<PAGE>
As filed with the Securities and Exchange Commission on May 5, 2000
Registration No. 333-__________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
-----------------------------
EXODUS COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)
-----------------------------
Delaware 77-0403076
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
-----------------------------
2831 Mission College Boulevard
Santa Clara, California 95054
(408) 346-2200
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
-----------------------------
Adam W. Wegner
General Counsel
Exodus Communications, Inc.
2831 Mission College Boulevard
Santa Clara, California 95054
(408) 346-2200
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
-----------------------------
Copies to:
Horace L. Nash, Esq.
Tram T. Phi, Esq.
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
(650) 494-0600
-----------------------------
Approximate date of commencement of proposed sale to the public: From time to
time after this registration statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
Title of Each Class of Amount Proposed Maximum Proposed Maximum Amount of
Securities To Be Offering Price Aggregate Registration
to be Registered Registered Per Unit (1) Offering Price Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value per share 3,758,268 $87.25 $327,908,883.00 $86,567.95
(2).....................................
====================================================================================================================================
</TABLE>
(1) Estimated pursuant to Rule 457(c) solely for the purpose of calculating the
registration fee, based on the average of the high and low prices of the
Registrant's common stock as reported by the Nasdaq National Market on May
2, 2000.
(2) Associated with Exodus Common Stock are preferred stock purchase rights
which will not be exercisable or evidenced separately from the Common Stock
prior to the occurrence of specified triggering events.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
================================================================================
<PAGE>
================================================================================
PROSPECTUS
================================================================================
SUBJECT TO COMPLETION, DATED MAY 5, 2000
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
EXODUS COMMUNICATIONS, INC.
Up to 3,758,268 Shares of Common Stock
----------------------
The 3,758,268 shares of common stock covered by this prospectus were
previously issued by Exodus in connection with its equity investment in Mirror
Image Internet, Inc. These shares may be offered and sold over time by the
stockholders named in this prospectus under the heading "Selling Stockholders,"
by their pledgees or donees, or by other transferees that receive the shares of
common stock in transfers other than public sales.
The selling stockholders may sell their Exodus shares in the open market at
prevailing market prices, or in private transactions at negotiated prices. They
may sell the shares directly, or may sell them through underwriters, brokers or
dealers. Underwriters, brokers or dealers may receive discounts, concessions or
commissions from the selling stockholders or from the purchaser, and this
compensation might be in excess of the compensation customary in the type of
transaction involved. See "Plan of Distribution."
We will not receive any of the proceeds from the sale of these shares.
Our common stock currently trades on the Nasdaq National Market under the
symbol "EXDS." The last reported sale price on May 3, 2000 was $86 7/8 per
share.
Investing in our common stock involves a high degree of risk. Please
carefully consider the "Risk Factors" beginning on page 5 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is May ___, 2000.
<PAGE>
In connection with this offering, no person is authorized to give any
information or to make any representations not contained in this prospectus. If
information is given or representations are made, you may not rely on that
information or representations as having been authorized by us. This prospectus
is neither an offer to sell nor a solicitation of an offer to buy any securities
other than those registered by this prospectus, nor is it an offer to sell or a
solicitation of an offer to buy securities where an offer or solicitation would
be unlawful. You may not imply from the delivery of this prospectus, nor from
any sale made under this prospectus, that our affairs are unchanged since the
date of this prospectus or that the information contained in this prospectus is
correct as of any time after the date of this prospectus.
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C> <C> <C>
Exodus............................................ 3 Plan of Distribution.............................. 15
Risk Factors...................................... 5 Legal Matters..................................... 16
Use of Proceeds................................... 14 Experts........................................... 16
Selling Stockholders.............................. 14 Where You Can Find More Information............... 16
</TABLE>
This prospectus includes forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. When used in this prospectus, the words "anticipate,"
"believe," "estimate," "will," "may," "intend" and "expect" and similar
expressions identify certain of such forward-looking statements. Although we
believe that our plans, intentions and expectations reflected in such forward-
looking statements are reasonable, we can give no assurance that such plans,
intentions or expectations will be achieved. Actual results, performance or
achievements could differ materially from those contemplated, expressed or
implied by the forward-looking statements contained in this prospectus.
Important factors that could cause actual results to differ materially from our
forward-looking statements are set forth in this prospectus, including under the
heading "Risk Factors." These factors are not intended to represent a complete
list of the general or specific factors that may affect us. It should be
recognized that other factors, including general economic factors and business
strategies, may be significant, presently or in the future, and the factors set
forth herein may affect us to a greater extent than indicated. All forward-
looking statements attributable to us or persons acting on our behalf are
expressly qualified in their entirety by the cautionary statements set forth
herein. Except as required by law, we undertake no obligation to update any
forward-looking statement, whether as a result of new information, future events
or otherwise.
Unless the context otherwise requires, the terms "we," "our," "us," "the
company" and "Exodus" refer to Exodus Communications, Inc., a Delaware
corporation.
All share numbers in this prospectus reflect the two-for-one stock split
effected by Exodus on December 14, 1999. The information incorporated by
reference into this prospectus, however, may not reflect the stock split.
2
<PAGE>
EXODUS
Exodus Communications is a leading provider of complex Internet hosting for
enterprises with mission-critical Internet operations. We offer sophisticated
system and network management solutions, along with technology professional
services to provide optimal performance for customers' Web sites. 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
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 March 31, 2000, we had over
2,800 customers under contract and managed over 39,000 customer servers
worldwide. Our customers represent a variety of industries, ranging from
Internet leaders, to major enterprise customers. Yahoo!, USA TODAY.com,
weather.com , priceline.com, British Airways and Nordstrom are just a few of the
growing number of companies selecting Exodus as their complex Web hosting
provider.
Internet usage is growing rapidly and businesses are increasing the breadth
and depth of their Internet product and services offerings. These Internet
operations are mission-critical for Internet-centric businesses and are becoming
increasingly mission-critical for many 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 which must be continuously
upgraded to reflect changing technologies and must rapidly scale as the
enterprise grows. This recurring and significant investment is an inefficient
use of 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 and
professional services that will enable reliable, high performance for 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 mission-critical Internet operations. Our server
hosting and Internet connectivity services are offered through our Internet Data
Centers' redundant backbone network of multiple high speed OC-3 and OC-12 lines,
along with our public and private network 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,
content delivery and management services, security services and professional
services. These services provide the foundation for high performance,
availability, scalability and reliability of customers' mission-critical
Internet operations. In addition, we integrate best-of-breed technologies from
leading vendors with our industry 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:
. position Exodus as the leader in this market;
. focus on enhancing systems and network management, Internet technology
services and professional services;
. accelerate our global expansion;
. leverage our expertise to address new market opportunities; 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 and professional services in 1998. We
currently operate Internet Data Centers located in nine metropolitan areas in
the United States: Atlanta, Austin, Boston, Chicago, Los Angeles, New York,
Seattle, Silicon Valley and Washington, D.C. In addition, we opened our first
Internet Data Center outside of the United States in the London metropolitan
area in June 1999, and the second in Tokyo, Japan in December 1999.
3
<PAGE>
We expanded our solutions and services by acquiring providers of Internet
technologies--Arca Systems, Inc. ("Arca"), American Information Systems, Inc.
("AIS"), Cohesive Technology Solutions, Inc. ("Cohesive"), Service Metrics,
Inc.("Service Metrics"), Exodus Communications KK (formerly Global Online Japan
Co. Ltd.) (sinjuku-ku) ("GOL") and KeyLabs, Inc. ("KeyLabs"). 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. In July 1999, we acquired Cohesive, a
technology professional services organization with expertise in networking, Web
applications and technology solutions. In November 1999, we acquired Service
Metrics, an Internet monitoring applications and services company. In December
1999, we acquired GOL, an Internet solutions provider, through which we offer
complex Web hosting and a range of Managed and Professional Services in the
Japanese market. In February 2000, we acquired KeyLabs, Inc., a
provider of e-business testing services, and in April 2000, we acquired
approximately 15% of Mirror Image Internet, Inc., a provider of content
distribution services.
