<PAGE>
As filed with the Securities and Exchange Commission on May 9, 2000.
Registration No. 333-93749
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
Amendment No. 3
to
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------
EQUINIX, INC.
(Exact Name of Registrant as Specified in its Charter)
---------------
Delaware 4813 77-0487526
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Classification Identification Number)
Incorporation or Code Number)
Organization)
901 Marshall Street
Redwood City, CA 94063
(650) 298-0400
(Address, Including zip code, and telephone number, including area code, of
registrant's principal executive offices)
RENEE F. LANAM
General Counsel and Assistant Secretary
Equinix, Inc.
901 Marshall Street
Redwood City, CA 94063
(650) 298-0400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies to:
SCOTT C. DETTMER
BRANDI L. GALVIN
MARGARET E. PAIGE
Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP
155 Constitution Drive
Menlo Park, California 94025
(650) 321-2400
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
---------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to rule 462(b) under the Securities Act of 1933, as amended (the
"Securities Act"), check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
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 that specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be +
+changed. We may not exchange these securities until the registration +
+statement filed with the Securities and Exchange Commission is effective. +
+This preliminary prospectus is not an offer to sell or exchange these +
+securities and it is not soliciting an offer to buy or exchange these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 9, 2000
PRELIMINARY PROSPECTUS
EQUINIX, INC.
[LOGO OF EQUINIX, INC.]
Exchange Offer for
$200,000,000 of its
13% Senior Notes Due 2007
TERMS OF THE EXCHANGE OFFER:
- --It expires at 5:00 p.m., New York City time, on 2000, unless extended.
- --The terms of the exchange notes we will issue in the exchange offer are
substantially identical to those of the initial notes, except that transfer
restrictions and registration rights relating to the initial notes will not
apply to the exchange notes.
- --We will not receive any proceeds from the exchange offer.
- --The exchange notes are new securities and there is currently no established
market for them.
Before participating in this exchange offer please refer to the section in
this prospectus entitled "Risk Factors" commencing on page 9.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the notes to be distributed in the
exchange offer or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The date of this Prospectus is , 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................. 1
Risk Factors............................................................. 9
Forward-Looking Statements............................................... 17
Available Information.................................................... 17
Use of Proceeds.......................................................... 18
Change in Accountants.................................................... 18
Capitalization........................................................... 19
Selected Consolidated Financial Data..................................... 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
Business................................................................. 28
Management............................................................... 38
Related-Party Transactions............................................... 45
Principal Stockholders................................................... 47
Description of Other Indebtedness........................................ 49
The Exchange Offer....................................................... 52
Description of the Exchange Notes........................................ 61
Book-Entry; Delivery and Form............................................ 91
United States Federal Income Tax Considerations.......................... 94
Plan of Distribution..................................................... 99
Legal Matters............................................................ 99
Experts.................................................................. 99
Index to Consolidated Financial Statements............................... F-1
</TABLE>
This prospectus incorporates by reference important business and financial
information about Equinix which is not presented in this prospectus or
delivered to you with it. You may request, and we will send you, without
charge, copies of these documents, including any exhibits that are specifically
incorporated by reference in that information. Requests should be directed to:
Equinix, Inc.
901 Marshall Street
Redwood City, CA 94063
Attn: General Counsel
(650) 298-0400
To ensure timely delivery, please request delivery of the information no
later than five (5) business days before you must make your investment
decision. In order to ensure timely delivery of the materials prior to the
expiration of the exchange offer, any request should be made before ,
2000.
<PAGE>
SUMMARY
This summary may not contain all of the information that may be important to
you. You should read the entire prospectus, including the section entitled
"Risk Factors" beginning on page 9 and the financial data and related notes,
before deciding whether to tender your initial notes in the exchange offer.
The Company
Overview
Equinix designs, builds and operates neutral Internet Business Exchange
centers, or IBX centers, where Internet businesses place their equipment and
their network facilities in order to interconnect with each other to improve
Internet performance. Our neutral IBX centers provide content providers,
application service providers and e-commerce companies with the ability to
directly interconnect with a choice of bandwidth providers, or
telecommunications carriers, Internet service providers, and companies which
integrate and manage a customer's Web presence and performance, or site and
performance management companies, to grow their business. Equinix IBX centers
enable Internet companies to quickly, easily and privately interconnect with a
choice of business partners and customers, providing them with the flexibility,
speed and adaptability they need to accelerate business growth and to allow a
faster, more reliable Internet.
We intend to open approximately 15 IBX centers in major Internet markets in
the U.S. and internationally by the end of 2001. In late 1999, we opened our
first IBX Center in the Washington, D.C. metropolitan area. In December 1999
and March 2000, we opened IBX centers in the New York metropolitan area, and in
the Silicon Valley area in California.
We were founded in June 1998. In April 1999, our first customer contract was
signed and we began recognizing revenue in November 1999. We have not yet been
profitable and expect to incur significant additional losses.
Market Opportunity
Since the early 1990s, the Internet has experienced tremendous growth and is
emerging as a global medium for communications and commerce. This growth has
aggravated the inefficiencies of the current Internet architecture, which has
constrained businesses' abilities to effectively grow and manage their Internet
operations, and has led to new Internet infrastructure requirements. According
to Forrester Research, the U.S. market for Internet related colocation and
hosting will grow from $3.5 billion in the year 2000 to over $14 billion by
2003.
The Equinix Solution
Our IBX centers will provide environments that stimulate efficient business
growth. We are able to provide the following key benefits to our customers:
. choice of product and service providers;
. opportunity to increase revenues and reduce costs;
. physical scalability, or the ability to continue to function well along
with changes in size or volume, and scalability from the perspective of
an individual customer's ability to transact business; and
. reliability.
1
<PAGE>
Recent Developments
On May 2, 2000, our board approved, subject to stockholder consent, an
amendment to our 1998 Stock Plan increasing the aggregate number of common
stock available for issuance over the term of the Plan by 3,000,000 shares, to
a total of 15,012,810 shares. The financial statements and all share numbers
included in this prospectus have been adjusted to reflect this increase where
applicable.
On May 8, 2000, we issued 3,315,649 shares of our Series C preferred stock.
Equinix is located at 901 Marshall Street, Redwood City, California 94063.
Our phone number is (650) 298-0400.
2
<PAGE>
Summary of the Exchange Offer
Securities Offered.......... Up to $200 million principal amount of 13%
Senior Notes due 2007, which will be
registered under the Securities Act. The
terms of the exchange notes and the initial
notes are identical except for transfer
restrictions and registration rights
relating to the initial notes that will not
be applicable to the exchange notes.
Issuance of Initial Notes... The initial notes were issued on December
1, 1999 to Salomon Smith Barney Inc.,
Morgan Stanley & Co. Incorporated and
Goldman, Sachs & Co., who placed the
initial notes with qualified institutional
buyers and institutional accredited
investors, and to buyers in offshore
transactions in reliance on Regulation S
under the Securities Act.
The Exchange Offer.......... We are offering to exchange $1,000
principal amount of exchange notes for each
$1,000 principal amount of initial notes.
There are $200 million aggregate principal
amount of initial notes outstanding. The
issuance of the exchange notes is intended
to satisfy our obligations contained in the
registration rights agreement we entered
into with Salomon Smith Barney Inc., Morgan
Stanley & Co. Incorporated and Goldman,
Sachs & Co. in connection with the issuance
of the initial notes.
Conditions to the Exchange The exchange offer is not conditioned upon
Offer....................... any minimum principal amount of initial
notes being tendered for exchange. However,
the exchange offer is subject to customary
conditions, which may be waived by us. See
"The Exchange Offer--Conditions." Except
for the requirements of applicable federal
and state securities laws, there are no
federal or state regulatory requirements to
be complied with or obtained by us in
connection with the exchange offer.
Procedures for Tendering.... If you want to tender your initial notes in
the exchange offer, you must complete, sign
and date the letter of transmittal
according to the instructions contained in
this prospectus and the letter of
transmittal. You must then mail or fax the
letter of transmittal, together with any
other required documents, to the exchange
agent, either with the initial notes to be
tendered or in compliance with the
specified procedures for guaranteed
delivery of initial notes. You should allow
sufficient time to ensure timely delivery.
Some brokers, dealers, commercial banks,
trust companies and other nominees may also
effect tenders by book-entry transfer. If
you own initial notes registered in the
name of a broker, dealer, commercial bank,
trust company or other nominee, you are
urged to contact that person promptly if
you wish to tender initial notes in the
exchange offer. Letters of transmittal and
certificates representing the initial notes
should not be sent to Equinix.
3
<PAGE>
These documents should only be sent to the
exchange agent. Questions regarding how to
tender initial notes and requests for
information should also be directed to the
exchange agent. See "The Exchange Offer--
Procedures for Tendering Initial Notes."
Expiration Date; The exchange offer will expire at 5:00
Withdrawal.................. p.m., New York City time on , 2000. We
will accept for exchange any and all
initial notes that are validly tendered in
the exchange offer on or before 5:00 p.m.,
New York City time, on the expiration date.
The tender of initial notes may be
withdrawn at any time before the expiration
date. Any initial note not accepted for
exchange for any reason will be returned
without expense to the tendering holder as
promptly as practicable after the
expiration or termination of the exchange
offer. The exchange notes issued in the
exchange offer will be delivered promptly
following the expiration date. See "The
Exchange Offer--Expiration of the Exchange
Offer" and "--Withdrawal of Tenders."
Guaranteed Delivery If you wish to tender your initial notes
Procedures.................. and (1) your initial notes are not
immediately available or (2) you cannot
deliver your initial notes together with
the letter of transmittal to the exchange
agent before the expiration date, you may
tender your initial notes according to the
guaranteed delivery procedures contained in
the letter of transmittal. See "The
Exchange Offer--Guaranteed Delivery
Procedure."
Acceptance of Initial Notes
and Delivery of Exchange
Notes.......................
Upon effectiveness of the registration
statement of which this prospectus
constitutes a part and consummation of the
exchange offer, we will accept any and all
initial notes that are properly tendered in
the exchange offer on or before 5:00 p.m.,
New York City time, on the expiration date.
The exchange notes issued in the exchange
offer will be delivered promptly after
acceptance of the initial notes. See "The
Exchange Offer--Acceptance of Initial Notes
for Exchange; Delivery of Exchange Notes."
Tax Considerations.......... For U.S. federal income tax purposes, the
exchange of initial notes for exchange
notes should not be considered a sale or
exchange or otherwise a taxable event to
the holders of notes. See "United States
Federal Income Tax Considerations."
Use of Proceeds............. We will receive no proceeds from the
exchange offer.
Exchange Agent.............. State Street Bank and Trust Company of
California, N.A. is serving as exchange
agent in connection with the exchange
offer.
Fees and Expenses........... We will bear all expenses related to the
exchange offer. See "The Exchange Offer--
Fees and Expenses."
4
<PAGE>
Consequences of Not
Exchanging the Initial
Notes.......................
If you do not tender your initial notes or
your initial notes are not properly
tendered, the existing transfer
restrictions will continue to apply. The
initial notes are currently eligible for
sale under Rule 144A through the PORTAL
Market. Because we anticipate that most
holders will elect to exchange initial
notes for exchange notes due to the absence
of restrictions on the resale of exchange
notes under the Securities Act in most
cases, we anticipate that the liquidity of
the market for any initial notes remaining
after the consummation of the exchange
offer may be substantially limited. See
"Risk Factors--There could be negative
consequences to you if you do not exchange
your initial notes for exchange notes."
Summary Description of the Exchange Notes
The terms of the exchange notes and the initial notes are identical in all
respects, except that the terms of the exchange notes do not include the
transfer restrictions and registration rights relating to the initial notes.
The initial notes and the exchange notes are referred to collectively as the
notes.
The exchange notes will bear interest from the most recent date to which
interest has been paid on the initial notes. Initial notes accepted for
exchange will cease to accrue interest from and after the date of completion of
the exchange offer.
Maturity Date............... December 1, 2007.
Interest.................... The interest on the notes will be payable semi-
annually in arrears on each June 1 and December
1, commencing on June 1, 2000.
Interest Escrow............. We have deposited with the escrow agent an amount
of cash or U.S. government securities totaling
approximately $37.0 million that, together with
the proceeds from their investment, will be
sufficient to pay, when due, the first three
interest payments on the notes, with us retaining
any balance. The notes will be collateralized by
a first priority security interest in the escrow
account.
Sinking Fund................ None
Optional Redemption......... Generally, we may not redeem the notes before
December 1, 2003. On or after December 1, 2003,
we may redeem the notes, in whole or in part, at
any time, at the redemption prices set forth
under the section entitled "Description of the
Exchange Notes" together with accrued and unpaid
interest, if any, to the redemption date.
Change of Control........... Upon a "Change of Control" as defined under the
section entitled "Description of the Notes," you
as a holder of notes will have the right to
require us to repurchase all of your notes at a
repurchase
5
<PAGE>
price equal to 101% of the aggregate principal
amount of such notes, plus accrued and unpaid
interest, if any, through the date of repurchase.
Ranking.....................
Except for the noteholders' security interest in
the escrow account, the notes will be general
unsecured obligations and will rank without
preference with all of our other existing and
future senior unsecured indebtedness. The notes
will be effectively subordinated to all our
existing and future secured indebtedness to the
extent of the value of the assets that secure
such indebtedness. The notes will also be
subordinated to all of our subsidiaries' existing
or future indebtedness, whether or not secured.
At present, the notes are subordinated to $12.4
million of existing indebtedness.
Restrictive Covenants....... The indenture under which the notes will be
issued will limit:
. the incurrence of additional indebtedness or
preferred stock by us and our subsidiaries;
. the payment of dividends on, and repurchase or
redemption of, our capital stock and our
subsidiaries' capital stock and the repurchase
or redemption of our subordinated obligations;
. our making of investments;
. the selling of our assets or the stock of our
subsidiaries;
. transactions with our affiliates;
. the incurrence of additional liens;
. our ability to permit restrictions to exist on
the ability of our subsidiaries to pay
dividends or make payments to us; and
. our ability to engage in consolidations,
mergers and transfers of all or substantially
all of our assets.
All of these limitations and prohibitions will be
subject to a number of important qualifications
and exceptions. See "Description of the Exchange
Notes."
Exchange Rights............. Holders of the exchange notes will not be
entitled to any exchange or registration rights
relating to the exchange notes. Holders of the
initial notes are entitled to certain exchange
rights under the registration rights agreement
entered into concurrently with the initial
offering between us and Salomon Smith Barney
Inc., Morgan Stanley & Co. Incorporated and
Goldman, Sachs & Co. This exchange offer is
intended to satisfy our obligations under the
registration rights agreement. Once the exchange
offer is consummated, we will have no further
obligations to register any of the initial notes
not tendered by the holders for exchange. See
"Risk Factors--There could be negative
consequences to you if you do not exchange your
initial notes for exchange notes."
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following summary consolidated financial data should be read in
conjunction with our consolidated financial statements and their related notes
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this registration statement. The consolidated
statement of operations data for the period from June 22, 1998 (inception) to
December 31, 1998 and for the year ended December 31, 1999 are derived from,
and are qualified by reference to, the audited consolidated financial
statements and their related notes, which are included in this registration
statement. The consolidated statement of operations data for the three months
ended March 31, 1999 and 2000 and the balance sheet data as of March 31, 2000
are derived from our unaudited condensed interim consolidated financial
statements and their related notes included in this registration statement. The
pro forma column gives effect to the issuance of Series C preferred stock on
May 8, 2000.
<TABLE>
<CAPTION>
Three Months
Period from June 22, Ended March 31,
1998 (inception) to Year Ended -----------------
December 31, 1998 December 31, 1999 1999 2000
-------------------- ----------------- ------- --------
Statement of
Operations Data: (in
thousands) (unaudited)
<S> <C> <C> <C> <C>
Revenues............ $ -- 37 -- 136
Costs and operating
expenses:
Cost of revenues
(includes stock-
based compensation
of none and $177
for the periods
ended December 31,
1998 and 1999,
respectively, and
none and $106 for
the three months
ended March 31,
1999 and 2000,
respectively)...... -- 3,136 43 2,336
Sales and marketing
(includes stock-
based compensation
of $13 and $1,631
for the periods
ended December 31,
1998 and 1999,
respectively, and
$29 and $1,359 for
the three months
ended March 31,
1999 and 2000,
respectively)...... 47 3,949 144 4,516
General and
administrative
(includes stock-
based compensation
of $151 and $4,819
for the periods
ended December 31,
1998 and 1999,
respectively, and
$347 and $2,018 for
the three months
ended March 31,
1999 and 2000,
respectively)...... 899 12,126 1,181 5,603
Depreciation and
amortization....... 4 609 51 1,636
------- ------- ------- --------
Total costs and
operating
expenses........... (950) 19,820 1,419 14,091
------- ------- ------- --------
Loss from
operations......... (950) (19,783) (1,419) (13,955)
Interest expense.... -- 3,146 32 7,716
Interest income..... (150) (2,138) (106) (3,662)
Interest charge on
beneficial
conversion of
convertible debt... 220 -- -- --
------- ------- ------- --------
Net loss............ $(1,020) (20,791) (1,345) (18,009)
======= ======= ======= ========
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
As of December 31, As of March 31, 2000
-------------------- ----------------------
1998 1999 Actual Pro Forma
--------- --------- ---------- ----------
Balance Sheet
Data: (in thousands) (unaudited)
<S> <C> <C> <C> <C>
Cash, cash equivalents and
short-term investments......... $ 9,165 222,974 193,619 243,619
Accounts receivable............. -- 178 285 285
Restricted cash and short-term
investments.................... -- 38,609 41,053 41,053
Property and equipment, net..... 482 31,932 53,350 53,350
Construction in progress........ 31 14,824 32,135 32,135
Total assets.................... 10,001 319,946 331,979 381,979
Debt facilities and capital
lease obligations, excluding
current portion................ -- 8,808 7,863 7,863
Senior notes.................... -- 183,955 184,441 184,441
Total stockholders' equity...... 9,590 105,699 96,224 146,224
Other Financial Data:
EBITDA(1)....................... $ (946) (19,174) (12,319) (12,319)
Net cash used in operating
activities..................... (796) (9,908) (4,176) (4,176)
Net cash used in investing
activities..................... (5,265) (66,461) (30,751) (30,751)
Net cash provided by (used in)
financing activities........... 10,226 295,178 (371) 49,629
Ratio of earnings to fixed
charges(2)..................... -- -- -- --
</TABLE>
- --------
(1) EBITDA consists of the net loss excluding interest, income taxes,
depreciation and amortization of capital assets. EBITDA is presented to
enhance an understanding of our operating results and is not intended to
represent cash flow or results of operations in accordance with generally
accepted accounting principles for the period indicated and may be
calculated differently than EBITDA for other companies. EBITDA is not a
measure determined under generally accepted accounting principles nor is it
a measure of liquidity.
