1990, the Planning (Hazardous
Substances) Act 1990, the Planning (Consequential Provisions) Act 1990 and
the Planning and Compensation Act 1991;
"PROPERTY" means the property described in Schedule 1 and every part of it
and all additions and alterations to it and includes (without limitation):
(a) every part of all buildings and other structures now or during the
Term on the property including walls, roofs, foundations, load-bearing
parts, doors, windows and Conduits exclusively serving the Property;
(b) landlord's fixtures and fittings including floor coverings;
(c) electrical and mechanical installations, plant, equipment and
machinery including (without limitation) lifts, heating plant, air
conditioning plant and ventilation plant and radiators;
(d) one half (severed vertically) of any wall separating the Property from
any adjoining Unit;
(e) service areas, loading bays and landscaped and open areas; and
(f) boundary walls and fences (if any);
"QUARTER DAYS" means 25th March, 24th June, 29th September and 25th
December in every year;
"RENT" includes all sums reserved as rent by this Lease and any interim
rent determined under the Landlord and Tenant Act 1954;
"RETAINED AREAS" means the whole of the Estate other than the Units;
"REVIEW DATE" means 29th September in the year 2003 and in every fifth year
after that year for so long as the Term continues;
"REVIEW PERIOD" means the period starting with any Review Date up to the
next Review Date or starting with the last Review Date up to the End of the
Term;
"TENANT" includes the Tenant's successors in title;
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"TERM" means the term granted by this Lease and any statutory or other
continuation or extension of it or any holding over;
"TERM COMMENCEMENT DATE" means the date of commencement of the Term
specified in clause 3(1);
"UNITS" means the units of accommodation on the Estate that are let or
otherwise exclusively occupied or designed or intended for letting or
exclusive occupation and "Unit shall mean any one of them;
"VAT" means value added tax and any imposition or levy of a like nature;
and
"VATA 1994" means the Value Added Tax Act 1994.
2. INTERPRETATION
(1) Where there are two or more persons included in the expressions "the
Landlord", "the Tenant" or "the Guarantor" each reference to the Landlord,
the Tenant or the Guarantor includes a separate reference to each of those
persons.
(2) Any reference, express or implied, to an enactment includes references to:
(a) that enactment as amended, extended or applied by or under any other
enactment (before or after this Lease);
(b) any enactment which that enactment re-enacts (with or without
modification);
(c) any subordinate legislation made (before or after this Lease) under
that enactment, as amended, extended or applied as described in
paragraph (a) above or under any enactment referred to in paragraph
(b) above; and
(d) any consents, licences and permissions given (before or after this
lease) under that enactment, as amended, extended or applied as
described in paragraph (a) above or under any enactment referred to in
paragraph (b) above or under that subordinate legislation and any
conditions contained in those consents, licences and permissions.
(3) Any reference, express or implied, to enactments generally includes
subordinate legislation and any legislation of the European Union that is
directly applicable in the United Kingdom and includes existing enactments
and those that come into effect during the Term.
(4) Sub-clauses (1) to (3) above apply unless the contrary intention appears.
(5) The headings in this Lease do not affect its interpretation.
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3. LEASE
(1) The Landlord lets the Property to the Tenant together with the rights set
out in Schedule 2 but except and reserving to the Landlord the rights set
out in Schedule 3 for the term of twenty five years commencing on and
including 29/th/ September 1998 subject to all rights and covenants
affecting the Property including (without prejudice to the generality of
the foregoing) the matters contained or referred to in Schedule 4 at a
yearly rent ascertained in accordance with clause 4.
(2) The rights granted to the Tenant are granted in common with the Landlord,
any person authorised by the Landlord and everyone else having the like or
similar rights.
(3) This Lease does not include any rights other than those set out in Schedule
2.
(4) The rights excepted and reserved to the Landlord are also excepted and
reserved to those authorised by the Landlord and everyone else entitled to
them.
4. RENT AND RENT REVIEW
(1) RENT
The yearly rent shall be:-
(a) until 16th May 1999 the rent of one peppercorn (if demanded);
(b) from and including 17th May 1999, until the first Review Date the
rent of one hundred thousand six hundred and forty one pounds fifty
pence ((Pounds)100,641.50); and
(c) during each successive Review Period a rent equal to the rent
previously payable under this Lease (or the rent which would be
payable but for any abatement or suspension of rent under this Lease)
or the revised rent ascertained in accordance with this clause,
whichever is the greater.
(2) RENT PAYMENT DATES
The yearly rent is payable without any deduction by equal quarterly
payments in advance on the Quarter Days. The first payment (which is an
apportioned sum) is to be made on 17th May 1999, in respect of the period
commencing on 17th May 1999 and ending on 23rd June 1999.
(3) RENT REVIEW - METHOD
The revised rent for any Review Period may be agreed in writing at any time
between the Landlord and the Tenant or (in the absence of agreement)
determined not earlier than the relevant Review Date by an independent
valuer (acting as an expert and not as an arbitrator) of recognised
standing and having experience in letting and valuing property of a like
kind and character to the Property.
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(4) NOMINATION
The independent valuer may be nominated in the absence of agreement by or
on behalf of the president for the time being of the Royal Institution of
Chartered Surveyors on the application of either the Landlord or the Tenant
made not earlier than three months before the relevant Review Date.
(5) RENT REVIEW - AMOUNT
In the case of valuation the revised rent to be determined by the valuer
shall be such as he shall decide is the yearly rent at which the Property
might reasonably be expected to be let at the relevant Review Date
(a) after the expiry of a rent free period or a concessionary rent period
given for fitting-out purposes only of such length and the giving of
such other inducements (including, without limitation, any rental
concession, capital payment or contribution to fitting out-costs)
given for fitting out purposes only as in either case would be
negotiated in the open market between a willing landlord and a willing
tenant so that the yearly rent is that payable after the expiry of any
such rent free period or concessionary rent period and after the
giving of such inducement; and
(b) on the assumptions set out in sub-clause (6) but disregarding the
matters set out in sub-clause (7).
(6) ASSUMPTIONS
The assumptions are that at the relevant Review Date:
(a) the Property:
(i) is available to let on the open market by a willing landlord
to a willing tenant by one lease without a premium from either
party and with vacant possession for a term of 10 years or a
term equal to the residue then unexpired of the Term
(whichever be the longer) but in either event commencing on
the relevant Review Date with the rent payable from then;
(ii) is to be let as a whole on a lease which is to contain the
same terms as this Lease (other than the amount of the rent
referred to in sub-clause (1)(a) and (b) and any rent free or
reduced rent period allowed to the Tenant but including the
provisions for review of that rent at the same intervals as
those in this Lease) the first Review Date in that lease
being the fifth anniversary of the relevant Review Date;
(iii) is fit and available for immediate occupation and use with
connections to all mains services independently of any other
Unit and with the inclusion of an internal dividing wall
between the Property and the adjacent Unit numbered 7 built
to the same specification as the internal dividing wall
between Units 5 and
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6 and is ready to be fitted out for the incoming tenant's use
as authorised by this Lease; and
(iv) may be used for any of the purposes permitted by this Lease
including any purpose which falls within the same use class
(under the Town & Country Planning (Use Classes) Order for
the time being in force) as the purpose permitted by this
Lease;
(b) all the covenants in this Lease by the Landlord and the Tenant have
been performed and observed; and
(c) no work has been carried out to the Property which has diminished the
rental value and in case the Property has been destroyed or damaged it
has been fully restored.
(7) DISREGARDS
The matters to be disregarded are:
(a) any effect on rent of the fact that the Tenant, its subtenants or
their respective predecessors in title have been in occupation of the
Property;
(b) any goodwill attached to the Property by reason of the carrying on at
it of the business of the Tenant, its subtenants or their predecessors
in title in their respective businesses; and
(c) any increase in rental value of the Property attributable to the
existence at the relevant Review Date of any improvement carried out
with consent of the Landlord (where required) but not under an
obligation to the Landlord or its predecessors in title to the
Property carried out by and at the cost of the Tenant, its subtenants
or their respective predecessors in title during the Term or during
any earlier period of occupation arising out of an agreement to grant
the Term.
(8) VALUER
In the case of determination by a valuer:
(a) the fees and expenses of the valuer including the cost of his
appointment shall be borne as he shall decide or in the absence of any
decision equally by the Landlord and the Tenant who shall otherwise
each bear their own costs;
(b) the valuer shall afford the Landlord and the Tenant an opportunity to
make representations to him; and
(c) if the valuer dies, delays or becomes unwilling or incapable of acting
or if for any other reason the president for the time being of the
Royal Institution of Chartered Surveyors or the person acting on his
behalf thinks fit he may discharge the valuer and appoint another in
his place.
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(9) MEMORANDUM
When the revised rent has been ascertained memoranda of it shall be signed
by or on behalf of the Landlord and the Tenant and annexed to this Lease
and the counterpart of it and the Landlord and the Tenant shall bear their
own costs in respect of the memoranda.
(10) INTEREST
If the revised rent payable with effect from any Review Date has not been
agreed by that Review Date rent shall continue to be payable at the rate
previously payable. Forthwith on the revised rent being ascertained the
Tenant shall pay to the Landlord any shortfall between the rent and the
revised rent payable up to and on the preceding quarter day together with
interest at the Interest Rate compounded quarterly on each part of the
shortfall from the date or respective dates on which each part would have
been due for payment had the revised rent been ascertained before the
relevant Review Date until the date of payment.
For the purpose of this clause the revised rent shall be deemed to have
been ascertained on the date when it has been agreed between the Landlord
and the Tenant or the date of the determination by the valuer.
(11) COSTS
If either the Landlord or the Tenant fails to pay the relevant part of the
fees and expenses of the valuer under sub-clause (8) within 15 Business
Days of the same being demanded by the valuer the other shall be entitled
to pay the same and the amount so paid shall be repaid on demand by the
party chargeable and recoverable from that party as a debt due.
(12) TIME NOT OF THE ESSENCE
Time shall not be of the essence for the purposes of this clause 4.
5. SERVICE CHARGE
(1) The Tenant shall pay to the Landlord the Provisional Service Charge without
any deduction by equal quarterly payments in advance on the Quarter Days.
The first payment (which is an apportioned sum) is to be made on the date
hereof in respect of the period commencing 17th December 1998 and ending
on the next following Quarter Day.
(2) As soon as possible after every Accounting Date the Landlord shall prepare
and supply to the Tenant an account:
(a) showing the Gross Expenses, the Income and the Net Expenses for the
Financial Year referred to in the account;
(b) containing a fair summary of the items referred to in it; and
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(c) certified by the Landlord or its agents (who may be the managing
agents for the Estate).
The account shall be conclusive evidence of all matters of fact referred to
it in it (save in the case of manifest error) and the Tenant shall be
afforded on request reasonable facilities for inspecting and taking copies
of the accounts and receipts and other documents supporting the account.
(3) In the case of the first Accounting Date after the date for commencement of
payment of the Provisional Service Charge specified in clause 5(1), if the
proportion of the Tenant's Share of the Net Expenses shown in the account
apportioned on a daily basis for the period from that date to the
Accounting Date:
(a) exceeds the amount already paid as Provisional Service Charge before
the first Accounting Date, the Tenant shall pay the excess to the
Landlord within 14 days of written demand; and
(b) is less than the amount already paid as Provisional Service Charge
before the first Accounting Date, the Landlord shall credit the excess
to the Tenant against the next quarterly payment of Provisional
Service Charge.
(4) In the case of every subsequent Accounting Date, if the Tenant's Share of
the Net Expenses shown in the account for the period beginning on the day
after the previous Accounting Date and ending on that Accounting Date:
(a) exceeds the amount paid as Provisional Service Charge during that
period, the Tenant shall pay the excess to the Landlord within 14 days
of written demand; and
(b) is less than the amount paid as Provisional Service Charge during that
period, the Landlord shall credit the excess to the Tenant against the
next quarterly payment of Provisional Service Charge or repay the
excess in respect of the last year of the Term.
(5) If the Landlord fails to include in any account for a Financial Year a sum
expended or liability incurred in that year the Landlord may include such
sum or the amount of such liability in an account for any subsequent
Financial Year.
(6) All sums payable under this clause shall be reserved as rent.
(7) In this clause:
"ACCOUNTING DATE" means 31st December or any other date that the Landlord
may nominate;
"FINANCIAL YEAR" means a year ending on an Accounting Date;
"GROSS EXPENSES" means all the expenses incurred by the Landlord in
connection with the Estate including, without limitation, the matters
referred to in Schedule 7;
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"GROSS INTERNAL AREA" has the meaning ascribed to that expression in the
Code of Measuring Practice published by the Royal Institution of Chartered
Surveyors and the Incorporated Society of Valuers and Auctioneers (4th
Edition);
"INCOME" means:
(a) any insurance money received under an insurance policy which the
Landlord was obliged to effect under this Lease where the Landlord has
incurred expenses in making good the insured loss itself; and
(b) any money received from any person (other than the service charge paid
by the tenants in the Estate) who was liable to contribute to the cost
of compliance with the Landlord's obligations under this Lease where
the Landlord has itself incurred the expense towards which that person
contributed;
"NET EXPENSES" means the amount by which Gross Expenses exceeds Income;
"PROVISIONAL SERVICE CHARGE" means:
(a) in respect of the period from the 17th December 1998 to the next
following Accounting Date, the annual sum of (Pounds)3,895.80; and
(b) in respect of each subsequent Financial Year, the sum fixed from time
to time by the Landlord or its agents acting reasonably (who may be
the managing agents for the Estate) as being a reasonable estimate of
the Tenant's Share of the Net Expenses for the relevant Financial
Year;
"TENANT'S SHARE" means the same proportion of the Net Expenses as the Gross
Internal Area of the Property from time to time bears to the Gross Internal
Area of the Lettable Areas at such time provided always that if the
Landlord shall consider that having regard to the nature and degree of use
by the Tenant or other tenants on the Estate of the facilities covered by
the Gross Expenses or any other factors which the Landlord may reasonably
consider relevant some other proportion ought properly to be payable by the
Tenant the Landlord may substitute such other percentage as it shall
consider reasonable either with regard to all or any items making up the
Net Expenses provided that the proportion of the Net Expenses payable by
the Tenant shall not be increased by reason solely or in part of any
Lettable Areas being vacant or unlet.
6. TENANT'S COVENANTS
(1) INTRODUCTION
The Tenant covenants with the Landlord to comply with its obligations set
out in this clause and in clauses 5, 8 and 9.
(2) RENT
The Tenant shall:
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(a) pay the yearly rent to the Landlord at the times and in the manner
referred to in clause 4 without any deduction; and
(b) not exercise or seek to exercise any right or claim to withhold rent
or any right or claim to legal or equitable set-off.
(3) OUTGOINGS
The Tenant shall:
(a) pay all present and future Outgoings assessed, charged or imposed on,
or payable in respect of the Property or the Car Spaces or assessed,
charged or imposed on, or payable by the owner or occupier of the
Property or the Car Spaces;
(b) pay the proportion properly attributable to the Property or the Car
Spaces of all Outgoings assessed, charged or imposed on or payable in
respect of the Property and other properties or the Car Spaces and
other car spaces or assessed, charged or imposed on or payable by the
owner or occupier of the Property and other properties or the Car
Spaces and other car spaces;
(c) pay all charges for the supply to and consumption at the Property of
water, gas and electricity and all charges for telecommunications
(including equipment rents) and observe and perform all regulations of
the supply authorities;
(d) where such charges as are referred to in paragraph (c) are made in
relation to the Property and other properties or upon the owner or
occupier of the Property and other properties, pay the suppliers and
indemnify the Landlord against the proportion of those charges
properly attributable to the Property or its owner or occupier; and
(e) if the Landlord loses rating relief because it has been allowed to the
Tenant or any other person deriving title under the Tenant during the
Term, make good that loss to the Landlord.
Provided that the Tenant shall not be obliged to pay such sums referred to
above to the extent that the same have been recovered by the Landlord under
Clause 5.
In this sub-clause "OUTGOINGS" means rates, taxes, duties, charges,
assessments, impositions and outgoings whether parliamentary, parochial,
local or of any other description and whether of the nature of capital or
revenue and even though of a wholly novel character and the proportion
referred to in paragraphs (b) and (d) shall be determined by the Landlord
acting reasonably and shall be conclusive save as to questions of law and
save in cases of manifest error.
(4) REPAIR
The Tenant shall:
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(a) put and keep the Property in good repair and condition, but shall not
be obliged to repair damage caused by an Insured Risk save where:
(i) the damage is not insured because of an exclusion, limitation or
excess imposed by the insurers; or
(ii) and to the extent that the insurance monies are irrecoverable in
whole or in part because of the act, default or omission of the
Tenant, any person deriving title under the Tenant or anyone at
the Property with the express or implied authority of any of
them;
(b) replace all the Landlord's fixtures and fittings in the Property which
become beyond repair during the Term with those of no lesser quality;
(c) keep all windows and other glass in the Property (both inside and
outside) clean, cleaning them at least once a month and more
frequently where necessary;
(d) keep any open area within the Property adequately surfaced (where
appropriate) in good condition, properly cultivated (where landscaped)
and free from weeds;
(e) enter into and maintain throughout the Term fully comprehensive
maintenance contracts in respect of all plant, equipment and machinery
forming part of the Property with a reputable company or companies and
produce the contracts to the Landlord on demand with evidence that any
payments due under them are paid up to date;
(f) ensure that the electrical circuits within the Property comply with
the then current regulations of the Institute of Electrical Engineers
or other amended standards or recommended current codes of practice
(save that this shall not obligate the Tenant to upgrade the existing
circuits within the Property save where it is unlawful not to do so);
and
(g) notify the Landlord of all defects in the Property which are relevant
defects for the purpose of section 4 of the Defective Premises Act
1972.
(5) REDECORATION
The Tenant shall redecorate the exterior of the Property in every third
year and in the last year of the Term and the interior of the Property in
every fifth year and in the last year of the Term in colours and patterns
which, in the case of external decorations, shall be first approved by the
Landlord at all times during the Term and, in the case of internal
decorations, shall be first approved by the Landlord in the last year of
the Term. The Tenant shall also have all parts of the Property requiring
treatment for their preservation and protection treated in accordance with
the best approved manner for preserving and protecting them. All works
under this sub-clause shall be carried out in a good and workmanlike manner
and with suitable, good quality materials.
In this sub-clause the "last year of the Term" means the period of 12
months ending at the End of the Term and all approvals shall not be
unreasonably withheld or delayed by the Landlord.
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(6) ENTRY BY THE LANDLORD
The Tenant shall:
(a) permit the Landlord to enter the Property to examine its condition and
take inventories;
(b) permit the Landlord to enter the Property to exercise any of the
rights reserved to the Landlord by this Lease and for any other
reasonable purpose connected with the management of the Estate subject
to the Landlord making good to the Tenant all damage to the Property
but not being obliged to compensate the Tenant for any loss suffered
by the Tenant or for any nuisance, annoyance, inconvenience, noise or
vibration;
(c) permit the Landlord and any person acting as valuer under clause 4 to
enter the Property and inspect and measure the Property for all
purposes connected with insurance of the Property, any action under
the Landlord and Tenant Act 1954 Part II, or the implementation of
clause 4; and
(d) furnish all information relevant for those purposes as the Landlord or
anyone having a right of entry under this sub-clause may reasonably
request.
Except in case of emergency the Landlord shall give the Tenant reasonable
prior written notice before exercising the right of entry and shall comply
with the Tenant's reasonable security and confidentiality requirements.
After notice or in case of emergency the Landlord may break into the
Property. Such rights shall be exercised in a reasonable manner and in
such a way so far as reasonably practicable as not to prevent the Tenant's
beneficial user and enjoyment of the Property and to use reasonable
endeavours not to damage or interfere with any equipment or machinery or
data transmission and storage facilities in the Property and shall make
good any damage caused.
(7) REMEDY BREACHES
The Tenant shall remedy all breaches of covenant notified by the Landlord
to the Tenant which the Tenant is liable to remedy under this Lease as soon
as possible and in any event within three months or sooner if appropriate
after service of the notice. If the Tenant fails to do so the Landlord may
enter the Property and remedy the breach and such entry shall be subject to
the same conditions as referred to in clause 6(6). All costs and expenses
incurred by the Landlord shall be paid by the Tenant within 14 days of
written demand.
(8) ALTERATIONS
Subject to the rights granted to the Tenant in Schedule 2 to this Lease the
Tenant shall:
(a) not make any alteration or addition to the Property (other than the
erection, alteration or removal of internal, non structural,
demountable partitioning) save as permitted by paragraph (b);
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(b) not make any non-structural alteration to the Property (other than as
mentioned in paragraph (a)) without the prior consent of the Landlord
which shall not be unreasonably withheld or delayed; and
(c) before the End of the Term if required to do so by the Landlord but
not otherwise, remove any alteration or addition (including any made
before the beginning of the Term) and make good all damage caused by
the removal.
In this sub-clause a non-structural alteration is one which does not affect
the roof, foundations or exterior of the Property or any load-bearing part
of it.
(9) SIGNS
The Tenant shall:
(a) not display on the Property any signs visible from outside the
Property except those which in the Landlord's opinion are reasonably
necessary in connection with the business carried on at the Property
and which are in a form approved by the Landlord and are affixed in
positions approved by the Landlord (such approvals not to be
unreasonably withheld or delayed);
(b) at the End of the Term remove all signs (including any erected before
the beginning of the Term) and make good all damage caused by their
removal; and
(c) not affix to the Property any external radio, television or other
aerial or satellite dish or any pole, mast, flag or wire save with the
prior written consent of the Landlord such consent not to be
unreasonably withheld or delayed and in making such decision the
Landlord shall have due regard to the Tenant's use of the Property.
In this sub-clause "signs" includes signs, hoardings, posters, placards,
advertisements, letters, bills and inscriptions.
(10) USE
The Property shall not be used for any purpose other than a use within
Class B1, Class B2 or Class B8 of the schedule to the Town and Country
Planning (Use Classes) Order 1987 as that Order is in force at the date of
this Lease.
(11) USE OBLIGATIONS
The Tenant shall:
(a) use any open area within the Property only for the purpose for which
it is designed and not keep any caravan or temporary building on it;
(b) not leave the Property unoccupied for more than a month without
notifying the Landlord and providing the security arrangements
reasonably required by the Landlord and its insurers;
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(c) not do anything on the Property which may become a nuisance or damage
to the Landlord or any nearby owner or occupier;
(d) not allow to pass into the Conduits serving the Property anything that
may obstruct them or cause damage, danger or pollution or anything
poisonous or radioactive;
(e) not bring onto or keep in the Property anything dangerous,
inflammable, explosive, or noxious save for materials ordinarily and
properly used in connection with alternative power generation provided
that such materials are safely stored and are otherwise in accordance
with all statutory requirements and the reasonable requirements of
insurers;
(f) not use the Property for any illegal purpose or for any dangerous,
noxious, or noisy occupation;
(g) not use the Property for the holding of public meetings or auction
sales or as a residence or sleep at the Property or keep any animal on
it;
(h) not overload the Property or its Conduits;
(i) remove all refuse on a reasonably frequent basis but no less than once
a week and keep the Property clean, tidy and in good order;
(j) not obstruct any road or footpath on the Estate and not do anything as
a result of which reasonable use of the Common Parts by others may be
impeded; and
(k) not park vehicles on or load or unload goods onto or from vehicles
save in those parts of the Property or the Common Parts designated by
the Landlord for that purpose.
(12) STATUTORY REQUIREMENTS
The Tenant shall comply with every enactment and with the requirements and
recommendations of every authority relating to or affecting the Property or
its use or the employment of anyone at the Property or any equipment or
chattels in the Property and whether applicable to the owner, landlord,
tenant or occupier of the Property save that this obligation shall not
include responsibility for compliance with anything relating to remediation
of any contamination affecting the Property which was caused before the
date hereof.
In this sub-clause "authority" includes every government department, local
or other authority and court of competent jurisdiction.
(13) NOTICES
The Tenant shall:
(a) give the Landlord a copy of every notice or order or any proposal for
a notice or order issued to the Tenant, its sub-tenants or any
occupier of the Property or left at the
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Property relating to the Property or the Tenant's its sub-tenants or
any occupiers use thereof within five Business Days of its service;
(b) (if it is the Tenant's responsibility to so comply in accordance with
the terms of this Lease) take all steps necessary to comply with every
notice or order without delay; and
(c) at the request and cost of the Landlord make or join with the Landlord
in making such objections or representations in respect of the notice,
order or proposal as the Landlord shall reasonably require.
(14) FIRE AUTHORITY REQUIREMENTS
The Tenant shall comply with all requirements and recommendations of the
appropriate authority and the Landlord's insurers and all reasonable
requirements of the Landlord as to means of escape from the Property in
case of fire or other emergency and as to the provision and maintenance of
fire detection equipment, fire alarm equipment and fire fighting equipment.
(15) PLANNING ACTS
The Tenant shall:
(a) comply with the Planning Acts in relation to the Property, any
operations carried out at the Property and its use and not commit any
breach of planning control (as defined in the Planning Acts);
(b) obtain from the local planning authority planning permission for the
carrying out of any operation on the Property or the institution or
continuance of any use which may constitute development within the
meaning of the Planning Acts;
(c) not make any application for planning permission without the
Landlord's prior consent (which shall not be unreasonably withheld or
delayed) to the making of the application, indemnify the Landlord
against all charges payable in respect of the application and repay to
the Landlord all reasonable and proper professional fees and expenses
properly incurred by the Landlord in connection with the application;
(d) forthwith after the grant or refusal of any application give the
Landlord a copy of the permission or the refusal;
(e) not make any alteration or addition to or change of use of the
Property (being an alteration or addition or change of use which is
prohibited by or for which the consent of the Landlord must be
obtained under this Lease and for which a planning permission must be
obtained) before planning permission for it has been produced to the
Landlord and acknowledged by the Landlord as satisfactory to it but so
that the Landlord may refuse to express satisfaction with the planning
permission on the grounds that anything contained in it or omitted
from it in the reasonable opinion of the Landlord would be or be
likely to be materially prejudicial to the Landlord's interest in the
Property during the
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Term or after the End of the Term such acknowledgement from the
Landlord shall not be unreasonably delayed;
(f) pay any charge imposed under the Planning Acts in respect of the
carrying out of any operation or the institution or continuance of any
use;
(g) unless the Landlord directs otherwise, carry out before the End of the
Term all works required to be carried out as a condition of any
planning permission which may have been granted and implemented during
the Term whether or not the date by which the planning permission
requires those works to be carried out falls within the Term;
(h) pay to the Landlord within 14 days of written demand a fair and
reasonable proportion of any compensation received by the Tenant
because of a restriction on the use of the Property under the Planning
Acts, any dispute as to the proportion to be referred to arbitration;
(i) produce to the Landlord all drawings, documents and other evidence
reasonably required by the Landlord to satisfy itself that this sub-
clause has been complied with;
(j) not implement any planning permission without providing reasonable
security if reasonably required for compliance with the conditions
imposed by that permission;
(k) not serve any purchase notice under the Planning Acts requiring any
authority to purchase the Tenant's interest in the Property without
first offering to surrender this Lease at the price which might
reasonably be expected to be obtained from the authority under the
purchase notice, any dispute as to the amount of the price to be
referred to arbitration;
(l) not to make any objection or adverse representation in respect of any
planning application made by or with the consent of the Landlord:
(i) within 12 months before the date specified in clause 15 of this
Lease if the Tenant has served the notice referred to in that
clause; or
(ii) within 12 months before the End of the Term unless the Tenant has
exercised its rights to take a new lease under the provisions of
the Landlord and Tenant Act 1954;
and in either case this clause shall not prevent the Tenant making
such objections if it is entitled to do so under a lease of another
Unit on the Estate.
(16) OBSTRUCTION
The Tenant shall not:
(a) stop up, darken or obstruct any window or opening belonging to the
Property save as part of the Tenant's usual security measures; or
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(b) give to any third party any acknowledgement that the Tenant enjoys the
access of light or air to any of the windows or openings in the
Property by the consent of a third party; or
(c) pay to any third party any sum of money or enter into any agreement
with any third party for the purpose of inducing or binding him to
abstain from obstructing the access of light or air to any windows or
openings.
(17) OBSTRUCTION PROCEEDINGS
If any of the owners or occupiers of nearby land or buildings do or
threaten to do anything which obstructs the access of light or air to any
of the windows or openings in the Property the Tenant shall:
(a) notify the same forthwith to the Landlord; and
(b) permit and afford all reasonable assistance to the Landlord to bring
proceedings in the name of the Tenant and at the joint cost of the
Landlord and Tenant against any of the owners or occupiers of the
nearby land or buildings in respect of the obstruction.
(18) ACQUISITION OF RIGHTS
The Tenant shall not allow any easement to be acquired over the Property.
If any such easement is acquired or attempted to be acquired, the Tenant
shall give immediate notice of it to the Landlord and at the request of the
Landlord but at the cost of the Tenant adopt the course reasonably required
by the Landlord for preventing the acquisition of the easement.
(19) PARTY MATTERS
The Tenant shall pay a fair proportion of all costs and expenses payable in
respect of repairing, lighting, cleansing and maintaining anything used in
common by the Property and any other property to the extent that those
costs and expenses are not recovered under clause 5. The proportion shall
be determined by the Landlord and shall be conclusive save as to questions
of law and save in the case of manifest error.
(20) NEW GUARANTOR
If a guarantor's event of default occurs, the Tenant shall give notice to
the Landlord of the event within ten Business Days of its occurrence. If
the Landlord serves notice on the Tenant under this sub-clause within
thirty Business Days of service of the Tenant's notice, the Tenant shall
procure that guarantors reasonably acceptable to the Landlord shall
covenant by deed with the Landlord in the form set out in Schedule 5.
In this sub-clause a guarantor's event of default is any of the following:
(a) in the case of a Guarantor who is an individual:
(i) the death of the individual;
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(ii) the individual being regarded as a patient under the Mental
Health Act 1983 section 94;
(iii) an application being made for an interim order in respect of
the individual or an interim order being made under the Act;
(iv) the making by the individual of a proposal for a voluntary
arrangement;
(v) a petition being presented for a bankruptcy order to be made
against the individual or a bankruptcy order being made;
(b) in the case of a Guarantor which is a company:
(i) a proposal being made to the company and to its creditors for a
voluntary arrangement;
(ii) a petition being presented for an administration order in
respect of the company or an administration order being made;
(iii) the company having an administrative or other receiver or a
manager appointed of the whole or any part of its property;
(iv) the company passing a resolution for winding up or a petition
being presented for the winding up of the company or a winding
up being made or the company being dissolved other than (in any
such case) a voluntary winding up of a solvent company for the
purposes of amalgamation or reconstruction;
(v) the company, having been registered as an unlimited company,
being re-registered as a limited company without the previous
consent of the Landlord;
(c) in the case of a Guarantor who is an individual or which is a company:
(i) the individual or the company entering into any kind of
composition, scheme of arrangement, compromise or arrangement
for the benefit of creditors or any class of creditors or
permitting or suffering any distress or execution to be levied
on his goods at the Property which remains unsatisfied for more
than 21 days;
(ii) there occurring in relation to the individual or the company in
any country or territory in which he carries on business or to
the jurisdiction of whose courts he or any of his property is
subject any event which corresponds in that country or
territory with any of those mentioned in paragraphs (a)(iii) to
(v) or (b) above or the individual or the company otherwise
becoming subject in any such country or territory to any law
relating to insolvency, bankruptcy or winding up.
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(21) COSTS
The Tenant shall pay the reasonable and proper costs and expenses incurred
by the Landlord:
(a) in or in contemplation of any proceedings relating to the Property
under the Law of Property Act 1925 sections 146 and 147, or the
Leasehold Property (Repairs) Act 1938, the preparation and service of
any notice under those sections or the taking of steps subsequent to
such notice notwithstanding that forfeiture is avoided otherwise than
by relief granted by the Court;
(b) in the preparation and service of any notice to repair or any
schedule of dilapidations at any time during the Term or after the
End of the Term;
(c) in connection with the recovery of arrears of Rent or other sums due
to the Landlord under this Lease including the levy or attempted levy
of any distress; and
(d) in respect of any application for consent required by this Lease
whether or not the consent is granted (including any inspection of
works authorised by the consent and of any re-instatement of those
works).
Where the Landlord could recover the cost of services or advice under the
first part of this sub-clause if they were undertaken by a third party but
those services or that advice are provided by the Landlord or by a company
which is a member of the same group as the Landlord (within the meaning of
section 42 of the Landlord and Tenant Act 1954), the Tenant shall pay to
the Landlord or to that company a reasonable sum (plus VAT if payable) for
such services or advice but not more than the amount payable by the Tenant
if those services or that advice had been provided by a third party
(22) INDEMNITY
The Tenant shall:
(a) pay and make good to the Landlord every loss and damage incurred or
sustained by the Landlord as a consequence of every breach or non-
observance of the Tenant's covenants contained in this Lease and
shall indemnify the Landlord against all actions, claims,
liabilities, costs and expenses arising by reason of the breach; and
(b) indemnify and keep the Landlord indemnified from liability in respect
of all loss, damage, actions, proceedings, claims, demands, costs,
damages and expenses in respect of any injury to or the death of any
person or damage to any property or in respect of the infringement,
disturbance or destruction of any right by reason of or arising in
any way directly or indirectly out of:
(i) the state of repair or condition of the Property;
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(ii) the act, omission or default of the Tenant, any person
deriving title under the Tenant or any person at the Property
with the express or implied authority of any of them;
(iii) the construction or existence of any additions or alterations
to the Property;
(iv) the use of the Property;
(v) anything now or in the future attached to or on the Property;
(vi) the use of vehicles on the Property;
(vii) the omission of the Tenant to give written notice to the
Landlord of any defects or items requiring repair of which
the Tenant is aware or ought reasonably to be aware; and
(viii) any breach by the Tenant or by any person deriving title
under the Tenant of any covenant by the Tenant or any
condition contained in this Lease.
Provided that the Tenant shall not be obliged to indemnify the
Landlord in respect of such matters to the extent that such damage
arises out of the Landlord's wilful misconduct or negligence.
(23) NOTICES FOR SALE AND RE-LETTING
The Tenant shall:
(a) permit (at a suitable location which does not materially interfere
with or obstruct the access of light to the Property) the Landlord
during the six months before the End of the Term to affix to the
Property a notice (of a suitable size and nature) for re-letting it;
(b) permit (at a suitable location which does not materially interfere
with or obstruct the access of light to the Property) the Landlord at
any time during the Term to affix to the Property a notice (of a
suitable size and nature) for dealing with the Landlord's interest in
the Property; and
(c) permit all persons with written authority from the Landlord or the
Landlord's agent to view the Property upon the Landlord giving at
least 24 hours prior written notice and subject to such person
complying with the Tenant's reasonable security and confidentiality
requirements.
(24) REGULATIONS
The Tenant shall observe all reasonable regulations made by the Landlord
for the proper management of the Estate.
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(25) CAR SPACES
The Tenant shall:
(a) not use the Car Spaces otherwise than for the purpose of the parking
of one private motor car in each Car Space and not to keep anything
else in the Parking Area including, without limitation, plant,
equipment, materials, containers of any description or any skip or
other receptacle for refuse or any caravan or temporary building;
(b) not without the express permission of the Landlord carry out any
repairs to any vehicle whilst it is in the Parking Area and if
permission is granted ensure that any repairs are carried out in such
manner as not to cause any nuisance, annoyance, inconvenience or
disturbance to the Landlord or any tenant or occupier of the Estate
or other user of the Parking Area;
(c) keep the Car Spaces and the surrounding area clean, tidy and free
from deposits of oil or grease;
(d) not cause any obstruction in the Parking Area;
(e) take all reasonable and proper precautions against fire occurring in
any vehicle using the Car Spaces;
(f) not do anything in the Parking Area which causes nuisance, annoyance,
inconvenience or disturbance to the Landlord or any tenant or
occupier of the Estate or other user of the Parking Area.
(26) FREEHOLD COVENANTS
The Tenant shall observe and perform the covenants contained in or
referred to in the documents specified in Schedule 4 so far as they relate
to the Property and are still subsisting and capable of taking effect and
shall indemnify and keep indemnified the Landlord from and against any
non-observance or non-performance of the same.
(27) YIELD UP
The Tenant shall:
(a) byield up the Property (except tenant's or trade fixtures including
those of the type listed on annexed schedule) to the Landlord at the
End of the Term with vacant possession and in accordance with the
Tenant's covenants contained in this Lease; and
(b) make good to the satisfaction of the Landlord all damage occasioned
by the removal of any tenant's or trade fixtures.