Our principal executive offices are located at 2831 Mission College
Boulevard, Santa Clara, California 95054. Our telephone number is (408) 346-
2200.
4
<PAGE>
RISK FACTORS
You should carefully consider the following risks before making an investment
decision. You should carefully consider these risk factors, together with all of
the other information contained or incorporated by reference in this prospectus,
before you decide to purchase shares of our common stock. This prospectus
contains forward-looking statements that involve risk and uncertainties, such as
statements of our plans, objectives, expectations and intentions. The cautionary
statements made in this prospectus should be read as being applicable to all
related forward-looking statements wherever they appear in this prospectus.
These risk factors could cause our future results to differ materially from
those expressed or implied in any forward-looking statements made by us. The
risks and uncertainties described below are not the only ones we face.
Additional risks and uncertainties not presently known to us or that we
currently deem immaterial may also harm our business. The trading price of our
common stock could decline due to any of these risks, and you may lose all or
part of your investment.
Our short operating history and heavy losses make our business difficult to
evaluate
Our limited operating history makes evaluating our business operations and our
prospects difficult. We began offering server hosting and Internet connectivity
services in 1995, opened our first dedicated Internet Data Center in August 1996
and introduced managed services in 1997 and professional services in 1998. Due
to our short operating history, our business model is still evolving. We have
incurred operating losses and negative cash flows each fiscal quarter and year
since 1995 through 1999. Our accumulated deficit was approximately $228.2
million at December 31, 1999. We anticipate continuing to make 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 and/or equity to
acquire complementary businesses, products, services or technologies. Although
we have experienced significant growth in revenues in recent periods, this
growth rate is not 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;
5
<PAGE>
. 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 timing of expansion of existing Internet Data Centers and completion of
new Internet Data Centers, including obtaining necessary permits and
adequate public utility power;
. the introduction by third parties of new Internet and networking
technologies;
. changes in our pricing policies and those of our competitors;
. fluctuations in bandwidth used by customers; and
. licenses and permits required to construct facilities, deploy networking
infrastructure or operate in the United States and foreign countries.
In addition, a relatively large portion of our expenses are fixed in the
short-term, particularly with respect to telecommunications, depreciation,
substantial interest expenses, real estate and personnel. Therefore, our results
of operations are particularly sensitive to fluctuations in revenues.
Furthermore, if we were to 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 emerging growth companies
which may have negative cash flows, and there is the possibility that we will
not be able to collect receivables on a timely basis.
Our rapid expansion produces a significant strain on our business and requires
us to expend substantial resources
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 17 Internet Data Centers located in nine metropolitan areas of
the United States: Atlanta, Austin, Boston, Chicago, Los Angeles, New York,
Seattle, Silicon Valley and Washington, D.C. In June 1999, we opened our first
Internet Data Center outside of the United States in the London metropolitan
area. In December 1999, we acquired GOL, which has an Internet Data Center
located in Tokyo. To expand successfully, we must be able to assess markets,
locate and secure new Internet Data Center sites, install telecommunications
circuits and equipment and Internet Data Center facilities, and establish
additional interconnections with Internet service providers. 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 and/or the purchase 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 additional 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
generate additional revenue and to respond to competitive pressures.
In general, it 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 incur further
expenses from sales personnel hired to test market our services in markets where
there is no Internet Data Center. Growth in the number
6
<PAGE>
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 compete with much larger companies and there are few barriers to entry, and
if we cannot compete effectively, we will lose business
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. Many companies have announced that they
intend to begin providing and/or greatly expand their service offerings that are
competitive with our services. The principal competitive factors in this market
include:
. the ability to deliver services when requested by the customer;
. Internet system engineering and other expertise;
. customer service;
. network capability, reliability, quality of service and scalability;
. the variety of services offered;
. access to network resources, including circuits, equipment and
interconnection capacity to other networks;
. 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, foreign and regional ISPs;
. global, regional and local telecommunications companies and Regional Bell
Operating Companies;
. IT outsourcing firms; and
. other technology services and products companies.
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
7
<PAGE>
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 price reductions. In addition, we believe our market is
likely to encounter consolidation in the near future, which could result in
increased prices and other competition.
Our market is new and our services may not be generally accepted by enterprises
looking to outsource their mission-critical Internet operations, which could
harm our operating results
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. We currently incur costs
greater than our revenues. If we cannot retain or grow our customer base, we
will not be able to increase our sales and revenues or create economics of scale
to offset our fixed and operating costs. 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 adversely
affected. In addition, in order to be successful we must be able to
differentiate ourselves from our competition through our service offerings and
delivery.
Our substantial leverage and debt service obligations adversely affect our cash
flow
We have substantial amounts of outstanding indebtedness, primarily from our 10
3/4% senior notes, 4 3/4% convertible subordinated notes, 11 1/4% senior
notes and our 5% convertible subordinated notes. 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 debt when due. As of December 31,
1999, we had debt of approximately $1.6 billion. We also have the right to
issue additional 10 3/4% senior notes on or prior to December 8, 2000 in an
aggregate principal amount not to exceed $100.0 million. In addition, we expect
to add additional equipment loans and lease lines to finance capital
expenditures for our Internet Data Centers and to obtain additional long term
debt, working capital lines of credit and lease lines. We cannot be certain that
any 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 compared to less leveraged
competitors and competitors that have better access to capital resources.
We are subject to restrictive covenants in our note indentures that limit our
flexibility in managing our business
Our senior notes and convertible subordinated notes contain various
restrictions on our ability to incur debt, pay dividends or make other
restricted payments, sell assets, enter into affiliate transactions and take
other actions. Furthermore, our existing financing arrangements are, and future
financing arrangements are likely to be, secured by
8
<PAGE>
substantially all of our assets. The existing financing arrangements require,
and future financing arrangements are likely to require, that we maintain
specific financial ratios and comply with covenants restricting our ability to
incur debt, pay dividends or make other restricted payments, sell assets, enter
into affiliate transactions or take other actions.
In addition, a number of instruments evidencing our debt restrict the manner
in which the funds raised in our debt financings and debt incurred in the future
may be used.
We must manage growth effectively by expanding operating and financial
procedures, controls and systems or our business will be harmed
We are experiencing, and expect to continue experiencing, rapid growth with
respect to the building of our Internet Data Centers and network infrastructure,
acquisitions of assets and companies, expansion of our service offerings,
geographic expansion, expansion of our customer base and increases in the number
of employees. This growth has placed, and we expect it to continue to 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 are 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. In addition, we intend to hire additional senior management personnel to
support our growth and expansion of our business. If our executives are unable
to manage growth effectively, our business could be materially adversely
affected.
We may experience difficulty in integrating our recent acquisitions which could
harm our operating results
In October 1998 we acquired the assets of Arca, in February 1999 we acquired
AIS, in July 1999 we acquired Cohesive, in November 1999 we merged with SMI, and
in December 1999 we acquired GOL. Furthermore, in February 2000, we completed
our acquisition of KeyLabs and in April 2000, we completed our equity investment
in Mirror Image. We continue to expend resources integrating Cohesive, SMI, and
KeyLabs and the personnel hired in connection with acquisitions. As we acquire
additional companies, we will incur additional expenses.
We believe that our future growth depends, in part, upon the acquisition of
complementary businesses, products, services or technologies. After acquiring 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 require us to issue stock that could
dilute the ownership of our then existing stockholders, incur additional debt or
assume liabilities, result in large one-time write-offs or create goodwill or
other intangible assets that could result in amortization expenses.