(2) In calculating the ratio of earnings to fixed charges, earnings consist of
net loss before income tax expense and fixed charges. Fixed charges consist
of interest expense, capitalized interest, amortized discounts and
capitalized expenses related to indebtedness and an estimate of the
interest within rental expense. The ratio of earnings to fixed charges was
less than 1.0 to 1.0 for each of the periods presented. Earnings available
for fixed charges were thus inadequate to cover fixed charges. The coverage
deficiency for the period from June 22, 1998 (inception) to December 31,
1998, the year ended December 31, 1999 and the three months ended March 31,
1999 and 2000 was $1,019,700, $20,790,600, $1,344,900 and $18,008,800,
respectively.
8
<PAGE>
RISK FACTORS
You should carefully consider the information set forth under the caption
"Risk Factors" and all other information in this prospectus before tendering
your initial notes in the exchange offer, including information in the section
of this prospectus entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Special Note Regarding Forward-Looking
Statements."
Risks Related to Our Business
Our business model is new and unproven and we may not succeed in generating
sufficient revenue to sustain or grow our business.
We were founded in June 1998. Except for fiber connectivity from our
telecommunication carriers, the construction of our first IBX center was
completed in July 1999. We began accepting customers the same month but did not
recognize any revenue until November 1999 as the sales cycle was not complete.
Our limited history and lack of meaningful financial or operating data makes
evaluating our business operations difficult. Moreover, the neutrality aspect
of our business model is unique and largely unproven. We expect that we will
encounter challenges and difficulties frequently experienced by early-stage
companies in new and rapidly evolving markets, such as our ability to generate
cash flow, hire and train sufficient operational and technical talent, and
implement our plan with minimal delays. We may not successfully address any or
all of these challenges and the failure to do so would seriously harm our
business plan and operating results, and affect our ability to raise additional
funds.
We have a history of losses, and we expect our operating expenses and losses to
increase significantly.
As an early-stage company without recognized revenues, we have experienced
operating losses since inception. As of March 31, 2000, we had cumulative net
losses of $39.8 million and cumulative cash used by operating activities of
$14.9 million since inception. We expect to incur significant losses in the
future. In addition, as we commence operations, our losses will increase as we:
. increase the number of IBX centers;
. increase our sales and marketing activities, including expanding our
direct sales force; and
. enlarge our customer support and professional services organizations.
As a result, we must significantly increase our revenues to become
profitable.
Because our ability to generate enough revenues to achieve profitability
depends on numerous factors, we may not become profitable.
Our IBX centers may not generate sufficient revenue to achieve
profitability. Our ability to generate sufficient revenues to achieve
profitability will depend on a number of factors, including:
. the timely completion of our IBX centers;
. demand for space and services at our IBX centers;
. our pricing policies and the pricing policies of our competitors;
. the timing of customer installations and related payments;
. competition in our markets;
. the timing and magnitude of our expenditures for sales and marketing;
. direct costs relating to the expansion of our operations;
. growth of Internet use;
. economic conditions specific to the Internet industry; and
. general economic factors.
9
<PAGE>
We are substantially leveraged and we may not generate sufficient cash flow to
meet our debt service and working capital requirements.
We are highly leveraged since the issuance of the initial notes. We have
total indebtedness of $213.7 million. Our highly leveraged position could have
important consequences, including:
. impairing our ability to obtain additional financing for working
capital, capital expenditures, acquisitions or general corporate
purposes;
. requiring us to dedicate a substantial portion of our operating cash
flow to paying principal and interest on our indebtedness, thereby
reducing the funds available for operations;
. limiting our ability to grow and make capital expenditures due to the
financial covenants contained in our debt arrangements;
. impairing our ability to adjust rapidly to changing market conditions,
invest in new or developing technologies, or take advantage of
significant business opportunities that may arise; and
. making us more vulnerable if a general economic downturn occurs or if
our business experiences difficulties.
In the past, we have experienced unforeseen delays in connection with our
IBX construction activities. We will need to successfully implement our current
rollout schedule and our business strategy to meet our debt service and working
capital needs. We may not successfully implement our business strategy, and
even if we do, we may not realize the anticipated results of our strategy or
generate sufficient operating cash flow to meet our debt service obligations
and working capital needs.
In the event our cash flow is inadequate to meet our obligations, we could
face substantial liquidity problems. If we are unable to generate sufficient
cash flow or otherwise obtain funds needed to make required payments under our
indebtedness, or if we breach any covenants under our indebtedness, we would be
in default under its terms and the holders of such indebtedness may be able to
accelerate the maturity of such indebtedness, which could cause defaults under
our other indebtedness.
If we do not obtain significant additional funds, we may not be able to
complete our rollout plan on a timely basis, or at all.
We currently intend to pursue a rollout strategy of approximately 15 IBX
centers in major Internet markets in the United States and internationally by
the end of 2001. We intend to finance the construction of these IBX centers
through our internal cash flow and approximately $750.0 million of additional
financing. If we cannot raise sufficient additional funds on acceptable terms
we may delay the rollout of additional IBX centers or permanently reduce our
rollout plans. We currently have $193.6 million in cash, cash equivalents and
short-term investments available to us. We anticipate that these funds will be
sufficient to fund the capital expenditure and working capital requirements,
including operating losses associated with the initial rollout of seven IBX
centers and expansion projects within two of those IBX centers. To complete the
implementation of our approximately 30 site rollout plan within our proposed
time frame we anticipate that we will need to raise funds through additional
debt or equity financing. In the past, we have had difficulties obtaining debt
financing due to the early stage of our company. Financing may not be available
to us at the time we seek to raise additional funds, or if such financing is
available, it may only be available on terms, or in amounts, which are
unfavorable to us.
The anticipated timing and amount of our capital requirements is forward-
looking and therefore inherently uncertain. In the past, we have experienced
unforeseen delays and expenses in connection with our IBX construction
activities. Our future capital requirements may vary significantly from what we
currently project and the timing of our rollout plan may be affected by
unforeseen construction delays and expenses and the amount of time it takes us
to lease space within our IBX centers. If we encounter any of these problems or
if we have underestimated our capital expenditure requirements or the operating
losses or working capital requirements, we may require significantly more
financing than we currently anticipate.
10
<PAGE>
Our rollout plan is preliminary and we may need to alter our plan and
reallocate funds.
Our IBX center rollout plan is preliminary and has been developed from our
current market data and research, projections and assumptions. We expect to
continually reevaluate our business and rollout plan in light of evolving
competitive and market conditions, and as a result, we may alter our IBX center
rollout and reallocate funds, or eliminate segments of our plan entirely if
there are:
. changes or inaccuracies in our market data and research, projections or
assumptions;
. unexpected results of operations or strategies in our target markets;
. regulatory, technological, and competitive developments, including
additional market developments and new opportunities; or
. changes in, or discoveries of, specific market conditions or factors
favoring expedited development in other markets.
If not properly managed, our growth and expansion could significantly harm our
business and operating results.
Our anticipated growth may significantly strain our resources as a result of
an increase in the number of our employees, the number of operating IBX centers
and our international expansion. Any failure to manage growth effectively could
seriously harm our business and operating results. To succeed, we will need to:
. hire and train new employees and qualified engineering personnel at each
IBX center;
. implement additional management information systems;
. locate additional office space for our corporate headquarters;
. improve our operating, administrative, financial and accounting systems
and controls; and
. maintain close coordination among our executive, engineering, accounting,
finance, marketing, sales and operations organizations.
We face risks associated with international operations that could harm our
business.
We intend to construct IBX centers outside of the United States and we will
commit significant resources to our international sales and marketing
activities. Our management has limited experience conducting business outside
of the United States and we may not be aware of all the factors that affect our
business in foreign jurisdictions. We will be subject to a number of risks
associated with international business activities that may increase our costs,
lengthen our sales cycles and require significant management attention. These
risks include:
. increased costs and expenses related to the leasing of foreign centers;
. difficulty or increased costs of constructing IBX centers in foreign
countries;
. difficulty in staffing and managing foreign operations;
. increased expenses associated with marketing services in foreign
countries;
. business practices that favor local competition and protectionist laws;
. difficulties associated with enforcing agreements through foreign legal
systems;
. general economic and political conditions in international markets;
. potentially adverse tax consequences, including complications and
restrictions on the repatriation of earnings;
. currency exchange rate fluctuations;
. unusual or burdensome regulatory requirements or unexpected changes to
those requirements;
11
<PAGE>
. tariffs, export controls and other trade barriers; and
. longer accounts receivable payment cycles and difficulties in collecting
accounts receivable.
To the extent that our operations are incompatible with, or not economically
viable within, any given foreign market, we may not be able to locate an IBX
center in that particular foreign jurisdiction.
We depend on third parties to provide high frequency Internet connectivity to
our IBX facilities; if connectivity is not established or is delayed, our
operating results and cash flow will be adversely affected.
The presence of diverse Internet fiber from communications carriers' fiber
networks to an Equinix IBX center is critical to our ability to attract new
customers. We believe that the availability of such carrier capacity will
directly affect our ability to achieve our projected results.
We are not a communications carrier, and as such rely on third parties to
provide our customers with carrier facilities. We intend to rely primarily on
revenue opportunities from our customers to encourage carriers to incur the
expenses required to build facilities from their points of presence to our IBX
centers. Carriers will likely evaluate the revenue opportunity of an IBX center
based on the assumption that the environment will be highly competitive. There
can be no assurance that, after conducting such an evaluation, any carrier will
elect to offer its services within our IBX centers.
The construction required to connect multiple carrier facilities to our IBX
centers is complex and involves factors outside of our control, including
regulatory processes and the availability of construction resources. For
example, in the past carriers have experienced delays in connecting to our
facilities. If the establishment of highly diverse Internet connectivity to our
IBX centers does not occur or is materially delayed, our operating results and
cash flow will be adversely affected.
Our new management team must prove that it can work together effectively.
We have recently hired many key personnel, including our chief financial
officer, vice president of operations, vice president of worldwide sales,
director of business development, vice president of marketing, vice president
of IBX development and general counsel. As a result, our management team has
worked together for only a brief time. Our ability to effectively execute our
strategies will depend in part upon our ability to integrate our current and
future managers into our operations. If our executives are unable to operate
together effectively, our business, results of operations and financial
condition will be materially adversely affected.
We must retain and attract key personnel to maintain and grow our business.
We require the services of additional management personnel in positions
related to our growth. For example, we need to expand our marketing and direct
sales operations to increase market awareness of our IBX facilities, market our
services to a greater number of enterprises and generate increased revenues. As
a result, we plan to hire additional personnel in related capacities. Our
success depends on our ability to identify, hire, integrate and retain
additional qualified management personnel, particularly in areas related to our
anticipated growth and geographic expansion.
We may not be successful in attracting, assimilating or retaining qualified
personnel. In addition, due to generally tight labor markets, our industry, in
particular, suffers from a lack of available qualified personnel. Moreover,
none of our present senior management or other key personnel is bound by an
employment agreement. If we lose one or more of our key employees, we may not
be able to find a replacement and our business and operating results could be
adversely affected.
We will operate in a new highly competitive market and we may be unable to
compete successfully against new entrants and established companies with
greater resources.
In a market that we believe will likely have an increasing number of
competitors, we must be able to differentiate ourself from existing providers
of space for telecommunications equipment and web hosting
12
<PAGE>
companies. We may also face competition from persons seeking to replicate our
IBX concept. Our competitors may operate more successfully than us or form
alliances to acquire significant market share. Furthermore, enterprises that
have already invested substantial resources in peering arrangements may be
reluctant or slow to adopt our approach that may replace, limit or compete with
their existing systems. If we are unable to complete our IBX centers in a
timely manner, other companies may be able to attract the same customers that
we are targeting. Once the customers are located in our competitors'
facilities, it will be extremely difficult to convince them to relocate to our
IBX centers.
Some of our potential competitors have longer operating histories and
significantly greater financial, technical, marketing and other resources than
we do. Because of their greater financial resources, some of these companies
have the ability to adopt aggressive pricing policies. As a result, in the
future, we may suffer from pricing pressure which would adversely affect our
ability to generate revenues and affect our operating results. See "Business--
Competition."
Any failure of our physical infrastructure or services could lead to
significant costs and disruptions which could reduce our revenue and harm our
business reputation and financial results.
Our business depends on providing our customers with highly reliable
service. The services we provide are subject to failure resulting from numerous
factors, including:
. human error;
. physical or electronic security breaches;
. fire, earthquake, flood and other natural disasters;
. power loss; and
. sabotage and vandalism.
Problems at one or more of our centers, whether or not within our control,
could result in service interruptions or significant equipment damage. Any loss
of services, particularly in the early stage of our development, could reduce
the confidence of our customers and could consequently impair our ability to
obtain and retain customers which would adversely affect our ability to
generate revenues and affect our operating results.
We may still discover that our computer systems and those of third parties with
whom we do business may not be year 2000 compliant, which may cause system
failure and disruptions of operations.
As of May 9, 2000, we had not experienced any year 2000-related disruption
in the operation of our systems. However, we cannot assure you that we will not
discover any year 2000 compliance problems. Our failure to fix or replace our
software, hardware or services on a timely basis could result in lost revenues,
increased operating costs and the loss of customers and other business
interruptions, any of which could have a material adverse effect on our
business. Moreover, the failure to adequately address year 2000 compliance
issues in our information technology systems could result in claims of
mismanagement, misrepresentation or breach of contract and related litigation,
which could be costly and time-consuming to defend.
In addition, we have not experienced any year 2000-related disruption in the
systems of third parties with whom we do business and we have assurances from
our material hardware and software vendors that their products are year 2000
compliant. Although we have not incurred any material expenditure in connection
with identifying or evaluating year 2000 compliance issues to date, we do not
at this time possess the information necessary to estimate the potential costs
of revisions or replacements to our software and systems or third-party
software, hardware or services that are determined not to be year 2000
compliant. Such expenses could have a material adverse effect on our business.
13
<PAGE>
Because we depend on the development and growth of a balanced customer base,
failure to attract this base could harm our business and operating results.
Our ability to maximize revenues depends on our ability to develop and grow
a balanced customer base as we roll out our IBX centers. Our ability to attract
customers to our IBX centers will depend on a variety of factors, including the
presence of multiple carriers, the overall mix of our customers, our operating
reliability and security and our ability to effectively market our services.
Construction delays, our inability to find suitable locations to build
additional IBX centers, equipment and material shortages or our inability to
obtain necessary permits on a timely basis could delay our IBX center rollout
schedule and prevent us from developing our anticipated customer base.
A customer's decision to lease cabinet space in our IBX centers typically
involves a significant commitment of resources and will be influenced by, among
other things, the customer's confidence that other Internet and e-commerce
related businesses will be located in a particular IBX center. In particular,
some customers will be reluctant to commit to locating in our IBX centers until
they are confident that the IBX center has adequate carrier connections.
In addition, some of our customers will be Internet companies that face many
competitive pressures and that may not ultimately be successful. If these
customers do not succeed, they will not continue to use our IBX facilities.
This may be disruptive to our business and may adversely affect our operating
results.
Risks Related to Our Industry
If use of the Internet and electronic business does not continue to grow, a
viable market for our IBX centers may not develop.
Rapid growth in the use of and interest in the Internet has occurred only
recently. Acceptance and use may not continue to develop at historical rates
and a sufficiently broad base of consumers may not adopt or continue to use the
Internet and other online services as a medium of commerce. Demand and market
acceptance for recently introduced Internet services and products are subject
to a high level of uncertainty and there are few proven services and products.
As a result, we cannot be certain that a viable market for our IBX centers will
emerge or be sustainable.
We must respond to rapid technological change and evolving industry standards
in order to meet the needs of our customers.
The market for IBX centers will be marked by rapid technological change,
frequent enhancements, changes in customer demands and evolving industry
standards. Our success will depend, in part, on our ability to address the
increasingly sophisticated and varied needs of our current and prospective
customers. Our failure to adopt and implement the latest technology in our
business could negatively affect our business and operating results.
In addition, we have made and will continue to make assumptions about the
standards that may be adopted by our customers and competitors. If the
standards adopted differ from those on which we have based anticipated market
acceptance of our services or products, our existing services could become
obsolete. This would have a material adverse effect on our businesses.
Government regulation may adversely effect the use of the Internet and our
business.