(28) RELEASE OF LANDLORD
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If the Landlord or any former landlord applies for release of a covenant
under section 8 of the Landlord and Tenant (Covenants) Act 1995:
(a) the Tenant shall not object unreasonably to the release of the
Landlord or the former landlord; and
(b) if, following such an application, the Tenant serves notice objecting
to the release, but the Court makes a declaration that it is
reasonable for the covenant to be released, the Tenant shall indemnify
the Landlord and any former landlord against all loss, damage, costs
and expenses incurred or sustained by any of them as a result of the
objection of the Tenant.
7. LANDLORD'S COVENANTS
(1) INTRODUCTION
The Landlord covenants with the Tenant to comply with its obligations set
out in this clause and in clauses 5 and 9.
(2) QUIET ENJOYMENT
For so long as the Tenant pays the Rent and performs and observes the
covenants by the Tenant and the conditions contained in this Lease the
Tenant may peaceably and quietly hold and enjoy the Property during the
Term without any lawful interruption by the Landlord or any person claiming
under or in trust for the Landlord.
(3) SERVICES
The Landlord shall use all reasonable endeavours to:
(a) maintain in good working order and repair all Conduits in, under or
upon the Estate which serve the Property (other than those which
exclusively serve the Property); and
(b) keep the surfaces of the Common Parts in good repair and cleaned at
regular intervals and reasonably well lit.
The Landlord will not be liable to the Tenant for any breach of these
obligations unless the Tenant has given the Landlord notice of the breach
and the Landlord is aware or should reasonably be aware of the breach and
has failed to remedy the breach within a reasonable time of service of the
notice.
8. ALIENATION
(1) RESTRICTIONS ON ALIENATION
The Tenant shall not:
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(a) save to the extent permitted by the following sub-clauses of this
clause, part with possession of the whole or any part of the Property
or part with or share occupation of the whole or any part of the
Property or permit occupation by a licensee of the whole or any part
of the Property or hold on any trust the whole or any part of the
Property; nor
(b) if it is an unlimited company, incorporate itself as a limited company
without the prior consent of the Landlord (such consent not to be
unreasonably withheld or delayed).
(2) ASSIGNMENT
The Tenant shall not:
(a) assign part of the Property; nor
(b) assign the whole of the Property without the prior consent of the
Landlord which, subject to sub-clauses (3) and (4), shall not be
unreasonably withheld or delayed.
(3) AGREEMENT AS TO CIRCUMSTANCES
The Landlord and the Tenant agree that the Landlord may withhold its
consent to an assignment if any one or more of the following circumstances
(which are specified for the purposes of section 19(1A) of the Landlord and
Tenant Act 1927) exist and it shall not be regarded as unreasonably
withholding its consent if it does so:
(a) any rent payable pursuant to clause 4(1) of this Lease agreed service
charge, insurance and VAT on such sums payable in accordance with this
Lease due from the Tenant under this Lease is unpaid;
(b) the Landlord reasonably determines that the proposed assignee is not a
person who is likely to be able both to comply with the tenant's
covenants in this Lease and to continue to be such a person following
the assignment;
(c) the proposed assignee or any proposed guarantor for it (other than any
guarantor under an authorised guarantee agreement) has the benefit of
state or diplomatic immunity or the Landlord determines that it is
likely to acquire that immunity;
(d) the proposed assignee is a company which is a member of the same group
(within the meaning of section 42 of the Landlord and Tenant Act 1954)
as the Tenant; and
(e) the proposed assignee or any proposed guarantor for it (other than any
guarantor under an authorised guarantee agreement) is a corporation
registered in or an individual resident in a jurisdiction in which a
judgement obtained in the courts of England and Wales will not
necessarily be enforced without any re-examination of the merits of
the case.
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(4) AGREEMENT AS TO CONDITIONS
The Landlord and the Tenant agree that the Landlord may grant consent to an
assignment subject to any one or more of the following conditions (which
are specified for the purposes of section 19(1A) of the Landlord and Tenant
Act 1927) and it shall not be regarded as giving consent subject to
unreasonable conditions if it does so:
(a) that before the assignment the Tenant enters into and unconditionally
delivers to the Landlord an authorised guarantee agreement, such
agreement to be a deed and to contain the provisions in Schedule 6 or
at the Landlord's absolute discretion) such other provisions as the
Landlord shall reasonably prescribe and (in either case) such
ancillary provisions as the Landlord shall reasonably prescribe;
(b) that before the assignment any person (other than a former Tenant) who
at the time of the application for the consent is guaranteeing the
obligations and liabilities under this Lease of the Tenant covenants
by deed with the Landlord that the Tenant shall perform its
obligations under the authorised guarantee agreement required under
paragraph (a), the deed to contain provisions equivalent to those
contained in paragraphs 1 to 4 and 9 of Schedule 5 and an obligation
on the part of the covenantor (in the event of default on the part of
the Tenant) to perform any obligation entered into by the Tenant in
the authorised guarantee agreement to take up a new lease, and
otherwise to be in such form as the Landlord reasonably requires;
(c) that before the assignment, if the Landlord determines it to be
necessary, one or more guarantors acceptable to the Landlord, acting
reasonably, covenant by deed with the Landlord in the form set out in
Schedule 5 (with "ASSIGNEE" substituted for "TENANT" in paragraphs 1
to 9 inclusive and with such other provisions as the Landlord
reasonably requires) in respect of the period during which the
assignee is bound by the tenant's covenants and the conditions in this
Lease;
(d) that all rent payable pursuant to clause 4(1) of this Lease agreed
service charge, insurance and VAT on such sums payable in accordance
with this Lease due from the Tenant under this Lease as at the date of
the assignment has been paid;
(e) that the assignment is completed and registered with the Landlord in
accordance with sub-clause (14) within three months of the date of the
consent and that if it is not, the consent shall be void but any of
the guarantees referred to in paragraphs (a) to (c) shall nevertheless
remain in full force and effect.
(f) that before the assignment of this Lease to an assignee who is not
also taking an assignment of the adjacent Unit numbered 7 the Tenant
has constructed to the Landlord's reasonable specification and
satisfaction an internal dividing wall between the Property and the
adjacent Unit numbered 7
(5) FURTHER AGREEMENT
The Landlord and the Tenant agree that:
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(a) the Landlord may withhold consent to an assignment in circumstances
which are not referred to in sub-clause (3) if it is reasonable to do
so and may grant consent subject to conditions which are not specified
in sub-clause (4) if the conditions are reasonable; and
(b) any power on the part of the Landlord to determine any matter for the
purposes of sub-clauses (3) or (4) shall be exercised reasonably.
(6) UNDERLETTING
The Tenant shall not:
(a) underlet part only of the Property;
(b) underlet the whole of the Property:
(i) without complying with the provisions of sub-clauses (7) to (11);
and
(ii) without the prior consent of the Landlord, which shall not be
unreasonably withheld or delayed.
(7) UNDERLETTING CONDITIONS
Not to underlet the whole of the Property without producing to the
Landlord:
(a) an order of the Court under section 38(4) of the Landlord and Tenant
Act 1954 authorising the inclusion in the intended underlease of an
agreement excluding sections 24 to 28 of that Act; and
(b) a written undertaking by the Tenant not to release the intended
undertenant from or otherwise waive or modify the agreement authorised
by the order
and without including the agreement in the intended underlease.
(8) COVENANTS ON UNDERLETTING
The Tenant shall procure that any intended undertenant covenants by deed
with the Landlord:
(a) to pay the rent to be reserved by and the other sums to be payable
under the underlease and to perform and observe, the tenant's
covenants and the conditions to be contained in the underlease
throughout the period during which the undertenant is bound by the
tenant's covenants and conditions in the underlease;
(b) without prejudice to paragraph (a), not to assign the underlet
property without:
(i) first obtaining a deed of covenant from the intended assignee in
favour of the Landlord in the same form (with the necessary
changes) as the deed referred to
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in this sub-clause, including (without limitation) the covenants
in this paragraph (b); and
(ii) if the Landlord reasonably requires, first obtaining a deed from
one or more guarantors acceptable to the Landlord, acting
reasonably, in favour of the Landlord guaranteeing the due and
punctual payment and performance of all the obligations and
liabilities of the intended assignee under the deed referred to
in sub-paragraph (i), the deed to contain provisions equivalent
to those contained in paragraphs 1 to 4 and 9 of Schedule 5 and
otherwise to be in such form as the Landlord reasonably requires.
(9) GUARANTEE ON UNDERLETTING
If the Landlord reasonably requires, the Tenant shall procure that, before
the underlease is granted, one or more guarantors acceptable to the
Landlord, acting reasonably, guarantee (by way of deed) to the Landlord, in
respect of the period during which the undertenant is bound by the tenant's
covenants and the conditions in the underlease, the due and punctual
payment and performance of all the obligations and liabilities of the
intended undertenant, the guarantee to contain provisions equivalent to
those contained in paragraphs 1 to 4 and 9 of Schedule 5 and otherwise to
be in such form as the Landlord reasonably requires.
(10) FORM OF UNDERLEASE
The Tenant shall procure that every underlease shall:
(a) contain the same tenant's covenants and other terms and conditions as
are contained in this Lease subject only to:
(i) such amendments as may be provided for in paragraphs (b) to (d);
and
(ii) such amendments as may reasonably be required by the Tenant,
having regard only to the duration of the proposed underlease,
and as may be approved by the Landlord, such approval not to be
unreasonably withheld;
(b) not permit any assignment, underlease or other dealing or disposal of
the Property which is prohibited by the terms of this Lease and
prohibit any further underletting of the whole or any part of the
Property;
(c) provide that where the underlease requires the undertenant to obtain
the landlord's consent, the undertenant shall be required to obtain
also the consent of the Landlord (such consent not to be unreasonably
withheld or delayed);
(d) contain provisions that require a review of the rent payable under the
underlease to open market rent in accordance with the provisions and
at the dates for review of the rent payable under this Lease, but this
paragraph shall not prohibit an underlease of the Property upon terms
that require review of the rent payable under the underlease at dates
additional to the dates for review of the rent payable under this
Lease;
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(11) UNDERLEASE REQUIREMENTS
The Tenant shall:
(a) not grant any underlease at a fine or premium;
(b) not grant any underlease at a rent which at the time of the grant of
the underlease is less than the open market rent of the Property;
(c) not vary the terms of any underlease or release the undertenant from
any covenant or condition in the underlease without the prior consent
of the Landlord such consent not to be unreasonably withheld or
delayed and shall notify the Landlord of any surrender of any
underlease;
(d) not waive any breach of any of the covenants on the part of the
undertenant and the conditions contained in any underlease but take
all such reasonable steps as are lawfully available to the Tenant
(including re-entry) to enforce such covenants and conditions;
(e) procure that the rent reserved by any underlease is reviewed in
accordance with the provisions of the underlease but not agree any
revised rent with the undertenant without the prior consent of the
Landlord (such consent not to be unreasonably withheld), and if on
any rent review under any underlease the revised rent is to be
determined by an independent third party, procure that any reasonable
representations which the Landlord may wish to make concerning the
revised rent are put forward to the third party at the same time as
the representations of the Tenant and as though they were
representations made by the Tenant; and
(f) procure that on any assignment of any underlease the outgoing
undertenant enters into an authorised guarantee agreement and, where
appropriate, guarantors enter into a contractual guarantee in each
case with the landlord under the underlease in accordance with the
provisions of the underlease.
In paragraphs (c) to (f) of this sub-clause an underlease includes any
lease where, by virtue of the grant of this Lease, the Tenant under this
Lease becomes the holder of the immediate reversion to that lease.
(12) ASSOCIATED COMPANIES
The Tenant may share the occupation of any part of the Property with a
company which is a member of the same group as the Tenant (within the
meaning of section 42 of the Landlord and Tenant Act 1954) for so long as
both companies remain members of that group and provided that:
(a) no relationship of landlord and tenant is created between the two
companies and no security of tenure is conferred upon the occupier;
and
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(b) within 15 Business Days of the commencement of the sharing the Tenant
gives to the Landlord notice of the company sharing occupation and
the address of its registered office.
(13) CHARGING
The Tenant shall not
(a) charge part of the Property; or
(b) charge the whole of the Property by way of fixed security without the
prior consent of the Landlord, which shall not be unreasonably
withheld.
(14) REGISTRATION OF DEALINGS
Within 15 Business Days of every assignment, transfer, underlease or
charge of the Property or the creation or transfer of any interest derived
out of the Term or any devolution of the interest of the Tenant or any
person deriving title under the Tenant, the Tenant shall produce a
certified copy of the assignment, transfer, underlease or charge or (in
the case of a devolution) the document evidencing or under which the
devolution arises and pay the Landlord a registration fee of a reasonable
amount, being not less than (Pounds)25, in respect of each assignment,
transfer, underlease, charge or devolution.
9. INSURANCE
(1) LANDLORD'S INSURANCE OBLIGATIONS
Unless the insurance is vitiated by any act, default or omission of the
Tenant, any person deriving title under the Tenant or any person at the
Property with the express or implied authority of any of them the Landlord
shall keep the Property (other than plate glass and tenant's or trade
fixtures) insured with insurers or underwriters selected by the Landlord
in accordance with the provisions of this clause to the extent to which
the Property is insurable and subject to all exclusions, limitations and
excesses imposed by the insurers.
(2) SUM AND RISKS INSURED
The Property shall be insured in a sum not less than its full
reinstatement cost (as determined from time to time by the Landlord)
against loss or damage by the Insured Risks.
(3) FEES
The insurance shall extend to:
(a) architects' and other professional fees in relation to the
reinstatement of the Property for a minimum sum of 15% of the amount
insured in respect of the Property;
(b) the costs of demolition and removal of debris; and
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(c) loss of rent for such period as the Landlord may decide in an amount
which takes into account the Landlord's estimate of potential
increases in rent.
(4) PRODUCTION OF POLICY
Whenever reasonably required to do so by the Tenant and at the Tenant's
cost, but not more often than twice a year, the Landlord shall produce to
the Tenant at the Landlord's office a copy of the insurance policy or other
evidence of it and evidence of payment of the last premium.
(5) REINSTATEMENT
Subject to sub-clause (13) if the Property is destroyed or damaged by any
of the Insured Risks, then unless the insurance is vitiated by any act,
default or omission of the Tenant, any person deriving title under the
Tenant or any person at the Property with the express or implied authority
of any of them, the Landlord shall use reasonable endeavours to:
(a) obtain all consents and permissions necessary for reinstatement as
soon as reasonably possible;
(b) subject to obtaining those consents and permissions, lay out as soon
as practicable all insurance monies received by the Landlord (other
than for fees and loss of rent) in reinstating the Property; and
(c) subject to the Tenant complying with its obligations in sub-clauses
(6)(a)(iii), (7) and(9) make good out of the Landlord's own monies any
deficiency (other than one arising from an exclusion, limitation or
excess imposed by the insurers).
(6) TENANT'S INSURANCE OBLIGATIONS
(a) The Tenant shall pay to the Landlord on demand:
(i) every premium payable by the Landlord (including any part of it
which the Landlord is entitled to retain by way of commission)
for insuring the Property in accordance with its obligations in
sub-clause (1) and for effecting insurance in respect of
liability to third parties including members of the public and
such other insurances as the Landlord reasonably considers
desirable;
(ii) where the policy includes the Property and other properties, the
proportion properly attributable to the Property of every premium
payable by the Landlord (including any part of it which the
Landlord is entitled to retain by way of commission) for insuring
the Property and the other properties in accordance with its
obligations in sub-clause (1) and for effecting (in relation to
the Property and the other properties) the other insurances
referred to in sub-paragraph (i), the proportion to be determined
by the Landlord whose determination shall be conclusive save as
to questions of law and save in case of manifest error;
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(iii) the amount of any excess deducted or deductible by the insurers
on any claim made by the Landlord; and
(iv) all costs and expenses reasonably incurred by the Landlord in
obtaining a valuation of the Property for insurance purposes
(provided this is limited to one such valuation every two
years).
All sums payable by the Tenant under paragraph (a)(i) shall be
reserved as rent.
(b) The Tenant shall insure all plate glass in the Property against all
risks with an insurance company approved by the Landlord in the joint
names of the Landlord and the Tenant and, on demand, produce a copy of
the insurance policy and evidence of payment of the last premium to
the Landlord.
(7) VITIATION
The Tenant shall not use the Property or carry on any business at the
Property or do or omit to do at the Property anything which may make void
or voidable any policy for the insurance of the Property or any nearby
property of the Landlord.
(8) INCREASED PREMIUM
The Tenant shall:
(a) not without the prior consent of the Landlord use the Property or
carry on any business at the Property or do or omit to do at the
Property anything which may increase the premium payable for the
insurance; and
(b) if consent is given, repay on demand to the Landlord any resulting
increased insurance premium payable by the Landlord.
(9) IRRECOVERABLE REINSTATEMENT COST
If the Property is destroyed or damaged by any of the Insured Risks and the
insurance money under any insurance effected by the Landlord is wholly or
partly irrecoverable because of any act, default or omission of the Tenant,
any person deriving title under the Tenant or any person at the Property
with the express or implied authority of any of them the Tenant shall pay
to the Landlord within 14 days of written demand the whole or the
appropriate proportion of the cost of reinstating the Property. Any
dispute as to the amount of such proportion shall be referred to
arbitration.
(10) NOTICE OF DAMAGE
If the Property is destroyed or damaged by any of the Insured Risks the
Tenant shall give notice to the Landlord as soon as the destruction or
damage comes to the notice of the Tenant.
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(11) DOUBLE INSURANCE
The Tenant shall not effect any insurance relating to the Property against
any of the Insured Risks. If the Tenant is entitled to the benefit of any
insurance in respect of the Property, the Tenant shall pay to the Landlord
all monies received by virtue of the insurance to enable the Landlord to
apply them in making good the loss or damage in respect of which they have
been received.
(12) CESSER OF RENT
If the Property or any part of it (or the means of access to or egress from
it) is destroyed or damaged by any of the Insured Risks so as to be unfit
for occupation or use the rent or a fair proportion of it according to the
nature and extent of the damage sustained shall be suspended until the
Property (or the means of access to or egress from it) has been reinstated
and made fit for occupation and use or until the end of three years from
the date of the destruction or damage, whichever first occurs. Any dispute
as to the amount of the proportion shall be referred to arbitration. This
sub-clause does not apply if and to the extent that the insurance monies in
respect of loss of rent are wholly or partially irrecoverable solely or
partly because of the act, default or omission of the Tenant or any person
deriving title under the Tenant or any person at the Property with the
express or implied authority of any of them.
(13) PREVENTION OF REINSTATEMENT
The Landlord shall not be obliged to reinstate the Property in accordance
with sub-clause (5) while prevented by a supervening event. If the
Landlord is unable to commence reinstatement within twenty four months from
the date of destruction or damage because of a supervening event and the
Property or a substantial part of it is unfit for occupation or use either
party may determine the Term by serving notice on the other party at any
time within six months of the end of the twenty four month period. On
service of the notice the Term will cease but without prejudice to any
rights that any party may have against another for breach of any of their
respective covenants or the conditions contained in this Lease and all
insurance monies shall belong to the Landlord.
In this sub-clause a supervening event means any of the following:
(a) inability of the Landlord to obtain the consents and permissions
referred to in sub-clause (5) despite using all reasonable endeavours
to do so;
(b) grant of any of the consents or permissions subject to a lawful
condition with which it would be unreasonable to expect the Landlord
to comply or the Landlord being requested as a precondition to
obtaining any of the consents or permissions to enter into an
agreement with the planning authority or any other authority
containing conditions with which it would be unreasonable to expect
the Landlord to comply;
(c) some defect in the site upon which reinstatement is to take place so
that it could not be undertaken or could be undertaken only at a cost
unacceptable to the Landlord (acting reasonably);
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(d) inability of the Landlord to obtain access to the site to reinstate;
(e) prevention of reinstatement by any cause beyond the control of the
Landlord.
10. RE-ENTRY
(1) If an Event of Default occurs then notwithstanding the waiver of any
previous right of re-entry the Landlord may re-enter the Property or any
part of it when the Term shall cease but without prejudice to any rights or
remedies which may then have accrued to any party against another in
respect of any antecedent breach (including the breach in respect of which
re-entry is made) of any of the covenants or obligations contained in this
Lease.
(2) In this clause an Event of Default is any one of the following:
(a) the Rent or any part of it is in arrear and unpaid for seven Business
Days after becoming payable (whether formally demanded or not); or
(b) a breach by the Tenant of any of the covenants by the Tenant in this
Lease; or
(c) the Tenant (being a company) is deemed unable to pay its debts under
section 123 of the Insolvency Act 1986 or the Tenant or any Guarantor
(being a company) passes a resolution for winding-up or the directors
of any of them present a petition for winding-up or an order for the
winding-up of the Tenant or any Guarantor is made (other than (in any
such case) a voluntary winding-up of a solvent company for the
purposes of amalgamation or reconstruction) or the Tenant or any
Guarantor is dissolved; or
(d) the Tenant (being a company) has an administrative or other receiver
or a manager appointed of the whole or any part of its property or a
petition is presented for an administration order or an administration
order is made in respect of the Tenant or any Guarantor; or
(e) the Tenant (being a company) being registered as an unlimited company
is re-registered as a limited company without the previous consent of
the Landlord; or
(f) the Tenant (being an individual) presents a petition for a bankruptcy
order to be made against him or a bankruptcy order is made against the
Tenant or any Guarantor; or
(g) in relation to the Tenant (whether an individual or a company) a
proposal is made or the Tenant (whether a company or an individual)
enters into any kind of composition, scheme of arrangement, compromise
or arrangement for the benefit of creditors or any class of creditors
or permits or suffers any distress or execution to be levied on his
goods; or
(h) there occurs in relation to the Tenant in any country or territory in
which any of them carries on business or to the jurisdiction of whose
courts any of them or any of the property of any of them is subject to
any event which corresponds in that country or
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territory with any of those mentioned in paragraphs (c) to (g) above
or the Tenant otherwise becomes subject in any such country or
territory to any law relating to insolvency, bankruptcy or winding up.
11. GUARANTEE
The Guarantor covenants with the Landlord in the terms set out in Schedule
5 in respect of the period during which Exodus Internet Limited is bound by
the Tenant's covenants and conditions in this Lease and any additional
period during which Exodus Internet Limited is liable under an authorised
guarantee agreement.
12. VALUE ADDED TAX
(1) If any VAT is chargeable on any supply made to the Tenant under the terms
of this Lease, the Tenant shall pay by way of additional consideration the
amount of that VAT and the Landlord shall provide a valid VAT invoice in
relation to such VAT to the Tenant.
(2) Without limiting sub-clause (1) above, each sum reserved or payable by the
Tenant under the terms of this Lease is exclusive of VAT (if any) and is
accordingly to be construed as a reference to that sum plus any VAT in
respect of it, and where any sum is reserved as rent, the VAT is also
reserved as rent.
(3) If VAT is chargeable on any supply made by the Landlord to the Tenant for
which a sum is not reserved or payable under the terms of this Lease, the
Tenant shall pay that VAT to the Landlord against issue of a VAT invoice
five Business Days before the Landlord has to pay the VAT to Customs.
(4) Where under the terms of this Lease the Tenant is obliged:
(a) to make any payment to the Landlord or any other person (including,
without limitation, by way of service charge, indemnity or
reimbursement) by reference to any amount incurred or which will or
may be incurred by the Landlord or any other person; or
(b) otherwise to pay all or part of the consideration for any supply made
to the Landlord or any other person,
then without prejudice to sub-clauses (1) to (3) above, the Tenant shall
not be obliged to pay any amount in respect of VAT to the extent that it is
recoverable by the Landlord or any other person as appropriate.
(5) For the purposes of sub-clause (3) above, VAT is recoverable by a person,
if that person (or any company treated as a member of the same VAT Group as
that person) is entitled to credit for it as input tax under sections 25
and 26 VATA 1994. For the avoidance of doubt, VAT is not recoverable by a
person only because he could elect to waive exemption, but has not done so.
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(6) Where for the purposes of this Lease it is necessary to calculate or
estimate the cost or value of anything, including any building, structure,
work, item, act or service, the cost or value shall be calculated or
estimated so as to include any VAT which will or may be incurred in
addition.
(7) This clause shall not affect the generality of clause 6(3) (Outgoings).
(8) Where the Tenant pays to the Landlord VAT in respect of any supply by the
Landlord to the Tenant, the Landlord shall issue the Tenant with a proper
VAT invoice in respect of that VAT.
(9) If the Landlord wishes to make an election to waive the exemption in
respect of the Property under paragraph 2 of Schedule 10, VATA 1994, the
Landlord shall notify the Tenant, no less than 20 Business Days before the
election is to take effect, of the election and the date on which it is
intended to take effect.
(10) If for any reason the election referred to in sub-clause (9) above is
validly revoked within three months after coming into effect, the Landlord
shall repay to the Tenant any VAT paid by the Tenant, five Business Days
after receipt by the Landlord from Customs of acknowledgement of the
revocation.
13. TRUSTEE LIABILITY PROVISION
(1) Lloyds Bank Plc has entered into this Lease in its capacity as trustee of
Schroder Exempt Property Unit Trust ("SEPUT") and therefore notwithstanding
any other provision contained in this Lease neither Lloyds Bank Plc nor any
successor trustee of SEPUT shall be obliged to meet any liability or claim
hereunder save to the extent that the same can be met by it out of the
Trust Assets.
(2) For the purposes of this clause "TRUST ASSETS" means the assets for the
time being held upon the trusts of SEPUT.
14. GENERAL
(1) INTEREST AND POWERS OF RECOVERY
If any Rent or other sum payable under this Lease is not paid on the day
falling 7 days after the date on which it is due it shall bear interest
from the date on which it is due until the date of payment at the Default
Interest Rate compounded quarterly. Every amount payable under this Lease
shall be reserved as rent and shall be recoverable as rent in arrear.
(2) DISPUTES
In relation to disputes:
(a) any statement in this Lease that any dispute shall be referred to
arbitration means that the dispute shall be determined by a single
arbitrator agreed by the Landlord and the Tenant and failing agreement
by a single arbitrator appointed by the president or his deputy for
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the time being of the Royal Institution of Chartered Surveyors in
accordance with the Arbitration Acts 1950 to 1979 and 1996; and
(b) any dispute between the Tenant and any tenant or occupier of any other
property owned or leased by the Landlord about any right in connection
with the use of the Property and the other property or about any
boundary structure separating the Property from the other property
shall be determined by the Landlord acting reasonably.
(3) COMPENSATION
Subject to the provisions of section 38(2) of the Landlord and Tenant Act
1954 neither the Tenant nor any person deriving title under the Tenant
shall be entitled on quitting the Property to any compensation under
section 37 of that Act.
(4) JOINT AND SEVERAL LIABILITY
Where the Tenant or any Guarantor is more than one person:
(a) those persons shall be jointly and severally responsible in respect of
every obligation undertaken by them under this Lease; and
(b) the Landlord may release or compromise the liability of any of those
persons under this Lease or grant any time or other indulgence without
affecting the liability of any other of them.
(5) WHOLE AGREEMENT
This Lease contains the whole agreement between the parties relating to the
transaction contemplated by this Lease and supersedes all previous
agreements between the parties relating to the transaction.
(6) REPRESENTATIONS
The Tenant acknowledges that in agreeing to enter into this Lease, the
Tenant has not relied on any representation, warranty, collateral contract
or other assurance. The Tenant waives all rights and remedies which, but
for this sub-clause, might otherwise be available to it in respect of any
such representation, warranty, collateral contract or other assurance, but
nothing in this sub-clause shall limit or exclude any liability for fraud.
(7) RIGHTS OF ENTRY
All rights of entry exercisable by the Landlord extend to include (without
limitation) its employees, agents, surveyors, contractors and licensees
with or without plant, equipment, appliances and materials.
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(8) INTERPRETATION OF COVENANTS
Any covenant by the Tenant not to do or omit anything shall be construed as
though the covenant was in addition a covenant not to permit or suffer to
be done or omitted that thing.
(9) TENANT'S POSSESSIONS
If after the Tenant has vacated the Property at the End of the Term any of
the Tenant's possessions remain on the Property and the Tenant fails to
remove them within fifteen Business Days after being requested to do so by
the Landlord then:
(a) the Landlord may dispose of the possessions as agent for the Tenant;
(b) (if disposal is by sale) subject to paragraph (c) the Landlord shall
hold the proceeds of sale after deducting the costs and expenses of
removal, storage and sale incurred by it to the order of the Tenant;
(c) if the Tenant fails to claim the proceeds of sale within sixty
Business Days of the date of the sale, the Landlord may keep them;
(d) the Tenant indemnifies the Landlord against:
(i) any liability incurred by the Landlord to any third party whose
possessions have been sold by the Landlord in the mistaken
belief (which shall be presumed) that the possessions belonged
to the Tenant;
(ii) any damage caused to the Property by the possessions; and
(iii) all loss, damage, actions, proceedings, claims, demands, costs,
damages and expenses properly incurred or suffered by or
brought or awarded against the Landlord as a result of the
presence of the possessions on the Property after the Tenant
has left it at the End of Term.
(10) OTHER LAND
Nothing contained in or implied by this Lease shall:
(a) impose or be deemed to impose any restriction on the use of any land
or buildings not comprised in this Lease; or
(b) give the Tenant:
(i) the benefit of or the right to enforce or to have enforced or to
prevent the release or modification of any covenant, lease,
condition or stipulation entered into by any purchaser or tenant
from the Landlord in respect of any property not comprised in
this Lease; or
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(ii) the right to prevent or restrict in any way the development of
any land not comprised in this Lease.
(11) SEVERANCE
To the extent that any provision of this Lease is rendered void by section
25 of the Landlord and Tenant (Covenants) Act 1995, that provision shall be
severed from the remainder of this Lease which shall remain in full force
and effect. In this sub-clause "provision" includes a clause, a sub-clause
or a schedule or any part of any of them.
(12) PERPETUITY PERIOD
The perpetuity period applicable to this Lease is 80 years beginning on the
date of this Lease and whenever in this Lease either the Landlord or the
Tenant is granted a future interest it must vest within that period and if
it has not it will be void for remoteness.
(13) NOTICES IN WRITING
Every notice, consent, approval or direction given under this Lease shall
be in writing.
(14) COUNTERPARTS
This lease may be executed in any number of counterparts, all of which,
taken together, shall constitute one and the same lease and any party may
enter into this lease by executing a counterpart.
15. BREAK CLAUSE
The Tenant may terminate this Lease on 29th September 2013 (the
"Termination Date") by giving to the Landlord not less than one year and
one day's prior written notice subject, to the Tenant:
(1) paying any arrears of rent payable pursuant to clause 4(1) and VAT
thereon on or before the Termination Date;
(2) giving up vacant possession of the Property by the Termination Date
In such case the Term shall cease on the Termination Date and no party
shall have any further rights or obligations under this Lease, but this
shall not affect any rights or remedies which may have accrued at the
Termination Date to any party against the other in respect of any prior
breach of any of the covenants and conditions contained in the lease.
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16. NOTICES
(1) Any notice or other document served under this Lease may be served in any
way in which a notice required or authorised to be served under section 196
of the Law of Property Act 1925 may be served.
(2) During such period that the reversion to this Lease is vested in the
trustee of Schroder Exempt Property Unit Trust no notice shall be deemed to
be validly served on the Landlord unless a copy of such notice is also
served on Schroder Property Investment Management Limited at 31 Gresham
Street, London EC2V 7QA or such other address as the Landlord shall notify
to the Tenant.
17. GOVERNING LAW AND JURISDICTION
(1) This Lease is governed by and shall be construed in accordance with English
law.
(2) The Tenant and the Guarantor submit to the jurisdiction of the English
courts for all purposes relating to this Lease and appoint Dibb Lupton
Alsop (ref RSS) 125 London Wall London EC2Y 5AE (or such other person in
the UK as the Guarantor and the Tenant may from time to time nominate by
written notice to the Landlord) as agent of each of them for service of
process and so that each appointment shall be irrevocable until such time
as the Guarantor and the Tenant have given written notice to the Landlord
of an alternative person in the UK to accept service of process on their
behalf
I N W I T N E S S of which this Lease has been executed as a deed and has been
delivered on the date which first appears on page 1.
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SCHEDULE 1
THE PROPERTY
Land on the north side of Coronation Road, Park Royal London NW10 which for the
purpose of identification only is shown edged red on the Plan with the building
on it having a Gross Internal Area (as defined in the Code) of 12,986 square
feet and known as Unit 6, Phase 1 Matrix Park, Coronation Road, Park Royal,
London, NW10. In this Schedule the Code means the fourth edition of the Code of
Measuring Practice published by the Royal Institution of Chartered Surveyors and
the Incorporated Society of Valuers and Auctioneers.
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SCHEDULE 2
RIGHTS GRANTED TO THE TENANT
1. The right to use the Common Parts for all reasonable and appropriate
purposes connected with the use and enjoyment of the Property pursuant to
this Lease (subject to temporary interruption for repair and maintenance).
2. The right to park 17 motor cars in the Car Spaces.
3. The right to use the Conduits in the Estate which serve the Property
(subject to temporary interruption for repair, alteration or replacement).
4. The right of support and protection from the other parts of the Estate as
now enjoyed by the Property.
5. Subject to obtaining the prior written consent of the Landlord (such
consent not to be unreasonably withheld or delayed but which consent may be
made subject to reasonable requirements and conditions of the Landlord) the
right to lay within the Common Parts but along routes reasonably specified
by the Landlord additional Conduits to serve the Property.
6. Subject to the giving of reasonable prior notice to the Landlord and to
compliance with all reasonable requirements of the Landlord the right to
enter the Common Parts in order to maintain, repair, replace or alter any
Conduits now or hereafter exclusively serving the Property the Tenant
causing to others as little inconvenience and disturbance as practicable
and making good without delay all damage thereby occasioned.
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SCHEDULE 3
RIGHTS RESERVED TO THE LANDLORD
1. The right to use the Conduits in the Property which serve other parts of
the Estate, the right to install new Conduits for the benefit of the
remainder of the Estate and the right to repair, maintain and renew
existing and new Conduits.
2. The right to enter the Property to exercise any of the rights referred to
in this Schedule or for the purposes set out in clause 6(6) PROVIDED THAT
such right shall only be exercised (except in case of emergency) by giving
reasonable prior notice to the Tenant and by complying with the Tenant's
reasonable security and confidentiality requirements.
3. All rights of light or air or other easements or rights over or belonging
to any other land or buildings (including other parts of the Estate).
4. The right to build, re-build or carry out any works on any other land or
buildings (including other parts of the Estate) even if it interferes with
the passage of light or air to the Property or causes nuisance, damage,
annoyance or inconvenience to the Tenant or occupier of the Property by
noise, dust, vibration or otherwise provided that it does not materially
affect the ability of the Tenant or the occupier to use the Property for
any purpose permitted by this Lease.
5. The support and protection from the Property enjoyed by other parts of the
Estate.
6. The right to build, alter and install and afterwards to maintain buildings,
structures and fixtures on, into or projecting over or under or taking
support from the Property (but those buildings, structures and fixtures
shall not become part of the Property).
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SCHEDULE 4
MATTERS AFFECTING THE FREEHOLD
All matters registered or pending registration as at the date hereof in the
Property and Charges Registers of Title Number AGL54738 maintained by HM Land
Registry (with the exception of Financial charges, if any) and the Deed dated
7th August 1998 made between the Landlord and Railtrack insofar as such matters
affect the Property still subsist and are capable of enforcement.
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SCHEDULE 5
GUARANTEE PROVISIONS
1. The Guarantor guarantees to the Landlord the due and punctual payment and
performance by the Tenant of all the tenant's obligations and liabilities
under this Lease and shall indemnify the Landlord against all losses,
damages, costs and expenses arising or incurred by the Landlord as a result
of the non-payment or non-performance of those obligations or liabilities.
2. The obligations of the Guarantor under this Lease:
(a) constitute a direct, primary and unconditional liability to pay on
demand to the Landlord any sum which the Tenant is liable to pay under
this Lease and to perform on demand by the Landlord any obligation of
the Tenant under this Lease without the need for any recourse on the
part of the Landlord against the Tenant;
(b) will not be affected by:
(i) any time or indulgence granted to the Tenant by the Landlord;
(ii) any legal limitation, disability or other circumstances
relating to the Tenant or any irregularity, unenforceability or
invalidity of any obligations of the Tenant under this Lease;
(iii) any licence or consent granted to the Tenant or any variation
in the terms of this Lease save as provided in section 18 of
the Landlord and Tenant (Covenants) Act 1995;
(iv) the release of one or more of the parties defined as the
Guarantor (if more than one); or
(v) any other act, omission, matter, event or thing whereby (but
for this provision) the Guarantor would be exonerated in whole
or in part from the guarantee other than a release by deed
given by the Landlord.