System failures could lead to significant costs
We must protect our network infrastructure, our equipment, 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, Qwest
Communications Corporation and Global Crossing, to provide consistent data
communications capacity, and local exchange carriers to provide interconnection
agreements, 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, temporary loss of power, and failure of networking equipment, all of
which led to short-term degradation in the level of performance of our network
or temporary unavailability of our services. We attempt to
9
<PAGE>
limit exposure to system downtime by contract by giving customers a credit of
free service for a short period of time for disruptions. However, customers may
demand additional remedies. If we incur significant service level commitment
obligations in connection with system downtime, our liability insurance may not
be adequate to cover those expenses.
Customer satisfaction with our services is critical to our success
Our customers demand a very high level of service. Our customer contracts
generally provide a limited service level commitment related to the continuous
availability of service on a 24 hours per day, seven days per week basis. This
commitment is generally limited to a credit consisting of free service for a
short period of time for disruptions in Internet transmission services. If we
incur significant service level commitment obligations in connection with system
downtime, our liability insurance may not be adequate to cover these expenses.
As customers outsource more mission-critical operations to us, we are subject to
increased liability claims and customer dissatisfaction if our systems fail or
our customers otherwise become unsatisfied.
Our ability to expand our network is unproven and will require substantial
financial, operational and management resources
To satisfy customer requirements, we must continue to expand and adapt our
network infrastructure. We are dependent on MCI WorldCom, Qwest, Global Crossing
and other telecommunications providers for our network capacity. 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 increase quickly 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,
customer demand could diminish 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 network interconnections provided by third parties who may raise
their fees or deny access
We rely on a number of public and private network interconnections to allow
our customers to connect to other networks. If the networks with which we
interconnect were to discontinue their interconnections, our ability to exchange
traffic would be significantly constrained. Furthermore, our business will be
harmed if these networks do not add more bandwidth to accommodate increased
traffic. Many of the companies with which we maintain interconnections are our
competitors. Some of these networks require that we pay them fees for the right
to maintain interconnections. There is nothing to prevent any networks, many of
which are significantly larger than we are, from increasing fees or denying
access. In the future, networks could refuse to continue to interconnect
directly with us, might impose significant costs on us or limit our customers'
access to their networks. In this event, we may not be able on a cost-effective
basis to access alternative networks to exchange our customers' traffic. In
addition, we may not be able to pass through to our customers any additional
costs of utilizing these networks. In these cases, our business could be harmed.
Difficulties presented by international economic, political, legal, accounting
and business factors could harm our business in international markets
A component of our strategy is to expand into international markets. We opened
our first Internet Data Center outside of the United States in the London
metropolitan area in June 1999 and acquired an Internet Data Center in Tokyo
through our acquisition of GOL in December 1999. Furthermore, we plan to open
additional international Internet Data Centers by the end of 2000. In order to
expand our 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 may
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
10
<PAGE>
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.
We might not be successful in our attempts to keep up with 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. In addition, we may not be able to incorporate
advances on a cost-effective and timely basis. Moreover, technological advances
may have the effect of encouraging 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 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. Any incompatibility would 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 conform
timely 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. A portion 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 of Exodus or others. Furthermore, 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. As a result,
we could become liable to others and lose existing or potential customers. The
costs required to eliminate computer viruses and alleviate other security
problems could be prohibitively expensive. In addition, the efforts to address
these problems could result in interruptions, delays or cessation of service to
our customers.
11
<PAGE>
We depend on third-party equipment and software suppliers
We depend on vendors to supply 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. If we are unable to obtain required products or
services on a timely basis and at an acceptable cost, our business would be
harmed. In addition, if our sole or limited source suppliers do not provide
products or components that comply with evolving Internet and telecommunications
standards or that interoperate with other products or components we use, our
business would be harmed. For example, we have experienced performance problems,
including previously unknown software and firmware bugs, with routers and
switches that have caused temporary disruptions in and impairment of network
performance.
Government regulation and legal uncertainties may harm 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 enacting 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 many 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 we are subject to
regulation, taxation, enforcement or other liability in unexpected ways, which
could materially adversely affect our business.
We could be held liable for the information disseminated through our network
The law relating to the liability of online services companies and Internet
access providers for information and commerce 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 this type of 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 various
service or product offerings. Further, the costs of defending against any claims
and potential adverse outcomes of these 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.
Some businesses, organizations and individuals have in the past sent
unsolicited commercial e-mail messages through our network or advertising sites
hosted at our facilities to a massive number of people. This practice, known as
"spamming," has led to some complaints against us. In addition, some 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, we cannot be sure that
customers will not engage in this practice, which could have a material adverse
effect on our business.
12
<PAGE>
Our future success depends on our key personnel
Our success depends in significant part upon the continued services of our key
technical, sales and senior management personnel. Any officer or employee can
terminate his or her relationship at any time. If we lose the services of one or
more of our key employees or are unable to attract additional qualified
personnel, our business would be adversely affected. We do not carry key-person
life insurance for any of our employees.
If the Internet and Internet infrastructure development do not continue to grow,
our business will be harmed
Our success depends 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.
We face risks associated with protection and enforcement of intellectual
property rights
We rely on a combination of copyright, patent, trademark, service mark and
trade secret laws and contractual restrictions to establish and protect
proprietary rights in our products and services. We have very little 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 various
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 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. These royalty or
licensing agreements might not be available on terms acceptable to us or at all.
Potential risks related to the Year 2000 problem might harm our business
In many of our recent filings with the Commission, we discussed the nature and
progress of our plans to become year 2000 compliant. In late 1999, we completed
our remediation and testing of systems. As a result of those planning and
implementation efforts, we experienced no significant disruptions in mission
critical information technology systems and other internal operating systems.
Costs directly associated with our year 2000 compliance efforts were not
material, amounting to less than $1.0 million. We are not aware of any material
problems with our products or services or internal operating systems resulting
from year 2000 issues, and we have not received notice of any material year 2000
compliance issues from our external vendors. However, it remains possible that
year 2000 problems associated with our systems or our vendors' products may
still arise or that we could receive notice of year 2000 problems that have
arisen with our vendors' products.
Our stock price has been volatile in the past and is likely to continue to be
volatile
The market price of our common stock has been volatile in the past and is
likely to continue to be volatile. In addition, the securities markets in
general, and Internet stocks in particular, have experienced significant price
volatility and accordingly the trading price of our common stock is likely to be
affected by this activity.
13
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the sales of our common stock by the
selling stockholders under this prospectus.
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the shares
beneficially owned by the selling stockholders named below as of May 1, 2000,
the shares that may be offered and sold from time to time by the selling
stockholders pursuant to this prospectus, assuming each selling stockholder
sells all of the shares offered in this prospectus, and the nature of any
position, office or other material relationship which each selling stockholder
has had with Exodus or any of its predecessors or affiliates within the past
three years. The selling stockholders named below, together with any pledgee or
donee of any named stockholders, and any person who may receive the shares
offered hereby from any named stockholders in a private transaction in which
they are assigned the stockholders' rights to registration of their shares, are
referred to in this prospectus as the "selling stockholders."
Except as indicated below, the shares that may be offered and sold pursuant
to this prospectus represent all of the shares beneficially owned by each named
selling stockholder as of May 1, 2000. All of these shares were acquired by the
selling stockholders in connection with our equity investment in Mirror Image.
Because the selling stockholders may offer from time to time all or some of
their shares under this prospectus, no assurances can be given as to the actual
number of shares that will be sold by any selling stockholder or that will be
held by the selling stockholder after completion of the sales. Information
concerning the selling stockholders may change from time to time and any changed
information will be set forth in supplements to this prospectus if and when
necessary.
None of the selling stockholders nor any of their affiliates, officers,
directors or principal equity holders has held any position or office or has had
any material relationship with Exodus within the past three years.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission that consider shares to be beneficially owned
by any person who has voting or investment power with respect to the shares.
Common stock subject to options that are currently exercisable or exercisable
within 60 days after May 1, 2000 are considered to be outstanding and to be
beneficially owned by the person holding the options for the purpose of
computing the percentage ownership of a person but are not treated as
outstanding for the purpose of computing the percentage ownership of any other
person. Based upon the 205,232,861 outstanding shares of common stock as of May
1, 2000 and assuming each selling stockholder sells all of the shares offered in
this prospectus, no selling stockholder will own one percent or more of our
outstanding shares of common stock after the completion of this offering.