Laws and regulations governing Internet services, related communications
services and information technologies, and electronic commerce are beginning to
emerge but remain largely unsettled, even in areas where there has been some
legislative action. It may take years to determine whether and how existing
laws,
14
<PAGE>
such as those governing intellectual property, privacy, libel,
telecommunications, and taxation, apply to the Internet and related services
such as ours. In addition, the development of the market for online commerce
and the displacement of traditional telephony services by the Internet and
related communications services may prompt increased calls for more stringent
consumer protection laws or other regulation, both in the United States and
abroad, that may impose additional burdens on companies conducting business
online and their service providers. The adoption or modification of laws or
regulations relating to the Internet, or interpretations of existing law, could
have a material adverse effect on our business.
Risks Related to the Exchange Offer
There could be negative consequences to you if you do not exchange your initial
notes for exchange notes.
Following the consummation of the exchange offer, holders who did not tender
their initial notes generally will not have any further rights under the
registration rights agreement and these initial notes will continue to be
subject to restrictions on transfer. As a result of making the exchange offer,
we will have fulfilled our obligations under the registration rights agreement.
Holders who do not tender their initial notes generally will not have any
further registration rights or rights to receive the liquidated damages
specified in the registration rights agreement for our failure to register the
exchange notes. In addition, the initial notes that are not exchanged for
exchange notes will remain restricted securities. Accordingly, the initial
notes may be resold only:
. to Equinix or one of its subsidiaries;
. to a qualified institutional buyer;
. to an institutional accredited investor;
. to a party outside the United States under Regulation S under the
Securities Act;
. under an exemption from registration provided by Rule 144 under the
Securities Act; or
. under an effective registration statement.
The issuance of the exchange notes may adversely affect the market for the
initial notes.
Following commencement of the exchange offer, you may continue to trade the
initial notes on the Private Offerings, Resales and Trading through Automated
Linkages, or PORTAL, market. However, if initial notes are tendered for
exchange and accepted in the exchange offer, the trading market for untendered
and tendered but unaccepted initial notes could be adversely affected. Any
initial notes tendered and exchanged in the exchange offer will reduce the
aggregate principal amount of initial notes outstanding. Because we anticipate
that most holders will elect to exchange their initial notes for exchange notes
due to the absence of most restrictions on the resale of exchange notes, we
anticipate that the liquidity of the market for any initial notes remaining
outstanding after the exchange offer may be substantially limited.
You may find it difficult to sell your exchange notes.
The exchange notes will be registered under the Securities Act but will not
be eligible for trading on the PORTAL market. The exchange notes will
constitute a new issue of securities with no established trading market, and
there can be no assurance as to:
. the development of any market for the exchange notes;
. the liquidity of any market for the exchange notes that may develop;
. your ability to sell your exchange notes; or
. the price at which you would be able to sell your exchange notes.
We have been advised by the initial purchasers for the initial notes that
they presently intend to make a market in the exchange notes. However, they are
not obligated to do so and may discontinue any market-
15
<PAGE>
making activity relating to the exchange notes at any time without notice. If a
market for the exchange notes were to exist, the exchange notes could trade at
prices that may be higher or lower than their principal amount or purchase
price, depending on many factors, including prevailing interest rates, the
market for similar debentures and our financial performance. Historically, the
market for non-investment grade debt has been subject to disruptions that have
caused substantial volatility in the prices of securities similar to the
exchange notes. We cannot assure you that the market for the exchange notes, if
any, will not be subject to similar disruptions.
Some people who participate in the exchange offer must deliver a prospectus in
connection with resales of the exchange notes.
Based on certain no-action letters issued by the staff of the Securities and
Exchange Commission, we believe that you may offer for resale, resell or
otherwise transfer the exchange notes without compliance with the registration
and prospectus delivery requirements of the Securities Act. However, in some
instances, you will remain obligated to comply with the registration and
prospectus delivery requirements of the Securities Act to transfer your
exchange notes. In these cases, if you transfer any exchange note without
delivering a prospectus meeting the requirements of the Securities Act or
without an exemption from registration of your exchange notes under this Act,
you may incur liability under the Securities Act. We do not and will not assume
or indemnify you against this liability. See "The Exchange Offer."
Risks Related to the Exchange Notes
The exchange notes are unsecured and effectively rank behind our secured
indebtedness.
The exchange notes will be general unsecured senior obligations and will
rank equally in right of payment with all our existing and future senior
indebtedness. The exchange notes will be effectively subordinated to all of our
secured indebtedness to the extent of the value of the assets securing such
indebtedness. All of the obligations under our current credit facilities are
either secured by all of the assets of Equinix-DC, Inc. or the assets purchased
from the proceeds of specific indebtedness. We anticipate that all of the
obligations under our future credit facilities will be secured. In a
bankruptcy, liquidation or reorganization of our company, our assets securing
other indebtedness will be available to pay obligations on the exchange notes
only after all indebtedness secured by such assets has been paid in full, at
which point there may not be sufficient proceeds remaining to pay amounts due
on the exchange notes then outstanding.
Management discretion relating to certain business matters will be limited by
restrictive covenants contained in our indebtedness.
Our credit facilities contain, and the indenture governing the exchange
notes contains, a number of restrictive covenants that will limit the
discretion of our management relating to certain business matters. We expect
that our future indebtedness will also contain similar restrictive covenants.
These covenants, among other things, will restrict our ability to incur
additional indebtedness, pay dividends and make other distributions, prepay
subordinated indebtedness, make investments and other restricted payments,
engage in mergers and consolidations, create liens, sell assets, and enter into
certain transactions with affiliates. There can be no assurance that such
covenants will not adversely affect our ability to finance our future
operations or capital needs or to engage in other business activities which may
be in the interests of our company.
We may not have sufficient funds to purchase the exchange notes as required
upon a change of control.
The indenture governing the exchange notes contains provisions relating to
certain events constituting a change in control of Equinix. Upon the occurrence
of such a change in control, we will be required to make an offer to purchase
all outstanding exchange notes at a purchase price equal to 101% of their
aggregate principal amount, in addition to the accrued and unpaid interest, if
any, up to the purchase date. We cannot assure you that we would have
sufficient funds to pay the purchase price for exchange notes tendered by
holders seeking to accept such an offer to purchase. Our failure to purchase
all exchange notes validly tendered under such an offer to purchase would
result in an event of default under the indenture.
16
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements relate
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology--for instance, may, will,
should, expect, plan, anticipate, believe, estimate, predict, potential or
continue, the negative of these terms or other comparable terminology. These
statements are only predictions. Actual events or results may differ
materially. In evaluating these statements, you should specifically consider
various factors, including the risks outlined in the Risk Factors section.
These factors may cause our actual results to differ materially from any
forward-looking statement.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of the forward-
looking statements. We are under no duty to amend this prospectus to update any
of the forward-looking statements after the date of this prospectus to conform
these statements to actual results or to changes in our expectations. However,
we will be subject to the reporting requirements of the Securities Exchange Act
of 1934, and as a result will file periodic current reports with the Securities
and Exchange Commission that will report all material changes to our business
as well as include material information to revise or correct any misleading
statements.
AVAILABLE INFORMATION
We have filed a registration statement on Form S-4 with the Securities and
Exchange Commission covering the exchange notes, and this prospectus is part of
our registration statement. For further information on Equinix and the exchange
notes, you should refer to our registration statement and its exhibits. This
prospectus summarizes material provisions of contracts and other documents that
we refer you to. Since the prospectus may not contain all the information that
you may find important, you should review the full text of these documents. We
have included copies of these documents as exhibits to our registration
statement.
In addition, the indenture requires that we file reports under the
Securities Exchange Act of 1934 with the Securities and Exchange Commission and
provide those reports to the trustee and holders of the notes. You can inspect
and copy at prescribed rates the reports and other information that we file
with the Securities and Exchange Commission at the public reference facilities
maintained by the Securities and Exchange Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and also at the regional
offices of the Securities and Exchange Commission located at 7 World Trade
Center, Suite 1300, New York, New York 10048 and the Citicorp Center at 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You may obtain
information on the operation of the public reference facilities by calling the
Securities and Exchange Commission at 1-800-SEC-0330. The Securities and
Exchange Commission also maintains an internet web site at http://www.sec.gov
that contains reports, proxy and information statements and other information.
You can also obtain copies of such materials from us upon request.
We have agreed that, whether or not we are required to do so by the rules
and regulations of the Securities and Exchange Commission, for so long as any
of the exchange notes remain outstanding, we will furnish you as a holder of
the exchange notes and will, if permitted, file with the Securities and
Exchange Commission (1) all quarterly and annual financial information that
would be required to be contained in a filing with the Securities and Exchange
Commission on Forms 10-Q and 10-K if we were required to file such forms,
including a "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, relating to the annual information only, a report
thereon by our independent accountants, and (2) all reports that would be
required to be filed with the Securities and Exchange Commission on Form 8-K if
we were required to file such reports. In addition, for so long as any of the
exchange notes remain outstanding, we have agreed to make available to any
prospective purchaser of the exchange notes or beneficial owner of the notes in
connection with any sale of these notes the information required by Rule 144A
under the Securities Act.
17
<PAGE>
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the exchange
notes in exchange for the outstanding initial notes. The exchange offer is
intended solely to satisfy certain of our obligations under the registration
rights agreement. In consideration for issuing the exchange notes, we will
receive initial notes in like aggregate principal amount.
The net proceeds to us from the original issuance of the initial notes,
after deducting discounts, commissions, expenses and restricted cash were
approximately $156.4 million. We invested approximately $37.0 million of the
net proceeds in a portfolio of U.S. government securities, which were then
pledged as security for the payment in full of interest on the initial notes
through June 1, 2001. We intend to use the balance of such net proceeds for the
buildout of our IBX centers in the United States and abroad and for other
capital expenditures, working capital and general corporate purposes. In
addition, although we do not currently have any acquisitions contemplated or
pending, in the future we may use a portion of the proceeds for the acquisition
of businesses or assets. We currently intend to allocate substantial proceeds
to each of these uses. However, the precise allocation of funds among these
uses will depend on future technological, regulatory and other developments in
or affecting our business, the competitive climate in which we operate and the
emergence of future opportunities.
We have invested such proceeds in U.S. government securities or other short-
term, interest bearing, investment grade securities. We are not currently and
do not expect as a result to become subject to the registration requirements of
the Investment Company Act of 1940, as amended. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
CHANGE IN ACCOUNTANTS
On March 7, 2000, KPMG LLP resigned as our independent auditors and we
subsequently appointed PricewaterhouseCoopers LLP as our principal accountants
on March 21, 2000. There were no disagreements with the former accountants
during the fiscal years ended December 31, 1998 and 1999 or during any
subsequent interim period preceding their replacement on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedures, which disagreements, if not resolved to the former
accountants' satisfaction, would have caused them to make reference to the
subject matter of the disagreement in connection with their reports. The former
independent auditors issued an unqualified report on the financial statements
as of December 31, 1999 and 1998 and for the year ended December 31, 1999 and
the period from June 22, 1998 (inception) to December 31, 1998. We did not
consult with PricewaterhouseCoopers LLP on any accounting or financial
reporting matters in the periods prior to their appointment. The change in
accountants was approved by our board of directors.
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<PAGE>
CAPITALIZATION
The following unaudited table sets forth our capitalization as of March 31,
2000:
. on an actual basis; and
. pro forma to give effect to the issuance of Series C preferred stock on
May 8, 2000.
Please read the capitalization table together with the sections of this
registration statement entitled "Selected Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements included in this registration
statement.
<TABLE>
<CAPTION>
March 31, 2000
-----------------
Pro
Actual Forma
-------- -------
(in thousands
except share
data)
<S> <C> <C>
Cash, cash equivalents and short-term investments .......... $193,619 243,619
======== =======
Restricted cash and short-term investments(1)............... $ 41,053 41,053
======== =======
Current portion of debt facilities and capital lease
obligations................................................ $ 4,144 4,144
======== =======
Long-term debt, net of current portion:
Debt facilities and capital lease obligations............. $ 7,863 7,863
13% Senior Notes due 2007................................. 184,441 184,441
-------- -------
Total long-term debt.................................... 192,304 192,304
-------- -------
Stockholders' equity:
Series A convertible preferred stock, $0.001 par value;
32,000,000 and 20,000,000 shares authorized actual and
pro forma, respectively; 18,682,500 shares issued and
outstanding actual and pro forma (2)..................... 19 19
Series B convertible preferred stock, $0.001 par value;
36,000,000 and 16,000,000 shares authorized actual and
pro forma, respectively; 15,762,373 shares issued and
outstanding actual and pro forma......................... 16 16
Series C convertible preferred stock, $0.001 par value; no
shares authorized actual, 5,000,000 shares authorized pro
forma; no shares issued and outstanding actual and
3,315,649 issued and outstanding pro forma............... -- 3
Common stock, $0.001 par value; 132,000,000 and 80,000,000
shares authorized actual and pro forma, respectively;
12,540,006 shares issued and outstanding actual and pro
forma(3)................................................. 12 12
Additional paid-in capital................................ 151,142 201,139
Deferred stock-based compensation......................... (15,119) (15,119)
Accumulated other comprehensive loss...................... (27) (27)
Accumulated deficit....................................... (39,819) (39,819)
-------- -------
Total stockholders' equity.............................. 96,224 146,224
-------- -------
Total capitalization.................................. $288,528 338,528
======== =======
</TABLE>
- --------
(1) Reflects the portion of the net proceeds from the 13% Senior Notes used to
purchase a portfolio of U.S. government securities to fund the first three
scheduled interest payments on the notes, plus accrued interest and
restricted cash of $3,451,200, plus accrued interest provided as collateral
under four separate security agreements for standby letters of credit and
an escrow account entered into and in accordance with certain lease
agreements.
(2) Excludes 1,245,000 shares of Series A preferred stock issuable upon the
exercise of outstanding warrants.
(3) Excludes 4,422,745 shares of common stock issuable upon the exercise of
outstanding warrants and 2,956,565 shares of common stock issuable upon
the exercise of outstanding options as of March 31, 2000.
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following statement of operations data for the periods from our
inception on June 22, 1998 to December 31, 1998, and for the year ended
December 31, 1999, and the balance sheet data as of December 31, 1998 and 1999
have been derived from our audited consolidated financial statements and the
related notes to the financial statements. The statement of operations data for
the three months ended March 31, 1999 and 2000 and balance sheet data as of
March 31, 2000 were derived from our unaudited condensed interim consolidated
financial statements included elsewhere in this registration statement, which
in the opinion of management, include all adjustments, consisting only of
normal recurring adjustments, which we consider necessary for a fair
presentation of our financial position and results of operations for this
period. Our historical results are not necessarily indicative of the results to
be expected for the full year or future periods. Our historical results are not
necessarily indicative of the results to be expected for future periods. The
pro forma column gives effect to the issuance of Series C preferred stock on
May 8, 2000. The following selected financial data should be read in
conjunction with our consolidated financial statements and the related notes to
the consolidated financial statements and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
registration statement.
<TABLE>
<CAPTION>
Three Months
Period from June 22, Ended March 31,
1998 (inception) to Year Ended -----------------
December 31, 1998 December 31, 1999 1999 2000
-------------------- ----------------- ------- --------
(unaudited)
Statement of Operations
Data: (in thousands)
<S> <C> <C> <C> <C>
Revenues................ $ -- 37 -- 136
Costs and operating
expenses:
Cost of revenues
(includes stock-based
compensation of none
and $177 for the
periods ended December
31, 1998 and 1999,
respectively, and none
and $106 for the three
months ended March 31,
1999 and 2000,
respectively).......... -- 3,136 43 2,336
Sales and marketing
(includes stock-based
compensation of $13 and
$1,631 for the periods
ended December 31, 1998
and 1999, respectively,
and $29 and $1,359 for
the three months ended
March 31, 1999 and
2000, respectively).... 47 3,949 144 4,516
General and
administrative
(includes stock-based
compensation of $151
and $4,819 for the
periods ended December
31, 1998 and 1999,
respectively, and $347
and $2,018 for the
three months ended
March 31, 1999 and
2000, respectively).... 899 12,126 1,181 5,603
Depreciation and
amortization........... 4 609 51 1,636
------- ------- ------- --------
Total costs and
operating expenses..... (950) 19,820 1,419 14,091
------- ------- ------- --------
Loss from operations.... (950) (19,783) (1,419) (13,955)
Interest expense........ -- 3,146 32 7,716
Interest income......... (150) (2,138) (106) (3,662)
Interest charge on
beneficial conversion
of convertible debt.... 220 -- -- --
------- ------- ------- --------
Net loss................ $(1,020) (20,791) (1,345) (18,009)
======= ======= ======= ========
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
As of
As of December 31, March 31, 2000
-------------------- ------------------
1998 1999 Actual Pro Forma
--------- --------- ------- ---------
Balance Sheet Data: (in thousands) (unaudited)
<S> <C> <C> <C> <C>
Cash, cash equivalents and short-term
investments......................... $ 9,165 222,974 193,619 243,619
Accounts receivable.................. -- 178 285 285
Restricted cash and short-term
investments......................... -- 38,609 41,053 41,053
Property and equipment, net.......... 482 31,932 53,350 53,350
Construction in progress............. 31 14,824 32,135 32,135
Total assets......................... 10,001 319,946 331,979 381,979
Debt facilities and capital lease
obligations, excluding current
portion............................. -- 8,808 7,863 7,863
Senior notes......................... -- 183,955 184,441 184,441
Total stockholders' equity........... 9,590 105,699 96,224 146,224
Other Financial Data:
EBITDA(1)............................ $ (946) (19,174) (12,319) (12,319)
Net cash used in operating
activities.......................... (796) (9,908) (4,176) (4,176)
Net cash used in investing
activities.......................... (5,265) (66,461) (30,751) (30,751)
Net cash provided by (used in)
financing activities................ 10,226 295,178 (371) 49,629
Ratio of earnings to fixed
charges(2).......................... -- -- -- --
</TABLE>
- --------
(1) EBITDA consists of the net loss excluding interest, income taxes,
depreciation and amortization of capital assets. EBITDA is presented to
enhance an understanding of our operating results and is not intended to
represent cash flow or results of operations in accordance with generally
accepted accounting principles for the period indicated and may be
calculated differently than EBITDA for other companies. EBITDA is not a
measure determined under generally accepted accounting principles nor is it
a measure of liquidity.