3. So long as this guarantee remains in force the Guarantor shall not:
(a) in the event of any bankruptcy, liquidation, rehabilitation,
moratorium or other insolvency proceedings relating to the Tenant,
claim or prove as creditor in competition with the Landlord; or
(b) be entitled to claim or participate in any security held by the
Landlord in respect of the obligations of the Tenant under this Lease;
or
(c) exercise any right of set-off against the Tenant.
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4. If the Landlord brings proceedings against the Tenant, the Guarantor shall
be bound by any findings of fact, interim or final award or interlocutory
or final judgment made by an arbitrator or the court in those proceedings
in so far as the same relate to the subject matter of this Lease PROVIDED
THAT the Landlord shall have served a copy of the writ summons petition or
similar process which initiated such proceedings on the Guarantor before
the expiry of 7 days after such proceedings were initiated
5. If:
(a) the Tenant (being a company) enters into liquidation and the
liquidator disclaims this Lease; or
(b) the Tenant (being a company) is dissolved and the Crown disclaims this
Lease; or
(c) the Tenant (being an individual) becomes bankrupt and the trustee in
bankruptcy disclaims this Lease; or
(d) this Lease is forfeited,
then within six months after the disclaimer or forfeiture the Landlord may
require the Guarantor by notice to accept a lease of the Property for a
term equivalent to the residue which would have remained of the Term if
there had been no disclaimer or forfeiture at the same rents and subject to
the same covenants and conditions (including those as to the review of
rent) as are reserved by and contained in this Lease (with the exception of
this Schedule).
6. The new lease and the rights and liabilities under it shall take effect as
from the date of the disclaimer or forfeiture and the Guarantor shall be
liable for all payments due under the new lease as from the date of
disclaimer or forfeiture as if the new lease had been granted on the date
of disclaimer or forfeiture.
7. The Guarantor or his personal representatives shall pay the Landlord's
costs of and accept the new lease and shall execute and deliver to the
Landlord a counterpart of it.
8. If the Landlord does not require the Guarantor to take a Lease of the
Property, the Guarantor shall pay to the Landlord on demand a sum equal to
the rent that would have been payable under this Lease but for the
disclaimer or forfeiture in respect of the period from the date of the
disclaimer or forfeiture until the date which is six months after the date
of the disclaimer or forfeiture or the date on which the Property has been
re-let by the Landlord, whichever first occurs.
9. If any VAT is payable by the Tenant to the Landlord under the terms of the
Lease, the Guarantor's obligation shall extend to that VAT. If the
Guarantor makes any payment in respect of VAT, the Landlord's obligation to
issue a VAT invoice to the Tenant under the Lease in respect of that VAT
shall not be affected, and the Landlord shall not be under any obligation
to issue a VAT invoice to the Guarantor in respect of that VAT.
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SCHEDULE 6
AUTHORISED GUARANTEE PROVISIONS
1. The Guarantor guarantees to the Landlord the performance by the Assignee
throughout the Guarantee Period of each of the covenants falling to be
complied with by the tenant under this Lease and shall indemnify the
Landlord against all losses, damages, costs and expenses arising or
incurred by the Landlord as a result of such non-performance.
2. The obligations of the Guarantor under this guarantee will not be affected
by:
(a) any time or indulgence granted to the Assignee by the Landlord;
(b) any legal limitation, disability or other circumstances relating to
the Assignee or any irregularity, unenforceability or invalidity of
any obligations of the Assignee under this Lease;
(c) any licence or consent granted to the Assignee or any variation in the
terms of this Lease save as provided in section 18 of the Act;
(d) the release of one or more of the parties defined as the Guarantor (if
more than one); or
(e) any other act, omission, matter, event or thing whereby (but for this
provision) the Guarantor would be exonerated in whole or in part from
the guarantee other than a release under seal given by the Landlord.
3. The Guarantor is liable to the Landlord under this guarantee as sole or
principal debtor and the obligations of the Guarantor under this guarantee
constitute a direct, primary and unconditional liability to pay on demand
to the Landlord any sum which the Assignee is liable to pay under this
Lease and to perform on demand by the Landlord any obligation of the
Assignee under this Lease without the need for any recourse on the part of
the Landlord against the Assignee. If the Landlord brings proceedings
against the Assignee, the Guarantor shall be bound by any findings of fact,
interim or final award or interlocutory or final judgment made by an
arbitrator or the court in those proceedings.
4. If during the Guarantee Period the Assignee (being a company) enters into
liquidation and the liquidator disclaims this Lease, or the Assignee (being
a company) is dissolved and the Crown disclaims this Lease, or the Assignee
(being an individual) becomes bankrupt and the trustee in bankruptcy
disclaims this Lease, then within six months after the disclaimer the
Landlord may require the Guarantor by notice to enter into a new lease of
the Property for a term equivalent to the residue which would have remained
of the term granted by this Lease if there had been no disclaimer at the
same rents and subject to the same covenants and conditions (including as
to the review of rent) as are reserved by and contained in this Lease.
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<PAGE>
5. The new lease and the rights and liabilities under it shall take effect as
from the date of the disclaimer and the Guarantor shall be liable for all
payments due under the new lease as from the date of disclaimer as if the
new lease had been granted on the date of disclaimer.
6. The Guarantor shall pay the Landlord's costs of and accept the new lease
and shall execute and deliver to the Landlord a counterpart of it.
7. If the Landlord does not require the Guarantor to take a new lease of the
Property the Guarantor shall pay to the Landlord on demand a sum equal to
the rents that would have been payable under this Lease but for the
disclaimer in respect of the period from the date of the disclaimer until
the date which is six months after the date of the disclaimer or the date
on which the Property has been re-let by the Landlord, whichever first
occurs.
8. During the Guarantee Period the Guarantor shall not;
(a) in the event of any bankruptcy, liquidation, rehabilitation,
moratorium or other insolvency proceedings relating to the Assignee
claim or prove as creditor in competition with the Landlord; or
(b) be entitled to claim or participate in any security held by the
Landlord in respect of the Assignee's obligations to the Landlord
under this Lease; or
(c) exercise any right of set off against the Assignee.
9. To the extent that any provision of this guarantee does not conform with
section 16 of the Act, that provision shall be severed from the remainder
of this guarantee and this guarantee shall have effect as if it excluded
that provision.
10. If any VAT is payable by the Tenant to the Landlord under the terms of the
Lease, the Guarantor's obligation shall extend to that VAT. If the
Guarantor makes any payment in respect of VAT, the Landlord's obligation to
issue a VAT invoice to the Assignee under the Lease in respect of that VAT
shall not be affected, and the Landlord shall not be under any obligation
to issue a VAT invoice to the Guarantor in respect of that VAT.
11. In this Schedule:
"ACT" means the Landlord and Tenant (Covenants) Act 1995;
"ASSIGNEE" means [INSERT NAME OF ASSIGNEE IN RESPECT OF WHOM THE TENANT IS
ENTERING INTO THE AUTHORISED GUARANTEE AGREEMENT];
"GUARANTEE PERIOD" means the period during which the Assignee is bound by
the covenants by the Tenant in this Lease; and
"GUARANTOR" means the outgoing Tenant.
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<PAGE>
SCHEDULE 7
SERVICE CHARGE COSTS
1. The cost of inspecting, repairing, maintaining, cleaning, decorating and
lighting the whole of the Retained Areas (including any party walls
separating Lettable Areas) including any retaining walls situate on the
Estate and the boundary walls and fences of the Estate and all Conduits
serving the Estate (excluding those serving solely any of the Lettable
Areas).
2. The cost of providing the services referred to in clause 7(3).
3. The cost of the maintenance (including planting) of all open and landscaped
areas within the Retained Area.
4. The cost of the erection and maintenance of directional or other signs or
notice boards relating to the Estate or it occupiers.
5. The cost of the establishment and enforcement of regulations for the
benefit or better ordering of the Estate or any part of the Estate.
6. The cost of providing caretaking and security services to the Estate.
7. The cost of marking out the roads, footpaths, service areas, loading bays
and all other relevant parts of the Retained Areas.
8. The cost of refuse disposal.
9. The cost of all fuel for the functions referred to in the other paragraphs
of this Schedule.
10. All Outgoings (as defined in clause 6(3)) assessed, charged or imposed on
the Estate as a whole and the Retained Areas.
11. Any amount which the Landlord may be called upon to pay as a contribution
towards the expense of making, repairing, maintaining, cleaning or lighting
anything used by the Estate and any nearby property.
12. The cost of complying with, making representations against or contesting
the incidence of any enactment relating or alleged to relate to the Estate.
13. All professional fees reasonably and properly incurred by the Landlord in
connection with the administration and the general management of the Estate
including (without limitation):
(a) the Landlord's agent's fees in connection with management of the
Estate (excluding rent collection); and
(b) fees payable in connection with the service charge account.
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<PAGE>
14. The reasonable fees of the Landlord or any company associated with the
Landlord where the Landlord or that company, rather than a third party,
undertakes any obligations under this Lease or other function referred to
in this Schedule.
15. The interest and fees on borrowing any money to finance any of the
functions referred to in this Schedule.
16. Any other sum properly incurred by the Landlord in connection with the
management of the Estate.
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<PAGE>
SIGNED as a deed by )
Michael Colin Warner Trust Manager )
as attorney for LLOYDS BANK PLC )
in the presence of: )
Witness' /s/ A.G. Schofield
Signature: ..................................
Name : ....A.G. Schofield....................
Address : Lloyds Bank
Securities Service
Hay's Lane House
1, Hay's Lane
London SE1 2HA
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<PAGE>
LLOYDS BANK SECURITIES SERVICES
-------------------------------
POWER OF ATTORNEY FOR EXECUTION OF DOCUMENTS
--------------------------------------------
By this power of attorney given on the eigth day of July 1998 Lloyds Bank Plc
whose registered office is at 71 Lombard Street, London EC3P 3BS ("the bank")
hereby appoints:
Julian Maxwell Ansell
Christopher Baldwin
Ian Martin Bransgrove
Paul Burgess
Martin Robert Clark
Sheila Mary Colley
David Croker
Andrew Donner
Steven Michael Dugay
Christopher John Edmeades
Colin Grant
Anthony Charles Jennings
Lesley Kean Kings
Wayne Paul Kitcat
John Willis Lamb
Graham Paul Lisle
Donald Patrick McIver
Jacqueline Kay Morley
Iain Christopher Mylchreest
Keith William Parker
Ronald Llewellyn Porter
Graham David Reeve
Stephen Harold Robson
Michael Edward Tomlin
Paul Arthur Turner
Richard Andrew Vesey
David James Watson
David Albert Charles Evans
Andrew Robert Gooding
Alison Pearce
Thomas Richard Pool
Mark Charles Thatcher
Paul Andrew Vickery
Richard William Warrington
Michael Colin Warner
Frank Michael Welpa
all of Lloyds Bank Securities Services, jointly and severally, to be attorneys
of the bank in its capacity as trustee, personal representative, nominee,
mortgagee or chargee, only for the purpose of carrying into effect matters
determined upon by the bank in any of these capacities, to sign, seal, execute
and deliver any deed or document considered necessary or desirable:
(1) to convey, transfer, assign, lease, let, underlet, surrender, sell or grant
options, rights of preemption or any other rights over any real or personal
property;
(3) to postpone, defer, subordinate or otherwise regulate the priority or
ranking of any mortgage, charge, debenture or other security;
(4) to vary, alter, amend, modify, revise, replace or substitute any deed or
document to which the bank is a party;
(5) to transfer any stocks, shares or other securities held by or registered in
the name or under the control of the bank and to authorise any person to
exercise any rights attached in any such stocks, shares or other
securities;
(6) to give such indemnities as may be necessary in favour of any person or
body of persons including without limitation indemnities in respect of
lost, destroyed or mislaid certificates, allotment letters or other
documents relating to stocks, shares or other securities;
(7) to grant easements or any other rights over or impose covenants or any
other restrictions on or consent to the letting, underletting, assignment,
surrender or alteration of any freehold or leasehold property;
(8) to assent to the vesting in any person of any real or personal property;
(9) to declare, constitute, regulate, record, vary, alter, amend or modify any
trust, settlement or family arrangement and to appoint or retire any
trustee, including the bank, of any trust, settlement or family
arrangement;
(10) to purchase, lease, acquire or otherwise take into the name of the bank or
under its control any real or personal property whatsoever or wheresoever
or any options, rights of preemption or any other rights over real or
personal property; and
(11) to manage, develop, refurbish, repair, reinstate or otherwise carry out any
works upon any real property whatsoever or wheresoever.
and generally for all or any of the purposes aforesaid to act as attorneys of
the bank. The common seal of the bank was affixed to this deed the date and
year first above written. Given under the common seal of Lloyds Bank Plc as a
deed.
Authorised signatory
Authorised counter signatory
<PAGE>
Schedule referred to in Clause 6(27)
1. Permanent and temporary generator systems including enclosures and fuel
tanks with the associated electronic and manual switch gear.
2. Mechanical Systems ie. Air Conditioning, and condenser systems, air
handlers and electrical dampers.
3. Raised Flooring, Racking, Cage materials, cabinets and patch panels,
Mezzanine flooring.
4. UPS Battery Systems including electrical switch gear.
5. Any customer satellite dishes installed on roof or parking lot areas.
6. FM200 fire suppression canisters, piping and nozzles.
7. VESDA or smoke sensor stations in ceiling or floor area.
8. Inside or outside security cameras, access card reader stations, VCR,
multiplexer, monitors and computers.
9. Parition and conference room furniture systems and freestanding,
cabinets, storage units.
10. Telephone and voice mail system with desk stations and receptionist,
computers, servers, printers, phone sets.
11. Fibre Muxes or other Telco equipment installed in MPOE rooms.
12. Emergency distribution board and telephone backboard with connectors.
13. Maintenance bypass electronic and manual switch gear.
14. Transformers and Power Distributions Units installed on premises.
15. Kitchen appliances like microwaves, refrigerators and vending machines.
16. Console monitors, screen projection and screens in command centre.
17. Bulletproof/resistant glass.
18. Satellite dishes or other communications equipment installed on roof or
in parking lot.
<PAGE>
DATED 24th December 1998
LLOYDS BANK PLC
(as trustee of Schroder Exempt Property Unit Trust)
- and -
EXODUS INTERNET LIMITED
- and -
EXODUS COMMUNICATIONS INC
---------------------------------
L E A S E
of property known as
Unit 7 Phase 1 Matrix Park,
Coronation Road, Park Royal, London NW10
---------------------------------
ALLEN & OVERY
London
PY0397912.06
H.M. LAND REGISTRY
<PAGE>
Land Registration Acts 1925-1988
County & District: London Boroughs & Ealing and Brent
Title Number: AGL54738
Property: Unit 7 Phase 1 Matrix Park, Coronation Road, Park
Royal, London NW10
THIS LEASE is made on 24th December, 1998
BETWEEN:
(1) LLOYDS BANK PLC (registered number 2065) (as trustee of Schroder Exempt
Property Unit Trust) whose registered office is at 71 Lombard Street,
London EC3P 3BS (the "LANDLORD");
(2) EXODUS INTERNET LIMITED (registered number 3591136) whose registered office
is at Fountain Precinct Balm Green Sheffield South Yorkshire S1 1RZ (the
"TENANT"); and
(3) EXODUS COMMUNICATIONS INC of 2650 San Thomas Expressway, Santa Clara
CA95051, USA (the "GUARANTOR").
This Lease is a new tenancy for the purposes of section 1 of the Landlord and
Tenant (Covenants) Act 1995.
THIS DEED WITNESSES as follows:
1. DEFINITIONS
In this Lease:
"AUTHORISED GUARANTEE AGREEMENT" means an authorised guarantee agreement as
defined in section 16 of the Landlord and Tenant (Covenants) Act 1995;
"BUSINESS DAY" means a day (other than a Saturday or Sunday) on which banks
are generally open in London for normal business;
"CAR SPACES" means the 17 parking spaces within the areas shown edged green
on the Plan from time to time designated by the Landlord for the Tenant's
use;
"CLEARING BANK" means a bank which is a member of CHAPS Clearing Company
Limited;
"COMMON PARTS" means the roads, footpaths, service areas, car parks,
loading bays, landscaped and open areas, entrances and other areas from
time to time during the Term provided by the Landlord for common use by the
tenants of the Estate (but shall not include
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<PAGE>
any such items as may exclusively serve and be demised to a tenant of any
Unit) but for the avoidance of doubt the common parts shall always include
the road coloured brown on the Plan and the Car Spaces and shall afford the
Tenant access to and from the Property and the Car Spaces;
"CONDUITS" includes those for sewage, water, gas, electricity,
telecommunications and data processing;
"DEFAULT INTEREST RATE" means four per centum per annum above the Interest
Rate;
"END OF THE TERM" includes the expiry of the Term by effluxion of time or
the determination of the Term by forfeiture, surrender, merger, notice or
in any other way;
"ESTATE" means Phases 1 and 3 Matrix Park Coronation Road Park Royal London
NW10 the present extent of which is shown edged green on the Estate Plan
but such expression shall mean such greater or lesser area which shall
include the Property and which shall from time to time be managed by the
Landlord as a single estate (including all buildings and other structures
on and all parts of such estate);
"ESTATE PLAN" means the plan numbered A3159/0/38 annexed to this Lease;
"GUARANTOR" includes the person named in this Lease as guarantor, if any,
and any other person who is for the time being a guarantor in respect of
the Tenant's obligations under this Lease and his personal representatives
and successors;
"INSURED RISKS" means fire, lightning, explosion, earthquake, aircraft and
other aerial devices and articles dropped from them, escape of oil, impact
by vehicles or animals, riot, civil commotion, strikes and labour
disturbances, storm, flood, bursting and overflowing of water tanks,
apparatus or pipes and other risks against which the Landlord reasonably
decides from time to time to insure and any other risks that the Tenant
shall reasonably require to be included and which the insurers shall accept
subject to such exclusions, limitations and excesses as are imposed by its
insurers and to the extent to which the risks mentioned in this definition
are insurable with the Landlord's insurers but shall include loss or damage
by acts of terrorism if and only to the extent that the Landlord has
insured against acts of terrorism;
"INTEREST RATE" means the base rate for the time being of Lloyds Bank Plc
or of another Clearing Bank designated from time to time by the Landlord or
if there is no such base rate the rate from time to time prescribed under
section 32 of the Land Compensation Act 1961;
"LANDLORD" includes the person for the time being entitled to the reversion
immediately expectant on the End of the Term;
"LEASE" means this lease, all deeds varying this lease and all licences and
consents granted under this lease or under any deed of variation;
"LETTABLE AREAS" means all buildings on the Estate designed to be let for
commercial use;
"PARKING AREA" means the car parking areas forming part of the Estate
including the Car Spaces;
"PLAN" means the plan annexed to this Lease numbered A3159:0:01;
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<PAGE>
"PLANNING ACTS" means the Town and Country Planning Act 1990, the Planning
(Listed Building and Conservation Areas) Act 1990, the Planning (Hazardous
Substances) Act 1990, the Planning (Consequential Provisions) Act 1990 and
the Planning and Compensation Act 1991;
"PROPERTY" means the property described in Schedule 1 and every part of it
and all additions and alterations to it and includes (without limitation):
(a) every part of all buildings and other structures now or during the
Term on the property including walls, roofs, foundations, load-bearing
parts, doors, windows and Conduits exclusively serving the Property;
(b) landlord's fixtures and fittings including floor coverings;
(c) electrical and mechanical installations, plant, equipment and
machinery including (without limitation) lifts, heating plant, air
conditioning plant and ventilation plant and radiators;
(d) one half (severed vertically) of any wall separating the Property from
any adjoining Unit;
(e) service areas, loading bays and landscaped and open areas; and
(f) boundary walls and fences (if any);
"QUARTER DAYS" means 25th March, 24th June, 29th September and 25th
December in every year;
"RENT" includes all sums reserved as rent by this Lease and any interim
rent determined under the Landlord and Tenant Act 1954;
"RETAINED AREAS" means the whole of the Estate other than the Units;
"REVIEW DATE" means 24th September in the year 2003 and in every fifth
year after that year for so long as the Term continues;
"REVIEW PERIOD" means the period starting with any Review Date up to the
next Review Date or starting with the last Review Date up to the End of the
Term;
"TENANT" includes the Tenant's successors in title;
"TERM" means the term granted by this Lease and any statutory or other
continuation or extension of it or any holding over;
"TERM COMMENCEMENT DATE" means the date of commencement of the Term
specified in clause 3(1);
"UNITS" means the units of accommodation on the Estate that are let or
otherwise exclusively occupied or designed or intended for letting or
exclusive occupation and "Unit" shall mean any one of them;
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<PAGE>
"VAT" means value added tax and any imposition or levy of a like nature;
and
"VATA 1994" means the Value Added Tax Act 1994.
2. INTERPRETATION
(1) Where there are two or more persons included in the expressions "the
Landlord", "the Tenant" or "the Guarantor" each reference to the Landlord,
the Tenant or the Guarantor includes a separate reference to each of those
persons.
(2) Any reference, express or implied, to an enactment includes references to:
(a) that enactment as amended, extended or applied by or under any other
enactment (before or after this Lease);
(b) any enactment which that enactment re-enacts (with or without
modification);
(c) any subordinate legislation made (before or after this Lease) under
that enactment, as amended, extended or applied as described in
paragraph (a) above or under any enactment referred to in paragraph
(b) above; and
(d) any consents, licences and permissions given (before or after this
lease) under that enactment, as amended, extended or applied as
described in paragraph (a) above or under any enactment referred to in
paragraph (b) above or under that subordinate legislation and any
conditions contained in those consents, licences and permissions.
(3) Any reference, express or implied, to enactments generally includes
subordinate legislation and any legislation of the European Union that is
directly applicable in the United Kingdom and includes existing enactments
and those that come into effect during the Term.
(4) Sub-clauses (1) to (3) above apply unless the contrary intention appears.
(5) The headings in this Lease do not affect its interpretation.
3. LEASE
(1) The Landlord lets the Property to the Tenant together with the rights set
out in Schedule 2 but except and reserving to the Landlord the rights set
out in Schedule 3 for the term of twenty five years commencing on and
including 29th September 1998 subject to all rights and covenants affecting
the Property including (without prejudice to the generality of the
foregoing) the matters contained or referred to in Schedule 4 at a yearly
rent ascertained in accordance with clause 4.
(2) The rights granted to the Tenant are granted in common with the Landlord,
any person authorised by the Landlord and everyone else having the like or
similar rights.
(3) This Lease does not include any rights other than those set out in Schedule
2.
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<PAGE>
(4) The rights excepted and reserved to the Landlord are also excepted and
reserved to those authorised by the Landlord and everyone else entitled to
them.
4. RENT AND RENT REVIEW
(1) RENT
The yearly rent shall be:-
(a) until 16th May 1999 the rent of one peppercorn (if demanded);
(b) from and including 17th May 1999, until the first Review Date the
rent of one hundred thousand eight hundred and fifty pounds seventy
five pence ((Pounds)100850.75); and
(c) during each successive Review Period a rent equal to the rent
previously payable under this Lease (or the rent which would be
payable but for any abatement or suspension of rent under this Lease)
or the revised rent ascertained in accordance with this clause,
whichever is the greater.
(2) RENT PAYMENT DATES
The yearly rent is payable without any deduction by equal quarterly
payments in advance on the Quarter Days. The first payment (which is an
apportioned sum) is to be made on 17th May 1999 in respect of the period
commencing on 17th May 1999 and ending on 23rd June 1999.
(3) RENT REVIEW - METHOD
The revised rent for any Review Period may be agreed in writing at any time
between the Landlord and the Tenant or (in the absence of agreement)
determined not earlier than the relevant Review Date by an independent
valuer (acting as an expert and not as an arbitrator) of recognised
standing and having experience in letting and valuing property of a like
kind and character to the Property.
(4) NOMINATION
The independent valuer may be nominated in the absence of agreement by or
on behalf of the president for the time being of the Royal Institution of
Chartered Surveyors on the application of either the Landlord or the Tenant
made not earlier than three months before the relevant Review Date.
(5) RENT REVIEW - AMOUNT
In the case of valuation the revised rent to be determined by the valuer
shall be such as he shall decide is the yearly rent at which the Property
might reasonably be expected to be let at the relevant Review Date
(a) after the expiry of a rent free period or a concessionary rent period
given for fitting-out purposes only of such length and the giving of
such other inducements
-5-
<PAGE>
(including, without limitation, any rental concession, capital payment
or contribution to fitting out-costs) given for fitting out purposes
only as in either case would be negotiated in the open market between
a willing landlord and a willing tenant so that the yearly rent is
that payable after the expiry of any such rent free period or
concessionary rent period and after the giving of such inducement; and
(b) on the assumptions set out in sub-clause (6) but disregarding the
matters set out in sub-clause (7).
(6) ASSUMPTIONS
The assumptions are that at the relevant Review Date:
(a) the Property:
(i) is available to let on the open market by a willing landlord to
a willing tenant by one lease without a premium from either
party and with vacant possession for a term of 10 years or a
term equal to the residue then unexpired of the Term (whichever
be the longer) but in either event commencing on the relevant
Review Date with the rent payable from then;
(ii) is to be let as a whole on a lease which is to contain the same
terms as this Lease (other than the amount of the rent referred
to in sub-clause (1)(a) and (b) and any rent free or reduced
rent period allowed to the Tenant but including the provisions
for review of that rent at the same intervals as those in this
Lease) the first Review Date in that lease being the fifth
anniversary of the relevant Review Date;
(iii) is fit and available for immediate occupation and use with
connections to all mains services independently of any other
Unit and with the inclusion of an internal dividing wall between
the Property and the adjacent Unit numbered 6 built to the same
specification as the internal dividing wall between Units 5 and
6 and is ready to be fitted out for the incoming tenant's use as
authorised by this Lease; and
(iv) may be used for any of the purposes permitted by this Lease
including any purpose which falls within the same use class
(under the Town & Country Planning (Use Classes) Order for the
time being in force) as the purpose permitted by this Lease;
(b) all the covenants in this Lease by the Landlord and the Tenant have
been performed and observed; and
(c) no work has been carried out to the Property which has diminished the
rental value and in case the Property has been destroyed or damaged it
has been fully restored.
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<PAGE>
(7) DISREGARDS
The matters to be disregarded are:
(a) any effect on rent of the fact that the Tenant, its subtenants or
their respective predecessors in title have been in occupation of the
Property;
(b) any goodwill attached to the Property by reason of the carrying on at
it of the business of the Tenant, its subtenants or their predecessors
in title in their respective businesses; and
(c) any increase in rental value of the Property attributable to the
existence at the relevant Review Date of any improvement carried out
with consent of the Landlord (where required) but not under an
obligation to the Landlord or its predecessors in title to the
Property carried out by and at the cost of the Tenant, its subtenants
or their respective predecessors in title during the Term or during
any earlier period of occupation arising out of an agreement to grant
the Term.
(8) VALUER
In the case of determination by a valuer:
(a) the fees and expenses of the valuer including the cost of his
appointment shall be borne as he shall decide or in the absence of any
decision equally by the Landlord and the Tenant who shall otherwise
each bear their own costs;
(b) the valuer shall afford the Landlord and the Tenant an opportunity to
make representations to him; and
(c) if the valuer dies, delays or becomes unwilling or incapable of acting
or if for any other reason the president for the time being of the
Royal Institution of Chartered Surveyors or the person acting on his
behalf thinks fit he may discharge the valuer and appoint another in
his place.
(9) MEMORANDUM
When the revised rent has been ascertained memoranda of it shall be signed
by or on behalf of the Landlord and the Tenant and annexed to this Lease
and the counterpart of it and the Landlord and the Tenant shall bear their
own costs in respect of the memoranda.
(10) INTEREST
If the revised rent payable with effect from any Review Date has not been
agreed by that Review Date rent shall continue to be payable at the rate
previously payable. Forthwith on the revised rent being ascertained the
Tenant shall pay to the Landlord any shortfall between the rent and the
revised rent payable up to and on the preceding quarter day together with
interest at the Interest Rate compounded quarterly on each part of the
shortfall from the date or respective dates on which each part would have
been due for payment had the revised rent been ascertained before the
relevant Review Date until the date of payment.
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<PAGE>
For the purpose of this clause the revised rent shall be deemed to have
been ascertained on the date when it has been agreed between the Landlord
and the Tenant or the date of the determination by the valuer.
(11) COSTS
If either the Landlord or the Tenant fails to pay the relevant part of the
fees and expenses of the valuer under sub-clause (8) within 15 Business
Days of the same being demanded by the valuer the other shall be entitled
to pay the same and the amount so paid shall be repaid on demand by the
party chargeable and recoverable from that party as a debt due.
(12) TIME NOT OF THE ESSENCE
Time shall not be of the essence for the purposes of this clause 4.
5. SERVICE CHARGE
(1) The Tenant shall pay to the Landlord the Provisional Service Charge without
any deduction by equal quarterly payments in advance on the Quarter Days.
The first payment (which is an apportioned sum) is to be made on the date
hereof in respect of the period commencing on 17th December 1998 and
ending on the next following Quarter Day.
(2) As soon as possible after every Accounting Date the Landlord shall prepare
and supply to the Tenant an account:
(a) showing the Gross Expenses, the Income and the Net Expenses for the
Financial Year referred to in the account;
(b) containing a fair summary of the items referred to in it; and
(c) certified by the Landlord or its agents (who may be the managing
agents for the Estate).
The account shall be conclusive evidence of all matters of fact referred to
it in it (save in the case of manifest error) and the Tenant shall be
afforded on request reasonable facilities for inspecting and taking copies
of the accounts and receipts and other documents supporting the account.
(3) In the case of the first Accounting Date after the date for commencement of
payment of the Provisional Service Charge specified in clause 5(1), if the
proportion of the Tenant's Share of the Net Expenses shown in the account
apportioned on a daily basis for the period from that date to the
Accounting Date:
(a) exceeds the amount already paid as Provisional Service Charge before
the first Accounting Date, the Tenant shall pay the excess to the
Landlord within 14 days of written demand; and
(b) is less than the amount already paid as Provisional Service Charge
before the first Accounting Date, the Landlord shall credit the excess
to the Tenant against the next quarterly payment of Provisional
Service Charge.
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<PAGE>
(4) In the case of every subsequent Accounting Date, if the Tenant's Share of
the Net Expenses shown in the account for the period beginning on the day
after the previous Accounting Date and ending on that Accounting Date:
(a) exceeds the amount paid as Provisional Service Charge during that
period, the Tenant shall pay the excess to the Landlord within 14 days
of written demand; and
(b) is less than the amount paid as Provisional Service Charge during that
period, the Landlord shall credit the excess to the Tenant against the
next quarterly payment of Provisional Service Charge or repay the
excess in respect of the last year of the Term.
(5) If the Landlord fails to include in any account for a Financial Year a sum
expended or liability incurred in that year the Landlord may include such
sum or the amount of such liability in an account for any subsequent
Financial Year.
(6) All sums payable under this clause shall be reserved as rent.
(7) In this clause:
"ACCOUNTING DATE" means 31st December or any other date that the Landlord
may nominate;
"FINANCIAL YEAR" means a year ending on an Accounting Date;
"GROSS EXPENSES" means all the expenses incurred by the Landlord in
connection with the Estate including, without limitation, the matters
referred to in Schedule 7;
"GROSS INTERNAL AREA" has the meaning ascribed to that expression in the
Code of Measuring Practice published by the Royal Institution of Chartered
Surveyors and the Incorporated Society of Valuers and Auctioneers (4th
Edition);
"INCOME" means:
(a) any insurance money received under an insurance policy which the
Landlord was obliged to effect under this Lease where the Landlord has
incurred expenses in making good the insured loss itself; and
(b) any money received from any person (other than the service charge paid
by the tenants in the Estate) who was liable to contribute to the cost
of compliance with the Landlord's obligations under this Lease where
the Landlord has itself incurred the expense towards which that person
contributed;
"NET EXPENSES" means the amount by which Gross Expenses exceeds Income;
"PROVISIONAL SERVICE CHARGE" means:
(a) in respect of the period from the 17th December 1998 to the next
following Accounting Date, the annual sum of (Pounds)3,903.90; and
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(b) in respect of each subsequent Financial Year, the sum fixed from time
to time by the Landlord or its agents acting reasonably (who may be
the managing agents for the Estate) as being a reasonable estimate of
the Tenant's Share of the Net Expenses for the relevant Financial
Year;
"TENANT'S SHARE" means the same proportion of the Net Expenses as the Gross
Internal Area of the Property from time to time bears to the Gross Internal
Area of the Lettable Areas at such time provided always that if the
Landlord shall consider that having regard to the nature and degree of use
by the Tenant or other tenants on the Estate of the facilities covered by
the Gross Expenses or any other factors which the Landlord may reasonably
consider relevant some other proportion ought properly to be payable by the
Tenant the Landlord may substitute such other percentage as it shall
consider reasonable either with regard to all or any items making up the
Net Expenses provided that the proportion of the Net Expenses payable by
the Tenant shall not be increased by reason solely or in part of any
Lettable Areas being vacant or unlet.
6. TENANT'S COVENANTS
(1) INTRODUCTION
The Tenant covenants with the Landlord to comply with its obligations set
out in this clause and in clauses 5, 8 and 9.
(2) RENT
The Tenant shall:
(a) pay the yearly rent to the Landlord at the times and in the manner
referred to in clause 4 without any deduction; and
(b) not exercise or seek to exercise any right or claim to withhold rent
or any right or claim to legal or equitable set-off.
(3) OUTGOINGS
The Tenant shall:
(a) pay all present and future Outgoings assessed, charged or imposed on,
or payable in respect of the Property or the Car Spaces or assessed,
charged or imposed on, or payable by the owner or occupier of the
Property or the Car Spaces;
(b) pay the proportion properly attributable to the Property or the Car
Spaces of all Outgoings assessed, charged or imposed on or payable in
respect of the Property and other properties or the Car Spaces and
other car spaces or assessed, charged or imposed on or payable by the
owner or occupier of the Property and other properties or the Car
Spaces and other car spaces;
(c) pay all charges for the supply to and consumption at the Property of
water, gas and electricity and all charges for telecommunications
(including equipment rents) and observe and perform all regulations of
the supply authorities;
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(d) where such charges as are referred to in paragraph (c) are made in
relation to the Property and other properties or upon the owner or
occupier of the Property and other properties, pay the suppliers and
indemnify the Landlord against the proportion of those charges
properly attributable to the Property or its owner or occupier; and
(e) if the Landlord loses rating relief because it has been allowed to the
Tenant or any other person deriving title under the Tenant during the
Term, make good that loss to the Landlord.
Provided that the Tenant shall not be obliged to pay such sums referred to
above to the extent that the same have been recovered by the Landlord under
Clause 5.
In this sub-clause "OUTGOINGS" means rates, taxes, duties, charges,
assessments, impositions and outgoings whether parliamentary, parochial,
local or of any other description and whether of the nature of capital or
revenue and even though of a wholly novel character and the proportion
referred to in paragraphs (b) and (d) shall be determined by the Landlord
acting reasonably and shall be conclusive save as to questions of law and
save in cases of manifest error.
(4) REPAIR
The Tenant shall:
(a) put and keep the Property in good repair and condition, but shall not
be obliged to repair damage caused by an Insured Risk save where:
(i) the damage is not insured because of an exclusion, limitation or
excess imposed by the insurers; or
(ii) and to the extent that the insurance monies are irrecoverable in
whole or in part because of the act, default or omission of the
Tenant, any person deriving title under the Tenant or anyone at
the Property with the express or implied authority of any of
them;
(b) replace all the Landlord's fixtures and fittings in the Property which
become beyond repair during the Term with those of no lesser quality;
(c) keep all windows and other glass in the Property (both inside and
outside) clean, cleaning them at least once a month and more
frequently where necessary;
(d) keep any open area within the Property adequately surfaced (where
appropriate) in good condition, properly cultivated (where landscaped)
and free from weeds;
(e) enter into and maintain throughout the Term fully comprehensive
maintenance contracts in respect of all plant, equipment and machinery
forming part of the Property with a reputable company or companies and
produce the contracts to the Landlord on demand with evidence that any
payments due under them are paid up to date;
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(f) ensure that the electrical circuits within the Property comply with
the then current regulations of the Institute of Electrical Engineers
or other amended standards or recommended current codes of practice
(save that this shall not obligate the Tenant to upgrade the existing
circuits within the Property save where it is unlawful not to do so);
and
(g) notify the Landlord of all defects in the Property which are relevant
defects for the purpose of section 4 of the Defective Premises Act
1972.