<TABLE>
<CAPTION>
Name Shares owned
- ---- Shares owned Shares after
before Offering Offered Offering
--------------- ------- ------------
<S> <C> <C> <C>
Xcelera.com Inc. .................................................... 3,023,318 3,023,318 --
Mirror Image Internet, Inc. ......................................... 734,950 734,950 --
</TABLE>
- -------------------
14
<PAGE>
PLAN OF DISTRIBUTION
The selling stockholders and their successors, including their transferees,
pledgees or donees or their successors, may sell the common stock offered under
this prospectus directly to purchasers or through underwriters, broker-dealers
or agents, who may receive compensation in the form of discounts, concessions or
commissions from the selling stockholders or the purchasers. These discounts,
concessions or commissions as to any particular underwriter, broker- dealer or
agent may be in excess of those customary in the types of transactions involved.
Neither Exodus nor the selling stockholders can presently estimate the amount of
this compensation.
The common stock offered under this prospectus may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of sale,
at prices related to the prevailing market prices, at varying prices determined
at the time of sale, or at negotiated prices. These sales may be effected in
transactions, which may involve crosses or block transactions, including, but
not limited to, one or more of the following transactions:
. on any national securities exchange or U.S. inter-dealer system of a
registered national securities association on which the common stock may be
listed or quoted at the time of sale;
. in the over-the-counter market;
. in transactions otherwise than on these exchanges or systems or in the over-
the-counter market;
. through the writing of options, whether the options are listed on an options
exchange or otherwise;
. through the issuance of securities by issuers, other than us, that are
exchangeable for (whether optional or mandatory), or payable in, the shares
(whether the securities are listed on a national securities exchange or
otherwise) or pursuant to which the shares may be distributed; or
. through the settlement of short sales.
In connection with the sale of the common stock, the selling stockholders may
enter into hedging transactions with broker-dealers or other financial
institutions, which may in turn engage in short sales of the common stock in the
course of hedging the positions they assume. The selling stockholders may also
sell the common stock short and deliver these securities to close out their
short positions, or loan or pledge the common stock to broker-dealers that in
turn may sell these securities.
The aggregate proceeds to the selling stockholders from the sale of the
common stock offered by them will be the purchase price of the common stock less
discounts and commissions, if any. Each of the selling stockholders reserves the
right to accept and, together with their agents from time to time, to reject, in
whole or in part, any proposed purchase of common stock to be made directly or
through agents. Exodus will not receive any of the proceeds from this offering.
Exodus' outstanding common stock is listed for trading on the Nasdaq National
Market.
The selling stockholders and any underwriters, broker-dealers or agents that
participate in the sale of the common stock may be "underwriters" within the
meaning of Section 2(11) of the Securities Act. Any discounts, commissions,
concessions or profit they earn on any resale of the shares may be underwriting
discounts and commissions under the Securities Act. Selling stockholders who are
"underwriters" within the meaning of Section 2(11) of the Securities Act will be
subject to the prospectus delivery requirements of the Securities Act.
In addition, any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 of the Securities Act may be sold under Rule 144 rather
than pursuant to this prospectus. A selling stockholder may not sell any common
stock described in this prospectus and may not transfer, devise or gift these
securities by other means not described in this prospectus.
To the extent required, the specific common stock to be sold, the names of
the selling stockholders, the respective purchase prices and public offering
prices, the names of any agent, dealer or underwriter, and any applicable
commissions or discounts with respect to a particular offer will be set forth in
an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement of which this prospectus is a part. This
prospectus also may be used, with Exodus' consent, by donees or pledgees of the
selling stockholders, or by other persons acquiring shares and who wish to offer
and sell shares under circumstances requiring or making desirable its use.
15
<PAGE>
In order to comply with the securities laws of some states, if applicable,
the common stock may be sold in these jurisdictions only through registered or
licensed brokers or dealers. In addition, in some states the common stock may
not be sold unless they have been registered or qualified for sale or an
exemption from registration or qualification requirements is available and is
complied with.
The common stock offered under this prospectus was originally issued to
Mirror Image and Xcelera.com, a majority stockholder of Mirror Image, in
connection with our equity investment in Mirror Image pursuant to exemptions
from the registration requirements of the Securities Act provided by Section
4(2) thereof and/or Regulation D promulgated thereunder. In connection with the
equity investment in Mirror Image, Exodus agreed to register the shares of
common stock offered under this prospectus under the Securities Act. Exodus and
the selling stockholders have agreed to indemnify each other, and their
respective controlling persons, and their respective affiliates, officers,
directors, partners, successors and assigns against specific liabilities,
including liabilities arising under the Securities Act and Exchange Act, in
connection with the offer and sale of the shares. In addition, the selling
stockholders may indemnify brokers, dealers, agents or underwriters that
participate in transactions involving sales of the shares against specific
liabilities, including liabilities arising under the Securities Act and/or
Exchange Act. Exodus will pay substantially all of the expenses incident to this
offering of the shares by the selling stockholders to the public other than
commissions and discounts of underwriters, brokers, dealers or agents.
LEGAL MATTERS
Fenwick & West LLP, Palo Alto, California, will provide Exodus with an
opinion as to legal matters in connection with the common stock.
EXPERTS
Our consolidated financial statements and related financial statement
schedule as of December 31, 1998 and 1999, and for each of the years in the
three-year period ended December 31,1999, have been incorporated by reference in
this registration statement in reliance on the report of KPMG LLP, independent
auditors, incorporated by reference in this registration statement, and upon the
authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
The following documents we have filed with the Commission are incorporated
into this prospectus by reference:
. our annual report on Form 10-K for the fiscal year ended December 31, 1999
filed with the Commission on March 30, 2000;
. our current report on Form 8-K filed with the Commission on April 7, 2000;
. the description of our common stock contained in our registration statement
on Form 8-A filed with the Commission on February 13, 1998 under Section
12(g) of the Exchange Act, including any amendment or report filed for the
purpose of updating such description;
. the description of our preferred stock purchase rights contained in our
registration statement on Form 8-A filed with the Commission on January 29,
1999 under Section 12(g) of the Exchange Act, as amended by a Form 8-A/A
filed with the Commission on November 29, 1999, including any amendment or
report filed for the purpose of updating such description; and
. all documents subsequently filed by us pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act after the date of this prospectus and before
the termination of this offering.
16
<PAGE>
To the extent that any statement in this prospectus is inconsistent with any
statement that is incorporated by reference, the statement in this prospectus
shall control. The incorporated statement shall not be deemed, except as
modified or superseded, to constitute a part of this prospectus or the
registration statement.
Because we are subject to the informational requirements of the Exchange Act,
we file reports and other information with the Commission. Reports, registration
statements, proxy and information statements and other information that we have
filed can be inspected and copied at the public reference facilities maintained
by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549.
You may obtain copies of this material from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at rates prescribed
by the Commission. The public may obtain information on the operation of the
Public Reference Room by calling the Commission at 1- 800-SEC-0330. The
Commission also maintains a World Wide Web site that contains reports, proxy and
information statements and other information that is filed electronically with
the Commission. This web site can be accessed at http://www.sec.gov.
We have filed with the Commission a registration statement on Form S-3 under
the Securities Act with respect to the common stock offered under this
prospectus. This prospectus does not contain all of the information in the
registration statement, parts of which we have omitted, as allowed under the
rules and regulations of the Commission. You should refer to the registration
statement for further information with respect to us and our common stock.
Statements contained in this prospectus as to the contents of any contract or
other document are not necessarily complete and, in each instance, we refer you
to the copy of each contract or document filed as an exhibit to the registration
statement. Copies of the registration statement, including exhibits, may be
inspected without charge at the Commission's principal office in Washington,
D.C., and you may obtain copies from this office upon payment of the fees
prescribed by the Commission.