(2) In calculating the ratio of earnings to fixed charges, earnings consist of
net loss before income tax expense and fixed charges. Fixed charges consist
of interest expense, and capitalized interest, amortized discounts and
capitalized expenses related to indebtedness and an estimate of the
interest within rental expense. The ratio of earnings to fixed charges was
less than 1.0 to 1.0 for each of the periods presented. Earnings available
for fixed charges were thus inadequate to cover fixed charges. The coverage
deficiency for the period from June 22, 1998 (inception) to December 31,
1998, the year ended December 31, 1999 and the three months ended March 31,
1999 and 2000 was $1,019,700, $20,790,600, $1,344,900 and $18,008,800,
respectively.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Equinix designs, builds and operates neutral Internet Business Exchange
centers, or IBX centers, where Internet businesses place their equipment and
their network facilities in order to interconnect with each other to improve
Internet performance. Our neutral IBX centers provide content providers,
application service providers, or ASPs, and e-commerce companies with the
ability to directly interconnect with a choice of bandwidth providers, Internet
service providers, or ISPs, and site and performance management companies to
grow their business. We intend to open approximately 15 IBX centers in major
Internet markets in the U.S. and internationally by the end of 2001. In July
1999, except for fiber connectivity from our telecommunications carriers, we
completed construction of our first IBX center in the Washington, D.C.
metropolitan area. We opened additional IBX centers in December 1999 and March
2000 in the New York, New York and Silicon Valley, California metropolitan
areas. From our inception on June 22, 1998 through December 31, 1999, our
operating activities consisted primarily of designing and building our first
three IBX centers, searching for additional space for IBX center expansion,
developing our management team and raising private equity and third party debt
to fund the design and building of our IBX centers.
We generate recurring revenues primarily from the leasing of cabinet space
and the provisioning of direct interconnections between our customers. In
addition, we intend to offer value-added services and professional services
including "Smart Hands" service for customer equipment installations and
maintenance. Customer contracts for the lease of cabinets, interconnections and
switch ports are renewable and typically range from one to three years with
payments for services made on a monthly basis. We entered into our first
customer contract in April 1999. In addition, we generate non-recurring
revenues which are comprised of installation charges that are billed upon
successful installation of our customer cabinets, interconnections and switch
ports. Both recurring and non-recurring revenues are recognized ratably over
the term of the contract.
Cost of revenues consist primarily of rental payments on our IBX centers,
site employees' salaries and benefits, utility costs, amortization and
depreciation of IBX center build-out costs and equipment and engineering power,
redundancy and security systems support and services. We expect that our cost
of revenues will increase significantly as we continue our rollout of
additional IBX centers.
Our selling, general and administrative expenses consist primarily of costs
associated with recruiting, training and managing new employees, salaries and
related costs of our operations, marketing and sales, customer fulfillment and
support functions costs and finance and administrative personnel and related
professional fees. Our current sales and marketing expenses, including sales
personnel, will increase significantly as we continue our rollout of additional
IBX centers into new domestic and international markets. We expect to
significantly increase our sales and marketing activities.
We recorded deferred stock-based compensation of approximately $1.1 million,
$19.4 million and $4.9 million in connection with stock options granted during
1998, 1999 and the three months ended March 31, 2000, respectively, where the
deemed fair value of the underlying common stock was subsequently determined to
be greater than the exercise price on the date of grant. Approximately
$164,000, $6.6 million and $3.5 million was amortized to stock-based
compensation expense for the period and year ended December 31, 1998 and 1999,
respectively and the three months ended March 31, 2000, respectively. Options
granted are typically subject to a four year vesting period. We are amortizing
the deferred stock-based compensation on an accelerated basis over the vesting
periods of the applicable options in accordance with FASB Interpretation
No. 28. The remaining $15.1 million of deferred stock-based compensation at
March 31, 2000 will be amortized over the remaining vesting period. Based on
grants from April 1 through May 2, 2000, we expect to record additional
deferred stock-based compensation of approximately $4.9 million. As a result of
the cumulative effect of stock-based compensation, we expect stock-based
compensation expense, which is primarily attributable to amortization of
deferred stock-based compensation charges, to impact our reported
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<PAGE>
results through December 31, 2004. Based on option grants through May 2, 2000,
we expect stock-based compensation expense to be approximately $13.7 million
for the year ending December 31, 2000.
A key aspect of our strategy is to capitalize on our first mover advantage
and to execute our rapid IBX center rollout program. The rollout of these
additional IBX centers will significantly increase both fixed and operating
expenses, including expenses associated with hiring, training and managing new
employees, leasing and maintaining additional IBX centers, power and redundancy
system engineering support and related costs, implementing security systems and
related costs and depreciation.
Results of Operations
Since our inception in June 1998, we have experienced operating losses and
negative cash flows from operations in each quarter. As of March 31, 2000 we
had an accumulated deficit of $39.8 million. The revenue and income potential
of our business and market is unproven, and our short operating history makes
an evaluation of our business and prospects difficult. There can be no
assurance that we will ever achieve profitability on a quarterly or annual
basis or, if achieved, sustain such profitability.
Three Months Ended March 31, 1999 and 2000
Revenues. We recognized revenues of $135,600 for the three months ended
March 31, 2000. Revenues consisted of recurring revenues of $124,200, primarily
from the leasing of cabinet space, and non-recurring revenue of $11,400 related
to the recognized portion of installation revenue. Installation and service
fees are recognized ratably over the term of the contract. We did not offer IBX
center colocation or interconnection exchange services during the three months
ended March 31, 1999, and as such, no revenues were recognized during that time
period.
Cost of Revenues. Cost of revenues increased from $43,100 for the three
months ended March 31, 1999 to $3.3 million for the three months ended March
31, 2000, an increase of $3.3 million. Cost of revenues consists primarily of
rental payments for our leased IBX centers, site employees' salaries and
benefits, utility costs, power and redundancy system engineering support
services and related costs, security services and related costs and
depreciation and amortization of our IBX center buildout and other equipment
costs. As of March 31, 1999, we had not opened any IBX centers, but we had
incurred rent expense on the first IBX center. During the three months ended
March 31, 2000, we incurred expenses on our first three operational IBX
centers.
Sales and Marketing. Sales and marketing expenses increased from $143,800
for the three months ended March 31, 1999 to $4.5 million for the three months
ended March 31, 2000, an increase of $4.4 million. Sales and marketing expenses
consist primarily of compensation and related costs for the sales and marketing
personnel, sales commissions, marketing programs, public relations, promotional
materials and travel. The increase in sales and marketing expense resulted from
the addition of personnel in our sales and marketing organizations, reflecting
our increased selling effort and our efforts to develop market awareness. Also
included in sales and marketing for the three months ended March 31, 1999 and
2000 are $28,500 and $1.4 million, respectively, of stock-based compensation
expense. We anticipate that sales and marketing expenses will increase in
absolute dollars as we increase our investment in these areas to coincide with
the rollout of additional IBX centers.
General and Administrative. General and administrative expenses increased
from $1.2 million for the three months ended March 31, 1999 to $6.3 million for
the three months ended March 31, 2000, an increase of $5.1 million. General and
administrative expenses consist primarily of salaries and related expenses,
accounting, legal and administrative expenses, professional service fees and
other general corporate expenses. The increase in general and administrative
expenses was primarily the result of increased expenses associated with
additional hiring of personnel in management, finance and administration, as
well as other related costs associated with supporting the Company's expansion.
Also included in general and administrative for the three
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<PAGE>
months ended March 31, 1999 and 2000 are $346,700 and $2.0 million,
respectively, of stock-based compensation expense.
Interest Expense, net. For the three months ended March 31, 1999, we
reported interest income of $106,000 and interest expense of $32,200. For the
three months ended March 31, 2000, we reported net interest expense of $4.0
million. Net interest for the three months ended March 31, 2000 consisted of
interest income of $3.7 million offset by interest expense of $7.7 million.
Interest income increased substantially due to higher cash, cash equivalent and
short-term investment balances held in interest bearing accounts, resulting
from the proceeds of the senior notes and preferred stock financing activities.
Interest expense for the three months ended March 31, 2000 is a result of the
issuance of senior notes and increased debt facilities and capital lease
obligations and amortization of the senior notes debt facilities and capital
lease obligation discount.
Period from Inception (June 22, 1998) through December 31, 1998 and Year Ended
December 31, 1999
Revenues. We recognized revenues of $37,100 for the year ended December 31,
1999. In addition, we entered into contracts with other customers and allocated
cabinet space to these customers as of December 31, 1999. Although we entered
into these customer contracts, we have not recognized such amounts as revenues
as the sales cycle was not yet complete by December 31, 1999. We did not offer
IBX center colocation or interconnection exchange services from inception
through December 31, 1998, and as such, no revenues were recognized from the
date of inception to December 31, 1998.
Cost of Revenues. We incurred cost of revenues of $3.3 million for the year
ended December 31, 1999. Cost of revenues is primarily comprised of rental
payments for our leased IBX centers, site employees' salaries and benefits,
utilities costs, power and redundancy system engineering support services and
related costs, security services and related costs and depreciation and
amortization of our IBX center build-out and other equipment costs. We did not
offer IBX center colocation or interconnection exchange services from inception
through December 31, 1998, and as such, no cost of revenues were recorded from
the date of inception to December 31, 1998.
Sales and Marketing. Sales and marketing expenses increased from $47,400 for
the period from the date of inception to December 31, 1998 to $3.9 million for
the year ended December 31, 1999. These expenses consist primarily of salary
and benefit costs from the hiring of both sales and marketing personnel and
certain related recruiting and relocation costs, the establishment of sales and
marketing programs and the recognition of stock-based compensation expense in
the amount of approximately $13,000 and $1.6 million for the period from the
date of inception to December 31, 1998 and the year ended December 31, 1999,
respectively. In addition, we established two regional sales offices to support
the New York and Washington, D.C. metropolitan area IBX centers. We anticipate
that sales and marketing expenses will increase substantially to coincide with
the commercial operation of our IBX centers and additional stock-based
compensation expense in the amount of approximately $9.0 million which will be
amortized over the applicable vesting periods.
General and Administrative. General and administrative expenses increased
from $902,200 for the period from the date of inception to December 31, 1998 to
$12.6 million for the year ended December 31, 1999. General and administrative
expenses are primarily comprised of salaries and employee benefits expenses,
including stock-based compensation expense in the amount of approximately
$151,000 and $4.8 million for the period from the date of inception to December
31, 1998 and the year ended December 31, 1999, respectively, professional and
consultant fees and corporate headquarter operating costs, including facility
and other rental costs. We anticipate that general and administrative expenses
will increase significantly due to increased staffing levels consistent with
the growth in our infrastructure and related operating costs associated with
our regional and international expansion efforts and additional stock-based
compensation expense in the amount of approximately $12.7 million which will be
amortized over the applicable vesting periods.
Interest Expense, net. Net interest expense increased from $70,100 for the
period from the date of inception to December 31, 1998 to $1.0 million for the
year ended December 31, 1999. We recognized interest
24
<PAGE>
income of $2.1 million for the year ended December 31, 1999 compared to
$150,000 for the period from inception to December 31, 1998. Interest income
increased substantially due to higher cash, cash equivalent and short-term
investment balances resulting from the senior notes and preferred stock
financing activities. Interest expense was $3.1 million for the year ended
December 31, 1999 compared to $220,000 for the period from inception to
December 31, 1998. Interest expense increased due to the issuance of senior
notes, increased debt facilities and capital lease obligations and amortization
of the senior notes and debt facilities and capital lease obligation discount.
Interest expense for the period from inception to December 31, 1998 consisted
of the interest charge from the conversion right of the convertible loan
arrangement, under which the initial lenders to the Company converted their
promissory notes into Series A preferred stock at a more beneficial rate than
other Series A investors.
Liquidity and Capital Resources
From inception through March 31, 2000, we have financed our operations and
capital requirements primarily through the issuance of senior notes, the
private sale of Series A and Series B preferred stock and debt financing for
aggregate gross proceeds of approximately $312.6 million. Our principal source
of liquidity as of March 31, 2000 consists of $193.6 million in cash and cash
equivalents and $6.9 million in debt and capital lease facilities. As of March
31, 2000, our total indebtedness from our senior notes, debt facilities and
capital lease obligations was $213.7 million.
Net cash used in operating activities was $796,000 for the period from
inception to December 31, 1998, $9.9 million for the year ended December 31,
1999 and $4.2 million for the three months ended March 31, 2000. We used cash
primarily to fund our net loss from operations.
Net cash used in investing activities was $5.3 million for the period from
inception to December 31, 1998, $66.5 million for the year ended December 31,
1999 and $30.8 million for the three months ended March 31, 2000. Net cash used
in investing activities was primarily attributable to the construction of our
IBX centers and the purchase of restricted cash and short-term investments.
Net cash generated by financing activities was $10.2 million for the period
from inception to December 31, 1998 and $295.2 million for the year ended
December 31, 1999. Net cash used in financing activities was $370,700 for the
three months ended March 31, 2000. The cash generated from financing activities
for the period from inception through December 31, 1998 was due to the sale of
Series A preferred stock. The cash generated by financing activities for the
year ended December 31, 1999 was primarily due to the issuance of senior notes,
proceeds from debt and capital lease facilities and proceeds from the issuance
of Series B preferred stock. Net cash used in financing activities during the
three months ended March 31, 2000 was primarily due to the repayment of debt
facilities and capital lease obligations, offset by proceeds from the exercise
of stock options.
In March 1999, we entered into a loan and security agreement in the amount
of $7.0 million bearing interest at 7.5% to 9.0% per annum repayable in 36 to
42 equal monthly payments with a final interest payment equal to 15% of the
advance amounts due at maturity. In May 1999, we entered into a master lease
agreement in the amount of $1.0 million. This master lease agreement was
increased by addendum in August 1999 by $5.0 million. This agreement bears
interest at either 7.5% or 8.5% and is repayable over 42 months in equal
monthly payments with a final interest payment equal to 15% of the advance
amounts due on maturity. In August 1999, we entered into a loan agreement in
the amount of $10.0 million. This loan agreement bears interest at 8.5% and is
repayable over 42 months in equal monthly payments with a final interest
payment equal to 15% of the advance amounts due on maturity. At March 31, 2000,
we had total debt and capital lease financings available of $23.0 million, of
which we had drawn down $16.1 million.
In December 1999, we issued $200,000,000 aggregate principal amount of 13%
Senior Notes due 2007 for aggregate net proceeds of $193,400,000, net of
offering expenses. Of the $200,000,000 gross proceeds,
25
<PAGE>
$16,207,200 was allocated to additional paid-in capital for the fair value of
the common stock warrants and recorded as a discount to the senior notes.
Senior notes, net of the unamortized discount, is $184,441,100 as of March 31,
2000.
In December 1999, we completed the private sale of our Series B preferred
stock, net of issuance costs, in the amount of $81.7 million.
In May 2000, we completed the private sale of Series C preferred stock in
the amount of $50.0 million.
We currently intend to open approximately 15 IBX centers in the U.S. and
internationally by the end of 2001. We intend to finance these IBX centers
through current cash flow from our existing IBX centers and approximately
$750.0 million of additional financing. As of May 8, 2000, we had $221.6
million in cash, cash equivalents and short-term investments available to us.
We anticipate that the funds currently available to us are sufficient to fund
the capital expenditure and working capital requirements, including operating
losses, associated with the initial rollout of seven IBX centers and two IBX
center expansion projects. To complete the implementation of our approximately
15 site rollout plan within our proposed time frame we anticipate that we will
need to raise funds through a combination of additional debt or equity
financing. If we cannot raise sufficient additional funds on acceptable terms,
or in amounts required by us, we may delay the rollout of additional IBX
centers or permanently reduce our rollout plans. If we are unable to raise
additional funds to further our rollout, we anticipate that the cash flow
generated from the IBX centers, for which we will have obtained financing,
will be sufficient to meet the working capital, debt service and corporate
overhead requirements associated with those IBX centers.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards, or SFAS, No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including derivative
instruments embedded in other contracts, and for hedging activities. SFAS No.
133, as amended by SFAS No. 137, Deferral of the Effective Date of FASB
Statement No. 133, is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. This statement does not currently apply to us
and we do not have any derivative instruments or hedging activities.
In December 1999, the SEC issued Staff Accounting Bulletin 101, or SAB 101,
Revenue Recognition, which outlines the basic criteria that must be met to
recognize revenue and provides guidance for presentation of revenue and for
disclosure related to revenue recognition policies in financial statements
filed with the SEC. We believe the adoption of SAB 101 will not have a
material impact on our financial position and results of operations.