(5) REDECORATION
The Tenant shall redecorate the exterior of the Property in every third
year and in the last year of the Term and the interior of the Property in
every fifth year and in the last year of the Term in colours and patterns
which, in the case of external decorations, shall be first approved by the
Landlord at all times during the Term and, in the case of internal
decorations, shall be first approved by the Landlord in the last year of
the Term. The Tenant shall also have all parts of the Property requiring
treatment for their preservation and protection treated in accordance with
the best approved manner for preserving and protecting them. All works
under this sub-clause shall be carried out in a good and workmanlike manner
and with suitable, good quality materials.
In this sub-clause the "last year of the Term" means the period of 12
months ending at the End of the Term and all approvals shall not be
unreasonably withheld or delayed by the Landlord.
(6) ENTRY BY THE LANDLORD
The Tenant shall:
(a) permit the Landlord to enter the Property to examine its condition and
take inventories;
(b) permit the Landlord to enter the Property to exercise any of the
rights reserved to the Landlord by this Lease and for any other
reasonable purpose connected with the management of the Estate subject
to the Landlord making good to the Tenant all damage to the Property
but not being obliged to compensate the Tenant for any loss suffered
by the Tenant or for any nuisance, annoyance, inconvenience, noise or
vibration;
(c) permit the Landlord and any person acting as valuer under clause 4 to
enter the Property and inspect and measure the Property for all
purposes connected with insurance of the Property, any action under
the Landlord and Tenant Act 1954 Part II, or the implementation of
clause 4; and
(d) furnish all information relevant for those purposes as the Landlord or
anyone having a right of entry under this sub-clause may reasonably
request.
Except in case of emergency the Landlord shall give the Tenant reasonable
prior written notice before exercising the right of entry and shall comply
with the Tenant's reasonable security and confidentiality requirements.
After notice or in case of emergency the Landlord may break into the
Property. Such rights shall be exercised in a reasonable manner and in
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such a way so far as reasonably practicable as not to prevent the Tenant's
beneficial user and enjoyment of the Property and to use reasonable
endeavours not to damage or interfere with any equipment or machinery or
data transmission and storage facilities in the Property and shall make
good any damage caused.
(7) REMEDY BREACHES
The Tenant shall remedy all breaches of covenant notified by the Landlord
to the Tenant which the Tenant is liable to remedy under this Lease as soon
as possible and in any event within three months or sooner if appropriate
after service of the notice. If the Tenant fails to do so the Landlord may
enter the Property and remedy the breach and such entry shall be subject to
the same conditions as referred to in clause 6(6). All costs and expenses
incurred by the Landlord shall be paid by the Tenant within 14 days of
written demand.
(8) ALTERATIONS
Subject to the rights granted to the Tenant in Schedule 2 to this Lease the
Tenant shall:
(a) not make any alteration or addition to the Property (other than the
erection, alteration or removal of internal, non structural,
demountable partitioning) save as permitted by paragraph (b);
(b) not make any non-structural alteration to the Property (other than as
mentioned in paragraph (a)) without the prior consent of the Landlord
which shall not be unreasonably withheld or delayed; and
(c) before the End of the Term if required to do so by the Landlord but
not otherwise, remove any alteration or addition (including any made
before the beginning of the Term) and make good all damage caused by
the removal.
In this sub-clause a non-structural alteration is one which does not affect
the roof, foundations or exterior of the Property or any load-bearing part
of it.
(9) SIGNS
The Tenant shall:
(a) not display on the Property any signs visible from outside the
Property except those which in the Landlord's opinion are reasonably
necessary in connection with the business carried on at the Property
and which are in a form approved by the Landlord and are affixed in
positions approved by the Landlord (such approvals not to be
unreasonably withheld or delayed);
(b) at the End of the Term remove all signs (including any erected before
the beginning of the Term) and make good all damage caused by their
removal; and
(c) not affix to the Property any external radio, television or other
aerial or satellite dish or any pole, mast, flag or wire save with the
prior written consent of the Landlord such consent not to be
unreasonably withheld or delayed and in making such decision the
Landlord shall have due regard to the Tenant's use of the Property.
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In this sub-clause "signs" includes signs, hoardings, posters, placards,
advertisements, letters, bills and inscriptions.
(10) USE
The Property shall not be used for any purpose other than a use within
Class B1, Class B2 or Class B8 of the schedule to the Town and Country
Planning (Use Classes) Order 1987 as that Order is in force at the date of
this Lease.
(11) USE OBLIGATIONS
The Tenant shall:
(a) use any open area within the Property only for the purpose for which
it is designed and not keep any caravan or temporary building on it;
(b) not leave the Property unoccupied for more than a month without
notifying the Landlord and providing the security arrangements
reasonably required by the Landlord and its insurers;
(c) not do anything on the Property which may become a nuisance or damage
to the Landlord or any nearby owner or occupier;
(d) not allow to pass into the Conduits serving the Property anything that
may obstruct them or cause damage, danger or pollution or anything
poisonous or radioactive;
(e) not bring onto or keep in the Property anything dangerous,
inflammable, explosive, or noxious save for materials ordinarily and
properly used in connection with alternative power generation provided
that such materials are safely stored and are otherwise in accordance
with all statutory requirements and the reasonable requirements of
insurers;
(f) not use the Property for any illegal purpose or for any dangerous,
noxious, or noisy occupation;
(g) not use the Property for the holding of public meetings or auction
sales or as a residence or sleep at the Property or keep any animal on
it;
(h) not overload the Property or its Conduits;
(i) remove all refuse on a reasonably frequent basis but no less than once
a week and keep the Property clean, tidy and in good order;
(j) not obstruct any road or footpath on the Estate and not do anything as
a result of which reasonable use of the Common Parts by others may be
impeded; and
(k) not park vehicles on or load or unload goods onto or from vehicles
save in those parts of the Property or the Common Parts designated by
the Landlord for that purpose.
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(12) STATUTORY REQUIREMENTS
The Tenant shall comply with every enactment and with the requirements and
recommendations of every authority relating to or affecting the Property or
its use or the employment of anyone at the Property or any equipment or
chattels in the Property and whether applicable to the owner, landlord,
tenant or occupier of the Property save that this obligation shall not
include responsibility for compliance with anything relating to remediation
of any contamination affecting the Property which was caused before the
date hereof.
In this sub-clause "authority" includes every government department, local
or other authority and court of competent jurisdiction.
(13) NOTICES
The Tenant shall:
(a) give the Landlord a copy of every notice or order or any proposal for
a notice or order issued to the Tenant, its sub-tenants or any
occupier of the Property or left at the Property relating to the
Property or the Tenant's its sub-tenants or any occupiers use thereof
within five Business Days of its service;
(b) (if it is the Tenant's responsibility to so comply in accordance with
the terms of this Lease) take all steps necessary to comply with every
notice or order without delay; and
(c) at the request and cost of the Landlord make or join with the Landlord
in making such objections or representations in respect of the notice,
order or proposal as the Landlord shall reasonably require.
(14) FIRE AUTHORITY REQUIREMENTS
The Tenant shall comply with all requirements and recommendations of the
appropriate authority and the Landlord's insurers and all reasonable
requirements of the Landlord as to means of escape from the Property in
case of fire or other emergency and as to the provision and maintenance of
fire detection equipment, fire alarm equipment and fire fighting equipment.
(15) PLANNING ACTS
The Tenant shall:
(a) comply with the Planning Acts in relation to the Property, any
operations carried out at the Property and its use and not commit any
breach of planning control (as defined in the Planning Acts);
(b) obtain from the local planning authority planning permission for the
carrying out of any operation on the Property or the institution or
continuance of any use which may constitute development within the
meaning of the Planning Acts;
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(c) not make any application for planning permission without the
Landlord's prior consent (which shall not be unreasonably withheld or
delayed) to the making of the application, indemnify the Landlord
against all charges payable in respect of the application and repay to
the Landlord all reasonable and proper professional fees and expenses
properly incurred by the Landlord in connection with the application;
(d) forthwith after the grant or refusal of any application give the
Landlord a copy of the permission or the refusal;
(e) not make any alteration or addition to or change of use of the
Property (being an alteration or addition or change of use which is
prohibited by or for which the consent of the Landlord must be
obtained under this Lease and for which a planning permission must be
obtained) before planning permission for it has been produced to the
Landlord and acknowledged by the Landlord as satisfactory to it but so
that the Landlord may refuse to express satisfaction with the planning
permission on the grounds that anything contained in it or omitted
from it in the reasonable opinion of the Landlord would be or be
likely to be materially prejudicial to the Landlord's interest in the
Property during the Term or after the End of the Term such
acknowledgement from the Landlord shall not be unreasonably delayed;
(f) pay any charge imposed under the Planning Acts in respect of the
carrying out of any operation or the institution or continuance of any
use;
(g) unless the Landlord directs otherwise, carry out before the End of the
Term all works required to be carried out as a condition of any
planning permission which may have been granted and implemented during
the Term whether or not the date by which the planning permission
requires those works to be carried out falls within the Term;
(h) pay to the Landlord within 14 days of written demand a fair and
reasonable proportion of any compensation received by the Tenant
because of a restriction on the use of the Property under the Planning
Acts, any dispute as to the proportion to be referred to arbitration;
(i) produce to the Landlord all drawings, documents and other evidence
reasonably required by the Landlord to satisfy itself that this sub-
clause has been complied with;
(j) not implement any planning permission without providing reasonable
security if reasonably required for compliance with the conditions
imposed by that permission;
(k) not serve any purchase notice under the Planning Acts requiring any
authority to purchase the Tenant's interest in the Property without
first offering to surrender this Lease at the price which might
reasonably be expected to be obtained from the authority under the
purchase notice, any dispute as to the amount of the price to be
referred to arbitration;
(l) not to make any objection or adverse representation in respect of any
planning application made by or with the consent of the Landlord:
(i) within 12 months before the date specified in clause 15 of this
Lease if the Tenant has served the notice referred to in that
clause; or
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(ii) within 12 months before the End of the Term unless the Tenant
has exercised its rights to take a new lease under the
provisions of the Landlord and Tenant Act 1954;
and in either case this clause shall not prevent the Tenant making
such objections if it is entitled to do so under a lease of another
Unit on the Estate.
(16) OBSTRUCTION
The Tenant shall not:
(a) stop up, darken or obstruct any window or opening belonging to the
Property save as part of the Tenant's usual security measures; or
(b) give to any third party any acknowledgement that the Tenant enjoys the
access of light or air to any of the windows or openings in the
Property by the consent of a third party; or
(c) pay to any third party any sum of money or enter into any agreement
with any third party for the purpose of inducing or binding him to
abstain from obstructing the access of light or air to any windows or
openings.
(17) OBSTRUCTION PROCEEDINGS
If any of the owners or occupiers of nearby land or buildings do or
threaten to do anything which obstructs the access of light or air to any
of the windows or openings in the Property the Tenant shall:
(a) notify the same forthwith to the Landlord; and
(b) permit and afford all reasonable assistance to the Landlord to bring
proceedings in the name of the Tenant and at the joint cost of the
Landlord and Tenant against any of the owners or occupiers of the
nearby land or buildings in respect of the obstruction.
(18) ACQUISITION OF RIGHTS
The Tenant shall not allow any easement to be acquired over the Property.
If any such easement is acquired or attempted to be acquired, the Tenant
shall give immediate notice of it to the Landlord and at the request of the
Landlord but at the cost of the Tenant adopt the course reasonably required
by the Landlord for preventing the acquisition of the easement.
(19) PARTY MATTERS
The Tenant shall pay a fair proportion of all costs and expenses payable in
respect of repairing, lighting, cleansing and maintaining anything used in
common by the Property and any other property to the extent that those
costs and expenses are not recovered under clause 5. The proportion shall
be determined by the Landlord and shall be conclusive save as to questions
of law and save in the case of manifest error.
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(20) NEW GUARANTOR
If a guarantor's event of default occurs, the Tenant shall give notice to
the Landlord of the event within ten Business Days of its occurrence. If
the Landlord serves notice on the Tenant under this sub-clause within
thirty Business Days of service of the Tenant's notice, the Tenant shall
procure that guarantors reasonably acceptable to the Landlord shall
covenant by deed with the Landlord in the form set out in Schedule 5.
In this sub-clause a guarantor's event of default is any of the following:
(a) in the case of a Guarantor who is an individual:
(i) the death of the individual;
(ii) the individual being regarded as a patient under the Mental
Health Act 1983 section 94;
(iii) an application being made for an interim order in respect of
the individual or an interim order being made under the Act;
(iv) the making by the individual of a proposal for a voluntary
arrangement;
(v) a petition being presented for a bankruptcy order to be made
against the individual or a bankruptcy order being made;
(b) in the case of a Guarantor which is a company:
(i) a proposal being made to the company and to its creditors for a
voluntary arrangement;
(ii) a petition being presented for an administration order in
respect of the company or an administration order being made;
(iii) the company having an administrative or other receiver or a
manager appointed of the whole or any part of its property;
(iv) the company passing a resolution for winding up or a petition
being presented for the winding up of the company or a winding
up being made or the company being dissolved other than (in any
such case) a voluntary winding up of a solvent company for the
purposes of amalgamation or reconstruction;
(v) the company, having been registered as an unlimited company,
being re-registered as a limited company without the previous
consent of the Landlord;
(c) in the case of a Guarantor who is an individual or which is a company:
(i) the individual or the company entering into any kind of
composition, scheme of arrangement, compromise or arrangement
for the benefit of creditors or any class of creditors or
permitting or suffering any distress or execution to
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be levied on his goods at the Property which remains
unsatisfied for more than 21 days;
(ii) there occurring in relation to the individual or the company in
any country or territory in which he carries on business or to
the jurisdiction of whose courts he or any of his property is
subject any event which corresponds in that country or
territory with any of those mentioned in paragraphs (a)(iii) to
(v) or (b) above or the individual or the company otherwise
becoming subject in any such country or territory to any law
relating to insolvency, bankruptcy or winding up.
(21) COSTS
The Tenant shall pay the reasonable and proper costs and expenses incurred
by the Landlord:
(a) in or in contemplation of any proceedings relating to the Property
under the Law of Property Act 1925 sections 146 and 147, or the
Leasehold Property (Repairs) Act 1938, the preparation and service of
any notice under those sections or the taking of steps subsequent to
such notice notwithstanding that forfeiture is avoided otherwise than
by relief granted by the Court;
(b) in the preparation and service of any notice to repair or any schedule
of dilapidations at any time during the Term or after the End of the
Term;
(c) in connection with the recovery of arrears of Rent or other sums due
to the Landlord under this Lease including the levy or attempted levy
of any distress; and
(d) in respect of any application for consent required by this Lease
whether or not the consent is granted (including any inspection of
works authorised by the consent and of any re-instatement of those
works).
Where the Landlord could recover the cost of services or advice under the
first part of this sub-clause if they were undertaken by a third party but
those services or that advice are provided by the Landlord or by a company
which is a member of the same group as the Landlord (within the meaning of
section 42 of the Landlord and Tenant Act 1954), the Tenant shall pay to
the Landlord or to that company a reasonable sum (plus VAT if payable) for
such services or advice but not more than the amount payable by the Tenant
if those services or that advice had been provided by a third party
(22) INDEMNITY
The Tenant shall:
(a) pay and make good to the Landlord every loss and damage incurred or
sustained by the Landlord as a consequence of every breach or non-
observance of the Tenant's covenants contained in this Lease and shall
indemnify the Landlord against all actions, claims, liabilities, costs
and expenses arising by reason of the breach; and
(b) indemnify and keep the Landlord indemnified from liability in respect
of all loss, damage, actions, proceedings, claims, demands, costs,
damages and expenses in respect of any injury to or the death of any
person or damage to any property or in
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respect of the infringement, disturbance or destruction of any right
by reason of or arising in any way directly or indirectly out of:
(i) the state of repair or condition of the Property;
(ii) the act, omission or default of the Tenant, any person deriving
title under the Tenant or any person at the Property with the
express or implied authority of any of them;
(iii) the construction or existence of any additions or alterations
to the Property;
(iv) the use of the Property;
(v) anything now or in the future attached to or on the Property;
(vi) the use of vehicles on the Property;
(vii) the omission of the Tenant to give written notice to the
Landlord of any defects or items requiring repair of which the
Tenant is aware or ought reasonably to be aware; and
(viii) any breach by the Tenant or by any person deriving title under
the Tenant of any covenant by the Tenant or any condition
contained in this Lease.
Provided that the Tenant shall not be obliged to indemnify the
Landlord in respect of such matters to the extent that such damage
arises out of the Landlord's wilful misconduct or negligence.
(23) NOTICES FOR SALE AND RE-LETTING
The Tenant shall:
(a) permit (at a suitable location which does not materially interfere
with or obstruct the access of light to the Property) the Landlord
during the six months before the End of the Term to affix to the
Property a notice (of a suitable size and nature) for re-letting it;
(b) permit (at a suitable location which does not materially interfere
with or obstruct the access of light to the Property) the Landlord at
any time during the Term to affix to the Property a notice (of a
suitable size and nature) for dealing with the Landlord's interest in
the Property; and
(c) permit all persons with written authority from the Landlord or the
Landlord's agent to view the Property upon the Landlord giving at
least 24 hours prior written notice and subject to such person
complying with the Tenant's reasonable security and confidentiality
requirements.
(24) REGULATIONS
The Tenant shall observe all reasonable regulations made by the Landlord
for the proper management of the Estate.
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(25) CAR SPACES
The Tenant shall:
(a) not use the Car Spaces otherwise than for the purpose of the parking
of one private motor car in each Car Space and not to keep anything
else in the Parking Area including, without limitation, plant,
equipment, materials, containers of any description or any skip or
other receptacle for refuse or any caravan or temporary building;
(b) not without the express permission of the Landlord carry out any
repairs to any vehicle whilst it is in the Parking Area and if
permission is granted ensure that any repairs are carried out in such
manner as not to cause any nuisance, annoyance, inconvenience or
disturbance to the Landlord or any tenant or occupier of the Estate or
other user of the Parking Area;
(c) keep the Car Spaces and the surrounding area clean, tidy and free from
deposits of oil or grease;
(d) not cause any obstruction in the Parking Area;
(e) take all reasonable and proper precautions against fire occurring in
any vehicle using the Car Spaces;
(f) not do anything in the Parking Area which causes nuisance, annoyance,
inconvenience or disturbance to the Landlord or any tenant or occupier
of the Estate or other user of the Parking Area.
(26) FREEHOLD COVENANTS
The Tenant shall observe and perform the covenants contained in or referred
to in the documents specified in Schedule 4 so far as they relate to the
Property and are still subsisting and capable of taking effect and shall
indemnify and keep indemnified the Landlord from and against any non-
observance or non-performance of the same.
(27) YIELD UP
The Tenant shall:
(a) yield up the Property (except tenant's or trade fixtures including
those of the type listed on annexed schedule) to the Landlord at the
End of the Term with vacant possession and in accordance with the
Tenant's covenants contained in this Lease; and
(b) make good to the satisfaction of the Landlord all damage occasioned by
the removal of any tenant's or trade fixtures.
(28) RELEASE OF LANDLORD
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If the Landlord or any former landlord applies for release of a covenant
under section 8 of the Landlord and Tenant (Covenants) Act 1995:
(a) the Tenant shall not object unreasonably to the release of the
Landlord or the former landlord; and
(b) if, following such an application, the Tenant serves notice objecting
to the release, but the Court makes a declaration that it is
reasonable for the covenant to be released, the Tenant shall indemnify
the Landlord and any former landlord against all loss, damage, costs
and expenses incurred or sustained by any of them as a result of the
objection of the Tenant.
7. LANDLORD'S COVENANTS
(1) INTRODUCTION
The Landlord covenants with the Tenant to comply with its obligations set
out in this clause and in clauses 5 and 9.
(2) QUIET ENJOYMENT
For so long as the Tenant pays the Rent and performs and observes the
covenants by the Tenant and the conditions contained in this Lease the
Tenant may peaceably and quietly hold and enjoy the Property during the
Term without any lawful interruption by the Landlord or any person claiming
under or in trust for the Landlord.
(3) SERVICES
The Landlord shall use all reasonable endeavours to:
(a) maintain in good working order and repair all Conduits in, under or
upon the Estate which serve the Property (other than those which
exclusively serve the Property); and
(b) keep the surfaces of the Common Parts in good repair and cleaned at
regular intervals and reasonably well lit.
The Landlord will not be liable to the Tenant for any breach of these
obligations unless the Tenant has given the Landlord notice of the breach
and the Landlord is aware or should reasonably be aware of the breach and
has failed to remedy the breach within a reasonable time of service of the
notice.
8. ALIENATION
(1) RESTRICTIONS ON ALIENATION
The Tenant shall not:
(a) save to the extent permitted by the following sub-clauses of this
clause, part with possession of the whole or any part of the Property
or part with or share occupation
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of the whole or any part of the Property or permit occupation by a
licensee of the whole or any part of the Property or hold on any trust
the whole or any part of the Property; nor
(b) if it is an unlimited company, incorporate itself as a limited company
without the prior consent of the Landlord (such consent not to be
unreasonably withheld or delayed).
(2) ASSIGNMENT
The Tenant shall not:
(a) assign part of the Property; nor
(b) assign the whole of the Property without the prior consent of the
Landlord which, subject to sub-clauses (3) and (4), shall not be
unreasonably withheld or delayed.
(3) AGREEMENT AS TO CIRCUMSTANCES
The Landlord and the Tenant agree that the Landlord may withhold its
consent to an assignment if any one or more of the following circumstances
(which are specified for the purposes of section 19(1A) of the Landlord and
Tenant Act 1927) exist and it shall not be regarded as unreasonably
withholding its consent if it does so:
(a) any rent payable pursuant to clause 4(1) of this Lease agreed service
charge, insurance and VAT on such sums payable in accordance with this
Lease due from the Tenant under this Lease is unpaid;
(b) the Landlord reasonably determines that the proposed assignee is not a
person who is likely to be able both to comply with the tenant's
covenants in this Lease and to continue to be such a person following
the assignment;
(c) the proposed assignee or any proposed guarantor for it (other than any
guarantor under an authorised guarantee agreement) has the benefit of
state or diplomatic immunity or the Landlord determines that it is
likely to acquire that immunity;
(d) the proposed assignee is a company which is a member of the same group
(within the meaning of section 42 of the Landlord and Tenant Act 1954)
as the Tenant; and
(e) the proposed assignee or any proposed guarantor for it (other than any
guarantor under an authorised guarantee agreement) is a corporation
registered in or an individual resident in a jurisdiction in which a
judgement obtained in the courts of England and Wales will not
necessarily be enforced without any re-examination of the merits of
the case.
(4) AGREEMENT AS TO CONDITIONS
The Landlord and the Tenant agree that the Landlord may grant consent to an
assignment subject to any one or more of the following conditions (which
are specified for the purposes of section 19(1A) of the Landlord and Tenant
Act 1927) and it shall not be regarded as giving consent subject to
unreasonable conditions if it does so:
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(a) that before the assignment the Tenant enters into and unconditionally
delivers to the Landlord an authorised guarantee agreement, such
agreement to be a deed and to contain the provisions in Schedule 6 or
at the Landlord's absolute discretion) such other provisions as the
Landlord shall reasonably prescribe and (in either case) such
ancillary provisions as the Landlord shall reasonably prescribe;
(b) that before the assignment any person (other than a former Tenant) who
at the time of the application for the consent is guaranteeing the
obligations and liabilities under this Lease of the Tenant covenants
by deed with the Landlord that the Tenant shall perform its
obligations under the authorised guarantee agreement required under
paragraph (a), the deed to contain provisions equivalent to those
contained in paragraphs 1 to 4 and 9 of Schedule 5 and an obligation
on the part of the covenantor (in the event of default on the part of
the Tenant) to perform any obligation entered into by the Tenant in
the authorised guarantee agreement to take up a new lease, and
otherwise to be in such form as the Landlord reasonably requires;
(c) that before the assignment, if the Landlord determines it to be
necessary, one or more guarantors acceptable to the Landlord, acting
reasonably, covenant by deed with the Landlord in the form set out in
Schedule 5 (with "ASSIGNEE" substituted for "TENANT" in paragraphs 1
to 9 inclusive and with such other provisions as the Landlord
reasonably requires) in respect of the period during which the
assignee is bound by the tenant's covenants and the conditions in this
Lease;
(d) that all rent payable pursuant to clause 4(1) of this Lease agreed
service charge, insurance and VAT on such sums payable in accordance
with this Lease due from the Tenant under this Lease as at the date of
the assignment has been paid;
(e) that the assignment is completed and registered with the Landlord in
accordance with sub-clause (14) within three months of the date of the
consent and that if it is not, the consent shall be void but any of
the guarantees referred to in paragraphs (a) to (c) shall nevertheless
remain in full force and effect.
(f) that before the assignment of this Lease to an assignee who is not
also taking an assignment of the adjacent Unit numbered 6 the Tenant
has constructed to the Landlord's reasonable specification and
satisfaction an internal dividing wall between the Property and the
adjacent Unit numbered 6.
(5) FURTHER AGREEMENT
The Landlord and the Tenant agree that:
(a) the Landlord may withhold consent to an assignment in circumstances
which are not referred to in sub-clause (3) if it is reasonable to do
so and may grant consent subject to conditions which are not specified
in sub-clause (4) if the conditions are reasonable; and
(b) any power on the part of the Landlord to determine any matter for the
purposes of sub-clauses (3) or (4) shall be exercised reasonably.
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(6) UNDERLETTING
The Tenant shall not:
(a) underlet part only of the Property;
(b) underlet the whole of the Property:
(i) without complying with the provisions of sub-clauses (7) to
(11); and
(ii) without the prior consent of the Landlord, which shall not be
unreasonably withheld or delayed.
(7) UNDERLETTING CONDITIONS
Not to underlet the whole of the Property without producing to the
Landlord:
(a) an order of the Court under section 38(4) of the Landlord and Tenant
Act 1954 authorising the inclusion in the intended underlease of an
agreement excluding sections 24 to 28 of that Act; and
(b) a written undertaking by the Tenant not to release the intended
undertenant from or otherwise waive or modify the agreement authorised
by the order
and without including the agreement in the intended underlease.
(8) COVENANTS ON UNDERLETTING
The Tenant shall procure that any intended undertenant covenants by deed
with the Landlord:
(a) to pay the rent to be reserved by and the other sums to be payable
under the underlease and to perform and observe, the tenant's
covenants and the conditions to be contained in the underlease
throughout the period during which the undertenant is bound by the
tenant's covenants and conditions in the underlease;
(b) without prejudice to paragraph (a), not to assign the underlet
property without:
(i) first obtaining a deed of covenant from the intended assignee
in favour of the Landlord in the same form (with the necessary
changes) as the deed referred to in this sub-clause, including
(without limitation) the covenants in this paragraph (b); and
(ii) if the Landlord reasonably requires, first obtaining a deed
from one or more guarantors acceptable to the Landlord, acting
reasonably, in favour of the Landlord guaranteeing the due and
punctual payment and performance of all the obligations and
liabilities of the intended assignee under the deed referred to
in sub-paragraph (i), the deed to contain provisions equivalent
to those contained in paragraphs 1 to 4 and 9 of Schedule 5 and
otherwise to be in such form as the Landlord reasonably
requires.
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(9) GUARANTEE ON UNDERLETTING
If the Landlord reasonably requires, the Tenant shall procure that, before
the underlease is granted, one or more guarantors acceptable to the
Landlord, acting reasonably, guarantee (by way of deed) to the Landlord, in
respect of the period during which the undertenant is bound by the tenant's
covenants and the conditions in the underlease, the due and punctual
payment and performance of all the obligations and liabilities of the
intended undertenant, the guarantee to contain provisions equivalent to
those contained in paragraphs 1 to 4 and 9 of Schedule 5 and otherwise to
be in such form as the Landlord reasonably requires.
(10) FORM OF UNDERLEASE
The Tenant shall procure that every underlease shall:
(a) contain the same tenant's covenants and other terms and conditions as
are contained in this Lease subject only to:
(i) such amendments as may be provided for in paragraphs (b) to
(d); and
(ii) such amendments as may reasonably be required by the Tenant,
having regard only to the duration of the proposed underlease,
and as may be approved by the Landlord, such approval not to be
unreasonably withheld;
(b) not permit any assignment, underlease or other dealing or disposal of
the Property which is prohibited by the terms of this Lease and
prohibit any further underletting of the whole or any part of the
Property;
(c) provide that where the underlease requires the undertenant to obtain
the landlord's consent, the undertenant shall be required to obtain
also the consent of the Landlord (such consent not to be unreasonably
withheld or delayed);
(d) contain provisions that require a review of the rent payable under the
underlease to open market rent in accordance with the provisions and
at the dates for review of the rent payable under this Lease, but this
paragraph shall not prohibit an underlease of the Property upon terms
that require review of the rent payable under the underlease at dates
additional to the dates for review of the rent payable under this
Lease;
(11) UNDERLEASE REQUIREMENTS
The Tenant shall:
(a) not grant any underlease at a fine or premium;
(b) not grant any underlease at a rent which at the time of the grant of
the underlease is less than the open market rent of the Property;
(c) not vary the terms of any underlease or release the undertenant from
any covenant or condition in the underlease without the prior consent
of the Landlord such consent not to be unreasonably withheld or
delayed and shall notify the Landlord of any surrender of any
underlease;
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(d) not waive any breach of any of the covenants on the part of the
undertenant and the conditions contained in any underlease but take
all such reasonable steps as are lawfully available to the Tenant
(including re-entry) to enforce such covenants and conditions;
(e) procure that the rent reserved by any underlease is reviewed in
accordance with the provisions of the underlease but not agree any
revised rent with the undertenant without the prior consent of the
Landlord (such consent not to be unreasonably withheld), and if on any
rent review under any underlease the revised rent is to be determined
by an independent third party, procure that any reasonable
representations which the Landlord may wish to make concerning the
revised rent are put forward to the third party at the same time as
the representations of the Tenant and as though they were
representations made by the Tenant; and
(f) procure that on any assignment of any underlease the outgoing
undertenant enters into an authorised guarantee agreement and, where
appropriate, guarantors enter into a contractual guarantee in each
case with the landlord under the underlease in accordance with the
provisions of the underlease.
In paragraphs (c) to (f) of this sub-clause an underlease includes any
lease where, by virtue of the grant of this Lease, the Tenant under this
Lease becomes the holder of the immediate reversion to that lease.
(12) ASSOCIATED COMPANIES
The Tenant may share the occupation of any part of the Property with a
company which is a member of the same group as the Tenant (within the
meaning of section 42 of the Landlord and Tenant Act 1954) for so long as
both companies remain members of that group and provided that:
(a) no relationship of landlord and tenant is created between the two
companies and no security of tenure is conferred upon the occupier;
and
(b) within 15 Business Days of the commencement of the sharing the Tenant
gives to the Landlord notice of the company sharing occupation and the
address of its registered office.
(13) CHARGING
The Tenant shall not
(a) charge part of the Property; or
(b) charge the whole of the Property by way of fixed security without the
prior consent of the Landlord, which shall not be unreasonably
withheld.
(14) REGISTRATION OF DEALINGS
Within 15 Business Days of every assignment, transfer, underlease or charge
of the Property or the creation or transfer of any interest derived out of
the Term or any devolution of the interest of the Tenant or any person
deriving title under the Tenant, the Tenant shall produce
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a certified copy of the assignment, transfer, underlease or charge or (in
the case of a devolution) the document evidencing or under which the
devolution arises and pay the Landlord a registration fee of a reasonable
amount, being not less than (Pounds)25, in respect of each assignment,
transfer, underlease, charge or devolution.
9. INSURANCE
(1) LANDLORD'S INSURANCE OBLIGATIONS
Unless the insurance is vitiated by any act, default or omission of the
Tenant, any person deriving title under the Tenant or any person at the
Property with the express or implied authority of any of them the Landlord
shall keep the Property (other than plate glass and tenant's or trade
fixtures) insured with insurers or underwriters selected by the Landlord in
accordance with the provisions of this clause to the extent to which the
Property is insurable and subject to all exclusions, limitations and
excesses imposed by the insurers.
(2) SUM AND RISKS INSURED
The Property shall be insured in a sum not less than its full reinstatement
cost (as determined from time to time by the Landlord) against loss or
damage by the Insured Risks.
(3) FEES
The insurance shall extend to:
(a) architects' and other professional fees in relation to the
reinstatement of the Property for a minimum sum of 15% of the amount
insured in respect of the Property;
(b) the costs of demolition and removal of debris; and
(c) loss of rent for such period as the Landlord may decide in an amount
which takes into account the Landlord's estimate of potential
increases in rent.
(4) PRODUCTION OF POLICY
Whenever reasonably required to do so by the Tenant and at the Tenant's
cost, but not more often than twice a year, the Landlord shall produce to
the Tenant at the Landlord's office a copy of the insurance policy or other
evidence of it and evidence of payment of the last premium.
(5) REINSTATEMENT
Subject to sub-clause (13) if the Property is destroyed or damaged by any
of the Insured Risks, then unless the insurance is vitiated by any act,
default or omission of the Tenant, any person deriving title under the
Tenant or any person at the Property with the express or implied authority
of any of them, the Landlord shall use reasonable endeavours to:
(a) obtain all consents and permissions necessary for reinstatement as
soon as reasonably possible;
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(b) subject to obtaining those consents and permissions, lay out as soon
as practicable all insurance monies received by the Landlord (other
than for fees and loss of rent) in reinstating the Property; and
(c) subject to the Tenant complying with its obligations in sub-clauses
(6)(a)(iii), (7) and (9) make good out of the Landlord's own monies
any deficiency (other than one arising from an exclusion, limitation
or excess imposed by the insurers).
(6) TENANT'S INSURANCE OBLIGATIONS
(a) The Tenant shall pay to the Landlord on demand:
(i) every premium payable by the Landlord (including any part of it
which the Landlord is entitled to retain by way of commission)
for insuring the Property in accordance with its obligations in
sub-clause (1) and for effecting insurance in respect of
liability to third parties including members of the public and
such other insurances as the Landlord reasonably considers
desirable;
(ii) where the policy includes the Property and other properties, the
proportion properly attributable to the Property of every
premium payable by the Landlord (including any part of it which
the Landlord is entitled to retain by way of commission) for
insuring the Property and the other properties in accordance
with its obligations in sub-clause (1) and for effecting (in
relation to the Property and the other properties) the other
insurances referred to in sub-paragraph (i), the proportion to
be determined by the Landlord whose determination shall be
conclusive save as to questions of law and save in case of
manifest error;
(iii) the amount of any excess deducted or deductible by the insurers
on any claim made by the Landlord; and
(iv) all costs and expenses reasonably incurred by the Landlord in
obtaining a valuation of the Property for insurance purposes
(provided this is limited to one such valuation every two
years).
All sums payable by the Tenant under paragraph (a)(i) shall be
reserved as rent.
(b) The Tenant shall insure all plate glass in the Property against all
risks with an insurance company approved by the Landlord in the joint
names of the Landlord and the Tenant and, on demand, produce a copy of
the insurance policy and evidence of payment of the last premium to
the Landlord.
(7) VITIATION
The Tenant shall not use the Property or carry on any business at the
Property or do or omit to do at the Property anything which may make void
or voidable any policy for the insurance of the Property or any nearby
property of the Landlord.
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(8) INCREASED PREMIUM
The Tenant shall:
(a) not without the prior consent of the Landlord use the Property or
carry on any business at the Property or do or omit to do at the
Property anything which may increase the premium payable for the
insurance; and
(b) if consent is given, repay on demand to the Landlord any resulting
increased insurance premium payable by the Landlord.
(9) IRRECOVERABLE REINSTATEMENT COST
If the Property is destroyed or damaged by any of the Insured Risks and the
insurance money under any insurance effected by the Landlord is wholly or
partly irrecoverable because of any act, default or omission of the Tenant,
any person deriving title under the Tenant or any person at the Property
with the express or implied authority of any of them the Tenant shall pay
to the Landlord within 14 days of written demand the whole or the
appropriate proportion of the cost of reinstating the Property. Any
dispute as to the amount of such proportion shall be referred to
arbitration.
(10) NOTICE OF DAMAGE
If the Property is destroyed or damaged by any of the Insured Risks the
Tenant shall give notice to the Landlord as soon as the destruction or
damage comes to the notice of the Tenant.
(11) DOUBLE INSURANCE
The Tenant shall not effect any insurance relating to the Property against
any of the Insured Risks. If the Tenant is entitled to the benefit of any
insurance in respect of the Property, the Tenant shall pay to the Landlord
all monies received by virtue of the insurance to enable the Landlord to
apply them in making good the loss or damage in respect of which they have
been received.