We will furnish without charge to each person to whom a copy of this
prospectus is delivered, upon written or oral request, a copy of the information
that has been incorporated by reference into this prospectus (except exhibits,
unless they are specifically incorporated by reference into this prospectus).
You should direct any requests for copies to Exodus Communications, Inc., 2831
Mission College Boulevard, Santa Clara, California 95054, Attention: Adam W.
Wegner, General Counsel, telephone: (408) 346-2200.
17
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses payable by the Registrant
in connection with the sale and distribution of the securities being registered
hereby. Normal commission expenses and brokerage fees are payable individually
by the selling stockholders. All amounts are estimated except the Securities and
Exchange Commission registration fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............... $ 86,568
Accounting fees and expenses...................................... 10,000
Legal fees and expenses........................................... 15,000
Printing and engraving expenses................................... 5,000
Miscellaneous..................................................... 3,432
--------
Total................................................................. $120,000
========
</TABLE>
ITEM 15. Indemnification of Directors and Officers.
As permitted by Section 145 of the Delaware General Corporation Law, the
Registrant's Restated Certificate of Incorporation includes a provision that
eliminates the personal liability of its directors to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law or (iv) for any transaction
from which the director derived an improper personal benefit. In addition, as
permitted by Section 145 of the Delaware General Corporation Law, the Bylaws of
the Registrant provide that: (i) the Registrant is required to indemnify its
directors and executive officers to the fullest extent permitted by the Delaware
General Corporation Law; (ii) the Registrant may, in its discretion, indemnity
other officers, employees and agents as set forth in the Delaware General
Corporation Law; (iii) upon receipt of an undertaking to repay such advances if
indemnification is determined to be unavailable, the Registrant is required to
advance expenses, as incurred, to its directors and executive officers to the
fullest extent permitted by the Delaware General Corporation Law in connection
with a proceeding (except if a determination is reasonably and promptly made by
the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to the proceeding or, in certain circumstances, by
independent legal counsel in a written opinion that the facts known to the
decision-making party demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in, or
not opposed to, the best interests of the corporation); (iv) the rights
conferred in the Bylaws are not exclusive and the Registrant is authorized to
enter into indemnification agreements with its directors, officers and employees
and agents; (v) the Registrant may not retroactively amend the Bylaw provisions
relating to indemnify; and (vi) to the fullest extent permitted by the Delaware
General Corporation Law, a director or executive officer will be deemed to have
acted in good faith and in a manner he or she reasonably believed to be in, or
not opposed to, the best interests of the Registrant and, with respect to any
criminal action or proceeding, to have had no reasonable cause to believe that
his or her conduct was unlawful if his or her action is based on the records or
books of account of the corporation or on information supplied to him or her by
officers of the corporation in the course of their duties or on the advice of
legal counsel for the corporation or on information or records given or reports
made to the corporation by independent certified public accountants or
appraisers or other experts.
The Registrant's policy is to enter into indemnification agreements with each
of its directors and executive officers. The indemnification agreements provide
that directors and executive officers will be indemnified and held harmless to
the fullest possible extent permitted by law including against all expenses
(including attorneys' fees), judgments, fines and settlement amounts paid or
reasonably incurred by them in any action, suit or proceeding, including any
derivative action by or in the right of the Registrant, on account of their
services as directors, officers,
II-1
<PAGE>
employees or agents of the Registrant or as directors, officers, employees or
agents of any other company or enterprise when they are serving in such
capacities at the request of the Registrant. The Registrant will not be
obligated pursuant to the agreements to indemnify or advance expenses to an
indemnified party with respect to proceedings or claims (i) initiated or brought
voluntarily by the indemnified party and not by way of defense, except with
respect to a proceeding to establish or enforce a right to indemnification under
the indemnification agreements or any other agreement or insurance policy or
under the Registrant's Certificate of Incorporation or Bylaws now or hereafter
in effect relating to indemnification, or authorized by the Board of Directors
or as otherwise required under Delaware statute or law, regardless of whether
the indemnified party is ultimately determined to be entitled to such
indemnification, (ii) for expenses and the payment of profits arising from the
purchase and sale by the indemnified party of securities in violation of Section
16(b) of the Securities Exchange Act of 1934 or any similar successor statute or
(iii) if a final decision by a court having jurisdiction in the matter shall
determine that such indemnification is not lawful.
The indemnification agreement also provides for contribution in certain
situations in which the Registrant and a director or executive officer are
jointly liable for indemnification is unavailable, such contribution to be based
on the relative benefits received and the relative fault of the Registrant and
the director or executive officer. No contribution is allowed to a person found
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) from any person who was not found guilty of such fraudulent
misrepresentation.
The indemnification agreement requires a director or executive officer to
reimburse the Registrant for all expenses advanced only to the extent it is
ultimately determined that the director or executive officer is not entitled,
under Delaware law, the Bylaws, the indemnification agreement or otherwise, to
be indemnified for such expenses. The indemnification agreement provides that it
is not exclusive of any rights a director or executive officer may have under
the Certificate of Incorporation, Bylaws, other agreements, any majority- in-
interest vote of the stockholders or vote of disinterested directors, Delaware
law or otherwise.
The indemnification provision in the Bylaws, and the form of indemnification
agreements entered into between the Registrant and its directors and executive
officers, may be sufficiently broad to permit indemnification of the
Registrant's executive officers and directors for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act").
As authorized by the Registrant's Bylaws, the Registrant, with approval by
the Board, maintains director and officer liability insurance.
In addition, Thadeus Mocarski, a director of the Registrant, is indemnified
in certain circumstances by Fleet Financial Group, Inc.
ITEM 16. Exhibits.
The following exhibits are filed herewith or incorporated by reference
herein:
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
-------- -------------
<S> <C>
2.01 Common Stock Purchase Agreement dated as of March 22, 2000 among Registrant, Mirror Image Internet,
Inc. and Xcelera.com Inc. (Incorporated by reference from Exhibit 2.01 to the Registrant's Current
Report on Form 8-K filed with the Securities and Exchange Commission on April 7, 2000.)
2.02 Common Stock Purchase Agreement dated as of March 22, 2000 between Registrant and Xcelera.com Inc.
(Incorporated by reference from Exhibit 2.02 to the Registrant's Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 7, 2000.)
4.01 Registration Rights Agreement dated April 21, 2000 between Registrant, Mirror Image Internet, Inc.
and Xcelera.com Inc.
5.01 Opinion of Fenwick & West LLP.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
-------- -------------
<S> <C>
23.01 Consent of Fenwick & West LLP (included in Exhibit 5.01).
23.02 Consent of KPMG LLP, independent auditors.
24.01 Power of Attorney (see the signature page to this Registration Statement).
</TABLE>
ITEM 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: (i) to include
any prospectus required by Section 10(a)(3) of the Securities Act; (ii)
to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information in the registration
statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement; and (iii) to include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to such information in the registration statement; provided, however,
that (i) and (ii) do not apply if the information required to be included
in a post-effective amendment thereby is contained in periodic reports
filed with or furnished to the Commission by the Registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Santa Clara, State of California, on this 4th day of
May, 2000.
EXODUS COMMUNICATIONS, INC.