In March 2000, the FASB issued Interpretation No. 44, Accounting for
Certain Transactions Involving Stock Compensation - an Interpretation of APB
25. This Interpretation clarifies (a) the definition of employee for purposes
of applying Opinion 25, (b) the criteria for determining whether a plan
qualifies as a noncompensatory plan, (c) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and
(d) the accounting for an exchange of stock compensation awards in a business
combination. This Interpretation is effective July 1, 2000, but certain
conclusions in this Interpretation cover specific events that occur after
either December 15, 1998, or January 12, 2000. To the extent that this
Interpretation covers events occurring during the period after December 15,
1998, or January 12, 2000, but before the effective date of July 1, 2000, the
effects of applying this Interpretation are recognized on a prospective basis
from July 1, 2000. We have not yet determined the impact, if any, of adopting
this interpretation.
26
<PAGE>
Impact of the Year 2000
As of May 9, 2000, we had not experienced any year 2000-related disruption
in the operation of our systems. Although most year 2000 problems should have
become evident on January 1, 2000, additional year 2000-related problems may
become evident only after that date.
Quantitative and Qualitative Disclosures About Market Risk
Equinix has limited exposure to financial market risks, including changes in
interest rates. An increase or decrease in interest rates would not
significantly increase or decrease interest expense on debt obligations due to
the fixed nature of our debt obligations. Our interest income is sensitive to
changes in the general level of U.S. interest rates, particularly since the
majority of our investments are in short-term instruments. Due to the short-
term nature of our investments, we believe that we are not subject to any
material market risk exposure. Equinix does not currently have any foreign
operations and thus is not currently exposed to foreign currency fluctuations.
27
<PAGE>
BUSINESS
Overview
Equinix designs, builds and operates neutral Internet Business Exchange
centers, or IBX centers, where Internet businesses place their equipment and
their network facilities in order to interconnect with each other to improve
mission critical Internet performance. Our neutral IBX centers place our
customers' operations at a central location and provide them with the highest
level of security, multiple back-up services, flexibility to grow and technical
assistance. Equinix's neutral IBX centers provide content providers, ASPs, and
e-commerce companies with the ability to directly interconnect with a choice of
bandwidth providers, ISPs, and site and performance management companies to
grow their business. Content providers include those companies that supply
information, education or entertainment content such as Excite@Home. ASPs
include those companies that supply hosted applications to enterprises over the
Internet, such as Storage Networks. E-commerce companies include those
companies which conduct the sale of goods and services over the Internet. ISPs
provide Internet connectivity services and include companies such as InterNAP
and NorthPoint Communications Group. Bandwidth providers include companies such
as MCI WorldCom and AT&T. Site and performance management companies include
one-stop Web presence integrators and content distribution companies such as
iBeam broadcasting. Equinix centers enable Internet companies to quickly,
easily, and privately interconnect with a choice of business partners and
customers, providing them with the flexibility, speed and adaptability they
need to accelerate business growth and to allow a faster, more reliable
Internet.
We intend to open approximately 15 IBX centers in major Internet markets in
the U.S. and internationally by the end of 2001. In late 1999, we opened our
first IBX center in the Washington, D.C. area. In December 1999, we opened our
second IBX center in the New York metropolitan area, and in March 2000, we
opened our third IBX center in the Silicon Valley area in California. Our
customers include: Cable & Wireless, Concentric Network, Excite@Home, iBeam,
InterNAP, MCI Worldcom, NorthPoint Communications Group, Onyx Networks, a
wholly-owned subsidiary of Pacific Gateway Exchange, Teleglobe and Storage
Networks.
We were incorporated in Delaware in June 1998 and are led by Albert M.
Avery, IV, our president and chief executive officer, and Jay S. Adelson, our
vice president, engineering and chief technology officer, who were responsible
for designing, building and operating the Palo Alto Internet Exchange, or PAIX,
one of the most active global Internet traffic exchange points. PAIX launched
commercial service in July 1996 and was functioning at full capacity within one
year of introduction.
Since March 1999, we have raised more than $350 million to fund the rollout
of our IBX centers. In April 1999, our first customer contract was signed and
we began recognizing revenue in December 1999. We have not yet been profitable
and expect to incur significant additional losses.
Market Opportunity
Since the early 1990s, the Internet has experienced tremendous growth and is
emerging as a global medium for communications and commerce. According to
International Data Corporation, or IDC, the number of Internet business-to-
business users worldwide will increase from approximately 142 million at the
end of 1998 to approximately 502 million by 2003. In addition, according to
Forrester Research, the number of Internet sites worldwide is expected to grow
from fewer than 500,000 in 1997 to approximately 4.0 million in 2002. IDC also
states that worldwide Internet business commerce sales are forecast to grow
from approximately $50 billion at the end of 1998 to approximately $1.3
trillion by the end of 2003.
As a result of competitive pressures, Internet and e-commerce companies are
demanding facilities that provide multiple interconnections with a broad cross-
section of product and service providers and customers. The tremendous growth
of Internet usage and e-commerce has aggravated the inefficiencies of the
current Internet architecture, which has constrained businesses' abilities to
effectively grow and manage their Internet operations.
As the Internet and Internet businesses experienced significant growth and
demand, and content providers emerged, vertically integrated hosting providers
evolved to provide these businesses with places to locate their
28
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equipment and access the Internet. Until now, Internet businesses have had to
rely on these vertically integrated hosting providers for the distribution of
content and delivery of services between thousands of individual networks.
Internet and e-commerce companies who choose to colocate equipment at these
facilities typically have no choice but to purchase bandwidth from the owner of
the facility. Bandwidth is typically known as the rate at which data flows over
a network and is measured in bits per second. This can be costly, given the
lack of competition, and a significant risk if the facility owner's network
were to fail or have performance problems.
As content becomes more critical, the choice of suppliers and direct
interconnection become increasingly important. Forrester Research predicts that
a combination of rapid Internet growth and increased outsourcing of Internet-
related services will create an acute need for Internet-related hosting and
colocation services, producing U.S. revenue growth from approximately $3.5
billion in the year 2000 to over $14 billion by 2003.
The Equinix Solution
Equinix IBX centers provide the environment and services to meet the
challenges facing Internet businesses today. Our centers will provide a free
market environment where choice stimulates efficient business growth. Because
Internet companies have a broad choice of product and service providers, they
can increase their service offerings, deliver services more efficiently and
have access to a larger potential customer base. As a result, we are able to
provide the following key benefits to our customers:
Choice. We believe that the ability of customers to choose among a variety
of product and service providers is the fundamental driver of dynamic growth in
commerce. By offering this crucial element of choice, our IBX centers are
designed to serve as a catalyst for our customers that creates synergy among
them and makes it possible for them to adapt their business models to
successfully scale, or keep pace, with the growth of each other and of the
Internet. Internet and e-commerce related businesses view the IBX center as a
forum to attract additional customers and diversify sources of supply for their
businesses.
Opportunity to Increase Revenues and Reduce Costs. Our customers will have
access to a variety of potential business partners. Accordingly, our customers
will have a better opportunity to increase the size of their addressable
markets, accelerate revenue growth and improve the quality of their services at
our IBX centers. In addition, participants will be able to enhance their
ability to control costs by aggregating their service purchases at a single
location and through improved purchasing power.
Scalability. Our IBX centers will both stimulate and support the efficient
growth of our customers. From a facility perspective, we construct our IBX
centers to be large enough to accommodate our customers' short term needs, and
our plan is to maintain sufficient available expansion space to meet their
long-term growth needs where possible. In addition, through our global presence
we will have a broad capacity to meet customers' multi-market and multi-
geographic requirements. On an individual basis, customers are able to design
their own unique cabinet configurations within a shared or private cage
environment. As the need arises, customers can expand within their original
cage or upgrade into a cage which meets their expanded requirements. We predict
that customers will require this added capacity as they interconnect with each
other and expand their customer reach.
Reliability. Our IBX design provides our customers with reliable and
disaster-resistant environments that are necessary for optimum Internet
commerce interconnection. We believe that the level of excellence and
consistency achieved in our IBX architecture and design results in premium,
secure, fault-tolerant exchanges. Our IBX centers are designed to offer our
customers redundant, high-bandwidth Internet connectivity through multiple
third-party connections. Additionally, our solutions include multiple layers of
physical security, scalable cabinet space availability, on-site trained staff
24 hours per day, 365 days per year, dedicated areas for customer care and
equipment staging, redundant AC/DC power systems and multiple other redundant,
fault-tolerant infrastructure systems.
Equinix Strategy
Our objective is to provide content providers, ASPs and e-commerce companies
with the ability to directly interconnect with a choice of bandwidth providers,
ISPs, and site and performance management companies to grow their business.
Equinix IBX centers enable Internet companies to quickly, easily and privately
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interconnect with a choice of business partners and customers, providing them
with the flexibility, speed and adaptability they need to accelerate business
growth and to allow a faster, more reliable Internet. To accomplish this
objective we are employing the following strategies:
Provide Customer Choice. We provide our customers with the freedom to choose
their preferred product and service providers. We call this a neutral
environment and it is one of the fundamental characteristics of an IBX center.
We believe this is a significantly improved approach compared with the current
Internet model because it offers customers increased value and reliability
based on the availability of multiple providers of needed services. In
traditional colocation or Web hosting environments, customers are often limited
to a single choice of network provider, site management company, or performance
management company. This limited choice can lead to single points of failure
for customers or a limited number of options to choose from for value added
services. The Equinix model of neutrality gives customers a wide range of
providers to choose from for each of the services they require for increased
Internet performance and reliability. For instance, in each IBX customers can
choose from multiple network providers, ISPs and Web management companies. The
ability to choose who they work with directly leads to better Internet business
performance due to the increased diversity and an improved overall total cost
of ownership since these suppliers are competing for the customers' business
within the IBX center. Our customers will benefit from a neutral environment
that stimulates efficient business growth through accelerated network
economics, or the value derived by a provider at an IBX center from being able
to sell its services to a locally-aggregated set of customers, created by the
efficient and rapidly growing interaction between Internet businesses.
Manage Choice to Create Network Effect. To attract the widest choice of
Internet partners, it is important to provide a robust mix of leading companies
from a variety of businesses and services. This allows content providers, e-
commerce companies and ASPs the opportunity to interconnect with a wide variety
of companies. As a result of the IBX interconnection model, IBX participants
encourage their customers, suppliers and business partners to also come into
the IBX center. These customers, suppliers and business partners may also, in
turn, encourage their business partners to locate in IBX centers resulting in
additional customer growth. For example, a large financial site who may choose
to locate in an Equinix IBX may encourage a bandwidth provider, a site
management company or another content partner, like a financial news service,
to also locate in the same IBX. In turn, these bandwidth providers or content
partners will also bring their business partners to the IBX. This network
effect enhances the value of an IBX center with each new customer.
Leverage Strategically Scalable Centers. The network effect created by the
Equinix IBX model requires strategic scalability to support the dynamic IBX
growth environment. Our expansion plans are designed to meet the growth of our
customers. Our IBX centers will both stimulate and support the efficient growth
of our customers. From a facility perspective, we construct our IBX centers to
be large enough to accommodate our customers' short term needs, and our plan is
to maintain sufficient available expansion space to meet their long-term growth
needs where possible.
Expand Globally and Capitalize on First Mover Advantage. We believe that
capitalizing on our first mover advantage is essential to establishing
leadership in the rapidly developing neutral Internet business exchange market.
As a result, we currently plan to open additional IBX centers in the United
States and internationally. We believe the demand for our international IBX
centers and services will be significant due to the early stage of Internet
infrastructure deployment outside of the U.S.
Establish Equinix as the Leading Brand for IBX Centers. We plan to establish
Equinix as the industry standard for the highest quality business to business
Internet exchanges. Through brand awareness and promotion we intend to create a
strong following among all top content providers, ASPs and e-commerce
companies. We believe that this strong brand awareness, combined with our
ability to provide the highest quality business to business marketplace
facilities and professional services will provide us with a competitive
advantage in our market.
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Leverage Blue-Chip Equity Owners. Our stockholders are some of the most
influential companies driving the development, operation and utilization of the
Internet. They provide us with invaluable technical and business insight,
industry contacts and customer relationships to help expedite the expansion of
our business. These stockholders include Artemis S.A., Bechtel Corp., Benchmark
Capital, the Carlyle Group, Cisco Systems and Reuters.
Customers
Customers typically sign renewable contracts of one to three years in
length, often with options on additional space. Our current customers,
including Cable & Wireless, Concentric Network, Excite@Home, iBeam, InterNAP,
MCI WorldCom, NorthPoint Communications Group, Onyx Networks, a wholly-owned
subsidiary of Pacific Gateway Exchange, Teleglobe, Storage Networks have
collectively reserved space in our Washington DC, New York, and Silicon Valley
metropolitan area IBX centers. Additionally, InterNAP, MCI WorldCom, Northpoint
Communications Group, Onyx Networks, Excite@Home, Teleglobe and Storage
Networks have signed multi-site agreements.
Historically, Internet businesses have been vertically integrated and
provided all services directly to their customers. These services typically
include marketing, access and Internet backbone connectivity, server hosting,
and other services such as e-mail and usenet newsgroups. Continued rapid
growth, innovation, competition and scarce human resources have opened the door
for companies to specialize in core Internet services and outsourced other
elements of their business or product to suppliers. These specialized players
include:
. content providers and e-commerce companies supplying information,
education or entertainment content and conducting the sale of goods and
services;
. ASPs offering hosted applications over the Internet;
. Internet service providers offering end-users Internet access and
customer support;
. bandwidth providers (telecommunications carriers); and
. site and performance management companies which integrate and manage a
customer's end-to-end web presence and performance.
We consider these companies to be the core of our customer base and we offer
each customer a choice of business partners and solutions that are designed to
meet their unique and changing needs.
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We believe our IBX centers provide the following benefits to all our
customers:
Choice and neutrality are important to companies interested in the growth
and reliability of the Internet. Equinix does not compete with its customers
and partners and offers choice within each customer segment. We believe all
Internet companies benefit from the choice of a wide variety of Internet
business partners because their business interaction is greatly enhanced which
can translate to new revenue sources, greater efficiency and growth.
Additional Benefits to all Customer Segments:
. Expedited service delivery
. Scalable, flexible, fault-tolerant environment
. Cost savings through aggregating purchases and sales at a single
location
. Minimize packet loss and latency, or time that elapses between a request
for information and its arrival
. Ability to focus on core competencies
. Centralized market with access to dozens of potential customers and
partners
. Proximity to service providers reduces operations, technology and
marketing costs, quickens service deployment, and improves performance
. Multiple layers of physical security
. Elimination of capital investment for facilities
. 24X7 on-site Internet and telecommunications-trained staff
We believe our IBX centers offer the following additional benefits to our
customers:
Type of Customer: Benefits:
Content Providers, ASPs and E-Commerce Companies
. Direct interconnection with a choice of
multiple bandwidth providers, Internet
service providers, and site and performance
management companies. Choice gives
participants the ability to decide which
suppliers are the most cost-effective and
provide the level of service they require.
The benefits to content providers, ASPs and
e-commerce companies include maximized Web
presence, increased revenue streams, greater
security and increased customer satisfaction
. Simplified outsourcing of various component
services including DSL, e-mail, Usenet and
content distribution
Internet Service Providers . Direct peering, or traffic exchange, with
other ISPs over private high-speed dedicated
interconnections
. Simplified outsourcing of various component
services including DSL, e-mail, Usenet and
content distribution
. Expedited, flexible, scalable and cost-
efficient bandwidth provisioning
Bandwidth Providers (Carriers)
. Economies of scale with reduced capital
costs
. Centralized market with access to dozens of
potential customers
Site and Performance Management Companies
. Direct interconnection with a choice of
multiple bandwidth providers and ISPs.
Choice gives site and performance management
companies the ability to decide which
suppliers are the most cost-effective and
provide the level of service they require
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Services
Within our IBX centers we provide our customers with a business to business
exchange and offer colocation, interconnection and value-added services.
Colocation Services
Within our IBX centers, customers can colocate and interconnect their
equipment and networks and connect directly with a choice of Internet
companies. Equinix also provides customized solutions for customers looking to
resell IBX space component as part of their complete, one-stop shop solution.
Cabinets. Customers have several choices for colocating their equipment.
They can place the equipment in an Equinix shared or private cage or customize
their space to build their own data center within an IBX center. Cabinets are
84 inches high, suitable for networking and server colocation. Cable trays
support cables between and among cabinets. Stationary or slide shelves and
enclosed cabinets are available upon request. As a customer's colocation
requirements increase, they can expand within their original cage or upgrade
into a cage that meets their expanded requirements.
Shared Cages. A shared cage environment is designed for customers needing
less than ten full cabinets to house their equipment. Each cabinet in a shared
cage is individually secured with an advanced trackable electronic locking
system and the cage itself is secured with the biometric hand-geometry system.
Private Cages. Customers that contract for a minimum of five full cabinets
can use a private cage to house their equipment. Private cages are also
available in larger full cabinet sizes. Each private cage is individually
secured with the biometric hand-geometry system.
Data Centers. Customers interested in providing a hosting service or
colocation center have the option of outsourcing the design, construction and
management of the physical facility to Equinix. Each customer can customize the
cabinet configuration within the space they purchase from Equinix in order to
satisfy their specific customers' needs.
Interconnection
Physical Cross-Connect. Customers needing to directly connect to another IBX
customer can do so for a set price. Equinix leaves the choice of speed and
media type to the participants, based on their needs. Cross connections are
installed, delivered and tested by us within twenty-four hours of a customer's
request.
Central Switching Fabric. Customers may choose to connect to our central
switching fabric rather than purchase a direct physical cross connection. With
a connection to this switch, a customer can aggregate multiple interconnects
over one physical wire instead of purchasing individual physical cross
connects.