(12) CESSER OF RENT
If the Property or any part of it (or the means of access to or egress from
it) is destroyed or damaged by any of the Insured Risks so as to be unfit
for occupation or use the rent or a fair proportion of it according to the
nature and extent of the damage sustained shall be suspended until the
Property (or the means of access to or egress from it) has been reinstated
and made fit for occupation and use or until the end of three years from
the date of the destruction or damage, whichever first occurs. Any dispute
as to the amount of the proportion shall be referred to arbitration. This
sub-clause does not apply if and to the extent that the insurance monies in
respect of loss of rent are wholly or partially irrecoverable solely or
partly because of the act, default or omission of the Tenant or any person
deriving title under the Tenant or any person at the Property with the
express or implied authority of any of them.
(13) PREVENTION OF REINSTATEMENT
The Landlord shall not be obliged to reinstate the Property in accordance
with sub-clause (5) while prevented by a supervening event. If the
Landlord is unable to commence
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reinstatement within twenty four months from the date of destruction or
damage because of a supervening event and the Property or a substantial
part of it is unfit for occupation or use either party may determine the
Term by serving notice on the other party at any time within six months of
the end of the twenty four month period. On service of the notice the Term
will cease but without prejudice to any rights that any party may have
against another for breach of any of their respective covenants or the
conditions contained in this Lease and all insurance monies shall belong to
the Landlord.
In this sub-clause a supervening event means any of the following:
(a) inability of the Landlord to obtain the consents and permissions
referred to in sub-clause (5) despite using all reasonable endeavours
to do so;
(b) grant of any of the consents or permissions subject to a lawful
condition with which it would be unreasonable to expect the Landlord
to comply or the Landlord being requested as a precondition to
obtaining any of the consents or permissions to enter into an
agreement with the planning authority or any other authority
containing conditions with which it would be unreasonable to expect
the Landlord to comply;
(c) some defect in the site upon which reinstatement is to take place so
that it could not be undertaken or could be undertaken only at a cost
unacceptable to the Landlord (acting reasonably);
(d) inability of the Landlord to obtain access to the site to reinstate;
(e) prevention of reinstatement by any cause beyond the control of the
Landlord.
10. RE-ENTRY
(1) If an Event of Default occurs then notwithstanding the waiver of any
previous right of re-entry the Landlord may re-enter the Property or any
part of it when the Term shall cease but without prejudice to any rights or
remedies which may then have accrued to any party against another in
respect of any antecedent breach (including the breach in respect of which
re-entry is made) of any of the covenants or obligations contained in this
Lease.
(2) In this clause an Event of Default is any one of the following:
(a) the Rent or any part of it is in arrear and unpaid for seven Business
Days after becoming payable (whether formally demanded or not); or
(b) a breach by the Tenant of any of the covenants by the Tenant in this
Lease; or
(c) the Tenant (being a company) is deemed unable to pay its debts under
section 123 of the Insolvency Act 1986 or the Tenant or any Guarantor
(being a company) passes a resolution for winding-up or the directors
of any of them present a petition for winding-up or an order for the
winding-up of the Tenant or any Guarantor is made (other than (in any
such case) a voluntary winding-up of a solvent company for the
purposes of amalgamation or reconstruction) or the Tenant or any
Guarantor is dissolved; or
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(d) the Tenant (being a company) has an administrative or other receiver
or a manager appointed of the whole or any part of its property or a
petition is presented for an administration order or an administration
order is made in respect of the Tenant or any Guarantor; or
(e) the Tenant (being a company) being registered as an unlimited company
is re-registered as a limited company without the previous consent of
the Landlord; or
(f) the Tenant (being an individual) presents a petition for a bankruptcy
order to be made against him or a bankruptcy order is made against the
Tenant or any Guarantor; or
(g) in relation to the Tenant (whether an individual or a company) a
proposal is made or the Tenant (whether a company or an individual)
enters into any kind of composition, scheme of arrangement, compromise
or arrangement for the benefit of creditors or any class of creditors
or permits or suffers any distress or execution to be levied on his
goods; or
(h) there occurs in relation to the Tenant in any country or territory in
which any of them carries on business or to the jurisdiction of whose
courts any of them or any of the property of any of them is subject to
any event which corresponds in that country or territory with any of
those mentioned in paragraphs (c) to (g) above or the Tenant otherwise
becomes subject in any such country or territory to any law relating
to insolvency, bankruptcy or winding up.
11. GUARANTEE
The Guarantor covenants with the Landlord in the terms set out in Schedule
5 in respect of the period during which Exodus Internet Limited is bound by
the Tenant's covenants and conditions in this Lease and any additional
period during which Exodus Internet Limited is liable under an authorised
guarantee agreement.
12. VALUE ADDED TAX
(1) If any VAT is chargeable on any supply made to the Tenant under the terms
of this Lease, the Tenant shall pay by way of additional consideration the
amount of that VAT and the Landlord shall provide a valid VAT invoice in
relation to such VAT to the Tenant.
(2) Without limiting sub-clause (1) above, each sum reserved or payable by the
Tenant under the terms of this Lease is exclusive of VAT (if any) and is
accordingly to be construed as a reference to that sum plus any VAT in
respect of it, and where any sum is reserved as rent, the VAT is also
reserved as rent.
(3) If VAT is chargeable on any supply made by the Landlord to the Tenant for
which a sum is not reserved or payable under the terms of this Lease, the
Tenant shall pay that VAT to the Landlord against issue of a VAT invoice
five Business Days before the Landlord has to pay the VAT to Customs.
(4) Where under the terms of this Lease the Tenant is obliged:
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(a) to make any payment to the Landlord or any other person (including,
without limitation, by way of service charge, indemnity or
reimbursement) by reference to any amount incurred or which will or
may be incurred by the Landlord or any other person; or
(b) otherwise to pay all or part of the consideration for any supply made
to the Landlord or any other person,
then without prejudice to sub-clauses (1) to (3) above, the Tenant shall
not be obliged to pay any amount in respect of VAT to the extent that it is
recoverable by the Landlord or any other person as appropriate.
(5) For the purposes of sub-clause (3) above, VAT is recoverable by a person,
if that person (or any company treated as a member of the same VAT Group as
that person) is entitled to credit for it as input tax under sections 25
and 26 VATA 1994. For the avoidance of doubt, VAT is not recoverable by a
person only because he could elect to waive exemption, but has not done so.
(6) Where for the purposes of this Lease it is necessary to calculate or
estimate the cost or value of anything, including any building, structure,
work, item, act or service, the cost or value shall be calculated or
estimated so as to include any VAT which will or may be incurred in
addition.
(7) This clause shall not affect the generality of clause 6(3) (Outgoings).
(8) Where the Tenant pays to the Landlord VAT in respect of any supply by the
Landlord to the Tenant, the Landlord shall issue the Tenant with a proper
VAT invoice in respect of that VAT.
(9) If the Landlord wishes to make an election to waive the exemption in
respect of the Property under paragraph 2 of Schedule 10, VATA 1994, the
Landlord shall notify the Tenant, no less than 20 Business Days before the
election is to take effect, of the election and the date on which it is
intended to take effect.
(10) If for any reason the election referred to in sub-clause (9) above is
validly revoked within three months after coming into effect, the Landlord
shall repay to the Tenant any VAT paid by the Tenant, five Business Days
after receipt by the Landlord from Customs of acknowledgement of the
revocation.
13. TRUSTEE LIABILITY PROVISION
(1) Lloyds Bank Plc has entered into this Lease in its capacity as trustee of
Schroder Exempt Property Unit Trust ("SEPUT") and therefore notwithstanding
any other provision contained in this Lease neither Lloyds Bank Plc nor any
successor trustee of SEPUT shall be obliged to meet any liability or claim
hereunder save to the extent that the same can be met by it out of the
Trust Assets.
(2) For the purposes of this clause "TRUST ASSETS" means the assets for the
time being held upon the trusts of SEPUT.
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14. GENERAL
(1) INTEREST AND POWERS OF RECOVERY
If any Rent or other sum payable under this Lease is not paid on the day
falling 7 days after the date on which it is due it shall bear interest
from the date on which it is due until the date of payment at the Default
Interest Rate compounded quarterly. Every amount payable under this Lease
shall be reserved as rent and shall be recoverable as rent in arrear.
(2) DISPUTES
In relation to disputes:
(a) any statement in this Lease that any dispute shall be referred to
arbitration means that the dispute shall be determined by a single
arbitrator agreed by the Landlord and the Tenant and failing agreement
by a single arbitrator appointed by the president or his deputy for
the time being of the Royal Institution of Chartered Surveyors in
accordance with the Arbitration Acts 1950 to 1979 and 1996; and
(b) any dispute between the Tenant and any tenant or occupier of any other
property owned or leased by the Landlord about any right in connection
with the use of the Property and the other property or about any
boundary structure separating the Property from the other property
shall be determined by the Landlord acting reasonably.
(3) COMPENSATION
Subject to the provisions of section 38(2) of the Landlord and Tenant Act
1954 neither the Tenant nor any person deriving title under the Tenant
shall be entitled on quitting the Property to any compensation under
section 37 of that Act.
(4) JOINT AND SEVERAL LIABILITY
Where the Tenant or any Guarantor is more than one person:
(a) those persons shall be jointly and severally responsible in respect of
every obligation undertaken by them under this Lease; and
(b) the Landlord may release or compromise the liability of any of those
persons under this Lease or grant any time or other indulgence without
affecting the liability of any other of them.
(5) WHOLE AGREEMENT
This Lease contains the whole agreement between the parties relating to the
transaction contemplated by this Lease and supersedes all previous
agreements between the parties relating to the transaction.
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(6) REPRESENTATIONS
The Tenant acknowledges that in agreeing to enter into this Lease, the
Tenant has not relied on any representation, warranty, collateral contract
or other assurance. The Tenant waives all rights and remedies which, but
for this sub-clause, might otherwise be available to it in respect of any
such representation, warranty, collateral contract or other assurance, but
nothing in this sub-clause shall limit or exclude any liability for fraud.
(7) RIGHTS OF ENTRY
All rights of entry exercisable by the Landlord extend to include (without
limitation) its employees, agents, surveyors, contractors and licensees
with or without plant, equipment, appliances and materials.
(8) INTERPRETATION OF COVENANTS
Any covenant by the Tenant not to do or omit anything shall be construed as
though the covenant was in addition a covenant not to permit or suffer to
be done or omitted that thing.
(9) TENANT'S POSSESSIONS
If after the Tenant has vacated the Property at the End of the Term any of
the Tenant's possessions remain on the Property and the Tenant fails to
remove them within fifteen Business Days after being requested to do so by
the Landlord then:
(a) the Landlord may dispose of the possessions as agent for the Tenant;
(b) (if disposal is by sale) subject to paragraph (c) the Landlord shall
hold the proceeds of sale after deducting the costs and expenses of
removal, storage and sale incurred by it to the order of the Tenant;
(c) if the Tenant fails to claim the proceeds of sale within sixty
Business Days of the date of the sale, the Landlord may keep them;
(d) the Tenant indemnifies the Landlord against:
(i) any liability incurred by the Landlord to any third party whose
possessions have been sold by the Landlord in the mistaken
belief (which shall be presumed) that the possessions belonged
to the Tenant;
(ii) any damage caused to the Property by the possessions; and
(iii) all loss, damage, actions, proceedings, claims, demands, costs,
damages and expenses properly incurred or suffered by or brought
or awarded against the Landlord as a result of the presence of
the possessions on the Property after the Tenant has left it at
the End of Term.
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<PAGE>
(10) OTHER LAND
Nothing contained in or implied by this Lease shall:
(a) impose or be deemed to impose any restriction on the use of any land
or buildings not comprised in this Lease; or
(b) give the Tenant:
(i) the benefit of or the right to enforce or to have enforced or to
prevent the release or modification of any covenant, lease,
condition or stipulation entered into by any purchaser or tenant
from the Landlord in respect of any property not comprised in
this Lease; or
(ii) the right to prevent or restrict in any way the development of
any land not comprised in this Lease.
(11) SEVERANCE
To the extent that any provision of this Lease is rendered void by section
25 of the Landlord and Tenant (Covenants) Act 1995, that provision shall be
severed from the remainder of this Lease which shall remain in full force
and effect. In this sub-clause "provision" includes a clause, a sub-clause
or a schedule or any part of any of them.
(12) PERPETUITY PERIOD
The perpetuity period applicable to this Lease is 80 years beginning on the
date of this Lease and whenever in this Lease either the Landlord or the
Tenant is granted a future interest it must vest within that period and if
it has not it will be void for remoteness.
(13) NOTICES IN WRITING
Every notice, consent, approval or direction given under this Lease shall
be in writing.
(14) COUNTERPARTS
This lease may be executed in any number of counterparts, all of which,
taken together, shall constitute one and the same lease and any party may
enter into this lease by executing a counterpart.
15. BREAK CLAUSE
The Tenant may terminate this Lease on 29th September 2013 (the
"Termination Date") by giving to the Landlord not less than one year and
one day's prior written notice subject, to the Tenant:
(1) paying any arrears of rent payable pursuant to clause 4(1) and VAT
thereon on or before the Termination Date;
(2) giving up vacant possession of the Property by the Termination Date
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<PAGE>
In such case the Term shall cease on the Termination Date and no party
shall have any further rights or obligations under this Lease, but this
shall not affect any rights or remedies which may have accrued at the
Termination Date to any party against the other in respect of any prior
breach of any of the covenants and conditions contained in the lease.
16. NOTICES
(1) Any notice or other document served under this Lease may be served in any
way in which a notice required or authorised to be served under section 196
of the Law of Property Act 1925 may be served.
(2) During such period that the reversion to this Lease is vested in the
trustee of Schroder Exempt Property Unit Trust no notice shall be deemed to
be validly served on the Landlord unless a copy of such notice is also
served on Schroder Property Investment Management Limited at 31 Gresham
Street, London EC2V 7QA or such other address as the Landlord shall notify
to the Tenant.
17. GOVERNING LAW AND JURISDICTION
(1) This Lease is governed by and shall be construed in accordance with English
law.
(2) The Tenant and the Guarantor submit to the jurisdiction of the English
courts for all purposes relating to this Lease and appoint Dibb Lupton
Alsop (ref RSS) 125 London Wall London EC2Y 5AE (or such other person in
the UK as the Guarantor and the Tenant may from time to time nominate by
written notice to the Landlord) as agent of each of them for service of
process and so that each appointment shall be irrevocable until such time
as the Guarantor and the Tenant have given written notice to the Landlord
of an alternative person in the UK to accept service of process on their
behalf.
I N W I T N E S S of which this Lease has been executed as a deed and has been
delivered on the date which first appears on page 1.
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<PAGE>
SCHEDULE 1
THE PROPERTY
Land on the north side of Coronation Road, Park Royal London NW10 which for the
purpose of identification only is shown edged red on the Plan with the building
on it having a Gross Internal Area (as defined in the Code) of 13,013 square
feet and known as Unit 7, Phase 1 Matrix Park, Coronation Road, Park Royal,
London, NW10. In this Schedule the Code means the fourth edition of the Code of
Measuring Practice published by the Royal Institution of Chartered Surveyors and
the Incorporated Society of Valuers and Auctioneers.
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<PAGE>
SCHEDULE 2
RIGHTS GRANTED TO THE TENANT
1. The right to use the Common Parts for all reasonable and appropriate
purposes connected with the use and enjoyment of the Property pursuant to
this Lease (subject to temporary interruption for repair and maintenance).
2. The right to park 17 motor cars in the Car Spaces.
3. The right to use the Conduits in the Estate which serve the Property
(subject to temporary interruption for repair, alteration or replacement).
4. The right of support and protection from the other parts of the Estate as
now enjoyed by the Property.
5. Subject to obtaining the prior written consent of the Landlord (such
consent not to be unreasonably withheld or delayed but which consent may be
made subject to reasonable requirements and conditions of the Landlord) the
right to lay within the Common Parts but along routes reasonably specified
by the Landlord additional Conduits to serve the Property.
6. Subject to the giving of reasonable prior notice to the Landlord and to
compliance with all reasonable requirements of the Landlord the right to
enter the Common Parts in order to maintain, repair, replace or alter any
Conduits now or hereafter exclusively serving the Property the Tenant
causing to others as little inconvenience and disturbance as practicable
and making good without delay all damage thereby occasioned.
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<PAGE>
SCHEDULE 3
RIGHTS RESERVED TO THE LANDLORD
1. The right to use the Conduits in the Property which serve other parts of
the Estate, the right to install new Conduits for the benefit of the
remainder of the Estate and the right to repair, maintain and renew
existing and new Conduits.
2. The right to enter the Property to exercise any of the rights referred to
in this Schedule or for the purposes set out in clause 6(6) PROVIDED THAT
such right shall only be exercised (except in case of emergency) by giving
reasonable prior notice to the Tenant and by complying with the Tenant's
reasonable security and confidentiality requirements.
3. All rights of light or air or other easements or rights over or belonging
to any other land or buildings (including other parts of the Estate).
4. The right to build, re-build or carry out any works on any other land or
buildings (including other parts of the Estate) even if it interferes with
the passage of light or air to the Property or causes nuisance, damage,
annoyance or inconvenience to the Tenant or occupier of the Property by
noise, dust, vibration or otherwise provided that it does not materially
affect the ability of the Tenant or the occupier to use the Property for
any purpose permitted by this Lease.
5. The support and protection from the Property enjoyed by other parts of the
Estate.
6. The right to build, alter and install and afterwards to maintain buildings,
structures and fixtures on, into or projecting over or under or taking
support from the Property (but those buildings, structures and fixtures
shall not become part of the Property).
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<PAGE>
SCHEDULE 4
MATTERS AFFECTING THE FREEHOLD
All matters registered or pending registration as at the date hereof in the
Property and Charges Registers of Title Number AGL54738 maintained by HM Land
Registry (with the exception of Financial charges, if any) and the Deed dated
7th August 1998 made between the Landlord and Railtrack insofar as such matters
affect the Property still subsist and are capable of enforcement
-41-
<PAGE>
SCHEDULE 5
GUARANTEE PROVISIONS
1. The Guarantor guarantees to the Landlord the due and punctual payment and
performance by the Tenant of all the tenant's obligations and liabilities
under this Lease and shall indemnify the Landlord against all losses,
damages, costs and expenses arising or incurred by the Landlord as a result
of the non-payment or non-performance of those obligations or liabilities.
2. The obligations of the Guarantor under this Lease:
(a) constitute a direct, primary and unconditional liability to pay on
demand to the Landlord any sum which the Tenant is liable to pay under
this Lease and to perform on demand by the Landlord any obligation of
the Tenant under this Lease without the need for any recourse on the
part of the Landlord against the Tenant;
(b) will not be affected by:
(i) any time or indulgence granted to the Tenant by the Landlord;
(ii) any legal limitation, disability or other circumstances
relating to the Tenant or any irregularity, unenforceability or
invalidity of any obligations of the Tenant under this Lease;
(iii) any licence or consent granted to the Tenant or any variation
in the terms of this Lease save as provided in section 18 of
the Landlord and Tenant (Covenants) Act 1995;
(iv) the release of one or more of the parties defined as the
Guarantor (if more than one); or
(v) any other act, omission, matter, event or thing whereby (but
for this provision) the Guarantor would be exonerated in whole
or in part from the guarantee other than a release by deed
given by the Landlord.
3. So long as this guarantee remains in force the Guarantor shall not:
(a) in the event of any bankruptcy, liquidation, rehabilitation,
moratorium or other insolvency proceedings relating to the Tenant,
claim or prove as creditor in competition with the Landlord; or
(b) be entitled to claim or participate in any security held by the
Landlord in respect of the obligations of the Tenant under this Lease;
or
(c) exercise any right of set-off against the Tenant.
4. If the Landlord brings proceedings against the Tenant, the Guarantor shall
be bound by any findings of fact, interim or final award or interlocutory
or final judgment made by an arbitrator or the court in those proceedings
in so far as the same relate to the subject matter of this Lease PROVIDED
THAT the Landlord shall have served a copy of the writ summons
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<PAGE>
petition or similar process which initiated such proceedings on the
Guarantor before the expiry of 7 days after such proceedings were initiated
5. If:
(a) the Tenant (being a company) enters into liquidation and the
liquidator disclaims this Lease; or
(b) the Tenant (being a company) is dissolved and the Crown disclaims this
Lease; or
(c) the Tenant (being an individual) becomes bankrupt and the trustee in
bankruptcy disclaims this Lease; or
(d) this Lease is forfeited,
then within six months after the disclaimer or forfeiture the Landlord may
require the Guarantor by notice to accept a lease of the Property for a
term equivalent to the residue which would have remained of the Term if
there had been no disclaimer or forfeiture at the same rents and subject to
the same covenants and conditions (including those as to the review of
rent) as are reserved by and contained in this Lease (with the exception of
this Schedule).
6. The new lease and the rights and liabilities under it shall take effect as
from the date of the disclaimer or forfeiture and the Guarantor shall be
liable for all payments due under the new lease as from the date of
disclaimer or forfeiture as if the new lease had been granted on the date
of disclaimer or forfeiture.
7. The Guarantor or his personal representatives shall pay the Landlord's
costs of and accept the new lease and shall execute and deliver to the
Landlord a counterpart of it.
8. If the Landlord does not require the Guarantor to take a Lease of the
Property, the Guarantor shall pay to the Landlord on demand a sum equal to
the rent that would have been payable under this Lease but for the
disclaimer or forfeiture in respect of the period from the date of the
disclaimer or forfeiture until the date which is six months after the date
of the disclaimer or forfeiture or the date on which the Property has been
re-let by the Landlord, whichever first occurs.
9. If any VAT is payable by the Tenant to the Landlord under the terms of the
Lease, the Guarantor's obligation shall extend to that VAT. If the
Guarantor makes any payment in respect of VAT, the Landlord's obligation to
issue a VAT invoice to the Tenant under the Lease in respect of that VAT
shall not be affected, and the Landlord shall not be under any obligation
to issue a VAT invoice to the Guarantor in respect of that VAT.
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<PAGE>
SCHEDULE 6
AUTHORISED GUARANTEE PROVISIONS
1. The Guarantor guarantees to the Landlord the performance by the Assignee
throughout the Guarantee Period of each of the covenants falling to be
complied with by the tenant under this Lease and shall indemnify the
Landlord against all losses, damages, costs and expenses arising or
incurred by the Landlord as a result of such non-performance.
2. The obligations of the Guarantor under this guarantee will not be affected
by:
(a) any time or indulgence granted to the Assignee by the Landlord;
(b) any legal limitation, disability or other circumstances relating to
the Assignee or any irregularity, unenforceability or invalidity of
any obligations of the Assignee under this Lease;
(c) any licence or consent granted to the Assignee or any variation in the
terms of this Lease save as provided in section 18 of the Act;
(d) the release of one or more of the parties defined as the Guarantor (if
more than one); or
(e) any other act, omission, matter, event or thing whereby (but for this
provision) the Guarantor would be exonerated in whole or in part from
the guarantee other than a release under seal given by the Landlord.
3. The Guarantor is liable to the Landlord under this guarantee as sole or
principal debtor and the obligations of the Guarantor under this guarantee
constitute a direct, primary and unconditional liability to pay on demand
to the Landlord any sum which the Assignee is liable to pay under this
Lease and to perform on demand by the Landlord any obligation of the
Assignee under this Lease without the need for any recourse on the part of
the Landlord against the Assignee. If the Landlord brings proceedings
against the Assignee, the Guarantor shall be bound by any findings of fact,
interim or final award or interlocutory or final judgment made by an
arbitrator or the court in those proceedings.
4. If during the Guarantee Period the Assignee (being a company) enters into
liquidation and the liquidator disclaims this Lease, or the Assignee (being
a company) is dissolved and the Crown disclaims this Lease, or the Assignee
(being an individual) becomes bankrupt and the trustee in bankruptcy
disclaims this Lease, then within six months after the disclaimer the
Landlord may require the Guarantor by notice to enter into a new lease of
the Property for a term equivalent to the residue which would have remained
of the term granted by this Lease if there had been no disclaimer at the
same rents and subject to the same covenants and conditions (including as
to the review of rent) as are reserved by and contained in this Lease.
5. The new lease and the rights and liabilities under it shall take effect as
from the date of the disclaimer and the Guarantor shall be liable for all
payments due under the new lease as from the date of disclaimer as if the
new lease had been granted on the date of disclaimer.
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<PAGE>
6. The Guarantor shall pay the Landlord's costs of and accept the new lease
and shall execute and deliver to the Landlord a counterpart of it.
7. If the Landlord does not require the Guarantor to take a new lease of the
Property the Guarantor shall pay to the Landlord on demand a sum equal to
the rents that would have been payable under this Lease but for the
disclaimer in respect of the period from the date of the disclaimer until
the date which is six months after the date of the disclaimer or the date
on which the Property has been re-let by the Landlord, whichever first
occurs.
8. During the Guarantee Period the Guarantor shall not;
(a) in the event of any bankruptcy, liquidation, rehabilitation,
moratorium or other insolvency proceedings relating to the Assignee
claim or prove as creditor in competition with the Landlord; or
(b) be entitled to claim or participate in any security held by the
Landlord in respect of the Assignee's obligations to the Landlord
under this Lease; or
(c) exercise any right of set off against the Assignee.
9. To the extent that any provision of this guarantee does not conform with
section 16 of the Act, that provision shall be severed from the remainder
of this guarantee and this guarantee shall have effect as if it excluded
that provision.
10 If any VAT is payable by the Tenant to the Landlord under the terms of the
Lease, the Guarantor's obligation shall extend to that VAT. If the
Guarantor makes any payment in respect of VAT, the Landlord's obligation to
issue a VAT invoice to the Assignee under the Lease in respect of that VAT
shall not be affected, and the Landlord shall not be under any obligation
to issue a VAT invoice to the Guarantor in respect of that VAT.
11. In this Schedule:
"ACT" means the Landlord and Tenant (Covenants) Act 1995;
"ASSIGNEE" means [INSERT NAME OF ASSIGNEE IN RESPECT OF WHOM THE TENANT IS
ENTERING INTO THE AUTHORISED GUARANTEE AGREEMENT];
"GUARANTEE PERIOD" means the period during which the Assignee is bound by
the covenants by the Tenant in this Lease; and
"GUARANTOR" means the outgoing Tenant.
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<PAGE>
SCHEDULE 7
SERVICE CHARGE COSTS
1. The cost of inspecting, repairing, maintaining, cleaning, decorating and
lighting the whole of the Retained Areas (including any party walls
separating Lettable Areas) including any retaining walls situate on the
Estate and the boundary walls and fences of the Estate and all Conduits
serving the Estate (excluding those serving solely any of the Lettable
Areas).
2. The cost of providing the services referred to in clause 7(3).
3. The cost of the maintenance (including planting) of all open and landscaped
areas within the Retained Area.
4. The cost of the erection and maintenance of directional or other signs or
notice boards relating to the Estate or it occupiers.
5. The cost of the establishment and enforcement of regulations for the
benefit or better ordering of the Estate or any part of the Estate.
6. The cost of providing caretaking and security services to the Estate.
7. The cost of marking out the roads, footpaths, service areas, loading bays
and all other relevant parts of the Retained Areas.
8. The cost of refuse disposal.
9. The cost of all fuel for the functions referred to in the other paragraphs
of this Schedule.
10. All Outgoings (as defined in clause 6(3)) assessed, charged or imposed on
the Estate as a whole and the Retained Areas.
11. Any amount which the Landlord may be called upon to pay as a contribution
towards the expense of making, repairing, maintaining, cleaning or lighting
anything used by the Estate and any nearby property.
12. The cost of complying with, making representations against or contesting
the incidence of any enactment relating or alleged to relate to the Estate.
13. All professional fees reasonably and properly incurred by the Landlord in
connection with the administration and the general management of the Estate
including (without limitation):
(a) the Landlord's agent's fees in connection with management of the
Estate (excluding rent collection); and
(b) fees payable in connection with the service charge account.
14. The reasonable fees of the Landlord or any company associated with the
Landlord where the Landlord or that company, rather than a third party,
undertakes any obligations under this Lease or other function referred to
in this Schedule.
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<PAGE>
15. The interest and fees on borrowing any money to finance any of the
functions referred to in this Schedule.
16. Any other sum properly incurred by the Landlord in connection with the
management of the Estate.
-47-
<PAGE>
SIGNED as a deed by )
Michael Colin Warner Trust Manager)
as attorney for LLOYDS BANK PLC )
in the presence of: )
Witness's /s/ A.G. Schofield
Signature: ..........................
Name : A.G. Schofield.................
Address : Lloyds Bank
Securities Service
Hay's Lane House
1, Hay's Lane
London SE1 2HA
-48-
<PAGE>
LLOYDS BANK SECURITIES SERVICES
-------------------------------
POWER OF ATTORNEY FOR EXECUTION OF DOCUMENTS
--------------------------------------------
By this power of attorney given on the eigth day of July 1998 Lloyds Bank Plc
whose registered office is at 71 Lombard Street, London EC3P 3BS ("the bank")
hereby appoints:
Julian Maxwell Ansell
Christopher Baldwin
Ian Martin Bransgrove
Paul Burgess
Martin Robert Clark
Sheila Mary Colley
David Croker
Andrew Donner
Steven Michael Dugay
Christopher John Edmeades
Colin Grant
Anthony Charles Jennings
Lesley Kean Kings
Wayne Paul Kitcat
John Willis Lamb
Graham Paul Lisle
Donald Patrick McIver
Jacqueline Kay Morley
Iain Christopher Mylchreest
Keith William Parker
Ronald Llewellyn Porter
Graham David Reeve
Stephen Harold Robson
Michael Edward Tomlin
Paul Arthur Turner
Richard Andrew Vesey
David James Watson
David Albert Charles Evans
Andrew Robert Gooding
Alison Pearce
Thomas Richard Pool
Mark Charles Thatcher
Paul Andrew Vickery
Richard William Warrington
Michael Colin Warner
Frank Michael Welpa
all of Lloyds Bank Securities Services, jointly and severally, to be attorneys
of the bank in its capacity as trustee, personal representative, nominee,
mortgagee or chargee, only for the purpose of carrying into effect matters
determined upon by the bank in any of these capacities, to sign, seal, execute
and deliver any deed or document considered necessary or desirable:
(1) to convey, transfer, assign, lease, let, underlet, surrender, sell or grant
options, rights of preemption or any other rights over any real or personal
property;
(3) to postpone, defer, subordinate or otherwise regulate the priority or
ranking of any mortgage, charge, debenture or other security;
(4) to vary, alter, amend, modify, revise, replace or substitute any deed or
document to which the bank is a party;
(5) to transfer any stocks, shares or other securities held by or registered in
the name or under the control of the bank and to authorise any person to
exercise any rights attached in any such stocks, shares or other
securities;
(6) to give such indemnities as may be necessary in favour of any person or
body of persons including without limitation indemnities in respect of
lost, destroyed or mislaid certificates, allotment letters or other
documents relating to stocks, shares or other securities;
(7) to grant easements or any other rights over or impose covenants or any
other restrictions on or consent to the letting, underletting, assignment,
surrender or alteration of any freehold or leasehold property;
(8) to assent to the vesting in any person of any real or personal property;
(9) to declare, constitute, regulate, record, vary, alter, amend or modify any
trust, settlement or family arrangement and to appoint or retire any
trustee, including the bank, of any trust, settlement or family
arrangement;
(10) to purchase, lease, acquire or otherwise take into the name of the bank or
under its control any real or personal property whatsoever or wheresoever
or any options, rights of preemption or any other rights over real or
personal property; and
(11) to manage, develop, refurbish, repair, reinstate or otherwise carry out any
works upon any real property whatsoever or wheresoever.
and generally for all or any of the purposes aforesaid to act as attorneys of
the bank. The common seal of the bank was affixed to this deed the date and
year first above written. Given under the common seal of Lloyds Bank Plc as a
deed.
Authorised signatory
Authorised counter signatory
<PAGE>
Schedule referred to in Clause 6(27)
1. Permanent and temporary generator systems including enclosures and fuel
tanks with the associated electronic and manual switch gear.
2. Mechanical Systems ie. Air Conditioning, and condenser systems, air
handlers and electrical dampers.
3. Raised Flooring, Racking, Cage materials, cabinets and patch panels,
Mezzanine flooring.
4. UPS Battery Systems including electrical switch gear.
5. Any customer satellite dishes installed on roof or parking lot areas.
6. FM200 fire suppression canisters, piping and nozzles.
7. VESDA or smoke sensor stations in ceiling or floor area.
8. Inside or outside security cameras, access card reader stations, VCR,
multiplexer, monitors and computers.
9. Parition and conference room furniture systems and freestanding,
cabinets, storage units.
10. Telephone and voice mail system with desk stations and receptionist,
computers, servers, printers, phone sets.
11. Fibre Muxes or other Telco equipment installed in MPOE rooms.
12. Emergency distribution board and telephone backboard with connectors.
13. Maintenance bypass electronic and manual switch gear.
14. Transformers and Power Distributions Units installed on premises.
15. Kitchen appliances like microwaves, refrigerators and vending machines.
16. Console monitors, screen projection and screens in command centre.
17. Bulletproof/resistant glass.
18. Satellite dishes or other communications equipment installed on roof or
in parking lot.
<PAGE>
DATED 24th December 1998
-----------------------------
LLOYDS BANK PLC (AS TRUSTEE FOR SCHRODER EXEMPT PROPERTY UNIT TRUST) (1)
- and -
EXODUS INTERNET LIMITED (2)
---------------------------------
RENT SECURITY DEPOSIT DEED
RELATING TO UNIT 5 PHASE 1 MATRIX PARK
CORONATION ROAD PARK ROYAL LONDON NW10
---------------------------------
WILDE SAPTE
1 Fleet Place
London EC4M 7WS
Tel. 0171 246 7000
Fax. 0171 246 7777
Ref: TLF/SJG/143834
PY0407348.02
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CLAUSE HEADING PAGE NO.
<S> <C> <C>
1. Definitions and Interpretation............................ 1
2. The Deposit............................................... 2
3. The Deposit Account....................................... 3
4. Withdrawals from and Maintenance of the Deposit Account... 3
5. Transfer of the Landlord's Interest....................... 4
6. Release of Deposit........................................ 4
7. Interest.................................................. 5
8. Miscellaneous............................................. 5
</TABLE>
<PAGE>
THIS DEED is made the 24th day of December 1998
BETWEEN
(1) LLOYDS BANK PLC (as Trustee for SCHRODER EXEMPT PROPERTY UNIT TRUST)
of 71 Lombard Street London EC3P 3BS ("THE LANDLORD")
(2) EXODUS INTERNET LIMITED whose registered office is at Fountain
Precinct Balm Green Sheffield South Yorkshire S1 1RZ (Company Number
3591136) ("THE TENANT")
WHEREAS
(A) This Deed is supplemental to the Lease
(B) The Landlord is entitled to the reversion immediately expectant upon
the determination of the term of the Lease and the Tenant is entitled
to the residue of the term of the Lease
WITNESSES as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Deed unless the context otherwise requires or except as
otherwise expressly provided
the "BANK" means Lloyds Bank PLC or such other London Clearing Bank or
registered building society of the Landlord's choice at which the
Deposit Account is maintained from time to time
the "DEPOSIT" means the moneys referred to in Clause 2 below together
with any interest credited to the Deposit Account and any moneys
received from the Tenant and added to the Deposit Account
the "DEPOSIT ACCOUNT" means such interest bearing deposit account
opened at the Bank in the Landlord's name and into which the Deposit
is paid by the Landlord
the "LANDLORD" (where the context so admits) shall include its
successors in title and personal representatives
the "LEASE" means the lease dated today made between the Landlord and
Tenant of the Property for a term of 25 years from [29th September]
1998 and includes all documents made supplemental or pursuant thereto
"NET ASSET VALUE" means tangible net asset value excluding goodwill
and intellectual property determined in accordance with UK Accounting
Principles.