By: /s/ R. Marshall Case
--------------------
R. Marshall Case
Executive Vice President, Finance and
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints Ellen M. Hancock and R. Marshall Case,
and each of them, his or her true and lawful attorneys-in-fact and agents with
full power of substitution, for him or her and in his or her name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement on Form S-3, and to
sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule 415
promulgated under the Securities Act of 1933, and all post-effective amendments
thereto, and to file the same with all exhibits thereto and all documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his, her or their substitute or
substitutes, may lawfully do or cause to be done or by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- -----
Principal Executive Officer:
<S> <C> <C>
/s/ Ellen M. Hancock President, Chief Executive Officer May 4, 2000
- ----------------------------------------- and Director
Ellen M. Hancock
Principal Financial Officer and
Principal Accounting Officer:
/s/ R. Marshall Case Executive Vice President, Finance May 4, 2000
- ----------------------------------------- and Chief Financial Officer
R. Marshall Case
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Name Title Date
---- ----- -----
Additional Directors:
<S> <C> <C>
/s/ K.B. Chandrasekhar Chairman of the Board of Directors May 4, 2000
- -----------------------------------------
K.B. Chandrasekhar
/s/ Frederick W.W. Bolander Director May 4, 2000
- -----------------------------------------
Frederick W.W. Bolander
/s/ Mark Dubovoy Director May 4, 2000
- -----------------------------------------
Mark Dubovoy
Director
- -----------------------------------------
John R. Dougery
Director
- -----------------------------------------
Max D. Hopper
Director
- -----------------------------------------
Peter A. Howley
/s/ Daniel C. Lynch Director May 4, 2000
- -----------------------------------------
Daniel C. Lynch
/s/ Thadeus J. Mocarski Director May 4, 2000
- -----------------------------------------
Thadeus J. Mocarski
/s/ Naomi O. Seligman Director May 4, 2000
- -----------------------------------------
Naomi O. Seligman
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
- ----------- -------------
<S> <C>
2.01 Common Stock Purchase Agreement dated as of March 22, 2000 among Registrant, Mirror Image Internet,
Inc. and Xcelera.com Inc. (Incorporated by reference from Exhibit 2.01 to the Registrant's Current
Report on Form 8-K filed with the Securities and Exchange Commission on April 7, 2000.)
2.02 Common Stock Purchase Agreement dated as of March 22, 2000 between Registrant and Xcelera.com Inc.
(Incorporated by reference from Exhibit 2.02 to the Registrant's Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 7, 2000.)
4.01 Registration Rights Agreement dated April 21, 2000 between Registrant, Mirror Image Internet, Inc.
and Xcelera.com Inc.
5.01 Opinion of Fenwick & West LLP.
23.01 Consent of Fenwick & West LLP (included in Exhibit 5.01).
23.02 Consent of KPMG LLP, independent auditors.
24.01 Power of Attorney (see the signature page to this Registration Statement).
</TABLE>
<PAGE>
Exhibit 4.01
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of April 21, 2000 by and among Exodus Communications, Inc., a Delaware
corporation (the "Company"), Mirror Image Internet, Inc., a Delaware corporation
("MII"), and Xcelera.com Inc., a Cayman Islands corporation ("Xcelera") (each of
MII and Xcelera are individually a "Holder," and collectively, the "Holders").
R E C I T A L S
- - - - - - - -
A. This Agreement is entered into in connection with and is ancillary to a
Common Stock Purchase Agreement dated as of March 22, 2000 among the Company and
the Holders (the "MII Purchase Agreement"), and a Common Stock Purchase
Agreement dated as of March 22, 2000 between the Company and Xcelera (the
"Xcelera Purchase Agreement"). Pursuant to the MII Purchase Agreement, the
Company will purchase from MII shares of MII's Common Stock ("MII Common Stock")
in exchange for cash and shares of the Company's common stock ("Company Common
Stock"). Pursuant to the Xcelera Purchase Agreement, the Company will purchase
from Xcelera shares of MII Common Stock in exchange for cash and shares of
Company Common Stock. References to capitalized terms in this Agreement that
are not otherwise defined herein will have the meaning ascribed to them in the
MII Purchase Agreement.
B. The parties have agreed that, in connection with the issuance of
Company Common Stock pursuant to the MII Purchase Agreement and the Xcelera
Purchase Agreement, the Holders will each be granted certain registration rights
on the terms set forth herein.
C. To induce MII and Xcelera to sell such shares of Common Stock to the
Company and to enter into the MII Purchase Agreement and the Xcelera Purchase
Agreement, the Company has agreed to grant the Holders registration rights, all
as more fully set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. REGISTRATION RIGHTS.
-------------------
(a) The Company shall use its reasonable best efforts to cause the
shares of Company Common Stock issued in connection with the MII Purchase
Agreement and the Xcelera Purchase Agreement, and any securities issued in
respect thereof, or in substitution therefor, in connection with any stock
split, dividend or distribution or any recapitalization, combination of shares
or the like (the "Registrable Securities") to be registered under the Securities
Act of 1933, as amended (the "Securities Act") within ten business days of the
Closing (as defined in the MII Purchase Agreement) so as to permit the resale or
distribution thereof, and in connection therewith shall prepare and file a shelf
Registration Statement under Rule 415 of the Securities Act on Form S-3
("Registration Statement") with the Securities and Exchange Commission ("SEC")
as soon as reasonably practical after the date hereof, and shall use its
reasonable best efforts to cause the Registration Statement to become effective
as soon as reasonably practical thereafter. The Company shall not be required
to effect more than one registration under this Section 1; provided that if a
Holder advises the Company that it intends to distribute the Registrable
Securities by means of an underwriting, then the Company shall be required to
assist in no more than one such underwritten offering, which offering shall be
consummated within a reasonable time from the date of the Holder's request;
provided further that, in the event that an offering is effected by means of an
underwriting, the Company shall have the right to select the underwriter (which
shall be reasonably acceptable to the Holders).
(b) The Company shall (i) prepare and file with the SEC the
Registration Statement in accordance with Section 1(a) hereof with respect to
the shares of Registrable Securities and shall use all reasonable
<PAGE>
best efforts to cause the Registration Statement to remain effective for a
period ending on the last to occur of the date all of the shares of Registrable
Securities registered thereunder (x) shall have been sold under the Registration
Statement or under Rule 144 under the Securities Act, or (y) may be sold under
Rule 144(k); (ii) prepare and file with the SEC such amendments and supplements
to the Registration Statement and the prospectus used in connection therewith as
may be necessary, and to comply with the provisions of the Securities Act with
respect to the sale or other disposition of all securities proposed to be
registered in the Registration Statement until the termination of effectiveness
of the Registration Statement; and (iii) furnish to each holder of Registrable
Securities (a "Holder") such number of copies of any prospectus (including any
preliminary prospectus and any amended or supplemented prospectus) in conformity
with the requirements of the Securities Act, and such other documents, as each
Holder may reasonably request in order to effect the offering and sale of the
shares of the Registrable Securities to be offered and sold, but only while the
Company shall be required under the provisions hereof to cause the Registration
Statement to remain current.
(c) The Company shall use reasonable best efforts to register and
qualify the securities covered by the Registration Statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
(d) In the event of any underwritten public offering, the Company
shall enter into and perform its obligations under an underwriting agreement, in
usual and customary form, with the managing underwriter(s) of such offering.
Each Holder participating in such underwriting shall also enter into and perform
its obligations under such an agreement.
(e) The Company shall furnish, at the request of any Holder requesting
registration of Registrable Securities, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities are
being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated as of such date, of
the counsel representing the Company for the purposes of such registration, in
form and substance as is customarily given to underwriters in an underwritten
public offering and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a
"comfort" letter dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities.
(f) The Company shall notify each Holder of Registrable Securities
covered by the Registration Statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing.
(g) Notwithstanding any other provision of this Section 1, the Company
shall have the right at any time to require that all Holders suspend further
offers and sales of Registrable Securities whenever, and for so long as, in the
good faith judgment of the Board of Directors of the Company, based on the
advice of outside counsel, it would materially adversely affect any financing,
acquisition or other material transaction of the Company out of the ordinary
course of business or would require premature disclosure thereof or of any other
material event out of the ordinary course of the business of the Company if the
offers and sales were not suspended (the "Suspension Right"). In the event the
Company exercises the Suspension Right, such suspension will continue for the
period of time reasonably necessary for disclosure to occur at a time that is
not materially detrimental to the Company or until such time as the information
or event is no longer material, each as determined in good faith by the Company
after consultation with counsel. The Company will promptly give the Holders
notice, in a writing signed by an executive officer of the Company of any such
suspension (the "Suspension Notice"). The Company agrees to notify the Holders
promptly upon termination of the suspension (the "Resumption Notice"). The
period
<PAGE>
during which the Company is required to keep the Registration Statement
effective shall be extended by a period equal in length to any and all periods
during which offers and sales of Registrable Securities are suspended pursuant
to exercise of the Suspension Right; provided that the Company shall not have
the right to suspend offers and sales for more than ninety days during any
twelve-month period.