Direct Connections. Customers requiring a dedicated communications link may
directly connect to each other. Direct connections are Any Mode Any Speed,
which means they can include single-mode fiber, multi-mode fiber, and other
media upon request, as well as handle any speed required by the customer. These
cross connections are customized and terminated per customer instructions and
may be implemented within 24 hours of request.
Value-Added Services
Our IBX centers are staffed with Internet and telecommunications specialists
who are on-site and available 24 hours per day, 365 days per year. These
professionals are trained to perform installations of customer equipment and
cross connections and integration and support services.
Core Infrastructure Services. Those customers with a port connection on the
central switching fabric have access to multiple core infrastructure services.
These services address critical intelligent networking requirements and assist
customers in improving the quality of their interconnection and traffic
exchange.
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"Smart Hands" Services. Our customers can take advantage of our professional
"Smart Hands" service, which gives customers access to our IBX staff for a
variety of troubleshooting tasks, when their own staff is not on site. These
tasks include power cycling, card swapping, and performing emergency equipment
replacement. Services are available on-demand or by customer contract.
IBX Design and Staffing
Our IBX centers are designed to provide a state-of-the-art, secure, full-
service, neutral operating environment of a minimum of 900 cabinets, or 50,000
square feet, in the first-phase buildout for colocation of customer equipment.
The IBX centers are designed to provide specific and compelling improvements
over legacy facilities, including scalability to meet our customer's ongoing
growth, improved security, redundancy of all key infrastructure systems and
improved customer care. An IBX center is divided into six basic functional
areas--access, customer care, colocation, telecommunications access, mechanical
and power systems and operations.
Access Area. The access area includes a bullet-resistant guard booth; a
welcome area, a hand-geometry enrollment station, and a mantrap to further
control access to the IBX center. All doors and access ways are secured with
biometric hand-geometry readers to ensure absolute identification and
authentication. All customers and Equinix employees entering an Equinix IBX
center must be cleared through this secured zone.
Customer Care Area. The customer care area includes a seating section,
conference rooms, Internet workstations, customer equipment preparation work
areas, equipment lockers, a game room, bathrooms, showers and a kitchen.
Colocation Area. The colocation area is divided into large cages to house
networking and customer computer equipment that is secured by biometric
security access systems. This area includes dual independent AC and DC power
distribution systems, full-automated CCTV digital camera security surveillance,
and a tamper-proof overhead cable-management system with separate trays for
fiber and copper data, AC power and DC power cables. Access to the colocation
area is through the customer care area.
Telecommunications Access Area. All IBX centers will have a minimum of two
dedicated fiber entry vaults for telecommunications carrier access to the
colocation area. In addition, every IBX center has roof space or a separate
platform for customers who access the IBX center via wireless devices such as
satellite dishes, radio antennae and microwave.
Mechanical and Power Systems Area. The mechanical and power systems area
includes machine rooms and space used to house all mechanical, power safety and
security equipment. Fully redundant heating, ventilation, air conditioning and
power systems, as well as dual electric utility feeds support all areas of the
IBX center. Power systems are designed and periodically tested to transparently
handle rapid transition from public utility power to back-up power. The AC
uninterruptable power supply and DC battery systems are configured to operate a
fully occupied IBX center for a minimum of fifteen minutes. If there is a
utility power failure, the on-site generator system could be brought on-line in
less than eight seconds through an automatic transfer switch to supply
seamless, uninterrupted power to the IBX center. The emergency generators,
located in a specially equipped area, supply power to the AC and DC systems.
On-site fuel tanks store sufficient fuel to power a fully occupied IBX center
for a minimum of 48 hours.
Operations Area. The operations area houses the IBX manager's office, an
operations center for staff technicians and office space for visiting Equinix
employees. It includes consoles for monitoring all IBX environmental systems
and for tracking all activities at the IBX center. In selected IBX centers,
this area will house regional operations centers that will monitor the
operations of several IBX centers.
Other Specifications
Security System. All access controls and other security functions are
connected to a central security computer system that controls access to the
interior and exterior perimeters of the IBX centers. An armed
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security guard located behind the bullet-resistant security console controls
access to the colocation area. The caged sections of the colocation area can
only be accessed through hand-geometry readers located on cage doors. CCTV
digital cameras connected to a central system at the security console monitor
and record all activity within the IBX center, as well as the perimeter and the
roof.
Staffing. A typical IBX center is staffed with nine Equinix employees,
including one IBX manager and eight technical service personnel who provide 24
hours per day, 365 days per year coverage for customer support needs. In
addition, an IBX facility has two armed security guards on duty at all times, a
chief engineer and 24-hour technical support.
Other. For security purposes, an Equinix IBX center is anonymous. No
indications of center ownership or function are visible from the exterior. In
addition, there are no raised floors and all walls are airtight and without
windows. Our IBX centers are designed with advanced fire suppression systems,
either a FM-200 gas type or a multi-zoned dry-pipe system, both of which are
armed with sensory mechanisms to sample the air and raise alarms before
pressurization or release. Finally, an Equinix IBX center is designed to
withstand a seismic event of 7.5 as measured on the Richter scale.
IBX Rollout Schedule
The objective of our global rollout strategy is to rapidly establish a
leadership position in the mission critical Internet and e-commerce market. We
intend to open approximately 15 IBX centers in major Internet markets in the
U.S. and internationally by the end of 2001. We opened our first IBX center in
late 1999 in the Washington, D.C. area, and in December 1999, we opened our
second IBX center in the New York metropolitan area and our third IBX center in
the Silicon Valley, California area in March 2000. In addition, we are
executing major expansions to our Washington, D.C. and Silicon Valley IBX
centers. The scalable nature of our IBX model enables us to be flexible in
response to changing market opportunities. As a result, the timing and
placement of our IBX centers will vary depending on numerous factors, including
customer need, technological and other developments.
In November 1999, the Company entered into a definitive agreement with MCI
Worldcom, or MCI, whereby MCI agreed to install high-bandwidth local
connectivity services to the Company's first seven IBX centers by a pre-
determined date in exchange for a warrant to purchase 675,000 shares of common
stock of the Company at $0.67 per share (the "MCI Warrant"). The MCI Warrant is
immediately exercisable and expires five years from the date of grant. As of
March 31, 2000, warrants for 187,500 shares are subject to repurchase at the
original exercise price if MCI's performance commitments are not completed.
In November 1999, the Company entered into a master agreement with Bechtel
Corporation, or Bechtel, whereby Bechtel agreed to act as the exclusive
contractor under a Master Agreement to provide program management, site
identification and evaluation, engineering and construction services to build
approximately 29 IBX centers over a four year period under mutually agreed upon
guaranteed completion dates. As part of the agreement, the Company granted
Bechtel a warrant to purchase 352,500 shares of the Company's common stock at
$1.00 per share (the "Bechtel Warrant"). The Bechtel Warrant is immediately
exercisable and expires five years from date of grant. As of March 31, 2000,
warrants for 281,988 shares are subject to repurchase at the original exercise
price, if Bechtel's performance commitments are not complete.
Sales and Marketing
Sales
We use a direct sales force to market our services to Internet and e-
commerce related businesses. We are organizing our sales force by customer
segments as well as establishing a sales presence in diverse geographic
regions, which will enable efficient servicing of the customer base from a
network of regional offices. A regional office is comprised of a manager, sales
representatives and technical support personnel. We also have
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reseller agreements with several large customers. These distribution channels
will account for a smaller portion of our business by design. In addition, our
sales team will work closely with each customer to foster the natural network
effect of our IBX model, resulting in access to a wider potential customer base
via our existing customers. As a result of the IBX interconnection model, IBX
participants encourage their customers, suppliers and business partners to also
come into the IBX. These customers, suppliers and business partners also, in
turn, encourage their business partners to locate in IBX centers resulting in
additional customer growth. This network effect significantly reduces Equinix's
customer acquisition costs.
Before opening an IBX center, we will focus on securing key anchor customers
and generating sales commitments for at least 20% of the available capacity.
Our sales strategy is to focus our efforts on the top 25 companies in our
customer segments, which include content providers, ASPs, e-commerce companies,
carriers, ISPs and site and performance management companies. Momentum in the
selling process and the presence of anchor customers are important to
attracting additional potential customers who see the IBX center as an
opportunity to generate new customers and revenues. We expect a substantial
number of customers to contract for services at multiple IBX centers and have
already received orders from such customers. At each IBX center, our sales
representatives will screen prospective customers and will manage the
population of the IBX center to ensure an appropriate mix of customer types.
Marketing
To support our sales effort and to actively promote and solidify the Equinix
brand, we plan to conduct comprehensive marketing programs. Our marketing
strategies will include an active public relations campaign, print
advertisements, online advertisements, trade shows, speaking engagements,
strategic partnerships and on-going customer communications programs. We are
focusing our marketing effort on business and trade publications, online media
outlets, industry events and sponsored activities. We participate in a variety
of Internet, computer and financial industry conferences and encourage our
officers and employees to pursue speaking engagements at these conferences. In
addition to these activities, we intend to build recognition through sponsoring
or leading industry technical forums and participating in Internet industry
standard-setting bodies.
Competition
Our market is new, rapidly evolving, and likely to have an increasing number
of competitors. To be successful in this emerging market, we must be able to
sufficiently differentiate our IBX model from existing colocation and web
hosting companies. We may also face competition from persons seeking to
replicate our IBX concept. We may not be successful in differentiating
ourselves or achieving widespread market acceptance of our business.
Furthermore, enterprises that have already invested substantial resources in
peering arrangements may be reluctant or slow to adopt our approach that may
replace, limit or compete with their existing systems. If we are unable to
complete our IBX centers in a timely manner, other companies will be able to
attract the same customers that we are targeting. Once the customers are
located in our competitors' facilities, it will be very difficult, if not
impossible, to convince them to relocate to our IBX centers.
We may encounter competition from a number of sources, some of which may
also be our customers, including:
. vertically integrated Web site hosting, colocation and ISP companies such
as AboveNet, Exodus, Frontier GlobalCenter and Globix;
. established communications carriers such as AT&T, Level 3, MCI WorldCom
and Qwest; and
. emerging colocation service providers such as Colo.com, and Telehouse.
Potential competitors may bundle their products or incorporate colocation
services in a manner that is more attractive to our potential customers than
purchasing cabinet space in our IBX centers and utilizing our
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services. Furthermore, new competitors or alliances among competitors may
emerge and rapidly acquire significant market share. Our competitors may be
able to respond more quickly to new or emerging technologies and changes in
customer requirements than we can.
Some of our potential competitors have longer operating histories and
significantly greater financial, technical, marketing and other resources than
we do. In particular, carriers and several hosting and colocation companies
have extensive customer bases and broad customer relationships that they can
leverage, including relationships with many of our potential customers. These
companies also have significantly greater customer support and professional
service capabilities than we do. Because of their greater financial resources,
some of these companies have the ability to adopt aggressive pricing policies.
As a result, in the future we may have to adopt pricing strategies that compete
with such competitors to attract and retain customers. Any such pricing
pressures would adversely affect our ability to generate revenues.
Employees
As of March 31, 2000, we had 136 full-time employees and 21 full-time
consultants. We had 104 employees based at our corporate headquarters in
Redwood City, California and our regional sales offices in New York, NY and
Reston, VA. Of those employees, 28 were in engineering and operations, 48 were
in sales and marketing and 28 were in management and finance. In addition, we
had 32 employees based at our Washington, D.C. Newark, N.J. and San Jose IBX
centers.
Properties
Our executive offices are currently located in Redwood City, CA and after
August 2000 will be located in Mountain View, CA. We have entered into lease
commitments for IBX centers in Ashburn, VA, Newark, NJ, San Jose and Los
Angeles, CA, Chicago, IL and Dallas, TX and Amsterdam, The Netherlands.
Relating to future IBX centers, we do not intend to own real estate or
buildings but rather continue to enter into lease agreements with a minimum
term of ten years, renewal options and rights of first refusal on space for
expansion.
Legal Proceedings
We are currently not involved in any litigation.
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MANAGEMENT
Officers, Key Employees and Directors
Our officers, key employees and directors, and their ages as of May 8, 2000,
are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Albert M. Avery, IV......... 56 President, Chief Executive Officer and Director
Jay S. Adelson.............. 29 Vice President, Engineering, Chief Technology
Officer and Director
Philip J. Koen.............. 48 Chief Financial Officer and Secretary
Marjorie S. Backaus......... 38 Vice President, Marketing
Roy A. Earle................ 43 Vice President, IBX Development
Peter T. Ferris............. 42 Vice President, Worldwide Sales
Renee F. Lanam.............. 37 General Counsel
Gregory F. McHugh........... 51 Vice President, Operations
William B. Norton........... 36 Director of Business Development
Andrew S. Rachleff.......... 41 Director
John G. Taysom.............. 46 Director
Michelangelo Volpi.......... 33 Director
</TABLE>
Albert M. Avery, IV, one of our founders, has served as Equinix's president,
chief executive officer and a director since our inception in June 1998. During
the period from February 1996 to June 1998, Mr. Avery was general manager of
the Palo Alto Internet Exchange, or PAIX, of Digital Equipment Corporation, or
DEC, a division of Compaq. During the period from March 1994 to February 1996,
Mr. Avery served as chief of staff to the vice president of research and
advanced development at DEC. Before holding this position, Mr. Avery held a
variety of sales, business and engineering management roles at DEC, which he
joined in 1968. Mr. Avery holds a B.S. in electrical engineering from Lafayette
College and an M.S. in computing from the University of California at Los
Angeles.
Jay S. Adelson, one of our founders, has served as Equinix's vice president,
engineering, chief technology officer and a director since our inception in
June 1998. During the period from February 1997 to June 1998, Mr. Adelson was
operations manager at PAIX. Before joining PAIX, Mr. Adelson was a founding
member of Netcom On-Line Communications, Inc., an Internet services
corporation, where, during the period from January 1994 to February 1997, he
managed both access and network operations. Mr. Adelson holds a B.S. in
communications from Boston University.
Philip J. Koen has served as Equinix's chief financial officer and secretary
since July 1999. Before joining Equinix, Mr. Koen was employed at PointCast,
Inc., an Internet company, where he served as chief executive officer during
the period from March 1999 to June 1999; chief operating officer during the
period from November 1998 to March 1999; and chief financial officer and
executive vice president responsible for software development, network
operations, finance, information technology, legal and human resources during
the period from July 1997 to November 1998. From December 1993 to May 1997, Mr.
Koen was vice president of finance and chief financial officer of Etec Systems,
Inc., a semi-conductor equipment company. Mr. Koen currently serves as a
director of Zitel Corporation and of Centura Software Corp., both public
companies. Mr. Koen holds a B.A. in economics from Claremont McKenna University
and an M.B.A. from the University of Virginia.
Marjorie S. Backaus has served as Equinix's vice president, marketing since
November 1999. During the period from August 1996 to November 1999, Ms. Backaus
was vice president of marketing at Global One, a telecommunications company.
From November 1987 to August 1996, Ms. Backaus served in various positions at
AT&T, including that of division manager, DirecTV. Ms. Backaus holds a B.B.A.A.
in accounting from Kennesaw State University and an M.B.A. from Emory
University.
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Roy A. Earle has served as Equinix's vice president, IBX development since
November 1999. Before joining Equinix, Mr. Earle was employed at Etec Systems,
a semiconductor equipment company where he served as vice president and general
manager of display products from September 1997 to November 1999 and as vice
president for operations from October 1995 to September 1997. From July 1994 to
October 1995, Mr. Earle served as chief operating officer and plant manager at
Temic Siliconix, a semiconductor company. Mr. Earle holds a B.S. in chemistry
from the University College in Dublin, Ireland and an M.S. in materials science
from the University of Sheffield in the United Kingdom.
Peter T. Ferris has served as Equinix's vice president, worldwide sales
since July 1999. During the period from June 1997 to July 1999, Mr. Ferris was
vice president of sales for Frontier Global Center, a provider of complex web
site hosting services. From June 1996 to June 1997, Mr. Ferris served as vice
president, eastern sales at Genvity Inc., an Internet services provider. From
December 1993 to June 1996, Mr. Ferris was vice president, mid-Atlantic sales
at MFS DataNet Inc., a telecommunications services provider. Mr. Ferris holds a
B.A. in economics from Ohio Wesleyan University.
Renee F. Lanam has served as Equinix's general counsel and assistant
secretary since April 2000. Before joining Equinix, Ms. Lanam was employed at
the law firm of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
("Gunderson Dettmer"), where she was an associate from January 1996 to January
2000 and a partner from January 2000 to April 2000. Prior to joining Gunderson
Dettmer, Ms. Lanam was associate at the law firms of Jackson, Tufts, Cole &
Black and Brobeck, Phleger & Harrison, LLP. Ms. Lanam holds a B.A. in political
science from the University of California at Los Angeles and a J.D. from the
University of Notre Dame.
Gregory F. McHugh has served as Equinix's vice president, operations since
March 1999. During the period from February 1996 to March 1999, Mr. McHugh was
a principal at Pittiglio, Rabin, Todd & McGrath, a high-technology consulting
firm. During the period from September 1993 to November 1995, Mr. McHugh was
vice president of operations for Cadence Design Systems, an electronic design
firm. Mr. McHugh has held a number of executive roles in information systems
for such companies as Quantum, Analog Devices, National Semiconductor and
Motorola. He also has experience managing service operations and Internet
services at Pacific Bell. Mr. McHugh holds a B.S. in engineering from San
Francisco State University and an M.S.E.E. in electrical engineering from
Stanford University.