<PAGE>
"NET PROFITS" means net trading profit (excluding extraordinary and
exceptional items) or net investment income (after deduction of
management expenses) in each case after tax and determined in
accordance with UK Accounting Principles
the "PROPERTY" means Unit 5 Phase 1 Matrix Park Coronation Road Park
Royal London NW10 being the property demised by the Lease
"RENTAL LIABILITY" means a sum equal to the rent from time to time
payable under the Lease or (if higher) the Landlord's reasonable
estimate of the anticipated rent payable under the Lease following any
rent review outstanding during the Years of Account
"UK ACCOUNTING PRINCIPLES" means UK accounting principles generally
accepted from time to time and consistently applied
"YEARS OF ACCOUNT" means three consecutive years of account
1.2 INTERPRETATION
In this Deed (unless otherwise provided)
1.2.1 clause headings are inserted for ease of reference only and
shall not affect construction
1.2.2 reference to clauses and sub-clauses are to the clauses and
sub-clauses of and to this Deed and
1.2.3 words denoting one gender include all genders, words
denoting individuals or persons include corporations and
trusts and vice versa, words denoting the singular include
the plural and vice versa, and words denoting the whole
include a reference to any part thereof
2. THE DEPOSIT
2.1 The Landlord hereby acknowledges receipt of a bank draft issued by a
bank which is a member of CHAPS Limited or of the receipt of monies by
telegraphic transfer to its solicitors account in the sum of
(Pounds)121,148 (ONE HUNDRED AND TWENTY ONE THOUSAND ONE HUNDRED AND
FORTY EIGHT POUNDS) plus Value Added Tax such payment being made as
security for the due performance and observance of the covenants
agreements and conditions on the part of the Tenant under the Lease
and all losses costs and expenses which the Landlord may incur by
reason of or consequent upon any breach of those covenants agreements
and conditions and (without prejudice to the generality of the
foregoing) as more particularly provided in Clause 4 below and the
Landlord shall be entitled to set off the Deposit against any sums
owed to it under the Lease
2.2 Following the ascertainment of a revised rent expressed as an annual
amount (the "Revised Rent") in accordance with clause 4 of the Lease
the Tenant shall pay to the Landlord by way of a bank draft issued by
a bank which is a member of CHAPS Limited within seven days of such
ascertainment an additional sum calculated in accordance with the
following
<PAGE>
formula (the "Additional Sum") plus VAT on the Additional Sum:
(Pounds)X = (Pounds)A - B
Where:
X = the additional sum to be paid to the Landlord in
accordance with this Clause
A = the amount of the Revised Rent
B = the yearly rent payable under clause 4 of the Lease
immediately prior to the ascertainment of the Revised
Rent or the yearly rent which would be payable
immediately prior to such ascertainment but for any
abatement or suspension of rent under the Lease
2.3 Within five Working Days of receipt of the Additional Sum by the
Landlord the Landlord shall pay the Additional Sum into the Deposit
Account and the Additional Sum shall thereafter form part of the
Deposit against which the Landlord shall be entitled to set off any
sums owed to it under the Lease in accordance with this Deed
3. THE DEPOSIT ACCOUNT
3.1 The Landlord shall forthwith place the Deposit in the Deposit Account
until withdrawal or repayment of the Deposit in accordance with the
terms of Clause 6 below
3.2 The Landlord shall also credit to the Deposit Account any sums
subsequently paid to it by the Tenant under Clause 4.2
4. WITHDRAWALS FROM AND MAINTENANCE OF THE DEPOSIT ACCOUNT
4.1 The Landlord and Tenant hereby agree that without prejudice to any
other right or remedy which the Landlord may have under this Deed or
the Lease the Landlord shall be entitled on 5 days prior written
notice to the Tenant to withdraw from the Deposit from time to time
the sums specified below which shall thereupon become the absolute
property of the Landlord
4.1.1 any liquidated and ascertained sum (including interest)
(whether rent or otherwise and whether or not any formal
demand has been made) which is due to the Landlord from the
Tenant in respect of the Lease and which is unpaid for a
period of fourteen days after the due date
4.1.2 any liquidated and ascertained loss, expense, cost, claim,
liability or damage suffered or incurred by the Landlord as
the result of any breach of any covenant agreement or
condition on the part of the Tenant under the Lease
4.2 The Landlord shall notify the Tenant in writing within fourteen days
after any withdrawal of any sum from the Deposit and the reason for
such withdrawal and (if the Lease is still subsisting) the Tenant
hereby covenants forthwith to pay the Landlord for payment into
<PAGE>
the Deposit Account a bank draft issued by a bank which is a member of
CHAPS Limited for such further sum as shall restore the Deposit to its
balance prior to such withdrawal
4.3 It is further agreed that if the Lease shall be forfeited or
disclaimed by any liquidator or trustee in bankruptcy of the Tenant or
otherwise determined otherwise than by agreement (which agreement
shall include the valid exercise of an option to determine the Lease)
the Deposit shall continue to be available to the Landlord in the
manner set out above until it shall be exhausted or until there shall
be no further liability of the Tenant to the Landlord whereupon any
remaining balance of the Deposit shall be released to the Tenant as
soon as reasonably practicable
4.4 The Landlord should as soon as reasonably practicable pay into the
Deposit Account the full amount of any sum (together with Interest (as
defined in the Lease)) shown to have been incorrectly withdrawn by the
Landlord or if earlier following the date on which the Landlord first
becomes aware of an error having been made
5. TRANSFER OF THE LANDLORD'S INTEREST
If the Landlord transfers the reversion immediately expectant upon the
determination of the Lease before the Deposit has become repayable to
the Tenant pursuant to Clause 6 either
5.1 5.1.1 the Tenant shall if required by (and at the cost of) the
Landlord such costs if incurred by the Tenant to be
reasonable, enter into a rent deposit deed with the
transferee of such reversion in identical terms to this Deed
(but with the name of the transferee being substituted for
the name of the Landlord) and
5.1.2 the Landlord shall procure that any transferee enters into a
rent deposit deed with the Tenant in identical terms to this
Deed (but with the transferee's name substituted for the
name of the Landlord) and on completion of such deed
transfer the balance of the Deposit to such account as shall
have been opened by the transferee (after the deduction of
any sum withdrawn pursuant to Clause 4 above) and upon
serving notice of such transfer on the Tenant shall
forthwith be released automatically from any further
liability under the terms of this Deed
or
5.2 The Landlord may instead release the balance of the Deposit to the
Tenant (after the deduction of any sum withdrawn pursuant to Clause 4
above)
6. RELEASE OF DEPOSIT
6.1 The Deposit or such part thereof as shall be remaining shall be
released by the Landlord and repaid to the Tenant on the earlier of:
6.1.1 one calendar month after the expiration or sooner
determination (by agreement) of the term granted by the
Lease or its determination in consequence of the exercise by
the Tenant of any option to determine conferred on it by the
Lease
<PAGE>
and in either case vacant possession of the premises demised
by the Lease being given to the Landlord; or
6.1.2 the Tenant demonstrating that it has made Net Profits for
each of the immediately preceding Years of Account at least
equal to three times the Rental Liability and that in each
of those Years of Account it has a Net Asset Value of not
less than five times the Rental Liability
and provided always the Tenant has paid to the Landlord all sums set
out as in Clause 4 above (failing which the Landlord may deduct such
sums as are properly due from the Deposit) the Landlord shall then
release the balance to the Tenant within 5 working days of receipt of a
written request from the Tenant for such release
6.2 The Tenant may demonstrate that it satisfies the requirements of
Clause 6.1.2 by means of audited accounts or by means of such other
evidence as shall be reasonably acceptable to the Landlord
7. INTEREST
7.1 The Landlord shall use all reasonable endeavours to select a Deposit
Account which yields the best rate of interest reasonably obtainable
from the Bank having regard to the provisions of this Deed
7.2 The interest accruing on the Deposit shall belong to the Tenant but in
the first instance shall be used in or towards payment of any sums
payable by the Tenant pursuant to clauses 2.3 and 4.2 of this Deed and
subject thereto such interest (less tax properly deducted) shall be
paid to the Tenant on an annual basis
7.3 All tax payable in respect of interest accruing on the Deposit
shall be paid by the Tenant from its own money
8. MISCELLANEOUS
It is hereby agreed and declared that:
8.1 The existence of the Deposit shall not prejudice the
Landlord's ability to proceed against the Tenant for any
breach of any covenant agreement or condition on the part of
the Tenant under the Lease or entitle the Tenant to withhold
any moneys or fail to perform any covenant agreement or
condition under the Lease and the Deposit shall not be
regarded as an advance payment of rent
8.2 The proviso for re-entry contained in the Lease shall be
exercisable as well upon any breach of any covenant or
obligation on the part of the Tenant contained in this Deed
as on the happening of any of the events mentioned in the
Lease
8.3 The rights of the Landlord under this Deed do not limit its
rights under the Lease
<PAGE>
8.4 The provisions as to notices contained in the Lease shall apply
to notices served pursuant to this Deed
8.5 The Landlord may at any time terminate this Deed by paying the
Deposit to the Tenant and on doing so will automatically be
released from all liabilities and obligations under this Deed
except in relation to rights of the Tenant that have arisen
before the termination
8.6 Any termination under clause 8.5 and any payment of the Deposit
shall not affect the Landlord's rights under the Lease
8.7 The Tenant shall not assign to any person whatsoever the benefit
of any of the Tenant's rights under this Deed, nor assign,
transfer or otherwise dispose of all or any part of its rights,
title or interest in or to the Deposit, nor create any further
encumbrance or other security interest over the whole or any
part of the Deposit
8.8 If any provision of this Deed is or becomes void or
unenforceable in whole or in part that provision to that extent
is to be deemed not to form part of this Deed but the validity
and enforceability of the remainder of that provision or of the
Deed are not to be affected
8.9 This Agreement shall be governed by and construed in accordance
with English law and the parties irrevocably agree that the
courts of England are to have exclusive jurisdiction to settle
any disputes which may arise out of or in connection with this
Agreement
AS WITNESS this Deed (which shall be delivered when dated) has been executed by
the parties or their duly authorised representatives on the date first stated
above
<PAGE>
SIGNED and DELIVERED as a DEED )
by [Michael Colin Warner] Trust )
Manager as attorney for LLOYDS )
BANK PLC in the presence of: )
/s/ A.G. Schofield
A.G. Schofield
Lloyd's Bank
Securities Services
Hay's Lane House
1, Hay's Lane
London SE1 2HA
EXECUTED and DELIVERED as a DEED by )
EXODUS INTERNET LIMITED acting by two )
Directors or a Director and its )
Company Secretary )
Director
Director/Company Secretary
<PAGE>
LLOYDS BANK SECURITIES SERVICES
-------------------------------
POWER OF ATTORNEY FOR EXECUTION OF DOCUMENTS
--------------------------------------------
By this power of attorney given on the eigth day of July 1998 Lloyds Bank Plc
whose registered office is at 71 Lombard Street, London EC3P 3BS ("the bank")
hereby appoints:
Julian Maxwell Ansell
Christopher Baldwin
Ian Martin Bransgrove
Paul Burgess
Martin Robert Clark
Sheila Mary Colley
David Croker
Andrew Donner
Steven Michael Dugay
Christopher John Edmeades
Colin Grant
Anthony Charles Jennings
Lesley Kean Kings
Wayne Paul Kitcat
John Willis Lamb
Graham Paul Lisle
Donald Patrick McIver
Jacqueline Kay Morley
Iain Christopher Mylchreest
Keith William Parker
Ronald Llewellyn Porter
Graham David Reeve
Stephen Harold Robson
Michael Edward Tomlin
Paul Arthur Turner
Richard Andrew Vesey
David James Watson
David Albert Charles Evans
Andrew Robert Gooding
Alison Pearce
Thomas Richard Pool
Mark Charles Thatcher
Paul Andrew Vickery
Richard William Warrington
Michael Colin Warner
Frank Michael Welpa
all of Lloyds Bank Securities Services, jointly and severally, to be attorneys
of the bank in its capacity as trustee, personal representative, nominee,
mortgagee or chargee, only for the purpose of carrying into effect matters
determined upon by the bank in any of these capacities, to sign, seal, execute
and deliver any deed or document considered necessary or desirable:
(1) to convey, transfer, assign, lease, let, underlet, surrender, sell or grant
options, rights of preemption or any other rights over any real or personal
property;
(3) to postpone, defer, subordinate or otherwise regulate the priority or
ranking of any mortgage, charge, debenture or other security;
(4) to vary, alter, amend, modify, revise, replace or substitute any deed or
document to which the bank is a party;
(5) to transfer any stocks, shares or other securities held by or registered in
the name or under the control of the bank and to authorise any person to
exercise any rights attached in any such stocks, shares or other
securities;
(6) to give such indemnities as may be necessary in favour of any person or
body of persons including without limitation indemnities in respect of
lost, destroyed or mislaid certificates, allotment letters or other
documents relating to stocks, shares or other securities;
(7) to grant easements or any other rights over or impose covenants or any
other restrictions on or consent to the letting, underletting, assignment,
surrender or alteration of any freehold or leasehold property;
(8) to assent to the vesting in any person of any real or personal property;
(9) to declare, constitute, regulate, record, vary, alter, amend or modify any
trust, settlement or family arrangement and to appoint or retire any
trustee, including the bank, of any trust, settlement or family
arrangement;
(10) to purchase, lease, acquire or otherwise take into the name of the bank or
under its control any real or personal property whatsoever or wheresoever
or any options, rights of preemption or any other rights over real or
personal property; and
(11) to manage, develop, refurbish, repair, reinstate or otherwise carry out any
works upon any real property whatsoever or wheresoever.
and generally for all or any of the purposes aforesaid to act as attorneys of
the bank. The common seal of the bank was affixed to this deed the date and
year first above written. Given under the common seal of Lloyds Bank Plc as a
deed.
Authorised signatory
Authorised counter signatory
<PAGE>
DATED 24th December 1998
---------------------------------
LLOYDS BANK PLC (AS TRUSTEE FOR SCHRODER EXEMPT PROPERTY UNIT TRUST) (1)
- and -
EXODUS INTERNET LIMITED (2)
---------------------------------------------
RENT SECURITY DEPOSIT DEED
RELATING TO UNIT 6 PHASE 1 MATRIX PARK
CORONATION ROAD PARK ROYAL LONDON NW10
--------------------------------------------
WILDE SAPTE
1 Fleet Place
London EC4M 7WS
Tel. 0171 246 7000
Fax. 0171 246 7777
Ref: TLF/SJG/143834
PY0407348.02
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CLAUSE HEADING PAGE NO.
<S> <C>
1. Definitions and Interpretation............................ 1
2. The Deposit............................................... 2
3. The Deposit Account....................................... 3
4. Withdrawals from and Maintenance of the Deposit Account... 3
5. Transfer of the Landlord's Interest....................... 4
6. Release of Deposit........................................ 4
7. Interest.................................................. 5
8. Miscellaneous............................................. 5
</TABLE>
<PAGE>
THIS DEED is made the 24th day of December 1998
BETWEEN
(1) LLOYDS BANK PLC (as Trustee for SCHRODER EXEMPT PROPERTY UNIT TRUST) of
71 Lombard Street London EC3P 3BS ("THE LANDLORD")
(2) EXODUS INTERNET LIMITED whose registered office is at Fountain Precinct
Balm Green Sheffield South Yorkshire S1 1RZ (Company Number 3591136)
("THE TENANT")
WHEREAS
(A) This Deed is supplemental to the Lease
(B) The Landlord is entitled to the reversion immediately expectant upon the
determination of the term of the Lease and the Tenant is entitled to the
residue of the term of the Lease
WITNESSES as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Deed unless the context otherwise requires or except as otherwise
expressly provided
the "BANK" means Lloyds Bank PLC or such other London Clearing Bank or
registered building society of the Landlord's choice at which the Deposit
Account is maintained from time to time
the "DEPOSIT" means the moneys referred to in Clause 2 below together
with any interest credited to the Deposit Account and any moneys received
from the Tenant and added to the Deposit Account
the "DEPOSIT ACCOUNT" means such interest bearing deposit account opened
at the Bank in the Landlord's name and into which the Deposit is paid by
the Landlord
the "LANDLORD" (where the context so admits) shall include its successors
in title and personal representatives
the "LEASE" means the lease dated today made between the Landlord and
Tenant of the Property for a term of 25 years from [29th September] 1998
and includes all documents made supplemental or pursuant thereto
"NET ASSET VALUE" means tangible net asset value excluding goodwill and
intellectual property determined in accordance with UK Accounting
Principles.
<PAGE>
"NET PROFITS" means net trading profit (excluding extraordinary and
exceptional items) or net investment income (after deduction of management
expenses) in each case after tax and determined in accordance with UK
Accounting Principles
the "PROPERTY" means Unit 6 Phase 1 Matrix Park Coronation Road Park Royal
London NW10 being the property demised by the Lease
"RENTAL LIABILITY" means a sum equal to the rent from time to time payable
under the Lease or (if higher) the Landlord's reasonable estimate of the
anticipated rent payable under the Lease following any rent review
outstanding during the Years of Account
"UK ACCOUNTING PRINCIPLES" means UK accounting principles generally
accepted from time to time and consistently applied
"YEARS OF ACCOUNT" means three consecutive years of account
1.2 INTERPRETATION
In this Deed (unless otherwise provided)
1.2.1 clause headings are inserted for ease of reference only and shall
not affect construction
1.2.2 reference to clauses and sub-clauses are to the clauses and sub-
clauses of and to this Deed and
1.2.3 words denoting one gender include all genders, words denoting
individuals or persons include corporations and trusts and vice
versa, words denoting the singular include the plural and vice
versa, and words denoting the whole include a reference to any part
thereof
2. THE DEPOSIT
2.1 The Landlord hereby acknowledges receipt of a bank draft issued by a bank
which is a member of CHAPS Limited or of the receipt of monies by
telegraphic transfer to its solicitors account in the sum of
(Pounds)100,641.50 (ONE HUNDRED THOUSAND SIX HUNDRED AND FORTY ONE POUNDS
FIFTY PENCE) plus Value Added Tax such payment being made as security for
the due performance and observance of the covenants agreements and
conditions on the part of the Tenant under the Lease and all losses costs
and expenses which the Landlord may incur by reason of or consequent upon
any breach of those covenants agreements and conditions and (without
prejudice to the generality of the foregoing) as more particularly provided
in Clause 4 below and the Landlord shall be entitled to set off the Deposit
against any sums owed to it under the Lease
2.2 Following the ascertainment of a revised rent expressed as an annual amount
(the "Revised Rent") in accordance with clause 4 of the Lease the Tenant
shall pay to the Landlord by way of a bank draft issued by a bank which is
a member of CHAPS Limited within seven days of such ascertainment an
additional sum calculated in accordance with the following
<PAGE>
formula (the "Additional Sum") plus VAT on the Additional Sum:
(Pounds)X = (Pounds)A - B
Where:
X = the additional sum to be paid to the Landlord in accordance
with this Clause
A = the amount of the Revised Rent
B = the yearly rent payable under clause 4 of the Lease
immediately prior to the ascertainment of the Revised Rent or
the yearly rent which would be payable immediately prior to
such ascertainment but for any abatement or suspension of
rent under the Lease
2.3 Within five Working Days of receipt of the Additional Sum by the Landlord
the Landlord shall pay the Additional Sum into the Deposit Account and the
Additional Sum shall thereafter form part of the Deposit against which the
Landlord shall be entitled to set off any sums owed to it under the Lease
in accordance with this Deed
3. THE DEPOSIT ACCOUNT
3.1 The Landlord shall forthwith place the Deposit in the Deposit Account until
withdrawal or repayment of the Deposit in accordance with the terms of
Clause 6 below
3.2 The Landlord shall also credit to the Deposit Account any sums subsequently
paid to it by the Tenant under Clause 4.2
4. WITHDRAWALS FROM AND MAINTENANCE OF THE DEPOSIT ACCOUNT
4.1 The Landlord and Tenant hereby agree that without prejudice to any other
right or remedy which the Landlord may have under this Deed or the Lease
the Landlord shall be entitled on 5 days prior written notice to the Tenant
to withdraw from the Deposit from time to time the sums specified below
which shall thereupon become the absolute property of the Landlord
4.1.1 any liquidated and ascertained sum (including interest)
(whether rent or otherwise and whether or not any formal
demand has been made) which is due to the Landlord from the
Tenant in respect of the Lease and which is unpaid for a
period of fourteen days after the due date
4.1.2 any liquidated and ascertained loss, expense, cost, claim,
liability or damage suffered or incurred by the Landlord as
the result of any breach of any covenant agreement or
condition on the part of the Tenant under the Lease
4.2 The Landlord shall notify the Tenant in writing within fourteen days after
any withdrawal of any sum from the Deposit and the reason for such
withdrawal and (if the Lease is still subsisting) the Tenant hereby
covenants forthwith to pay the Landlord for payment into
<PAGE>
the Deposit Account a bank draft issued by a bank which is a member of
CHAPS Limited for such further sum as shall restore the Deposit to its
balance prior to such withdrawal
4.3 It is further agreed that if the Lease shall be forfeited or disclaimed by
any liquidator or trustee in bankruptcy of the Tenant or otherwise
determined otherwise than by agreement (which agreement shall include the
valid exercise of an option to determine the Lease) the Deposit shall
continue to be available to the Landlord in the manner set out above until
it shall be exhausted or until there shall be no further liability of the
Tenant to the Landlord whereupon any remaining balance of the Deposit shall
be released to the Tenant as soon as reasonably practicable
4.4 The Landlord should as soon as reasonably practicable pay into the Deposit
Account the full amount of any sum (together with Interest (as defined in
the Lease)) shown to have been incorrectly withdrawn by the Landlord or if
earlier following the date on which the Landlord first becomes aware of an
error having been made
5. TRANSFER OF THE LANDLORD'S INTEREST
If the Landlord transfers the reversion immediately expectant upon the
determination of the Lease before the Deposit has become repayable to the
Tenant pursuant to Clause 6 either
5.1 5.1.1 the Tenant shall if required by (and at the cost of) the
Landlord such costs if incurred by the Tenant to be
reasonable, enter into a rent deposit deed with the
transferee of such reversion in identical terms to this Deed
(but with the name of the transferee being substituted for
the name of the Landlord) and
5.1.2 the Landlord shall procure that any transferee enters into a
rent deposit deed with the Tenant in identical terms to this
Deed (but with the transferee's name substituted for the name
of the Landlord) and on completion of such deed transfer the
balance of the Deposit to such account as shall have been
opened by the transferee (after the deduction of any sum
withdrawn pursuant to Clause 4 above) and upon serving notice
of such transfer on the Tenant shall forthwith be released
automatically from any further liability under the terms of
this Deed
or
5.2 The Landlord may instead release the balance of the Deposit to the Tenant
(after the deduction of any sum withdrawn pursuant to Clause 4 above)
6. RELEASE OF DEPOSIT
6.1 The Deposit or such part thereof as shall be remaining shall be released by
the Landlord and repaid to the Tenant on the earlier of:
6.1.1 one calendar month after the expiration or sooner
determination (by agreement) of the term granted by the Lease
or its determination in consequence of the exercise by the
Tenant of any option to determine conferred on it by the
Lease
<PAGE>
and in either case vacant possession of the premises demised by
the Lease being given to the Landlord; or
6.1.2 the Tenant demonstrating that it has made Net Profits for each of
the immediately preceding Years of Account at least equal to
three times the Rental Liability and that in each of those Years
of Account it has a Net Asset Value of not less than five times
the Rental Liability
and provided always the Tenant has paid to the Landlord all sums set out as
in Clause 4 above (failing which the Landlord may deduct such sums as are
properly due from the Deposit) the Landlord shall then release the balance
to the Tenant within 5 working days of receipt of a written request from
the Tenant for such release
6.2 The Tenant may demonstrate that it satisfies the requirements of Clause
6.1.2 by means of audited accounts or by means of such other evidence as
shall be reasonably acceptable to the Landlord
7. INTEREST
7.1 The Landlord shall use all reasonable endeavours to select a Deposit
Account which yields the best rate of interest reasonably obtainable from
the Bank having regard to the provisions of this Deed
7.2 The interest accruing on the Deposit shall belong to the Tenant but in the
first instance shall be used in or towards payment of any sums payable by
the Tenant pursuant to clauses 2.3 and 4.2 of this Deed and subject thereto
such interest (less tax properly deducted) shall be paid to the Tenant on
an annual basis
7.3 All tax payable in respect of interest accruing on the Deposit shall be
paid by the Tenant from its own money
8. MISCELLANEOUS
It is hereby agreed and declared that:
8.1 The existence of the Deposit shall not prejudice the Landlord's
ability to proceed against the Tenant for any breach of any
covenant agreement or condition on the part of the Tenant under
the Lease or entitle the Tenant to withhold any moneys or fail to
perform any covenant agreement or condition under the Lease and
the Deposit shall not be regarded as an advance payment of rent
8.2 The proviso for re-entry contained in the Lease shall be
exercisable as well upon any breach of any covenant or obligation
on the part of the Tenant contained in this Deed as on the
happening of any of the events mentioned in the Lease
8.3 The rights of the Landlord under this Deed do not limit its
rights under the Lease
<PAGE>
8.4 The provisions as to notices contained in the Lease shall
apply to notices served pursuant to this Deed
8.5 The Landlord may at any time terminate this Deed by paying
the Deposit to the Tenant and on doing so will automatically
be released from all liabilities and obligations under this
Deed except in relation to rights of the Tenant that have
arisen before the termination
8.6 Any termination under clause 8.5 and any payment of the
Deposit shall not affect the Landlord's rights under the
Lease
8.7 The Tenant shall not assign to any person whatsoever the
benefit of any of the Tenant's rights under this Deed, nor
assign, transfer or otherwise dispose of all or any part of
its rights, title or interest in or to the Deposit, nor
create any further encumbrance or other security interest
over the whole or any part of the Deposit
8.8 If any provision of this Deed is or becomes void or
unenforceable in whole or in part that provision to that
extent is to be Deemed not to form part of this deed but the
validity and enforceability of the remainder of that
provision or of the Deed are not to be affected
8.9 This Agreement shall be governed by and construed in
accordance with English law and the parties irrevocably agree
that the courts of England are to have exclusive jurisdiction
to settle any disputes which may arise out of or in
connection with this Agreement
AS WITNESS this Deed (which shall be delivered when dated) has been executed by
the parties or their duly authorised representatives on the date first stated
above
<PAGE>
SIGNED and DELIVERED as a DEED by )
[Michael Colin Warner] Trust Manager as )
attorney for LLOYDS BANK PLC in the )
presence of: )
/s/ A.G. Schofield
A.G. Schofield
Lloyd's Bank
Securities Services
Hay's Lane House
1, Hay's Lane
London, SE1 2HA
EXECUTED and DELIVERED as a DEED by )
EXODUS INTERNET LIMITED acting by two )
Directors or a Director and its )
Company Secretary )
Director
Director/Company Secretary
<PAGE>
LLOYDS BANK SECURITIES SERVICES
-------------------------------
POWER OF ATTORNEY FOR EXECUTION OF DOCUMENTS
--------------------------------------------
By this power of attorney given on the eigth day of July 1998 Lloyds Bank Plc
whose registered office is at 71 Lombard Street, London EC3P 3BS ("the bank")
hereby appoints:
Julian Maxwell Ansell
Christopher Baldwin
Ian Martin Bransgrove
Paul Burgess
Martin Robert Clark
Sheila Mary Colley
David Croker
Andrew Donner
Steven Michael Dugay
Christopher John Edmeades
Colin Grant
Anthony Charles Jennings
Lesley Kean Kings
Wayne Paul Kitcat
John Willis Lamb
Graham Paul Lisle
Donald Patrick McIver
Jacqueline Kay Morley
Iain Christopher Mylchreest
Keith William Parker
Ronald Llewellyn Porter
Graham David Reeve
Stephen Harold Robson
Michael Edward Tomlin
Paul Arthur Turner
Richard Andrew Vesey
David James Watson
David Albert Charles Evans
Andrew Robert Gooding
Alison Pearce
Thomas Richard Pool
Mark Charles Thatcher
Paul Andrew Vickery
Richard William Warrington
Michael Colin Warner
Frank Michael Welpa
all of Lloyds Bank Securities Services, jointly and severally, to be attorneys
of the bank in its capacity as trustee, personal representative, nominee,
mortgagee or chargee, only for the purpose of carrying into effect matters
determined upon by the bank in any of these capacities, to sign, seal, execute
and deliver any deed or document considered necessary or desirable:
(1) to convey, transfer, assign, lease, let, underlet, surrender, sell or grant
options, rights of preemption or any other rights over any real or personal
property;
(3) to postpone, defer, subordinate or otherwise regulate the priority or
ranking of any mortgage, charge, debenture or other security;
(4) to vary, alter, amend, modify, revise, replace or substitute any deed or
document to which the bank is a party;
(5) to transfer any stocks, shares or other securities held by or registered in
the name or under the control of the bank and to authorise any person to
exercise any rights attached in any such stocks, shares or other
securities;
(6) to give such indemnities as may be necessary in favour of any person or
body of persons including without limitation indemnities in respect of
lost, destroyed or mislaid certificates, allotment letters or other
documents relating to stocks, shares or other securities;
(7) to grant easements or any other rights over or impose covenants or any
other restrictions on or consent to the letting, underletting, assignment,
surrender or alteration of any freehold or leasehold property;
(8) to assent to the vesting in any person of any real or personal property;
(9) to declare, constitute, regulate, record, vary, alter, amend or modify any
trust, settlement or family arrangement and to appoint or retire any
trustee, including the bank, of any trust, settlement or family
arrangement;
(10) to purchase, lease, acquire or otherwise take into the name of the bank or
under its control any real or personal property whatsoever or wheresoever
or any options, rights of preemption or any other rights over real or
personal property; and
(11) to manage, develop, refurbish, repair, reinstate or otherwise carry out any
works upon any real property whatsoever or wheresoever.
and generally for all or any of the purposes aforesaid to act as attorneys of
the bank. The common seal of the bank was affixed to this deed the date and
year first above written. Given under the common seal of Lloyds Bank Plc as a
deed.
Authorised signatory
Authorised counter signatory
<PAGE>
DATED 24th December 1998
---------------------------------------
LLOYDS BANK PLC (AS TRUSTEE FOR SCHRODER EXEMPT PROPERTY UNIT TRUST) (1)
- and -
EXODUS INTERNET LIMITED (2)
_____________________________________
RENT SECURITY DEPOSIT DEED
RELATING TO UNIT 7 PHASE 1 MATRIX PARK
CORONATION ROAD PARK ROYAL LONDON NW10
_____________________________________
WILDE SAPTE
1 Fleet Place
London EC4M 7WS
Tel. 0171 246 7000
Fax. 0171 246 7777
REF: TLF/SJG/143834
PY0397901.04
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CLAUSE HEADING PAGE NO.
<S> <C> <C>
1. Definitions and Interpretation.......................... 1
2. The Deposit............................................. 2
3. The Deposit Account..................................... 3
4. Withdrawals from and Maintenance of the Deposit Account. 3
5. Transfer of the Landlord's Interest..................... 4
6. Release of Deposit...................................... 4
7. Interest................................................ 5
8. Miscellaneous........................................... 5
</TABLE>
<PAGE>
THIS DEED is made the 24th day of December 1998
BETWEEN
(1) LLOYDS BANK PLC (as Trustee for SCHRODER EXEMPT PROPERTY UNIT TRUST) of
71 Lombard Street London EC3P 3BS ("THE LANDLORD")
(2) EXODUS INTERNET LIMITED whose registered office is at Fountain Precinct
Balm Green Sheffield South Yorkshire S1 1RZ (Company Number 3591136)
("THE TENANT")
WHEREAS
(A) This Deed is supplemental to the Lease
(B) The Landlord is entitled to the reversion immediately expectant upon the
determination of the term of the Lease and the Tenant is entitled to the
residue of the term of the Lease
WITNESSES as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Deed unless the context otherwise requires or except as otherwise
expressly provided
the "BANK" means Lloyds Bank PLC or such other London Clearing Bank or
registered building society of the Landlord's choice at which the Deposit
Account is maintained from time to time
the "DEPOSIT" means the moneys referred to in Clause 2 below together
with any interest credited to the Deposit Account and any moneys received
from the Tenant and added to the Deposit Account
the "DEPOSIT ACCOUNT" means such interest bearing deposit account opened
at the Bank in the Landlord's name and into which the Deposit is paid by
the Landlord
the "LANDLORD" (where the context so admits) shall include its successors
in title and personal representatives
the "LEASE" means the lease dated today made between the Landlord and
Tenant of the Property for a term of 25 years from [29th September]
1998 and includes all documents made supplemental or pursuant thereto
"NET ASSET VALUE" means tangible net asset value excluding goodwill and
intellectual property determined in accordance with UK Accounting
Principles.