(h) The Company shall pay all of the out-of-pocket expenses, other
than underwriting discounts and commissions, if any, incurred in connection with
any registration of Registrable Securities pursuant to this Section 1,
including, without limitation, all registration and filing fees, printing
expenses, transfer agents' and registrars' fees, the fees and disbursements of
the Company's outside counsel and independent accountants; provided that the
Holders shall be responsible for all such out-of-pocket expenses in the event
that the offering made pursuant to the registration is underwritten.
(i) To the fullest extent permitted by law, the Company will
indemnify, defend, protect and hold harmless each selling Holder, each
underwriter of the Company Common Stock being sold by such Holders pursuant to
this Section 1, each person, if any, who controls any such Holder or underwriter
within the meaning of the Securities Act or the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and their respective affiliates, officers,
directors, partners, successors and assigns (each a "Holder Indemnitee"),
against all actions, claims, losses, damages, liabilities and expenses to which
they or any of them become subject under the Securities Act, the Exchange Act or
under any other statute or at common law or otherwise and, except as hereinafter
provided, will promptly reimburse each such Holder Indemnitee, for any legal or
other expenses reasonably incurred by them or any of them in connection with
investigating or defending any actions whether or not resulting in any
liability, insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of material fact in any registration statement and any prospectus
filed pursuant to Section 1 or any post-effective amendment thereto or arise out
of or are based upon any omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading or any violation by the Company of any rule or regulation promulgated
under the Securities Act, the Exchange Act or any statute, regulation or law
applicable to the Company and relating to action or inaction required of the
Company in connection with such registration; provided, however, that the
Company shall not be liable to any such Holder Indemnitee in respect of any
claims, losses, damages, liabilities and expenses resulting from any untrue
statement or alleged untrue statement, or omission or alleged omission made in
reliance upon and in conformity with information furnished in writing to the
Company by such Holder Indemnitee specifically for use in connection with such
registration statement and prospectus or post-effective amendment.
(j) To the fullest extent permitted by law, each selling Holder of
Registrable Securities registered in accordance with Section 1 will indemnify
the Company, each person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act, each underwriter of the Company Common
Stock and their respective affiliates, officers, directors, partners, successors
and assigns (each an the "Company Indemnitee") against any actions, claims,
losses, damages, liabilities and expenses to which they or any of them may
become subject under the Securities Act, the Exchange Act or under any other
statute or at common law or otherwise, and, except as hereinafter provided, will
promptly reimburse each Company Indemnitee for any legal or other expenses
reasonably incurred by them or any of them in connection with investigating or
defending any actions whether or not resulting in any liability, insofar as such
losses, claims, damages, expenses, liabilities or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
in any registration statement and any prospectus filed pursuant to Section 1 or
any post-effective amendment thereto, or any omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, which untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with information furnished in writing to the Company by such Holder
specifically for use in connection with such registration statement, prospectus
or post-effective amendment; provided, however, that the obligations of each
such selling Holder hereunder shall be limited to an amount equal to the
proceeds to such Holder from the sale of such Holder's Registrable Securities as
contemplated herein.
(k) Each person entitled to indemnification under this Section 1 (an
"Indemnified Person") shall give notice to the party required to provide
indemnification (the "Indemnifying Person") promptly after such Indemnified
Person has actual knowledge of any claim as to which indemnity may be sought and
shall permit the Indemnifying Person to assume the defense of any such claim and
any litigation resulting therefrom,
<PAGE>
provided that counsel for the Indemnifying Person who conducts the defense of
such claim or any litigation resulting therefrom shall be approved by the
Indemnified Person (whose approval shall not unreasonably be withheld), and the
Indemnified Person may participate in such defense at such party's expense
(unless the Indemnified Person has reasonably concluded that there may be a
conflict of interest between the Indemnifying Person and the Indemnified Person
in such action or unless the Indemnifying Person fails to assume the defense or
pursue it in good faith, in which case the fees and expenses of counsel for the
Indemnified Person shall be at the expense of the Indemnifying Person), and
provided further that the failure of any Indemnified Person to give notice as
provided herein shall not relieve the Indemnifying Person of its obligations
under this Section 1 except to the extent the Indemnifying Person is materially
prejudiced thereby. No Indemnifying Person, in the defense of any such claim or
litigation, shall (except with the consent of each Indemnified Person) consent
to entry of any judgment or enter into any settlement that does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Person of a release from all liability in respect to such claim or
litigation. Each Indemnified Person shall furnish such information regarding
itself or the claim in question as an Indemnifying Person may reasonably request
in writing and as shall be reasonably required in connection with the defense of
such claim and litigation resulting therefrom.
(l) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which the Company or any
Holder makes a claim for indemnification pursuant to this Section 1 but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding that this Section 1 provides for indemnification, in such case,
then the Company and such Holder will contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion as is appropriate to reflect the relative fault
of the Company on the one hand and of the Holder on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations or, if the
allocation provided herein is not permitted by applicable law, in such
proportion as shall be permitted by applicable law and reflect as nearly as
possible the allocation provided herein. The relative fault of the Company on
the one hand and of the Holder on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or by the Holder on the
other, and each party's relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission; provided, however,
that, in any such case (i) no Holder will be required to contribute any amount
in excess of the proceeds received by such Holder from the sale of Registrable
Securities pursuant to the Registration Statement; and (ii) no person or entity
guilty of fraudulent misrepresentation within the meaning of Section 11(f) of
the Securities Act will be entitled to contribution from any person or entity
who was not guilty of such fraudulent misrepresentation.
2. Furnish Information. It shall be a condition precedent to the
-------------------
obligations of the Company to take any action pursuant to this Agreement that
the selling Holders will furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition and plan of distribution of such Registrable Securities as shall be
required to timely effect the registration of their Registrable Securities.
3. Injunctive and Other Relief. The Company and the Holders agree that in
---------------------------
the event that either party breaches this Agreement, the non-breaching party
will be irreparably harmed and will be entitled to injunctive relief and
specific enforcement in addition to any other remedy which it may have at law or
in equity.
4. Entire Agreement; Modification. This Agreement sets forth the entire
------------------------------
agreement and understanding between the parties hereto with respect to the
subject matter hereof, and merges and supersedes any and all prior discussions,
agreements, and understandings between or among them with respect thereto, and
no party shall be bound by any condition, definition, warranty or
representation, other than those expressly set forth or provided for in this
Agreement or in any document or instrument delivered pursuant to this Agreement,
or as may be set forth in writing and signed by the party or parties to be bound
thereby on or subsequent to the date hereof. This Agreement may not be changed
or modified, except by an agreement in writing executed by the Company and the
Holders.
<PAGE>
5. Governing Law. This Agreement shall be governed by California law
-------------
(excluding the choice of law provisions) and applicable federal law.
6. Severability. If any term, provision, covenant or restriction
------------
contained in this Agreement is held by a court of competent jurisdiction to be
invalid, void, or unenforceable, then the remainder of this Agreement shall
remain operative and in full force and effect. If any provision contained in
this Agreement is invalidated or becomes inoperative because of a change in law,
the parties hereto will use their reasonable best efforts to adopt an
appropriate substitute (if any) for such provision consistent with the intent of
the parties.
7. Binding Effect of Agreement. The terms of this Agreement shall be
---------------------------
binding on and inure to the benefit of the parties hereto and their respective
subsidiaries, parents or other affiliated entities, agents, attorneys, heirs,
executors, successors, representatives and assigns. Any transferee of
Registrable Securities shall have the rights of a Holder hereunder.