William B. Norton, one of our founders, has served as Equinix's director of
business development since October 1998. During the period from October 1987 to
September 1998, Mr. Norton, an industry-recognized speaker and panelist, was
manager of Internet engineering at Merit Network, Inc., a not-for-profit
corporation in support of higher education networks, and led the North American
Network Operators Group, the Internet network operations forum for the United
States and Canada. Mr. Norton holds a B.A. in computer science from the State
University of New York, Potsdam and an M.B.A. from the University of Michigan
School of Business Administration.
Andrew S. Rachleff has served as a director of Equinix since September 1998.
Mr. Rachleff has served as a general partner of Benchmark Capital, a Menlo
Park-based venture capital firm, since its founding in May 1995. Since May
1986, Mr. Rachleff has served as a general partner of Merrill, Pickard,
Anderson & Eyre. Mr. Rachleff currently serves as a director of several
privately held companies and of NorthPoint Communications, Inc., a public
company and one of our stockholders. Mr. Rachleff holds a B.S. from the
University of Pennsylvania and an M.B.A. from the Stanford Graduate School of
Business.
John G. Taysom has served as a director of Equinix since March 2000. Mr.
Taysom has been employed by Reuters Plc., a global television and news agency,
since 1982, most recently as managing director of the Reuters Greenhouse Fund.
Mr. Taysom currently serves as a director of Tibco Software Inc., Digimarc
Corp., and several privately held companies. Mr. Taysom holds a B.Sc. in
economics from Bath University in the United Kingdom.
39
<PAGE>
Michelangelo Volpi has served as a director of Equinix since November 1999.
Mr. Volpi has served in various capacities at Cisco Systems, a data
communications equipment manufacturer, since 1994, most recently as chief
strategy officer. Mr. Volpi holds a B.S. and an M.S. in mechanical engineering
from Stanford University and an M.B.A. from the Stanford Graduate School of
Business.
Director Compensation
Directors do not receive compensation for services provided as a director or
for participation on any committee of the board of directors. Directors are not
reimbursed for their out-of-pocket expenses in serving on the board of
directors or any committee of the board of directors. Directors are eligible
for option grants under our 1998 Stock Plan.
Compensation Committee Interlocks and Insider Participation
No interlocking relationship exists between any member of our board of
directors and any member of the board of directors or compensation committee of
any other company, and no such interlocking relationship has existed in the
past. Currently, we do not have a compensation committee. Instead, compensation
related decisions are made by the entire board of directors.
Indemnification
To the fullest extent permitted by applicable law, our amended and restated
certificate of incorporation authorizes us to provide indemnification of, and
advancement of expenses to, our agents and any other persons to whom the
Delaware General Corporation Law permits us to provide indemnification, in
excess of the indemnification and advancement otherwise permitted by the
Delaware General Corporation Law. Our authorization is subject only to limits
created by the Delaware General Corporation Law relating to actions for breach
of duty to Equinix, our stockholders and others.
Our bylaws provide for mandatory indemnification of our directors to the
fullest extent permitted by Delaware law and for permissive indemnification of
any person, other than a director, made party to any action, suit or proceeding
by reason of the fact that he or she is or was our officer or employee.
We have also entered into indemnification agreements with our officers and
directors containing provisions that may require us to indemnify such officers
and directors against liabilities that may arise by reason of their status or
service as directors or officers, other than liabilities arising from willful
misconduct of a culpable nature, and to advance their expenses incurred as a
result of any proceeding against them as to which they could be indemnified.
40
<PAGE>
Executive Compensation
The following table sets forth compensation information for the period from
June 1998 through December 31, 1999 paid by us for services by our chief
executive officer and our other highest-paid executive officers whose total
annualized salary and bonus for such fiscal year exceeded $100,000:
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards
------------------- ----------------------
Securities
Name and Principal Position Salary($) Bonus($) Underlying Options(#)
- --------------------------- --------- --------- ----------------------
<S> <C> <C> <C>
Albert M. Avery, IV............... $ 178,020 0(1)
President, Chief Executive Officer
and Director
Jay S. Adelson.................... $ 173,754 0(1)
Vice President, Engineering, Chief
Technology Officer and Director
Peter T. Ferris................... $ 187,583 510,000
Vice President, Worldwide Sales
</TABLE>
- --------
(1) Each of Messrs. Avery and Adelson purchased 3,030,000 shares of restricted
stock on June 22, 1998 in accordance with a Stock Purchase Agreement. Each
agreed to amend their stock purchase agreement on July 30, 1998 to subject
2,727,000 of the shares to vesting restrictions. Pursuant to the amendment,
the 2,727,000 shares will vest in 48 monthly installments from June 22,
1998. The purchaser will also vest in 25% of the shares if his employment
is involuntarily terminated and will vest in all of the shares if his
employment is involuntarily terminated within 12 months following a change
in control of Equinix. As of December 31, 1999, Messrs. Avery and Adelson
had each vested in 1,022,625 of the restricted shares and the restricted
shares had a value of $4,549,829, which represents 1,704,375 shares valued
at $2.67 per share less $0.0003, the price paid per share.
41
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth the only grant of stock options made during
the fiscal year ended December 31, 1999 to the named executive officers. We
have not granted stock appreciation rights. The option listed in the table is
immediately exercisable. The shares purchasable thereunder are subject to
repurchase by Equinix at the original exercise price paid per share upon the
optionee's cessation of service prior to vesting in such shares. The repurchase
right on his option lapses and he vests as to 25% of the option shares upon
completion of one year of service from the date of grant and the balance in a
series of equal monthly installments over the next 36 months of service
thereafter. Mr. Ferris' option will vest in 12 months worth of stock upon a
change in control of Equinix. The exercise price for each option was equal to
the fair market value of our common stock as determined by our board of
directors on the date of grant. The exercise price may be paid in cash, in
shares of our common stock valued at fair market value on the exercise date or
through a cashless exercise procedure involving a same-day sale of the
purchased shares. We may also finance the option exercise by loaning the
optionee sufficient funds to pay the exercise price for the purchased shares,
together with any federal and state income tax liability incurred by the
optionee in connection with such exercise. We have calculated the potential
realizable value based on the term of the option at the time of grant (ten
years) and we assumed stock price appreciation of 5% and 10% in accordance with
the rules promulgated by the Securities and Exchange Commission; this does not
represent our prediction of our stock price performance. The potential
realizable values at 5% and 10% appreciation are calculated by assuming that
the exercise price on the date of grant appreciates at the indicated rate for
the entire term of the option and that the option is exercised at the exercise
price and sold on the last day of its term at the appreciated price.
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------
Potential
Realizable
Value at
Assumed
Annual Rates
of Stock
Price
Number of Appreciation
Securities % of Total for Option
Underlying Options Granted Exercise Term
Options to Employees in Price Expiration -------------
Name Granted(#) Fiscal Year ($/Sh) Date 5%($) 10%($)
---- ---------- --------------- -------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Albert M. Avery, IV..... 0 -- -- -- -- --
Jay S. Adelson.......... 0 -- -- -- -- --
Peter T. Ferris......... 510,000 8.4% 0.067 6/30/09 21,382 54,187
</TABLE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
None of the named executive officers exercised options during the fiscal
year ended December 31, 1999. The following table sets forth for each of the
named executive officers the number and value of securities underlying
unexercised options that are held by the named executive officers as of
December 31, 1999. Since our options are immediately exercisable at grant, any
shares purchased under those options will be subject to repurchase by us, at
the original exercise price paid per share, upon the optionee's cessation of
service with Equinix, prior to vesting in such shares. Accordingly, we have
chosen to report the number of the underlying shares that are vested and the
number unvested as of December 31, 1999. The heading "Vested" refers to shares
no longer subject to repurchase; the heading "Unvested" refers to shares
subject to repurchase as of December 31, 1999. Our board has determined that
the fair market value of our common stock on December 31, 1999 was $2.67 per
share.
<TABLE>
<CAPTION>
Number of Value of Unexercised
Securities Underlying in-the-Money
Unexercised Options at Options at
December 31, 1999 (#) December 31, 1999 ($)
---------------------- -----------------------
Name Vested Unvested Vested Unvested
- ---- ---------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Albert M. Avery, IV.......... 0 0 0 0
Jay S. Adelson............... 0 0 0 0
Peter T. Ferris.............. 0 510,000 0 1,327,530
</TABLE>
42
<PAGE>
Employee Benefit Plan
1998 Stock Plan
Share Reserve. Our board of directors adopted our 1998 Stock Plan on
September 10, 1998. Our stockholders have also approved this plan. We have
reserved 15,012,810 shares of our common stock for issuance under the 1998
Stock Plan. In general, if options or shares awarded under the 1998 Stock Plan
are forfeited, then those options or shares will again become available for
awards under the 1998 Stock Plan.
Administration. Our board of directors administers the 1998 Stock Plan. The
board has the complete discretion to make all decisions relating to the
interpretation and operation of our 1998 Stock Plan. The board has the
discretion to determine who will receive an option, what type of option it will
be, how many shares will be covered by the option, what the vesting
requirements will be, if any, and what the other features and conditions of
each option will be. The board may also reprice outstanding options and modify
outstanding options in other ways.
Eligibility. The following groups of individuals are eligible to participate
in the 1998 Stock Plan:
. Employees;
. Non-employee members of our board of directors; and
. Consultants.
Types of Awards. The 1998 Stock Plan provides for the following types of
awards:
. Incentive stock options to purchase shares of our common stock;
. Nonstatutory stock options to purchase shares of our common stock; and
. Restricted stock.
Options. An optionee who exercises an incentive stock option may qualify for
favorable tax treatment under Section 422 of the Internal Revenue Code of 1986.
However, nonstatutory stock options do not qualify for such favorable tax
treatment. The exercise price for incentive stock options granted under the
1998 Stock Plan may not be less than 100% of the fair market value of our
common stock on the option grant date. In the case of nonstatutory stock
options, the minimum exercise price is 85% of the fair market value of our
common stock on the option grant date. Optionees may pay the exercise price by
using:
. Cash;
. Shares of common stock that the optionee already owns;
. An immediate sale of the option shares through a broker designated by us;
or
. A loan from a broker designated by us, secured by the option shares.
Options vest at the time or times determined by our board of directors. In
most cases, our options will vest over a four-year period following the date of
grant. Options generally expire 10 years after they are granted, however they
generally expire earlier if the optionee's service terminates earlier.
Restricted Shares. Restricted shares may be awarded under the 1998 Stock
Plan in return for:
. Cash;
. Services previously provided to us; and
. Services to be provided to us in the future, except that the par value of
such shares, if newly issued, shall be paid in cash.
Restricted shares vest at the time or times determined by the board.
43
<PAGE>
Change in Control. If a change in control of Equinix occurs, an option or
restricted stock award under the 1998 Stock Plan will generally become fully
vested. However, if the surviving corporation assumes the option stock award or
option or replaces it with a comparable option, then vesting will not
accelerate. An option or stock award will become fully exercisable and fully
vested if the holder's employment or service is involuntarily terminated within
12 months following the change in control. A change in control includes:
. A merger or consolidation of Equinix with or into another entity or any
other corporate reorganization, if persons who were not our shareholders
immediately before the transaction own immediately after the transaction
50% or more of the voting power of the outstanding securities of each of
(a) the continuing or surviving entity and (b) any direct or indirect
parent corporation of such continuing or surviving entity; after which
our own stockholders own 50% or less of the surviving corporation, or its
parent company; or
. A sale of all or substantially all of our assets.
Amendments or Termination. Our board of directors may amend or terminate the
1998 Stock Plan at any time. If our board amends the plan, stockholder approval
is not required unless such approval is otherwise required under applicable
law. The 1998 Stock Plan will continue in effect until September 9, 2008,
unless the board decides to terminate the plan earlier.
Employment Agreements and Change of Control Arrangements
The board of directors, as plan administrator of the 1998 Stock Plan, has
the authority to provide for accelerated vesting of the shares of common stock
subject to outstanding options held by our officers and any other person in
connection with certain changes in control of Equinix. In connection with our
adoption of the 1998 Stock Plan, we have provided that upon a change in control
of Equinix, each outstanding option and all shares of restricted stock will
generally become fully vested unless the surviving corporation assumes the
option or award or replaces it with a comparable award.
Except for Mr. Ferris, none of the executive officers have employment
agreements with Equinix, and their employment may be terminated at any time.
Equinix has entered into an agreement with Mr. Ferris, our Vice President of
Sales, dated June 28, 1999 which provides that his salary shall be $190,000 per
year and he is eligible for a target bonus of $60,000. The agreement provides
for the grant of an option to purchase 510,000 shares of common stock at the
fair market value on the grant date vesting over 4 years. The agreement also
provides that we will extend a loan to Mr. Ferris of up to $750,000. Should
Equinix be acquired before an initial public offering of its equity securities,
we have agreed to pay Mr. Ferris a cash bonus equal to the difference between
$1,000,000 and the amount Mr. Ferris receives for his shares of Equinix stock.
The agreement also provides for acceleration of vesting of option shares as if
Mr. Ferris remained employed for one additional year if there are certain
changes in control of Equinix. We also agreed to indemnify Mr. Ferris for any
claims brought by his former employer under an employment and non-compete
agreement he had with this employer.
44
<PAGE>
RELATED-PARTY TRANSACTIONS
Since inception, there has not been, nor is there currently proposed, any
transaction or series of similar transactions to which we were or are to be a
party in which the amount involved exceeds $60,000 and in which any director,
executive officer or holder of more than 5% of our common stock, on an as
converted basis, or an immediate family member of any of these individuals or
entities, had or will have a direct or indirect interest other than:
. compensation arrangements, which are described where required under
"Management;" and
. the transactions described below.
Sale of Common Stock. In June 1998, we issued and sold 3,030,000 shares of
our common stock to Albert M. Avery, IV, our president, chief executive officer
and director, at a per share purchase price of $0.0003, which accounts for a
2.02 for one stock split on August 31, 1998 and a three for two stock split on
January 19, 2000.
In June 1998, we issued and sold 3,030,000 shares of our common stock to Jay
S. Adelson, our vice president, engineering and site development, chief
technology officer and director, at a per share purchase price of $0.0003,
which accounts for a 2.02 for one stock split on August 31, 1998 and a three
for two stock split on January 19, 2000.
Series A Preferred Stock Financing. In September 1998, we issued and sold
7,522,500 shares of our Series A preferred stock to Benchmark Capital Partners
II, L.P., a 5% stockholder of us, at a per share purchase price of $0.67 which
accounts for a three for two stock split on January 19, 2000. One of our
directors, Andrew S. Rachleff, is a general partner of Benchmark Capital, the
general partner of Benchmark Capital Partners II, L.P.
In September 1998, we issued and sold 5,775,000 shares of our Series A
preferred stock to Cisco Systems, Inc., a 5% stockholder of us, at a per share
purchase price of $0.67. One of our directors, Michelangelo Volpi, is a senior
vice president of Cisco Systems, Inc. which accounts for a three for two stock
split on January 19, 2000.
In January 1999, we issued and sold 3,000,000 shares of our Series A
preferred stock to Microsoft Corporation, a 5% stockholder of us, at a per
share purchase price of $0.67 which accounts for a three for two stock split on
January 19, 2000.
Series B Preferred Stock Financing. In August through November 1999, we
issued and sold 1,012,500 shares of our Series B preferred stock to Benchmark
Capital Partners II, L.P., at a per share purchase price of $5.33 which
accounts for a three for two stock split on January 19, 2000.
In September 1999, we issued and sold 684,375 shares of our Series B
preferred stock to Cisco Systems, Inc., at a per share purchase price of $5.33
which accounts for a three for two stock split on January 19, 2000.
In September 1999, we issued and sold 356,250 shares of our Series B
preferred stock to Microsoft Corporation, at a per share purchase price of
$5.33 which accounts for a three for two stock split on January 19, 2000.
In September 1999, we issued and sold 937,500 shares of our Series B
preferred stock to NorthPoint Communications, Inc. at a per share purchase
price of $5.33 which accounts for a three for two stock split on January 19,
2000. One of our directors, Andrew S. Rachleff, is also a director of
NorthPoint Communications, Inc.
Lease Agreement with Entity Affiliated with 5% Stockholder. In March 1999,
we entered into an equipment lease facility with Cisco Systems Credit
Corporation, an entity affiliated with Cisco Systems, Inc., under which we
leased $137,293 of equipment for a 24-month term. See "Description of Other
Indebtedness--Cisco Systems Credit Corporation Lease Facility" for a
description of this lease facility.
45
<PAGE>
Warrants to Purchase Common Stock. In August 1999, we issued warrants to
purchase 338,145 shares of our common stock, at a purchase price of $0.53 per
share, to NorthPoint Communications, Inc. in connection with a strategic
agreement which accounts for a three for two stock split on January 19, 2000.
Loans to Executive Officers In September 1999, we loaned an aggregate of
$750,000 to Peter Ferris, one of our executive officers, to purchase a
principal residence. The non-interest bearing note is secured by a second deed
of trust on the residence, a promissory note and a stock pledge agreement, and
has a term of five years. In January 2000, we loaned an aggregate of $250,000
to Marjorie Backaus, one of our executive officers, to purchase a principal
residence. The non-interest bearing note is secured by a second deed of trust
on the residence, a promissory note and a stock pledge agreement, and has a
term of five years. In addition, in December 1999 we loaned Ms. Backaus
$112,500. This amount was repaid in full in January 2000.
Relocation Allowance to Executive Officers. In July 1999, we granted a
relocation allowance in the amount of $60,000 to Peter Ferris. The full amount
of the allowance has been paid to Peter Ferris. In November 1999, we granted a
relocation allowance in the amount of $60,000 to Marjorie Backaus. To date,
Marjorie Backaus has not received any amount under the allowance.