-1-
<PAGE>
"NET PROFITS" means net trading profit (excluding extraordinary and
exceptional items) or net investment income (after deduction of
management expenses) in each case after tax and determined in accordance
with UK Accounting Principles
the "PROPERTY" means Unit 7 Phase 1 Matrix Park Coronation Road Park
Royal London NW10 being the property demised by the Lease
"RENTAL LIABILITY" means a sum equal to the rent from time to time
payable under the Lease or (if higher) the Landlord's reasonable estimate
of the anticipated rent payable under the Lease following any rent review
outstanding during the Years of Account
"UK ACCOUNTING PRINCIPLES" means UK accounting principles generally
accepted from time to time and consistently applied
"YEARS OF ACCOUNT" means three consecutive years of account
1.2 INTERPRETATION
In this Deed (unless otherwise provided)
1.2.1 clause headings are inserted for ease of reference only and shall
not affect construction
1.2.2 reference to clauses and sub-clauses are to the clauses and sub-
clauses of and to this Deed and
1.2.3 words denoting one gender include all genders, words denoting
individuals or persons include corporations and trusts and vice
versa, words denoting the singular include the plural and vice
versa, and words denoting the whole include a reference to any
part thereof
2. THE DEPOSIT
2.1 The Landlord hereby acknowledges receipt of a bank draft issued by a bank
which is a member of CHAPS Limited or of the receipt of monies by
telegraphic transfer to its solicitors account in the sum of
(Pounds)100,850.75 (ONE HUNDRED THOUSAND EIGHT HUNDRED AND FIFTY POUNDS
SEVENTY FIVE PENCE) plus Value Added Tax such payment being made as
security for the due performance and observance of the covenants
agreements and conditions on the part of the Tenant under the Lease and
all losses costs and expenses which the Landlord may incur by reason of
or consequent upon any breach of those covenants agreements and
conditions and (without prejudice to the generality of the foregoing) as
more particularly provided in Clause 4 below and the Landlord shall be
entitled to set off the Deposit against any sums owed to it under the
Lease
2.2 Following the ascertainment of a revised rent expressed as an annual
amount (the "Revised Rent") in accordance with clause 4 of the Lease the
Tenant shall pay to the Landlord by way
-2-
<PAGE>
of a bank draft issued by a bank which is a member of CHAPS Limited
within seven days of such ascertainment an additional sum calculated in
accordance with the following
-3-
<PAGE>
formula (the "Additional Sum") plus VAT on the Additional Sum:
(Pounds)X = (Pounds)A - B
Where:
X = the additional sum to be paid to the Landlord in accordance
with this Clause
A = the amount of the Revised Rent
B = the yearly rent payable under clause 4 of the Lease
immediately prior to the ascertainment of the Revised Rent
or the yearly rent which would be payable immediately prior
to such ascertainment but for any abatement or suspension
of rent under the Lease
2.3 Within five Working Days of receipt of the Additional Sum by the Landlord
the Landlord shall pay the Additional Sum into the Deposit Account and
the Additional Sum shall thereafter form part of the Deposit against
which the Landlord shall be entitled to set off any sums owed to it under
the Lease in accordance with this Deed
3. THE DEPOSIT ACCOUNT
3.1 The Landlord shall forthwith place the Deposit in the Deposit Account
until withdrawal or repayment of the Deposit in accordance with the terms
of Clause 6 below
3.2 The Landlord shall also credit to the Deposit Account any sums
subsequently paid to it by the Tenant under Clause 4.2
4. WITHDRAWALS FROM AND MAINTENANCE OF THE DEPOSIT ACCOUNT
4.1 The Landlord and Tenant hereby agree that without prejudice to any other
right or remedy which the Landlord may have under this Deed or the Lease
the Landlord shall be entitled on 5 days prior written notice to the
Tenant to withdraw from the Deposit from time to time the sums specified
below which shall thereupon become the absolute property of the Landlord
4.1.1 any liquidated and ascertained sum (including interest) (whether
rent or otherwise and whether or not any formal demand has been
made) which is due to the Landlord from the Tenant in respect of
the Lease and which is unpaid for a period of fourteen days after
the due date
4.1.2 any liquidated and ascertained loss, expense, cost, claim,
liability or damage suffered or incurred by the Landlord as the
result of any breach of any covenant agreement or condition on the
part of the Tenant under the Lease
-4-
<PAGE>
4.2 The Landlord shall notify the Tenant in writing within fourteen days
after any withdrawal of any sum from the Deposit and the reason for such
withdrawal and (if the Lease is still subsisting) the Tenant hereby
covenants forthwith to pay the Landlord for payment into the Deposit
Account a bank draft issued by a bank which is a member of CHAPS Limited
for such further sum as shall restore the Deposit to its balance prior to
such withdrawal
4.3 It is further agreed that if the Lease shall be forfeited or disclaimed
by any liquidator or trustee in bankruptcy of the Tenant or otherwise
determined otherwise than by agreement (which agreement shall include the
valid exercise of an option to determine the Lease) the Deposit shall
continue to be available to the Landlord in the manner set out above
until it shall be exhausted or until there shall be no further liability
of the Tenant to the Landlord whereupon any remaining balance of the
Deposit shall be released to the Tenant as soon as reasonably practicable
4.4 The Landlord should as soon as reasonably practicable pay into the
Deposit Account the full amount of any sum (together with Interest (as
defined in the Lease)) shown to have been incorrectly withdrawn by the
Landlord or if earlier following the date on which the Landlord first
becomes aware of an error having been made
5. TRANSFER OF THE LANDLORD'S INTEREST
If the Landlord transfers the reversion immediately expectant upon the
determination of the Lease before the Deposit has become repayable to the
Tenant pursuant to Clause 6 either
5.1 5.1.1 the Tenant shall if required by (and at the cost of) the Landlord
such costs if incurred by the Tenant to be reasonable, enter into
a rent deposit deed with the transferee of such reversion in
identical terms to this Deed (but with the name of the transferee
being substituted for the name of the Landlord) and
5.1.2 the Landlord shall procure that any transferee enters into a rent
deposit deed with the Tenant in identical terms to this Deed (but
with the transferee's name substituted for the name of the
Landlord) and on completion of such deed transfer the balance of
the Deposit to such account as shall have been opened by the
transferee (after the deduction of any sum withdrawn pursuant to
Clause 4 above) and upon serving notice of such transfer on the
Tenant shall forthwith be released automatically from any further
liability under the terms of this Deed
or
5.2 The Landlord may instead release the balance of the Deposit to the Tenant
(after the deduction of any sum withdrawn pursuant to Clause 4 above)
-5-
<PAGE>
6. RELEASE OF DEPOSIT
6.1 The Deposit or such part thereof as shall be remaining shall be released
by the Landlord and repaid to the Tenant on the earlier of:
6.1.1 one calendar month after the expiration or sooner determination
(by agreement) of the term granted by the Lease or its
determination in consequence of the exercise by the Tenant of any
option to determine conferred on it by the Lease and in either
case vacant possession of the premises demised by the Lease being
given to the Landlord; or
6.1.2 the Tenant demonstrating that it has made Net Profits for each of
the immediately preceding Years of Account at least equal to three
times the Rental Liability and that in each of those Years of
Account it has a Net Asset Value of not less than five times the
Rental Liability
and provided always the Tenant has paid to the Landlord all sums set out
as in Clause 4 above (failing which the Landlord may deduct such sums as
are properly due from the Deposit) the Landlord shall then release the
balance to the Tenant within 5 working days of receipt of a written
request from the Tenant for such release
6.2 The Tenant may demonstrate that it satisfies the requirements of Clause
6.1.2 by means of audited accounts or by means of such other evidence as
shall be reasonably acceptable to the Landlord
7. INTEREST
7.1 The Landlord shall use all reasonable endeavours to select a Deposit
Account which yields the best rate of interest reasonably obtainable from
the Bank having regard to the provisions of this Deed
7.2 The interest accruing on the Deposit shall belong to the Tenant but in
the first instance shall be used in or towards payment of any sums
payable by the Tenant pursuant to clauses 2.3 and 4.2 of this Deed and
subject thereto such interest (less tax properly deducted) shall be paid
to the Tenant on an annual basis
7.3 All tax payable in respect of interest accruing on the Deposit shall be
paid by the Tenant from its own money
8. MISCELLANEOUS
It is hereby agreed and declared that:
8.1 The existence of the Deposit shall not prejudice the Landlord's
ability to proceed against the Tenant for any breach of any
covenant agreement or condition on the
-6-
<PAGE>
part of the Tenant under the Lease or entitle the Tenant to
withhold any moneys or fail to perform any covenant agreement or
condition under the Lease and the Deposit shall not be regarded as
an advance payment of rent
8.2 The proviso for re-entry contained in the Lease shall be
exercisable as well upon any breach of any covenant or obligation
on the part of the Tenant contained in this Deed as on the
happening of any of the events mentioned in the Lease
8.3 The rights of the Landlord under this Deed do not limit its rights
under the Lease
8.4 The provisions as to notices contained in the Lease shall apply to
notices served pursuant to this Deed
8.5 The Landlord may at any time terminate this Deed by paying the
Deposit to the Tenant and on doing so will automatically be
released from all liabilities and obligations under this Deed
except in relation to rights of the Tenant that have arisen before
the termination
8.6 Any termination under clause 8.5 and any payment of the Deposit
shall not affect the Landlord's rights under the Lease
8.7 The Tenant shall not assign to any person whatsoever the benefit
of any of the Tenant's rights under this Deed, nor assign,
transfer or otherwise dispose of all or any part of its rights,
title or interest in or to the Deposit, nor create any further
encumbrance or other security interest over the whole or any part
of the Deposit
8.8 If any provision of this Deed is or becomes void or unenforceable
in whole or in part that provision to that extent is to be deemed
not to form part of this Deed but the validity and enforceability
of the remainder of that provision or of the Deed are not to be
affected
8.9 This Agreement shall be governed by and construed in accordance
with English law and the parties irrevocably agree that the courts
of England are to have exclusive jurisdiction to settle any
disputes which may arise out of or in connection with this
Agreement
AS WITNESS this Deed (which shall be delivered when dated) has been executed by
the parties or their duly authorised representatives on the date first stated
above
-7-
<PAGE>
SIGNED and DELIVERED as a DEED by )
Michael Colin Warner, Trust Manager as )
attorney for LLOYDS BANK PLC in the )
presence of: )
/s/ A.G. Schofield
A.G. Schofield
Lloyd's Bank
Securities Services
Hay's Lane House
1, Hay's Lane
London SE1 2HA
EXECUTED and DELIVERED as a DEED by )
EXODUS INTERNET LIMITED acting by two )
Directors or a Director and its )
Company Secretary )
Director
Director/Company Secretary
-8-
<PAGE>
LLOYDS BANK SECURITIES SERVICES
-------------------------------
POWER OF ATTORNEY FOR EXECUTION OF DOCUMENTS
--------------------------------------------
By this power of attorney given on the eigth day of July 1998 Lloyds Bank Plc
whose registered office is at 71 Lombard Street, London EC3P 3BS ("the bank")
hereby appoints:
Julian Maxwell Ansell
Christopher Baldwin
Ian Martin Bransgrove
Paul Burgess
Martin Robert Clark
Sheila Mary Colley
David Croker
Andrew Donner
Steven Michael Dugay
Christopher John Edmeades
Colin Grant
Anthony Charles Jennings
Lesley Kean Kings
Wayne Paul Kitcat
John Willis Lamb
Graham Paul Lisle
Donald Patrick McIver
Jacqueline Kay Morley
Iain Christopher Mylchreest
Keith William Parker
Ronald Llewellyn Porter
Graham David Reeve
Stephen Harold Robson
Michael Edward Tomlin
Paul Arthur Turner
Richard Andrew Vesey
David James Watson
David Albert Charles Evans
Andrew Robert Gooding
Alison Pearce
Thomas Richard Pool
Mark Charles Thatcher
Paul Andrew Vickery
Richard William Warrington
Michael Colin Warner
Frank Michael Welpa
all of Lloyds Bank Securities Services, jointly and severally, to be attorneys
of the bank in its capacity as trustee, personal representative, nominee,
mortgagee or chargee, only for the purpose of carrying into effect matters
determined upon by the bank in any of these capacities, to sign, seal, execute
and deliver any deed or document considered necessary or desirable:
(1) to convey, transfer, assign, lease, let, underlet, surrender, sell or grant
options, rights of preemption or any other rights over any real or personal
property;
(3) to postpone, defer, subordinate or otherwise regulate the priority or
ranking of any mortgage, charge, debenture or other security;
(4) to vary, alter, amend, modify, revise, replace or substitute any deed or
document to which the bank is a party;
(5) to transfer any stocks, shares or other securities held by or registered in
the name or under the control of the bank and to authorise any person to
exercise any rights attached in any such stocks, shares or other
securities;
(6) to give such indemnities as may be necessary in favour of any person or
body of persons including without limitation indemnities in respect of
lost, destroyed or mislaid certificates, allotment letters or other
documents relating to stocks, shares or other securities;
(7) to grant easements or any other rights over or impose covenants or any
other restrictions on or consent to the letting, underletting, assignment,
surrender or alteration of any freehold or leasehold property;
(8) to assent to the vesting in any person of any real or personal property;
(9) to declare, constitute, regulate, record, vary, alter, amend or modify any
trust, settlement or family arrangement and to appoint or retire any
trustee, including the bank, of any trust, settlement or family
arrangement;
(10) to purchase, lease, acquire or otherwise take into the name of the bank or
under its control any real or personal property whatsoever or wheresoever
or any options, rights of preemption or any other rights over real or
personal property; and
(11) to manage, develop, refurbish, repair, reinstate or otherwise carry out any
works upon any real property whatsoever or wheresoever.
and generally for all or any of the purposes aforesaid to act as attorneys of
the bank. The common seal of the bank was affixed to this deed the date and
year first above written. Given under the common seal of Lloyds Bank Plc as a
deed.
Authorised signatory
Authorised counter signatory
<PAGE>
THIS LICENCE is made as a deed on 24th December, 1998 BETWEEN
(1) LLOYDS BANK PLC (registered number 2065) whose registered office is at 71
Lombard Street London EC3P 3BS (as trustee of Schroder Exempt Property
Unit Trust) (the "Landlord");
(2) EXODUS INTERNET LIMITED (registered number 3591136) whose registered office
is at Fountain Precinct Balm Green Sheffield South Yorkshire S1 1RZ (the
"Tenant"); and
(3) EXODUS COMMUNICATIONS INC of 2650 San Thomas Expressway, Santa Clara CA
95051, USA and whose address for service in England is Dibb Lupton Alsop
(ref RSS) 125 London Wall London EC2Y 5AE or such other address in the UK
as the Guarantor may from time to time notify in writing to the Landlord
(the "Guarantor")
WHEREAS:
(A) This licence is supplemental and collateral to the Leases whereby the
Property was let for the Term.
(B) The Landlord is entitled to the reversion immediately expectant on the
determination of the Term.
(C) The Property is vested in the Tenant for the remainder of the Term.
(D) The Landlord has agreed to permit alterations to the Property upon the
terms contained in this licence.
THIS DEED WITNESSES as follows:
1. DEFINITIONS AND INTERPRETATION
(1) In this licence:
"CDM Regulations" means the Construction (Design and Management)
Regulations 1994 or any remaking of them or any amendment to a regulation
in them;
"Consents" means all planning, bye-law, building regulation and other
permissions, licences and consents which are or may be necessary for the
Works to be carried out;
"End of the Term" includes the expiry of the Term by effluxion of time or
the determination of the Term by forfeiture, surrender, merger, notice or
in any other way;
"Landlord" includes the person for the time being entitled to the reversion
immediately expectant on the End of the Term;
"Leases" means each and all of the Unit 5 Lease, the Unit 6 Lease and the
Unit 7 Lease;
"Property" means each and all of Unit 5, Unit 6 and Unit 7;
"Tenant" includes the Tenant's successors in title and assigns;
"Term" means in respect of the Unit 5 Lease the term of years set out in
Part 1 of Schedule 1 in respect of the Unit 6 Lease the term of years set
out in Part 2 of Schedule 1 and in respect
<PAGE>
of the Unit 7 Lease the term of years set out in Part 3 of Schedule 1 and
in each case includes any statutory or other extension of it or any holding
over;
"Unit 5" means the property briefly described in Part 1 of Schedule 2 being
the property demised by and more particularly described in the Unit 5
Lease.
"Unit 5 Lease" means the document short details of which are set out in
Part 1 of Schedule 1 and, where the context permits, includes any documents
supplemental or collateral to it.
"Unit 6" means the property briefly described in Part 2 of Schedule 2 being
the property demised by and more particularly described in the Unit 6
Lease.
"Unit 6 Lease" means the document short details of which are set out in
Part 2 of Schedule 1 and, where the context permits, includes any documents
supplemental or collateral to it.
"Unit 7" means the property briefly described in Part 3 of Schedule 1 being
the property demised by and more particularly described in the Unit 7
Lease.
"Unit 7 Lease" means the document short details of which are set out in
Part 3 of Schedule 2 and, where the context permits, includes any documents
supplemental or collateral to it.
"Works" means the alterations and works specified in Schedule 3.
(2) The headings in this licence do not affect its interpretation.
(3) References in this licence to clauses or schedules are, unless otherwise
defined, references to the clauses or schedules in this licence.
2. LICENCE
In consideration of the covenants on the part of the Tenant and the
Guarantor contained in this licence and at the request of the Guarantor,
the Landlord grants to the Tenant licence to carry out the Works at the
Property.
3. TENANT'S COVENANTS
(1) The Tenant covenants with the Landlord to comply with the obligations
set out in this clause throughout the period during which the Tenant
is bound by the tenant covenants of each of the Leases.
(2) Before starting any part or parts of the Works the Tenant shall at its
own expense (in relation to the relevant part or parts of the Works):
(a) obtain all Consents;
(b) produce to the Landlord and obtain the Landlord's written
acknowledgement (which the Landlord shall not unreasonably
withhold or delay) that the Consents obtained for the relevant
part or parts of the Works (if any) are satisfactory to the
Landlord; and
(c) give full particulars of the relevant part or parts of the Works
to the insurers of the Property, obtain their consent to the
same, produce the consent to the
<PAGE>
Landlord immediately upon its receipt and pay any additional
premium which the insurers may require.
(3) The Tenant shall carry out and complete the Works:
(a) in a good and workmanlike manner using good quality materials fit
for the purpose for which they will be used;
(b) in compliance with every enactment, every instrument, rule,
order, regulation or by-law, including those of every local
authority and every supply authority or other competent authority
which has any jurisdiction with regard to the Works or with whose
systems the Works are to be connected;
(c) in accordance with good building practice;
(d) without infringing any rights, covenants or other encumbrances
binding on or affecting the whole or any part of the Property.
(e) to the reasonable satisfaction of the Landlord's surveyors; and
(f) in accordance with the terms of each of the Leases and all
Consents.
(4) The Tenant shall take all proper and sufficient precautions during the
progress of the Works so that the Tenant:
(a) causes as little inconvenience and disturbance as possible
(whether by noise, dust, vibration or otherwise) to the Landlord
or the occupiers of adjoining or neighbouring property; and
(b) shall not at any time damage or render unsafe the structure of
the whole or any part of the Property or any part of any
adjoining or neighbouring property or any plant or machinery in
such property but shall forthwith make good any damage occasioned
by the carrying out of the Works to any such property as is
mentioned in this paragraph.
(5) The Tenant shall use all reasonable endeavours to ensure that anyone
involved in the design of the Works understands and complies with the
requirements of Regulation 13 of the CDM Regulations.
(6) If the Works are notifiable (as defined in Regulation 2(4) of the CDM
Regulations) and five or more people will be involved in the Works at
any one time, the Tenant shall:
(a) act as the sole client in respect of the Works for the purposes
of the CDM Regulations and issue a declaration to that effect
pursuant to Regulation 4 of the CDM Regulations;
(b) appoint a competent planning supervisor and a competent principal
contractor pursuant to its obligations under the CDM Regulations;
(c) provide the Landlord with a full and complete copy of the health
and safety plan (as defined in the CDM Regulations) prior to the
commencement of the Works;
<PAGE>
(d) provide the Landlord with a full and complete copy of the health
and safety file (as defined in the CDM Regulations) within 30
days of practical completion of the Works; and
(e) provide to the Landlord at the End of the Term of each of the
Unit 5 Lease and the Unit 6 Lease and the Unit 7 Lease the
original health and safety file relating to that unit and
incorporating any subsequent amendments made to update it.
(7) The Tenant shall indemnify the Landlord from liability in respect of
all loss, damage, actions, proceedings, claims, demands, costs,
damages and expenses:
(a) arising out of any breach of the provisions of this licence; or
(b) in respect of any injury to or the death of any person or damage
to any property; or
(c) in respect of the infringement, disturbance or destruction of any
right of a third party due to the carrying out or existence of
the Works
and shall insure (or procure such insurance) against any liability
arising under sub paragraph (b) to the reasonable satisfaction of the
Landlord.
(8) The Tenant shall notify the Landlord's surveyors of the date of
commencement and completion of the Works and shall permit the Landlord
and its surveyors to inspect the Works at all reasonable times
(provided that the Landlord and/or its surveyors comply with the
Tenant's reasonable security and confidentiality requirements).
(9) The Tenant shall pay any charge, levy or tax that may be imposed under
any Act of Parliament, bye-law or regulation as a result of the Works,
whether on the Landlord or on the Tenant, and shall indemnify the
Landlord from any liability in respect of such charge, levy or tax.
(10) Unless the Landlord shall otherwise direct the Tenant shall carry out
before the End of the Term of each of the Unit 5 Lease and the Unit 6
Lease and the Unit 7 Lease any works required to be carried out to
Unit 5, Unit 6 or Unit 7 as the case may be as a condition of any
Consent.
(11) Before the End of the Term of each of the Unit 5 Lease and the Unit 6
Lease and the Unit 7 Lease (unless and to the extent released by the
Landlord in writing from this obligation) the Tenant shall remove that
part of the Works relating to Unit 5, Unit 6 and/or Unit 7 as the case
may be and reinstate Unit 5, Unit 6 and/or Unit 7 as the case may be,
making good all damage to the whole or any part of the Property and to
the decoration of the whole or any part of the Property. The Tenant
shall carry out the works of removal and reinstatement at its own
expense, in a good and workmanlike manner and to the reasonable
satisfaction of the Landlord's surveyors.
(12) The Tenant shall pay on demand the reasonable and proper fees,
expenses and disbursements of the Landlord's surveyors and any other
professional advisers (together with any Value Added Tax on them)
incurred by the Landlord relating to any works of removal and re-
instatement it is required to undertake in accordance with this
Licence.
<PAGE>
(13) The Tenant shall deal with the insurance of the Works in accordance
with the terms of the Agreement for Lease dated [24th December 1998].
4. GUARANTOR'S COVENANTS
(1) The Guarantor guarantees to the Landlord the due and punctual payment and
performance of all the liabilities and obligations of the Tenant under this
licence and shall indemnify the Landlord against all losses, damages, costs
and expenses arising or incurred by the Landlord as a result of the non-
payment or non-performance of those obligations or liabilities.
(2) The obligations of the Guarantor under this licence:
(a) constitute a direct, primary and unconditional liability to pay on
demand to the Landlord any sum which the Tenant is liable to pay under
this licence and to perform on demand by the Landlord any obligation
of the Tenant under this licence without the need for any recourse on
the part of the Landlord against the Tenant; and
(b) will not be affected by:-
(i) any time or indulgence granted to the Tenant by the Landlord;
(ii) any legal limitation, disability or other circumstances relating
to the Tenant or any irregularity, unenforceability or
invalidity of any obligations of the Tenant under this licence;
(iii) any licence or consent granted to the Tenant, any variation in
the terms of this licence or any variation in the terms of any
of the Leases;
(iv) the release of one or more of the parties defined as the
Guarantor (if more than one); or
(v) any other act, omission, matter or thing whereby (but for this
provision) the Guarantor would be exonerated in whole or in part
from this guarantee other than a release under seal given by the
Landlord.
(3) So long as this guarantee remains in force the Guarantor shall not:
(a) in the event of any bankruptcy, liquidation, rehabilitation,
moratorium or other insolvency proceedings relating to the Tenant,
claim or prove as creditor in competition with the Landlord; or
(b) be entitled to claim or participate in any security held by the
Landlord in respect of the obligations of the Tenant under this
licence; or
(c) exercise any right of set-off against the Tenant.
(4) If the Landlord brings proceedings against the Tenant, the Guarantor shall
be bound by any findings of fact, interim or final award of interlocutory
or final judgment made by an arbitrator or the court in those proceedings
insofar as the same relate to the subject matter of this Deed PROVIDED THAT
the Landlord shall have served a copy of the writ summons petition or
similar process which initiated such proceedings on the Guarantor before
the expiry of 7 days after such proceedings were initiated
<PAGE>
5. DECLARATIONS
It is agreed and declared that:
(a) at the sole discretion of the Landlord the licence granted by the
Landlord under this licence shall lapse and become void if the Works
are not commenced within six months from the date of this licence;
(b) the carrying out of the Works is subject to all rights of the owners
and occupiers of adjoining or neighbouring properties;
(c) all the covenants on the part of the Tenant and conditions contained
in the Leases which are now applicable to the Property shall continue
to be applicable to the Property and shall extend to the Works;
(d) the proviso for re-entry on breach or non-observance in the Leases
shall be read and construed from the date of this licence as including
a reference to the covenants contained in this licence;
(e) the Tenant shall not be entitled to any compensation in respect of the
Works or the reinstatement of the Property whether at the End of the
Term or at any other time;
(f) this licence and any approval of the Works by or on behalf of the
Landlord is granted without any liability on the part of the Landlord
or its architects, surveyors or other agents, whether for the design
or carrying out of the Works or otherwise;
(g) any decrease or increase in the rental value of Unit 5 or Unit 6 or
Unit 7 as a result of the Works shall be disregarded on any rent
review under the respective Leases; and
(h) the Works shall be at the sole risk of the Tenant until such time as
the Landlord's surveyors certify that the Works have been completed to
their satisfaction and until that time the Landlord's covenant to
insure contained in the Leases shall not apply to the Works.
6. JOINT AND SEVERAL LIABILITY
Where the Tenant or the Guarantor is more than one person:
(a) those persons shall be jointly and severally responsible in respect of
every obligation undertaken by them under this licence; and
(b) the Landlord may release or compromise the liability of any of those
persons under this licence or grant any time or other indulgence
without affecting the liability of any other of them.
7. NOTICES
Any notice or other document served under this licence shall be in writing
and may be served in any way in which a notice required or authorised to be
served under Section 196 of the Law of Property Act 1925 (as amended or re-
enacted) may be served.
<PAGE>
8. JURISDICTION
This Deed shall be governed by and construed in accordance with English law
and the parties irrevocably agree that the courts of England are to have
exclusive jurisdiction to settle any disputes which may arise out of or in
connection with this Deed.
<PAGE>
IN WITNESS of which this licence has been executed as a deed and has been
delivered on the date first appearing on Page 1.
SCHEDULE 1
Details of the Leases and the Term
Part 1
------
Lease or underlease: Lease of Unit 5 Phase 1 Matrix Park dated as set out
below, for the Term and made between the Parties set
out below
Date:
Parties: (1) Lloyds Bank Plc (as trustee of Schroder Exempt
Property Unit Trust)
(2) Exodus Internet Limited
(3) Exodus Communications Inc
Term: 25 years from [29th December 1998]
Part 2
------
Lease or underlease: Lease of Unit 6 Phase 1 Matrix Park dated as set out
below, for the Term and made between the Parties set
out below
Date:
Parties: (1) Lloyds Bank Plc (as trustee of Schroder Exempt
Property Unit Trust)
(2) Exodus Internet Limited
(3) Exodus Communications Inc
Term: 25 years from [29th December 1998]
Part 3
------
Lease or underlease: Lease of Unit 7 Phase 1 Matrix Park dated as set out
below, for the Term and made between the Parties set
out below
Date:
Parties: (1) Lloyds Bank Plc (as trustee of Schroder Exempt
Property Unit Trust)
(2) Exodus Internet Limited
(3) Exodus Communications Inc
Term: 25 years from [29th December 1998]
<PAGE>
SCHEDULE 2
Details of the Property
Part 1
Unit 5 Phase 1 Matrix Park, Coronation Road, Park Royal, London NW10
Part 2
Unit 6 Phase 1 Matrix Park, Coronation Road, Park Royal, London NW10
Part 3
Unit 7 Phase 1 Matrix Park, Coronation Road, Park Royal, London NW10
SCHEDULE 3
Details of the Works
[Tenant to provide]
<PAGE>
SIGNED as a deed by )
Michael Colin Warner Trust Manager )
as attorney for LLOYDS BANK PLC )
in the presence of: )
Witness's /s/ A.G. Schofield
Signature : ..................
A.G. Schofield
Name : .......................
Address : Llyod's Bank
Securities Services
Hay's Lane House
1, Hay's Lane
London, SE1 2HA
<PAGE>
EXECUTED and DELIVERED as a Deed by )
EXODUS INTERNET LIMITED )
acting by two Directors or a Director and its )
Company Secretary )
Director /s/ Richard Stolz
Director/Secretary /s/ Adam Wegner
SIGNED and DELIVERED as a Deed by )
EXODUS COMMUNICATIONS INC )
acting by its Authorised Signatory Richard )
Stoltz in accordance with the constitution )
of the Company and the country in which it is )
incorporated )
Authorised Signatory /s/
<PAGE>
DATED 24TH DECEMBER, 1998
LLOYDS BANK, PLC
(as trustee of Schroder Exempt Property Unit Trust)
and
EXODUS INTERNET LIMITED
and
EXODUS COMMUNICATIONS INC
_______________________________________________
DEED
relating to car spaces used in connection with
leasehold premises being Units 5, 6 & 7, Phase 1,
Matrix Park, Coronation Road, Park Royal,
London, NW10
_______________________________________________
ALLEN & OVERY
LONDON
PY0409042.02
<PAGE>
THIS DEED is made on 24th December 1998 BETWEEN
(1) LLOYDS BANK PLC (registered number 2065) whose registered office is at 71
Lombard Street London EC3P 3BS (as trustee of Schroder Exempt Property
Unit Trust) (the "Landlord");
(2) EXODUS INTERNET LIMITED (registered number 3591136) whose registered office
is at Fountain Precinct Balm Green Sheffield South Yorkshire S1 1RZ (the
"Tenant"); and
(3) EXODUS COMMUNICATIONS INC of 2650 San Thomas Expressway, Santa Clara CA
95051, USA and whose address for service in England is Dibb Lupton Alsop
(ref RSS) 125 London EC2Y 5AE or such other address in the UK as the
Guarantor may from time to time notify in writing to the Landlord (the
"Guarantor").
WHEREAS:
(A) The parties hereto have today entered into the Leases which, inter alia,
grant the Tenant the right to park motor vehicles in Parking Area 1 and
Parking Area 2.
(B) The parties hereto have agreed to enter into this deed for the purposes
hereinafter set out.
THIS DEED WITNESSES as follows:
1. DEFINITIONS AND INTERPRETATION
(1) In this deed:
"CDM Regulations" means the Construction (Design and Management)
Regulations 1994 or any remaking of them or any amendment to a regulation
in them;
"Consents" means all planning, bye-law, building regulation and other
permissions, licences and consents which are or may be necessary for the
Works to be carried out;
"End of the Term" includes the expiry of the Term by effluxion of time or
the determination of the Term by forfeiture, surrender, merger, notice or
in any other way;
"Entry System 1" means an electronic entry or other similar system of a
type to be first approved in writing by the Landlord (such approval not to
be unreasonably withheld or delayed) to be installed by the Tenant at the
Tenant's own cost in the approximate position marked "X" on the Plan but so
that the positioning of such system shall be such as to allow vehicles to
come to a halt between the entry barrier at point "X" and the Service Road
without the vehicle in any way obstructing the passage of other vehicles
over and along the Service Road;
"Entry System 2" means an electronic entry or other similar system of a
type to be first approved in writing by the Landlord (such approval not to
be unreasonably withheld or delayed) to be installed by the Tenant at the
Tenant's own cost in the approximate position marked "Y" on the Plan;
"Estate" has the same meaning as ascribed in the Leases;
"Landlord" includes the person for the time being entitled to the reversion
immediately expectant on the End of the Term of the Leases;
<PAGE>
"Leases" means each and all of the Unit 5 Lease, the Unit 6 Lease and the
Unit 7 Lease;
"Parking Area 1" means the areas edged blue and edged green on the Plan;
"Parking Area 1 Rights" means the rights granted by clause 2(2);
"Parking Area 2" means the area edged green on the Plan;
"Parking Area 2 Rights" means the rights granted by clause 2(3);
"Parking Areas" means each and both of Parking Area 1 and Area 2;
"Plan" means the plan attached to this deed;
"Property" means each and all of Unit 5, Unit 6 and Unit 7;
"Service Road" means the road on the Estate which is shown in part coloured
brown on the Plan;
"Tenant" includes (where the context admits or allows) the Tenant's
successors in title and assigns;
"Term" means in respect of the Unit 5 Lease the term of years mentioned in
Part 1 of the Schedule, in respect of the Unit 6 Lease the term of years
mentioned in Part 2 of the Schedule and in respect of the Unit 7 Lease the
term of years mentioned in Part 3 of the Schedule and in each case includes
any statutory or other extension of it or any holding over;
"Unit 5" means the premises briefly described in Part 1 of the Schedule
being the premises demised by and more particularly described in the Unit 5
Lease;
"Unit 5 Lease" means the document short details of which are set out in
Part 1 of the Schedule and, where the context permits, includes any
documents supplemental or collateral to it;
"Unit 6" means the premises briefly described in Part 2 of the Schedule
being the premises demised by and more particularly described in the Unit 6
Lease;
"Unit 6 Lease" means the document short details of which are set out in
Part 2 of the Schedule and, where the context permits, includes any
documents supplemental or collateral to it;
"Unit 7" means the premises briefly described in Part 3 of the Schedule
being the premises demised by and more particularly described in the Unit 7
Lease;
"Unit 7 Lease" means the document short details of which are set out in
Part 3 of the Schedule and, where the context permits, includes any
documents supplemental or collateral to it;
"Works" means the works described in clause 2.
(2) The headings in this deed do not affect its interpretation.
<PAGE>
(3) References in this deed to clauses or schedules are, unless otherwise
defined, references to the clauses or schedules in this deed.
2. RIGHTS GRANTED TO THE TENANT
(1) In consideration of the covenants on the part of the Tenant and the
Guarantor contained in this deed and at the request of the Guarantor, the
Landlord grants to the Tenant the following rights.
(2) For so long as the respective terms created by the Unit 5 Lease, the Unit 6
Lease and the Unit 7 Lease shall all remain vested in the same tenant (be
it the Tenant or a successor in title) the Tenant shall have the following
rights:
subject to obtaining the Landlord's prior written approval of detailed
drawings and specifications as to size, design and positioning (such
approval not to be unreasonably withheld or delayed) the right to
install and thereafter maintain and remove:
(a) a closed circuit television monitoring system within Parking Area
1; and
(b) Entry System 1.
(3) If the term created by the Unit 5 Lease ceases to be vested in the same
tenant as both the Unit 6 Lease and the Unit 7 Lease then the rights
granted in clause 2(2) shall automatically and immediately terminate but so
long as the respective terms created by the Unit 6 Lease and the Unit 7
Lease shall together remain vested in the same tenant (be it the Tenant or
a successor in title) the Tenant shall have rights in identical terms as
those set out in clause 2(2) save that the reference to Parking Area 1
shall be deemed to be a reference to Parking Area 2 and the reference to
Entry System 1 shall be deemed to be a reference to Entry System 2.
3. EXPIRATION AND TERMINATION OF TENANT'S RIGHTS
The rights contained in clause 2 shall automatically and immediately
terminate on the earlier of the following events occurring:
(a) assignment of either the Unit 6 Lease only or the Unit 7 Lease
only or the Tenant ceasing for any reason to be tenant under
either the Unit 6 Lease or the Unit 7 Lease only;
(b) the End of the Term of the Leases or the Unit 6 Lease and the Unit
7 Lease;
(c) the End of the Term of either the Unit 6 Lease alone or the Unit 7
Lease alone;
(d) the Tenant is the tenant under the Unit 5 Lease only or the Unit 6
Lease only or the Unit 7 Lease only;
(e) the Landlord exercises its rights of re-entry in accordance with
clause 10 of the Leases in respect of the Leases or the Unit 6
Lease and the Unit 7 Lease or the Unit 7 Lease alone or the Unit 6
Lease alone (save where the Tenant successfully obtains relief
from forfeiture from a court of competent jurisdiction in relation
to any such re-entry);
<PAGE>
(f) the Tenant serving written notice on the Landlord to the effect
that the Tenant with immediate effect surrenders such rights.
4. TENANT'S COVENANTS
(1) The Tenant covenants with the Landlord to comply with the obligations set
out in this clause.
(2) Before starting the Works the Tenant shall at its own expense:
(a) obtain all Consents;
(b) produce to the Landlord and obtain the Landlord's written
acknowledgement (which the Landlord shall not unreasonably withhold or
delay) that the Consents obtained for the Works (if any) are
satisfactory to the Landlord; and
(c) give full particulars of the Works to the insurers of the Property,
obtain their consent to the Works, produce the consent to the Landlord
immediately upon its receipt and pay any additional premium which the
insurers may require.
(3) The Tenant shall carry out and complete the Works:
(a) in a good and workmanlike manner using good quality materials fit for
the purpose for which they will be used;
(b) in compliance with every enactment, every instrument, rule, order,
regulation or by-law, including those of every local authority and
every supply authority or other competent authority which has any
jurisdiction with regard to the Works or with whose systems the Works
are to be connected;
(c) in accordance with good building practice;
(d) to the reasonable satisfaction of the Landlord's surveyors; and
(e) in accordance with the terms of all Consents.
(4) The Tenant shall take all proper and sufficient precautions during the
progress of the Works so that the Tenant:
(a) causes as little inconvenience and disturbance as possible (whether by
noise, dust, vibration or otherwise) to the Landlord or the occupiers
of adjoining or neighbouring property; and
(b) shall not at any time damage or render unsafe the structure of the
whole or any part of the Estate or any plant or machinery in such
property but shall forthwith make good any damage occasioned by the
carrying out of the Works to any such property as is mentioned in this
paragraph.
(5) The Tenant shall use all reasonable endeavours to ensure that anyone
involved in the design of the Works understands and complies with the
requirements of Regulation 13 of the CDM Regulations.
(6) If the Works are notifiable (as defined in Regulation 2(4) of the CDM
Regulations) and five or more people will be involved in the Works at any
one time, the Tenant shall:
<PAGE>
(a) act as the sole client in respect of the Works for the purposes of the
CDM Regulations and issue a declaration to that effect pursuant to
Regulation 4 of the CDM Regulations;
(b) appoint a competent planning supervisor and a competent principal
contractor pursuant to its obligations under the CDM Regulations;
(c) provide the Landlord with a full and complete copy of the health and
safety plan (as defined in the CDM Regulations) prior to the
commencement of the Works;
(d) provide the Landlord with a full and complete copy of the health and
safety file (as defined in the CDM Regulations) within 30 days of
practical completion of the Works.
(7) The Tenant shall indemnify the Landlord from liability in respect of all
loss, damage, actions, proceedings, claims, demands, costs, damages and
expenses:
(a) arising out of any breach of the provisions of this deed; or
(b) in respect of any injury to or the death of any person or damage to
any property due to the carrying out or existence of the Works ; or
(c) in respect of the infringement, disturbance or destruction of any
right of a third party due to the carrying out or existence of the
Works
and shall insure against any liability arising under sub paragraph (b) to
the reasonable satisfaction of the Landlord.
(8) The Tenant shall notify the Landlord's surveyors of the date of
commencement and completion of the Works and shall permit the Landlord and
its surveyors to inspect the Works at all reasonable times.
(9) The Tenant shall pay any charge, levy or tax that may be imposed under any
Act of Parliament, bye-law or regulation as a result of the Works, whether
on the Landlord or on the Tenant, and shall indemnify the Landlord from any
liability in respect of such charge, levy or tax.
(10) Any equipment or apparatus from time to time comprised in the Works shall
be maintained by the Tenant at its own cost in good and substantial repair
and condition.
(11) Upon the expiration or termination of the Parking Area 1 Rights or the
Parking Area 2 Rights the Tenant shall forthwith:
(a) remove all equipment installed pursuant to clause 2 including Entry
System 1 where the Parking Area 1 Rights have terminated and Entry
System 2 where the Parking Area 2 Rights have terminated;
(b) cease to employ the security measures referred to in clause 2(2) where
the Parking Area 1 Rights have terminated and in clause 2(3) where the
Parking Area 2 Rights have terminated;
<PAGE>
(c) reinstate Parking Area 1 where the Parking Area 1 Rights have
terminated and Parking Area 2 where the Parking Area 2 Rights have
terminated; and
(d) carry out any works required as a condition of any Consent
and in each case making good all damage to Parking Area 1 and Parking Area
2 respectively and to the Estate.
(12) The Tenant shall carry out the works of reinstatement required by sub-
clause (11) at its own expense and in a good and workmanlike manner and to
the reasonable satisfaction of the Landlord or their surveyors.
(13) The Tenant shall pay on demand the reasonable and proper fees, expenses and
disbursements of the Landlord and its surveyors and any other professional
advisers (together with any Value Added Tax on them) incurred by the
Landlord relating to the approvals required by this deed and any works of
removal and re-instatement the Tenant is required to undertake in
accordance with this deed.