8. Notices. Any notice, request or other communication required or
-------
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or if deposited in the U.S. mail by registered or
certified mail, return receipt requested, postage prepaid, as follows:
(a) If to the Investor:
Exodus Communications, Inc.
2831 Mission College Blvd.
Santa Clara, CA 95054
Attention: Adam W. Wegner, General Counsel
Phone: (408) 346-2200
Fax: (408) 346-2206
with a copy to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
Attention: David W. Healy, Esq.
Phone: (650) 494-0600
Fax: (650) 494-1417
(b) If to the Company:
Mirror Image Internet, Inc.
49 Dragon Court
Woburn, MA 01801
Attention: Timo Aittola, Chief Financial Officer
Phone: (781) 376-1156
Fax: (781) 376-1104
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: Brian M. Stadler
Phone: (212) 455-3765
Fax: (212) 455-2502
<PAGE>
(c) If to Xcelera:
Xcelera.com Inc.
P.O. Box 309
Ugland House
South Church Street
Grand Cayman Islands, British West Indies
Attention: Gareth Griffiths
Phone: (345) 949-8066
Fax: (345) 949-8080
with copies to:
10 Ashton Drive
Greenwich, CT 06831
Attention: Alexander M. Vik, President
Phone: (203) 622-1606
Fax: (203) 622-1610
and
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: Brian M. Stadler, Esq.
Phone: (212) 455-3765
Fax: (212) 455-2502
or to such other address as the party in question may have furnished to the
other party by written notice given in accordance with this Section 8.
9. Counterparts. This Agreement may be executed in counterparts, each of
------------
which will be deemed an original, but all of which together will constitute one
and the same instrument.
[Remainder of page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
Mirror Image Internet, Inc., Exodus Communications, Inc.,
a Delaware corporation a Delaware corporation
Name: /s/ Timo Aittola Name: /s/ Ellen M. Hancock
---------------- --------------------
By: Timo Aittola By: /s/ Ellen M. Hancock
------------ --------------------
Title: Chief Financial Officer Title: President and Chief Executive
----------------------- -----------------------------
Officer
-------
Xcelera.com Inc.,
a Cayman Islands corporation
Name: /s/ Alexander M. Vik
--------------------
By: Alexander M. Vik
----------------
Title: Chief Executive Officer
-----------------------
[Signature Page to Registration Rights Agreement]
<PAGE>
Exhibit 5.01
[Letterhead of Fenwick & West LLP]
May 5, 2000
Exodus Communications, Inc.
2831 Mission College Boulevard
Santa Clara, CA 95054
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form S-3
(the "Registration Statement") to be filed by you with the Securities and
Exchange Commission (the "Commission") on or about May 5, 2000 in connection
with the registration under the Securities Act of 1933, as amended, of an
aggregate of 3,758,268 shares of your Common Stock (the "Stock"), all of which
will be sold by certain selling stockholders (the "Selling Stockholders").
In rendering this opinion, we have examined the following:
(1) your Amended and Restated Certificate of Incorporation, certified by
the Delaware Secretary of State on January 31, 2000;
(2) your Bylaws, certified by your Secretary on April 21, 2000;
(3) the Registration Statement, together with the Exhibits filed as a part
thereof or incorporated therein by reference;
(4) the Prospectus prepared in connection with the Registration Statement;
(5) the minutes of meetings and actions by written consent of the
stockholders and Board of Directors that are contained in your minute
books and the minute books of your predecessor, Exodus Communications,
Inc., a California corporation ("Exodus California"), that are in our
possession;
(6) the stock records for both you and Exodus California that you have
provided to us (consisting of a certificate from your transfer agent of
even date herewith verifying the number of your issued and outstanding
shares of capital stock as of the date hereof and a list of option and
warrant holders respecting your capital and of any rights to purchase
capital stock that was prepared by you and dated May 4, 2000 verifying
the number of such issued and outstanding securities); and
(7) a Management Certificate addressed to us and dated of even date
herewith executed by you containing certain factual and other
representations.
In our examination of documents for purposes of this opinion, we have
assumed, and express no opinion as to, the genuineness of all signatures on
original documents, the authenticity and completeness of all documents submitted
to us as originals, the conformity to originals and completeness of all
documents submitted to us as copies, the legal capacity of all persons or
entities executing the same, the lack of any undisclosed termination,
modification, waiver or amendment to any document reviewed by us and the due
authorization, execution and delivery of all documents where due authorization,
execution and delivery are prerequisites to the effectiveness thereof. We have
also assumed that the certificates representing the Stock have been, or will be
when issued, properly signed by your authorized officers or their agents.
<PAGE>
As to matters of fact relevant to this opinion, we have relied solely upon
our examination of the documents referred to above and have assumed the current
accuracy and completeness of the information obtained from public officials and
documents referred to above. We have made no independent investigation or other
attempt to verify the accuracy of any of such information or to determine the
existence or non-existence of any other factual matters; however, we are not
-------
aware of any facts that would cause us to believe that the opinion expressed
herein is not accurate.
We are admitted to practice law in the State of California, and we render
this opinion only with respect to, and express no opinion herein with concerning
the application or effect of the laws of any jurisdiction other than, the
existing laws of the United States of America, of the State of California and,
with respect to the validity of corporate action and the requirements for the
issuance of stock, of the State of Delaware.
In connection with our opinion expressed below, we have assumed that, at or
prior to the time of the delivery of any shares of Stock, the Registration
Statement will have been declared effective under the Securities Act of 1933, as
amended, that the registration will apply to such shares of Stock and will not
have been modified or rescinded and that there will not have occurred any change
in law affecting the valid issuance of such shares of Stock.
You have informed us that you intend to issue the Stock from time to time
on a delayed or continuous basis. This opinion is limited to the laws,
including the rules and regulations, as in effect on the date hereof. We are
basing this opinion on our understanding that, prior to issuing any Stock, you
will advise us in writing of the terms thereof and other information material
thereto, will afford us an opportunity to review the operative documents
pursuant to which such Stock is to be issued (including the Registration
Statement, the Prospectus and the applicable Prospectus Supplement, as then in
effect) and will file such supplement or amendment to this opinion (if any) as
we may reasonably consider necessary or appropriate with respect to such Stock.
However, we undertake no responsibility to monitor your future compliance with
applicable laws, rules or regulations of the Commission or other governmental
body. We also assume you will timely file any and all supplements to the
Registration Statement and Prospectus as are necessary to comply with applicable
laws in effect from time to time.
Based upon the foregoing, it is our opinion that the 3,758,268 shares of
Stock to be sold by the Selling Stockholders pursuant to the Registration
Statement are validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us, if any, in the
Registration Statement, the Prospectus constituting a part thereof and any
amendments thereto. This opinion speaks only as of its date and we assume no
obligation to update this opinion should circumstances change after the date
hereof. This opinion is intended solely for use in connection with issuance and
sale of shares subject to the Registration Statement and is not to be relied
upon for any other purpose.
Very truly yours,
FENWICK & WEST LLP
By: /s/ Horace L. Nash
------------------
Horace L. Nash, a partner
<PAGE>
EXHIBIT 23.02
CONSENT OF KPMG LLP, INDEPENDENT AUDITORS
The Board of Directors
Exodus Communications, Inc.:
We consent to the incorporation by reference in the registration statement on
Form S-3 of Exodus Communications, Inc. dated on or about May 4, 2000, of our
report dated January 25, 2000, relating to the consolidated balance sheets of
Exodus Communications, Inc. and subsidiaries as of December 31, 1998 and 1999,
and the related consolidated statements of operations, stockholders' (deficit)
equity and comprehensive loss, and cash flows for each of the years in the
three-year period ended December 31, 1999, and the related financial statement
schedule. We also consent to the reference to our firm under the heading
"Experts" in the registration statement.
/s/ KPMG LLP
Mountain View, California
May 4, 2000