5. LANDLORD'S COVENANTS
The Landlord hereby covenants with the Tenant as follows:
(a) for so long as the respective terms created by the Unit 5 Lease, the
Unit 6 Lease and the Unit 7 Lease shall all remain vested in the same
tenant (be it the Tenant or a successor in title) the Landlord will
not grant to any other person any rights in respect of the parking of
vehicles on or over Parking Area 1; and
(b) for so long as the respective terms created by the Unit 6 Lease and
the Unit 7 Lease shall together remain vested in the same tenant (be
it the Tenant or a successor in title) the Landlord will not grant to
any other person any rights in respect of the parking of vehicles on
or over Parking Area 2,
(c) during the subsistence of the rights granted by clause 2(2) or clause
2(3) the Landlord shall give to the Tenant at least 3 working days
prior notice (save in case of emergency) of the date on which the
Landlord (or its agent or contractors as the case may be) intends to
enter on to Parking Area 1 or Parking Area 2 (as appropriate) for any
purpose which may substantially interfere with or impair the Tenant's
ability to exercise the rights granted to it in this deed.
6. ALIENATION
(1) The Tenant may assign the benefit of this deed to an assignee of the Leases
or an assignee of both the Unit 6 Lease and the Unit 7 Lease subject to
obtaining the Landlord's prior written consent, such consent not to be
unreasonably withheld or delayed.
(2) Save as set out in sub-clause (1) the Tenant may not assign, underlet,
charge or otherwise deal with its rights under this deed.
(3) The Landlord and Tenant agree that the Landlord may as a condition of
granting consent in accordance with sub-clause (1) require such assignee to
covenant by deed with the Landlord to observe and perform the covenants and
conditions on the part of the Tenant contained in this deed.
<PAGE>
7. TRANSFER OF THE LANDLORD'S INTEREST
If the Landlord transfers the reversion immediately expectant upon the
determination of the Leases the Landlord may procure that any transferee
enters into a deed with the Tenant to observe the covenants on the
Landlord's part contained in clause 5 and on delivery of such deed to the
Tenant the Landlord shall be automatically released from its obligations
under such clause (save in respect of any rights the Tenant may have
against the Landlord in respect of any prior breach of such covenant by the
Landlord).
8. GUARANTOR'S COVENANTS
(1) The Guarantor guarantees to the Landlord the performance of all the
liabilities and obligations of the Tenant under this deed and shall
indemnify the Landlord against all losses, damages, costs and expenses
arising or incurred by the Landlord as a result of the non-payment or non-
performance of those obligations or liabilities.
(2) The obligations of the Guarantor under this deed:
(a) constitute a direct, primary and unconditional liability to pay on
demand to the Landlord any sum which the Tenant is liable to pay under
this deed and to perform on demand by the Landlord any obligation of
the Tenant under this deed without the need for any recourse on the
part of the Landlord against the Tenant; and
(b) will not be affected by:-
(i) any time or indulgence granted to the Tenant by the Landlord;
(ii) any legal limitation, disability or other circumstances
relating to the Tenant or any irregularity, unenforceability or
invalidity of any obligations of the Tenant under this deed;
(iii) any licence or consent granted to the Tenant, any variation in
the terms of this deed or any variation in the terms of the
Leases or any one or more of them;
(iv) the release of one or more of the parties defined as the
Guarantor (if more than one); or
(v) any other act, omission, matter or thing whereby (but for this
provision) the Guarantor would be exonerated in whole or in
part from this guarantee other than a release under seal given
by the Landlord.
(3) So long as this guarantee remains in force the Guarantor shall not:
(a) in the event of any bankruptcy, liquidation, rehabilitation,
moratorium or other insolvency proceedings relating to the Tenant,
claim or prove as creditor in competition with the Landlord; or
(b) be entitled to claim or participate in any security held by the
Landlord in respect of the obligations of the Tenant under this deed;
or
<PAGE>
(c) exercise any right of set-off against the Tenant.
(4) If the Landlord brings proceedings against the Tenant, the Guarantor shall
be bound by any findings of fact, interim or final award of interlocutory
or final judgment made by an arbitrator or the court in those proceedings
insofar as the same relate to the subject matter of this deed PROVIDED THAT
the Landlord shall have served a copy of the writ summons petition or
similar process which initiated such proceedings on the Guarantor before
the expiry of 7 days after such proceedings were initiated
9. DECLARATIONS
It is agreed and declared that:
(a) the Tenant shall not be entitled to any compensation in respect of the
Works or the reinstatement of Parking Area 1 and Parking Area 2
following the removal of the Works;
(b) this deed and any approval of the Works by or on behalf of the
Landlord is granted without any liability on the part of the Landlord
or its surveyors or other agents, whether for the design or carrying
out of the Works or otherwise;
(c) the Works shall be and shall remain at the sole risk of the Tenant;
(d) the Tenant is not granted and shall not acquire any rights over
Parking Area 1 or Parking Area 2 save as specifically set out in this
deed; and
(e) any decrease in the rental value of the Property as a result of this
deed shall be disregarded on any rent review under the Leases or any
one of them.
10. JOINT AND SEVERAL LIABILITY
Where the Tenant or the Guarantor is more than one person:
(a) those persons shall be jointly and severally responsible in respect of
every obligation undertaken by them under this deed; and
(b) the Landlord may release or compromise the liability of any of those
persons under this deed or grant any time or other indulgence without
affecting the liability of any other of them.
11. NOTICES
Any notice or other document served under this deed shall be in writing and
may be served in any way in which a notice required or authorised to be
served under Section 196 of the Law of Property Act 1925 (as amended or re-
enacted) may be served.
12. JURISDICTION
This deed shall be governed by and construed in accordance with English law
and the parties irrevocably agree that the courts of England are to have
exclusive jurisdiction to settle any disputes which may arise out of or in
connection with this deed.
<PAGE>
IN WITNESS of which this deed has been executed as a deed and has been delivered
on the date first appearing on Page 1.
<PAGE>
THE SCHEDULE
Part 1
------
Lease or underlease: Lease of Unit 5
Premises demised Unit 5 Phase 1 Matrix Park, Coronation Road, Park
Royal, London NW10
Date: 24th December, 1998
Parties: (1) Lloyds Bank Plc (as trustee of Schroder Exempt
Property Unit Trust)
(2) Exodus Internet Limited
(3) Exodus Communications Inc
Term: 25 years from 29th September 1998
Part 2
------
Lease or underlease: Lease of Unit 6
Premises demised Unit 6 Phase 1 Matrix Park, Coronation Road, Park
Royal, London NW10
Date: 24th December, 1998
Parties: (1) Lloyds Bank Plc (as trustee of Schroder Exempt
Property Unit Trust)
(2) Exodus Internet Limited
(3) Exodus Communications Inc
Term: 25 years from 29th September 1998
Part 3
------
Lease or underlease: Lease of Unit 7
Premises demised Unit 7 Phase 1 Matrix Park, Coronation Road, Park
Royal, London NW10
Date: 24th December, 1998
Parties: (1) Lloyds Bank Plc (as trustee of Schroder Exempt
Property Unit Trust)
(2) Exodus Internet Limited
(3) Exodus Communications Inc
Term: 25 years from 29th September 1998
<PAGE>
SIGNED as a deed by )
Michael Colin Warner, Trust Manager )
as attorney for LLOYDS BANK PLC )
in the presence of: )
Witness's /s/ A.G. Schofield
Signature: ...............................
Name: .............A.G. Schofield.........
Address: Lloyds Bank
Securities Service
Hay's Lane House
1, Hay's Lane
London SE1 2HA
<PAGE>
LLOYDS BANK SECURITIES SERVICES
-------------------------------
POWER OF ATTORNEY FOR EXECUTION OF DOCUMENTS
--------------------------------------------
By this power of attorney given on the eigth day of July 1998 Lloyds Bank Plc
whose registered office is at 71 Lombard Street, London EC3P 3BS ("the bank")
hereby appoints:
Julian Maxwell Ansell
Christopher Baldwin
Ian Martin Bransgrove
Paul Burgess
Martin Robert Clark
Sheila Mary Colley
David Croker
Andrew Donner
Steven Michael Dugay
Christopher John Edmeades
Colin Grant
Anthony Charles Jennings
Lesley Kean Kings
Wayne Paul Kitcat
John Willis Lamb
Graham Paul Lisle
Donald Patrick McIver
Jacqueline Kay Morley
Iain Christopher Mylchreest
Keith William Parker
Ronald Llewellyn Porter
Graham David Reeve
Stephen Harold Robson
Michael Edward Tomlin
Paul Arthur Turner
Richard Andrew Vesey
David James Watson
David Albert Charles Evans
Andrew Robert Gooding
Alison Pearce
Thomas Richard Pool
Mark Charles Thatcher
Paul Andrew Vickery
Richard William Warrington
Michael Colin Warner
Frank Michael Welpa
all of Lloyds Bank Securities Services, jointly and severally, to be attorneys
of the bank in its capacity as trustee, personal representative, nominee,
mortgagee or chargee, only for the purpose of carrying into effect matters
determined upon by the bank in any of these capacities, to sign, seal, execute
and deliver any deed or document considered necessary or desirable:
(1) to convey, transfer, assign, lease, let, underlet, surrender, sell or grant
options, rights of preemption or any other rights over any real or personal
property;
(3) to postpone, defer, subordinate or otherwise regulate the priority or
ranking of any mortgage, charge, debenture or other security;
(4) to vary, alter, amend, modify, revise, replace or substitute any deed or
document to which the bank is a party;
(5) to transfer any stocks, shares or other securities held by or registered in
the name or under the control of the bank and to authorise any person to
exercise any rights attached in any such stocks, shares or other
securities;
(6) to give such indemnities as may be necessary in favour of any person or
body of persons including without limitation indemnities in respect of
lost, destroyed or mislaid certificates, allotment letters or other
documents relating to stocks, shares or other securities;
(7) to grant easements or any other rights over or impose covenants or any
other restrictions on or consent to the letting, underletting, assignment,
surrender or alteration of any freehold or leasehold property;
(8) to assent to the vesting in any person of any real or personal property;
(9) to declare, constitute, regulate, record, vary, alter, amend or modify any
trust, settlement or family arrangement and to appoint or retire any
trustee, including the bank, of any trust, settlement or family
arrangement;
(10) to purchase, lease, acquire or otherwise take into the name of the bank or
under its control any real or personal property whatsoever or wheresoever
or any options, rights of preemption or any other rights over real or
personal property; and
(11) to manage, develop, refurbish, repair, reinstate or otherwise carry out any
works upon any real property whatsoever or wheresoever.
and generally for all or any of the purposes aforesaid to act as attorneys of
the bank. The common seal of the bank was affixed to this deed the date and
year first above written. Given under the common seal of Lloyds Bank Plc as a
deed.
Authorised signatory
Authorised counter signatory
<PAGE>
EXHIBIT 10.46
FIRST AMENDMENT TO LEASE AGREEMENT
This First Amendment To Lease Agreement ("Amendment") is entered into as of
the _________ day of January, 1999 ("Amendment Date") by and between WASHCOP
ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited partnership ("Landlord"), and
EXODUS COMMUNICATIONS, INC., a Delaware corporation ("Tenant"), with reference
to the following:
RECITALS
--------
A. Landlord and Tenant entered into that certain lease agreement dated
April 18, 1996 ("Lease") wherein Landlord leased to Tenant and Tenant leased
from Landlord premises consisting of approximately fourteen thousand two hundred
eighty (14,280) square feet in that certain building commonly known as 1605 and
1615 Wyatt Drive, Santa Clara, California ("Building"), which premises are
commonly known as 1605 Wyatt Drive, Santa Clara, California, and which premises
are more particularly described in the Lease ("Existing Premises").
B. Upon the Expansion Premises Existing Tenant (hereafter defined in
Paragraph 2.b.) vacating the Expansion Premises (hereafter defined in Paragraph
2.b.), Tenant wishes to lease the Expansion Premises from Landlord and Landlord
wishes to lease the Expansion Premises to Tenant on the terms set forth
hereinbelow. In connection with Tenant's leasing of the Expansion Premises,
Landlord and Tenant further wish to extend the term of the Lease as to the
Existing Premises to the same date on which Tenant's lease of the Expansion
Premises expires.
C. Landlord and Tenant therefore wish to amend the Lease as more
particularly set forth hereinbelow to provide for the leasing by Tenant of the
Expansion Premises, to provide for the extension of the term as to the Existing
Premises, and to provide for the other matters set forth hereinbelow.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant agree as
follows:
AMENDMENTS AND AGREEMENTS
-------------------------
1. RECITALS. Landlord and Tenant hereby agree that the hereinabove
--------
recitals are true and correct.
2. DEFINITIONS.
-----------
<PAGE>
A. Unless defined otherwise in this Amendment, all defined terms used in
this Amendment shall have the same meaning and definition given them in the
Lease.
B. The following defined terms shall have the following meanings:
"Expansion Premises" shall mean the approximately nine thousand one hundred
------------------
twenty (9,120) square feet of space located in the Building more particularly
depicted in Exhibit A, attached hereto and incorporated herein by this
---------
reference, immediately adjacent to the Existing Premises. The Expansion
Premises are commonly known as 1615 Wyatt Drive, Santa Clara, California.
"Expansion Premises Delivery Date" shall mean November 1, 1999, the day
--------------------------------
immediately following the expiration date of the term of the Expansion Premises
Existing Lease. The Expansion Premises Delivery Date shall be subject to
adjustment as set forth in Paragraph 4 below.
"Expansion Premises Existing Lease" shall mean that certain lease agreement
---------------------------------
dated June 12, 1996 by and between Landlord and U.S. 3, Inc., a California
corporation, predecessor in interest to the Expansion Premises Existing Tenant,
for the Expansion Premises.
"Expansion Premises Existing Tenant" shall mean Amazing! Controls, Inc., a
----------------------------------
California corporation.
"Expansion Premises Term" shall mean a period of one hundred twenty (120)
-----------------------
months commencing on November 1, 1999 and expiring on October 31, 2009, unless
sooner terminated. The Expansion Premises Term shall be subject to adjustment as
set forth in Paragraph 4 below.
3. EXPANSION OF PREMISES. Landlord hereby leases to Tenant and Tenant
---------------------
hereby leases from Landlord the Expansion Premises for the Expansion Premises
Term. From and after the Expansion Premises Delivery Date, the Expansion
Premises shall be added to and constitute part of the premises leased pursuant
to the Lease and the Lease shall be amended as follows:
(a) The defined term "Premises" shall mean the entire Building, which
Building is comprised of the Existing Premises and the Expansion Premises, and
which Building contains a total of approximately twenty-three thousand four
hundred (23,400) square feet.
(b) Exhibit A of the Lease shall be amended to be Exhibit B attached
---------
hereto and incorporated herein by this reference.
4. EARLY OR LATE DELIVERY OF THE EXPANSION PREMISES. If prior to
------------------------------------------------
November 1, 1999 the term of the Expansion Premises Existing Lease expires and
the Expansion Premises Existing Tenant vacates the Expansion Premises, then
Tenant shall be obligated to take delivery
<PAGE>
of the Expansion Premises on the day immediately following such expiration and
vacation, and the Expansion Premises Delivery Date shall be the day immediately
following such expiration and vacation. If for any reason whatsoever Landlord
cannot deliver possession of the Expansion Premises to Tenant on November 1,
1999, this Amendment shall not be void or voidable, nor shall Landlord or
Landlord's agents be liable to Tenant for any loss or damage resulting
therefrom, and the Expansion Premises Delivery Date shall be the date on which
Landlord actually delivers possession of the Expansion Premises to Tenant. In
the event of any adjustment to the Expansion Premises Delivery Date as provided
for in this Paragraph 4, appropriate adjustments shall be made to the dates of
the Expansion Premises Term as set forth in this Amendment, and the dates
contained in the Monthly Rent Schedule attached hereto as Exhibit C.
---------
Notwithstanding the foregoing to the contrary, in the event that Landlord
has not delivered possession of the Expansion Premises to Tenant by March 1,
2000, then Tenant may terminate this Amendment by giving written notice thereof
("Termination Notice") to Landlord on or before March 10, 2000. If the
Termination Notice is not given in the manner and by the date required in the
immediately preceding sentence, then it shall be deemed that Tenant has elected
not to terminate this Amendment and the Amendment shall remain in full force and
effect.
5. EXTENSION OF TERM. Landlord and Tenant hereby acknowledge and agree
-----------------
that the term of the Lease (prior to the Lease being amended by this Amendment)
as to the Existing Premises expires on April 30, 2001. Landlord and Tenant
hereby agree to extend the term of the Lease as to the Existing Premises to the
same date on which the Expansion Premises Term expires ("Existing Premises
Extended Term"). Effective on the Expansion Premises Delivery Date, the defined
word "Term" as used in the Lease shall mean the Existing Premises Extended Term
and the Expansion Premises Term, which terms are identical in time and which
shall run concurrently.
6. MONTHLY RENT. Effective on the Expansion Premises Delivery Date, the
------------
Monthly Rent due by Tenant under the Lease shall be as set forth in the Monthly
Rent Schedule attached hereto as Exhibit C and incorporated herein by this
---------
reference.
7. SECURITY DEPOSIT.
----------------
A. INCREASE IN SECURITY DEPOSIT. The existing Cash Security Deposit
----------------------------
in the amount of Fifteen Thousand Seven Hundred Eight and 00/100ths Dollars
($15,708.00) on deposit with Landlord shall be increased by Tenant by an
additional Thirty-Eight Thousand One Hundred Twelve and 00/100ths Dollars
($38,112.00) ("Additional Cash Security Deposit"). The existing Letter of Credit
Security Deposit in the amount of One Hundred Thirty-Eight Thousand and
00/100ths Dollars ($138,000.00) on deposit with Landlord shall be replaced by
Tenant with a Letter of Credit Security Deposit in the amount of Two Hundred
Seventy-Six Thousand and 00/100ths Dollars ($276,000.00) ("Increased Letter of
Credit Security Deposit"). The Increased Letter of Credit Security Deposit shall
be on the terms and conditions set forth in clauses (i) through (vi) of
Paragraph 7 of the Lease. The Additional Cash Security Deposit shall be
deposited by Tenant with Landlord concurrently with Tenant's execution and
delivery of this
<PAGE>
Amendment. The Increased Letter of Credit Security Deposit shall be deposited by
Tenant with Landlord on or before the date which is thirty (30) days prior to
the Expansion Premises Delivery Date. From and after the date that the
Additional Cash Security Deposit is deposited with Landlord, the term "Cash
Security Deposit" as used in the Lease (as amended by this Amendment) shall mean
the existing Cash Security Deposit plus the Additional Cash Security Deposit,
which shall be in a total amount of Fifty-Three Thousand Eight Hundred Twenty
and 00/100ths Dollars ($53,820.00). From and after the date that the Increased
Letter of Credit Security Deposit is deposited with Landlord, the term "Letter
of Credit Security Deposit" as used in the Lease (as amended by this Amendment)
shall mean the Increased Letter of Credit Security Deposit.
B. AMENDMENT TO PARAGRAPH 7. The third and fourth sentences of
------------------------
Paragraph 7 of the Lease are deleted in their entirety and replaced with the
following: "If Tenant defaults with respect to any provision of this Lease,
Landlord may apply all or any part of the Cash Security Deposit and/or draw on
all or any part of the Letter of Credit Security Deposit for the payment of any
Rent or other sum in default, the repair of such damage to the Premises or the
payment of any other amount which Landlord may spend or become obligated to
spend by reason of Tenant's default or to compensate Landlord for any other loss
or damage which Landlord may suffer by reason of Tenant's default to the full
extent permitted by law. Without limiting the generality of the foregoing,
Tenant hereby acknowledges that the following shall constitute loss or damage
incurred by Landlord by reason of a default by Tenant hereunder and Landlord
shall be entitled to draw on the Cash Security Deposit and/or the Letter of
Credit Security Deposit to reimburse Landlord for the following costs incurred
by Landlord: leasing fees and/or commissions paid in connection with entering
into this Lease, reasonable attorneys' fees and costs incurred in connection
with entering into this Lease, and all other costs incurred in connection with
entering into this Lease and delivering the Premises to Tenant."
8. CONDITION OF EXPANSION PREMISES. Tenant agrees to take the Expansion
-------------------------------
Premises in its "AS IS" condition on the Expansion Premises Delivery Date
subject to all applicable laws, codes, and ordinances; provided, however, on the
Expansion Premises Delivery Date the electrical, plumbing, and HVAC systems of
the Expansion Premises shall be in good working condition given the age and
prior uses thereof. By taking possession of the Expansion Premises Tenant shall
be deemed to have accepted the Expansion Premises in the condition required
hereunder. Landlord shall have no obligation to make any alterations,
additions, or improvements to the Expansion Premises. Tenant acknowledges that
neither Landlord nor Landlord's employees, agents, managers, or other
representatives have made any representations or warranties, express or implied,
with respect to the Expansion Premises, including, without limitation, any
representations or warranties as to the condition of the Expansion Premises or
suitability or fitness of the Expansion Premises for the conduct of Tenant's
business
9. TENANT'S PERCENTAGE. Effective as of the Expansion Premises Delivery
-------------------
Date, Tenant's Percentage shall be one hundred percent (100%).
<PAGE>
10. PARKING. Effective as of the Expansion Premises Delivery Date, Tenant
-------
shall have the right to use all of the parking spaces in the Project's parking
facilities upon such terms and conditions as may from time to time be
established by Landlord.
11. BROKERS. Landlord and Tenant warrant and represent each to the other
-------
that it has had no dealings with any real estate broker or agent in connection
with the negotiation of this Amendment. Landlord and Tenant agree to indemnify,
defend and hold each other and their respective agents harmless from and against
any and all liabilities or expenses, including attorneys' fees and costs,
arising out of or in connection with claims made by any broker or individual
against the indemnified party for commissions or fees in connection with the
execution of this Amendment and resulting from the actions of the indemnifying
party.
12. INCONSISTENCY. In the event of any inconsistency or conflict between
-------------
the terms of this Amendment and the terms of the Lease with respect to the
matters which are the subject of this Amendment, the terms of this Amendment
shall control.
13. RATIFICATION. Except as amended by this Amendment, the terms and
------------
provisions of the Lease are hereby ratified, confirmed, and shall remain in full
force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as of
the Amendment Date.
TENANT LANDLORD
- ------ --------
EXODUS COMMUNICATIONS, INC., WASHCOP ASSOCIATES LIMITED
a California corporation PARTNERSHIP,.
a Delaware limited partnership
By: CB Richard Ellis, Inc.,
By: /s/ Richard Stolz a Delaware corporation
----------------------------
Its: Managing Agent
Its: COO/CFO
----------------------------
By:______________________________
By: Adam Wegner Its:_____________________________
-----------------------------
Its: VP, GC and Secretary
----------------------------
<PAGE>
EXHIBIT A
---------
DIAGRAM OF THE EXPANSION PREMISES
[DIAGRAM OF THE EXPANSION PREMISES]
<PAGE>
EXHIBIT B
---------
DIAGRAM OF THE EXISTING PREMISES
AND THE EXPANSION PREMISES
[DIAGRAM OF EXISTING PREMISES AND EXPANSION PREMISES]
<PAGE>
EXHIBIT C
---------
MONTHLY RENT SCHEDULE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Monthly Rent
Period Per Square Square Footage Monthly Rent
------ ---------- -------------- ------------
Foot
----
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
11/1/99-10/31/00 $1.10 x 14,280 (Existing Premises) = $15,708 per month/NNN
- -----------------------------------------------------------------------------------------------------------
$1.85 x 9,120 (Expansion Premises) = $16,872 per month/NNN
------
23,400 (Total Square Footage ---------------------
Combined Premises) $32,580 per month/NNN
total Monthly Rent
- -----------------------------------------------------------------------------------------------------------
11/1/00-4/30/01 $1.10 x 14,280 (Existing Premises) = $15,708 per month/NNN
$1.90 x 9,120 (Expansion Premises) = $17,328 per month/NNN
------ ---------------------
23,400 (Total Square Footage $33,036 per month/NNN
Combined Premises) total Monthly Rent
- -----------------------------------------------------------------------------------------------------------
5/1/01-10/31/01 $1.65 x 14,280 (Existing Premises) = $23,562 per month/NNN
$1.90 x 9,120 (Expansion Premises) = $17,328 per month/NNN
------ ---------------------
23,400 (Total Square Footage $40,890 per month/NNN
Combined Premises ) total Monthly Rent
- -----------------------------------------------------------------------------------------------------------
11/1/01-10/31/02 $1.95 x 23,400 (Total Square Footage = $45,630 per month/NNN
Combined Premises)
- -----------------------------------------------------------------------------------------------------------
11/1/02-10/31/03 $2.00 x 23,400 (Total Square Footage = $46,800 per month/NNN
Combined Premises)
- -----------------------------------------------------------------------------------------------------------
11/1/03-10/31/04 $2.05 x 23,400 (Total Square Footage = $47,970 per month/NNN
Combined Premises)
- -----------------------------------------------------------------------------------------------------------
11/1/04-10/31/05 $2.10 x 23,400 (Total Square Footage = $49,140 per month/NNN
Combined Premises)
- -----------------------------------------------------------------------------------------------------------
11/1/05-10/31/06 $2.15 x 23,400 (Total Square Footage = $50,310 per month/NNN
Combined Premises)
- -----------------------------------------------------------------------------------------------------------
11/1/06-10/31/07 $2.20 x 23,400 (Total Square Footage = $51,480 per month/NNN
Combined Premises)
- -----------------------------------------------------------------------------------------------------------
11/1/07-10/31/08 $2.25 x 23,400 (Total Square Footage = $52,650 per month/NNN
Combined Premises)
- -----------------------------------------------------------------------------------------------------------
11/1/08-10/31/09 $2.30 x 23,400 (Total Square Footage = $53,820 per month/NNN
Combined Premises)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.47
FIRST AMENDMENT OF LEASE
This First Amendment of Lease ("Amendment") is entered into by and between
David A. Sabey and Sandra L. Sabey, Husband and Wife ("Landlord"), as Landlord
and Exodus Communications, Inc, a Delaware corporation ("Tenant"), as Tenant,
under that certain Lease ("Lease"), dated December 4, 1998, between the parties
hereto.
R E C I T A L S
- - - - - - - -
A. Landlord and Tenant desire to expand the Premises to include the third
floor of the Building and to provide for certain other amendments to the Lease.
B. Except as may be expressly provided otherwise in this Amendment,
capitalized terms in this Amendment shall have the meaning given such terms in
the Lease.
NOW, THEREFORE, Landlord and Tenant agree as follows:
1. Amendments.
----------
1.1 Section 1.3 of the Lease is amended and restated in its entirety
to read as follows:
1.3 PREMISES. The "Premises" shall mean the space consisting of
approximately 99,288 net rentable square feet located on the first, second and
third floors of the Building, including 6,195 square feet in the annex building
and the 710 non-rentable square foot loading dock, which are depicted on the
floor plan attached to this Lease as Exhibit B, subject to recalculation in
accordance with Section 2. The loading dock shall be free of Rent during the
Term of this Lease. Landlord shall deliver the annex building of 6,195 rentable
s.f., the loading dock and approximately 28,500 net rentable square feet of
office space/data center to Tenant on February 1, 1999. Landlord shall pay a
penalty of Five Thousand Dollars ($5,000) to Tenant for each day that it delays
delivery of at least 25,000 net rentable square feet of office space/data
center, subject to Tenant's timely approvals and decisions, after March 1, 1999.
Approximately 32,593 net rentable square feet of additional space shall be
delivered to Tenant on June 1, 1999 and the remaining approximately 32,000 net
rentable square feet located on the third floor of the Building shall be
delivered June 1, 2000. The Premises shall include the tenant improvements, if
any, described in Exhibit C.
1.2 Section 1.4 of the Lease is amended and restated in its entirety
to read as follows:
1.4 TENANT'S SHARE. "Tenant's Share" shall mean "Tenant's Share of
the Building" or "Tenant's Share of the Property," as applicable. "Tenant's
1
<PAGE>
Share of the Building" shall initially mean thirty-four and ninety-three one
hundredths percent (34.93%). "Tenant's Share of the Property" shall initially
mean fourteen and fifty-five one hundredths percent (14.55%). Commencing on the
earlier of June 1, 1999 or the date on which Tenant first occupies all or any
portion of the remaining 32,593 net rentable square feet of office space/data
center located on the second floor, "Tenant's Share of the Building" shall
automatically be increased to sixty-seven and seventy-eight one hundredths
percent (67.78%) and "Tenant's Share of the Property" shall be automatically
increased to twenty-eight and twenty-one one hundredths percent (28.21%). The
earlier of: (i) the date that Tenant occupies the third floor space for purposes
other than build-out or (ii) June 1, 2000, "Tenant's Share of the Building"
shall automatically be increased to one hundred percent (100%) and "Tenant's
Share of the Property" shall be automatically increased to forty-one and sixty-
three one hundredths percent (41.63%). "Tenant's Share of the Building" is
calculated by dividing the net rentable area of the Premises by the net rentable
area of the Building (approximately 99,288 net rentable square feet). "Tenant's
Share of the Property" is calculated by dividing the net rentable area of the
Premises by the net rentable area of the Property (approximately 238,540 net
rentable square feet). In the event the rentable area of the Premises or
Building is altered or recalculated in accordance with Section 2, Landlord shall
adjust Tenant's Share of the Building to properly reflect such event. Landlord's
adjustment of such Tenant's Share shall be final.
1.3 Section 1.9 of the Lease is amended and restated in its entirety
to read as follows:
1.9 BASE RENT. "Base Rent" from the Commencement Date through May 31,
1999 shall mean the net rentable square feet of the first floor multiplied by
$10.25 per square foot per year, based on 34,695 rentable square feet of
Premises (Twenty-nine Thousand Six Hundred Thirty-five and 31/100 Dollars
($29,635.31) per month). "Base Rent" from June 1, 1999 through May 31, 2001
shall mean 67,288 net rentable square feet of Premises multiplied by $10.25 per
square foot per year, (Fifty-seven Thousand Four Hundred Seventy-five and 17/100
Dollars ($57,475.17) per month). Notwithstanding the foregoing, the earlier of:
(i) the date Tenant occupies the third floor space for other than build-out or
(ii) June 1, 2000, "Base Rent" from such date through May 31, 2001 shall be
increased to include the net rentable square feet of 32,000 multiplied by $10.50
per square foot per year for an additional Twenty-eight Thousand and 00/100
Dollars ($28,000.00) per month. "Base Rent" from June 1, 2001 through May 31,
2004 shall mean the net rentable square feet of 67,288 multiplied by $11.25 per
square foot per year and the net rentable square feet of 32,000 multiplied by
$11.50 (Ninety-three Thousand Seven Hundred Forty-nine and 17/100 Dollars
($93,749.17) per month). "Base Rent" from June 1, 2004 through May 31, 2006
shall mean the net rentable square feet of 67,288 multiplied by $12.50 per
square foot per year and the net rentable square feet of 32,000 multiplied by
$12.75 per square foot per year (One Hundred-four Thousand Ninety-one and 67/100
Dollars ($104,091.67) per month). "Base Rent" from June 1, 2006 through May 31,
2009 shall mean the net rentable square feet of 67,288 multiplied by $13.50 per
square foot per year and the net rentable square feet of 32,000 multiplied by
$13.75 per square foot per year, (One Hundred-twelve Thousand Three Hundred
Ninety-five and 67/100 Dollars ($112,365.67)
2
<PAGE>
per month). Prior to the Commencement Date, the net rentable square feet shall
be recalculated in accordance with Section 2. Base Rent shall be payable as
provided in Section 4.
1.4 Section 1.10 of the Lease is amended and restated in its entirety to
read as follows:
1.10 EARLY OCCUPANCY. Tenant will be allowed to occupy any square
footage on the first and second floors of the Premises they feel is ready for
occupancy before the Commencement Date, or any square footage on the third floor
of the Premises before June 1, 2000. Early Occupancy shall mean any use of the
space not directly related to the installation of equipment or constructing the
Premises. "Base Rent" for space located on the first and second floors of the
Premises will be calculated by multiplying the actual occupied rentable square
feet by $10.25 per net rentable square foot and "Base Rent" for space located on
the third floor of the Premises will be calculated by multiplying the actual
occupied rentable square feet by $10.50 per net rentable square foot. Tenant
will be responsible for all "Additional Rent" as described in Section 8 on the
portion of the space that they occupy early.
1.5 Section 15.1 of the Lease is amended by adding the following to
the end of such Section:
Notwithstanding the foregoing, Landlord hereby grants Tenant the right to
sublease all or a portion of the 32,000 net rentable square feet of Premises
located on the third floor of the Building; however, if the Rent that Tenant
charges to a sublessee is more than the Base Rent Tenant is paying on such
subleased Premises under this Lease, Tenant agrees to share fifty percent (50%)
of such additional amount with Landlord, which amount shall be paid to Landlord
on a monthly basis as Additional Rent throughout the term of the sublease.
2. Entire Amendment. This Amendment sets forth the entire agreement of
----------------
the parties with respect to the subject matter set forth herein and may not be
modified other than by an agreement in writing signed by the parties hereto or
their respective successors and interests.
3. Exhibit. Exhibit B-3 is attached hereto and incorporated herein by
-------
this reference.
4. Acknowledgment. The parties hereto each acknowledge that except as
--------------
expressly modified by this Amendment, all the terms and conditions of the Lease
remain unchanged and are in full force and effect and enforceable in accordance
with their terms. In the event of a conflict between the Lease and this
Amendment, the terms and provisions of this Amendment shall control.
3
<PAGE>
DATED this 4th day of December, 1998.
TENANT:
EXODUS COMMUNICATIONS, INC.
By: /s/ Richard Stolz
----------------------------
Its: CFO and COO
----------------------------
LANDLORD:
SABEY CORPORATION, as agent for David A. and
Sandra L. Sabey
By: /s/ Laurent D. Poole
----------------------------
Its: Executive VP
----------------------------
4
<PAGE>
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 4th day of December, 1998, before me, the undersigned, a Notary
Public in and for the State of Washington, duly commissioned and sworn as such,
personally appeared Laurent D. Poole, to me known to be the Executive VP of
SABEY CORPORATION, the corporation that executed the within and foregoing
instrument as agent for David A. and Sandra L. Sabey, and acknowledged the said
instrument to be the free and voluntary act and deed of said corporation for the
uses and purposes therein mentioned, and on oath stated that he was authorized
to execute said instrument, and that the seal affixed is the corporate seal of
said corporation.
WITNESS my hand and official seal the day and year in this certificate
first above written.
/s/
- ------------------------------
Printed Name: Mary A. Hall
------------------------------
My commission expires: 12-19-01
---------------------
STATE OF CALIFORNIA )
) ss.
COUNTY OF SANTA CLARA )
On this 1st day of December, 1998, before me, the undersigned, a Notary
Public in and for the State of California, duly commissioned and sworn as such,
personally appeared Richard S. Stolz to me known to be the COO/CFO of Exodus
Communications, Inc., the corporation that executed the within and foregoing
instrument, and acknowledged the said instrument to be the free and voluntary
act and deed of said corporation for the uses and purposes therein mentioned,
and on oath stated that he/she was authorized to execute said instrument, and
that the seal affixed is the corporate seal of said corporation.
WITNESS my hand and official seal the day and year in this certificate
first above written.
/s/
-------------------------------------------
Printed Name: Mary L. Woods
------------------------------
My commission expires: June 26, 2001
---------------------
5
<PAGE>
Exhibit 21.01
LIST OF REGISTRANT'S SUBSIDIARIES
Percentage
Owned by
Name Jurisdiction Exodus
---- ------------ ----------
Arca Systems, Inc. Delaware 100%
American Information Illinois 100%
Systems, Inc.
Exodus Internet England 100%
Limited
<PAGE>
EXHIBIT 23.02
CONSENT OF KPMG LLP, INDEPENDENT AUDITORS
The Board of Directors:
Exodus Communications, Inc.:
We consent to incorporation by reference in the registration statements
(Nos. 33-48273 and 33-72525) on Form S-8 of Exodus Communications, Inc. of our
report dated January 26, 1999, relating to the consolidated balance sheets of
Exodus Communications, Inc. and subsidiaries as of December 31, 1997 and 1998,
and the related consolidated statements of operations, stockholders' (deficit)
equity and cash flows for each of the years in the three-year period ended
December 31, 1998, and related schedule, which report appears in the December
31, 1998, Annual Report on Form 10-K of Exodus Communications, Inc.
/s/ KPMG LLP
Mountain View, California
February 20, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
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0
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