Founders' Registration Rights. We have entered into an investors' rights
agreement that provides for registration rights in favor of Albert M. Avery, IV
and Jay S. Adelson if there are public issuances of our common stock.
Option Grants. In the past, we have granted options to our executive
officers. We may grant options to our directors and executive officers in the
future. See "Management--Option Grants in Last Fiscal Year."
Indemnification. We have entered into an indemnification agreement with each
of our officers and directors. See "Management--Indemnification" for a
description of the indemnification available to our officers and directors
under these indemnification agreements.
46
<PAGE>
PRINCIPAL STOCKHOLDERS
The table below presents selected information regarding beneficial ownership
of our outstanding common stock, on an as converted basis, as of March 31, 2000
for:
. each person known by us to own beneficially more than five percent, in
the aggregate, of the outstanding shares of our common stock on an as
converted basis;
. each of our directors, our chief executive officer and our four other
highest-paid executive officers; and
. all of our directors and executive officers as a group.
Under the rules of the Securities and Exchange Commission, beneficial
ownership includes sole or shared voting or investment power over securities
and includes the shares issuable under stock options that are exercisable
within 60 days of March 31, 2000. Shares issuable under stock options
exercisable within 60 days are considered outstanding for computing the
percentage of the person holding the options but are not considered outstanding
for computing the percentage of any other person.
Percentage ownership calculations are based on 46,418,629 shares of common
stock outstanding as of March 31, 2000, as adjusted to reflect the conversion
of all outstanding shares of preferred stock into common stock. Unless
otherwise indicated, the address for each listed stockholder is c/o Equinix,
Inc., 901 Marshall Street, Redwood City, California 94063. To our knowledge,
except as indicated in the footnotes to this table and under applicable
community property laws, the persons or entities identified in this table have
sole voting and investment power relating to all shares of stock shown as
beneficially owned by them.
<TABLE>
<CAPTION>
Number of Percentage
Beneficially Beneficially
Name of Beneficial Owner Owned Shares Owned
- ------------------------ ------------ ------------
<S> <C> <C>
Albert M. Avery, IV(1).............................. 2,580,000 5.6%
Jay S. Adelson (2).................................. 2,986,734 6.4
Philip J. Koen (3).................................. 660,000 1.4
Peter T. Ferris (4)................................. 510,000 1.1
Andrew S. Rachleff (5).............................. 8,535,000 18.4
2480 Sand Hill Road, Suite 200
Menlo Park, CA 94025
John G. Taysom (6).................................. -- --
85 Fleet Street
London EC4P 4AJ England
Michelangelo Volpi (7).............................. -- --
170 West Tasman Drive
San Jose, CA 95134
Entities affiliated with Benchmark Capital (8)...... 8,535,000 18.4
2480 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Cisco Systems, Inc. (9)............................. 6,459,375 13.9
170 West Tasman Drive
San Jose, CA 95134
Microsoft Corporation............................... 3,356,250 7.2
One Microsoft Way
Redmond, WA 98052
All directors and executive officers as a group (10
persons) (10)...................................... 16,509,234 35.1
</TABLE>
- --------
(1) Includes 1,590,750 shares subject to a right of repurchase by us as of
March 31, 2000.
47
<PAGE>
(2) Includes 1,590,750 shares subject to a right of repurchase by us as of
March 31, 2000. Also includes 6,474 shares held as custodian for Rowan
Sharon Adelson. Mr. Adelson disclaims beneficial ownership of these
shares.
(3) Includes 467,501 shares subject to a right of repurchase by us as of March
31, 2000.
(4) Includes 510,000 shares subject to a right of repurchase by us as of March
31, 2000.
(5) Includes shares held by Benchmark Capital Partners II, L.P., Benchmark
Founders' Fund II, L.P., Benchmark Founders' Fund II-A, L.P., and
Benchmark Members' Fund II, L.P. Mr. Rachleff is a managing member of
Benchmark Capital Management Co. II, L.L.C., which is the general partner
of Benchmark Capital Partners II, L.P., Benchmark Founders' Fund II, L.P.,
Benchmark Founders' Fund II-A, L.P., and Benchmark Members' Fund II, L.P.
Mr. Rachleff shares voting and dispositive power relating to the shares
held by each such entity and disclaims beneficial ownership of these
shares, except to the extent of his pecuniary interest in Benchmark
Capital Management Co. II, L.L.C., arising from his general partnership
interest.
(6) Mr. Taysom is employed by Reuters Plc., an entity affiliated with Reuters
Holding Switzerland SA which holds 937,500 shares of Equinix.
(7) Mr. Volpi is chief strategy officer of Cisco Systems, Inc., which
beneficially holds 6,459,375 shares of Equinix.
(8) Includes shares held by Benchmark Capital Partners II, L.P., Benchmark
Founders' Fund II, L.P., Benchmark Founders' Fund II-A, L.P., and
Benchmark Members' Fund II, L.P.
(9) Represents 5,775,000 shares held of record by Coastdock & Co., a wholly-
owned subsidiary of Cisco Systems, Inc., and 684,375 shares held of record
by Cisco Systems, Inc.
(10) Includes the shares described in Notes 1 through 7. Also includes 675,000
shares subject to options that are exercisable within 60 days of March 31,
2000 and 478,125 shares subject to a right of repurchase by us as of March
31, 2000.
48
<PAGE>
DESCRIPTION OF OTHER INDEBTEDNESS
Venture Lending & Leasing Equipment Acquisition Loan Facility
In August 1999, we entered into a $10.0 million equipment acquisition loan
facility with Venture Lending & Leasing, Inc. II, as the agent and principal
lender. The facility lenders will make advances up to:
. 85% of the acquisition cost of the equipment and tenant improvements for
our Newark, New Jersey IBX center; and
. 100% of the acquisition cost, to the extent that such cost does not
exceed $1.0 million, of certain customer acquisition and serving software
that we acquire for our headquarters.
Our obligations under the facility are secured by a first priority security
interest against the assets financed with the facility advances and the
customer acquisition and serving software that the facility lenders have agreed
to finance. We can request facility advances until June 2000. As of March 31,
2000 we have drawn the entire $10.0 million against this loan facility.
Interest will accrue on the facility advances at the annual rate of 8.5%,
and the advances will be repaid in 42 equal monthly installments. In connection
with the last installment we will pay a final amount equal to 15% of the
original advance amount. We will have the right to prepay the advances, in
whole or in part, provided that we pay a prepayment premium equal to the
following percentage of the principal prepaid:
<TABLE>
<CAPTION>
Month of Term of Advance Prepaid Percentage
-------------------------------- ----------
<S> <C>
1-6 ....................................................... 8%
7-12....................................................... 7%
13-18....................................................... 6%
19-24....................................................... 5%
25-30....................................................... 4%
31-36....................................................... 3%
37-42....................................................... 2%
</TABLE>
In connection with this facility, we issued to the lenders warrants to
purchase Series A preferred stock at an exercise price of $3.00 per share. In
total, 300,000 shares can be acquired under the warrants, for an aggregate
exercise price equal to 9% of the facility commitment. The fair value of these
warrants, as determined using an option pricing model, has been recorded as a
deferred debt facility cost and will be amortized to interest expense on a
straight-line basis over the term of the facility.
The facility contains customary covenants that restrict our operations
relating to, among other things, incurring debt, granting security interests,
merging or consolidating with other entities, making loans and investments,
entering into affiliate transactions and changing our business. It does not
have any financial covenants. The facility contains customary events of
default, including non-payment of amounts due under the facility, default under
certain of our other obligations, breach of covenants set forth in the
facility, the existence of certain unstayed or undischarged judgments, the
making of materially false or misleading representations or warranties, the
commencement of reorganization, bankruptcy, insolvency or similar proceedings,
the occurrence of certain ERISA events or certain change of control events.
Comdisco Equipment Lease Facility
In May 1999, we entered into a $1.0 million equipment lease finance facility
with Comdisco, Inc. In August 1999, Comdisco amended this facility and
increased its total lease financing commitment by $5.0 million.
Under the original $1.0 million commitment, which we can draw down through
May 2000, Comdisco will lease to us equipment, software and tenant improvements
for our corporate headquarters, on the condition that the dollar amount of the
software and tenant improvements financed does not exceed 20% of this
commitment. Each lease schedule under this commitment is for 42 months, with
monthly lease payments in the amount of
49
<PAGE>
2.698% of the acquisition cost of the leased property, for an implied annual
interest rate of 16.2%. When the term for a schedule covering equipment
expires, we will have the option of returning the leased property to Comdisco,
negotiating with Comdisco for an extension of the lease term or purchasing the
property at its then fair market value, to the extent that such value does not
exceed 15% of the equipment's original acquisition cost. When the term for a
schedule covering software and tenant improvements expires, we must make a
final payment equal to 15% of the original acquisition cost of the software and
tenant improvements. As of March 31, 2000, we have leased a total of $661,000
in equipment under this facility.
Under the $5.0 million increased commitment, which we can draw down until
August 2000, Comdisco will lease to us equipment, software and tenant
improvements for our San Jose, California IBX center, provided that the dollar
amount of the software and tenant improvements financed does not exceed 57% of
this commitment. Each lease schedule under this commitment is for 42 months,
with monthly lease payments in the amount of 2.742% of the acquisition cost of
the leased property, for an implied annual interest rate of 8.5%. Upon
executing a lease schedule, we must pay the first and last months rent in
advance. When the term for a schedule covering the San Jose IBX center expires,
we must make a final payment equal to 15% of the original acquisition cost of
the property financed under the schedule. To date, we have not leased any
amount under this commitment.
In connection with the original $1.0 million lease commitment, we issued to
Comdisco a warrant to acquire 30,000 shares of Series A preferred stock at a
purchase price of $1.67 per share, as adjusted to reflect a three-for-two
forward split of our capital stock effected on January 19, 2000. In connection
with the $5.0 million increase in the facility commitment, we issued to
Comdisco a warrant to acquire 150,000 shares of Series A preferred stock at a
purchase price of $3.00 per share, as adjusted to reflect a three-for-two
forward split of our capital stock effected on January 19, 2000. The fair value
of these warrants, as determined using an option pricing model, has been
recorded as a deferred debt facility cost and will be amortized on a straight-
line basis to interest expense over the term of the facility.
The facility restricts our ability to merge or consolidate with another
entity. It does not contain any financial covenants. The facility contains
customary equipment lease events of default, including non-payment of amounts
due under the facility, breach of covenants set forth in the facility, the
making of materially false or misleading representations or warranties under
the facility, and the commencement of reorganization, bankruptcy, insolvency or
similar proceedings involving us.
Comdisco Equipment Loan Facility
In March 1999, Equinix-DC, Inc., our wholly owned subsidiary and the
operator of our Washington, D.C. IBX center, entered into a $7.0 million
equipment acquisition loan facility with Comdisco, Inc. Until March 2000,
Comdisco will make advances up to 100% of the acquisition cost of equipment,
tenant improvements and software for our Washington, D.C. IBX center, provided
that no more than 57% of the loan commitment may be used to finance tenant
improvements and software. Comdisco holds a first priority security interest in
all of Equinix-DC's assets as collateral for the facility obligations.
Advances that finance equipment acquisitions will accrue interest at the
annual rate of 7.5% and will be repaid in 42 monthly installments, and in
connection with the last installment we will pay a final amount equal to 15% of
the original advance amount. Advances that finance tenant improvements and
software acquisitions will accrue interest at the annual rate of 9% and will be
repaid in 36 monthly installments. In connection with the last installment, we
will pay a final amount equal to 15% of the original advance amount. We will
have the right to prepay the advances, in whole or in part, without paying any
penalty or premium. As at March 31, 2000, we have borrowed a total of $5.5
million under this facility. The remaining portion of the facility was drawn in
April 2000.
In connection with this facility, we issued to Comdisco a warrant to acquire
765,000 shares of our Series A preferred stock at a purchase price of $0.67 per
share, as adjusted to reflect a three-for-two forward split of our capital
stock effected on January 19, 2000. The fair value of these warrants, as
determined using an
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option pricing model, has been recorded as a deferred debt facility cost and
will be amortized on a straight-line basis to interest expense over the term of
the facility.
The facility contains covenants that restrict Equinix-DC's right to, among
other things, grant security interests, declare dividends, dispose of a
material portion of its assets, and enter into settlements with customers
relating to outstanding accounts. It does not have any financial covenants. The
facility contains customary events of default, including non-payment of amounts
due under the facility, default by Equinix-DC relating to certain of its other
obligations, breach of covenants set forth in the facility, the existence of
certain unstayed or undischarged judgments against Equinix-DC, the making of
materially false or misleading representations or warranties under the
facility, and the commencement of reorganization, bankruptcy, insolvency or
similar proceedings involving Equinix-DC.
Fore Financial Services Equipment Lease Facility
In June 1999, we entered into an equipment lease facility with Fore
Financial Services. Under the first lease schedule, we leased $197,440 in
equipment and software for our corporate headquarters. We are required to make
36 monthly lease payments of $5,943. Upon expiration of the initial lease term,
the term can be extended for another 6 months, or we can purchase the leased
property at its then fair market value. Under the second lease schedule, we
leased $208,298 in equipment and software for the Washington, D.C. IBX center.
We are required to make 36 monthly lease payments of $6,270. Upon expiration of
the initial lease term, the term can be extended for another 6 months, or we
can purchase the leased property at its then fair market value. Under the third
lease schedule, we leased $210,300 in equipment and software for our Newark,
New Jersey IBX center, effective November 1999. We are required to make 36
monthly lease payments of $6,379. Upon the expiration of the initial lease
term, the term can be extended for another 6 months, or we can purchase the
lease property at its then fair market value. Under the fourth lease schedule,
we leased $195,500 in equipment and software for our Silicon Valley, California
IBX center, effective December 1999. We are required to make 36 monthly lease
payments of $6,037. Upon the expiration of the initial lease term, the term can
be extended for another 6 months, or we can purchase the lease property at its
then fair market value.
The facility restricts our ability to merge or consolidate with another
entity or to sell all or substantially all of our assets, by treating such
events as defaults. It does not contain any financial covenants. The facility
contains customary equipment lease events of default, including non-payment of
amounts due under the facility, breach of covenants set forth in the facility,
the making of materially false or misleading representations or warranties
under the facility, and the commencement of reorganization, bankruptcy,
insolvency or similar proceedings involving us.
Cisco Systems Credit Corporation Lease Facility
In March 1999, we entered into an equipment lease facility with Cisco
Systems Credit Corporation. Under this facility, we have leased, for a 24-month
term, $137,293 in Cisco and Cisco-related equipment for our corporate
headquarters. We paid the first and last months' rent payments upon signing the
lease schedule. Each rent payment is $5,463. When the term expires, we will
have the option to purchase the leased property at its then fair market value.
The option will terminate, however, if default occurs during the term. If we do
not purchase the leased property, we will have the right to extend the lease
term in one-year increments with the same monthly payments.
The facility contains customary equipment lease events of default, including
non-payment of amounts due under the facility, breach of covenants set forth in
the facility and the commencement of reorganization, bankruptcy, insolvency or
similar proceedings involving us.
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THE EXCHANGE OFFER
Purpose of the Exchange Offer
Under the registration rights agreement, we are required to use our
reasonable best efforts to file not later than February 29, 2000, 90 days
following the date of original issuance of the initial notes, the registration
statement of which this prospectus is a part for a registered exchange offer
relating to an issue of new notes. The date of the original issuance of the
initial notes is also referred to as the "closing date". The new notes will be
substantially identical in all material respects to the initial notes except
that the new notes will be registered under the Securities Act, will not bear
legends restricting their transfer and will not be entitled to registration
rights under the registration rights agreement. This summary of provisions of
the registration rights agreement does not purport to be complete and we refer
you to the provisions of the registration rights agreement, which has been
filed as an exhibit to the registration statement of which this prospectus is a
part and a copy of which is available as described under the heading "Available
Information."
Under the registration rights agreement, we are required to:
. use our reasonable best efforts to cause the registration statement to be
declared effective no later than June 28, 2000, 210 days after the
closing date;
. use our reasonable best efforts to consummate the exchange offer within
30 days of the registration statement being declared effective; and
. keep the exchange offer effective for not less than 30 days, or longer if
required by applicable law, after the date that notice of the exchange
offer is mailed to holders of the initial notes.
The exchange offer being made here, if commenced and consummated within the
time periods described in this paragraph, will satisfy those requirements under
the registration rights agreement.
This prospectus, together with the letter of transmittal, is being sent to
all record holders of initial notes as of , 2000.
Based on interpretations by the staff of the Securities and Exchange
Commission, as set forth in no-action letters issued to third parties, we
believe that the exchange notes issued in the exchange offer may be offered for
resale, resold or otherwise transferred by each holder of exchange notes, other
than a broker-dealer who acquires the initial notes directly from Equinix for
resale under Rule 144A under the Securities Act or any other available
exemption under the Securities Act, and other than any holder that is an
"affiliate," as defined in Rule 405 under the Securities Act, of Equinix,
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such holder:
. is acquiring the exchange notes in the ordinary course of its business;
. is not participating in, and does not intend to participate in, a
distribution of such exchange notes within the meaning of the Securities
Act and has no arrangement or understanding with any person to
participate in a distribution of the exchange notes within the meaning of
the Securities Act; and
. is not an affiliate, as defined in Rule 405 under the Securities Act, of
Equinix.
By tendering the initial notes in exchange for exchange notes, each holder,
other than a broker-dealer, will be required to make representations to that
effect. If a holder of initial notes is participating in or intends to
participate in, a distribution of the exchange notes, or has any arrangement or
understanding with any person to participate in a distribution of the exchange
notes to be acquired in the exchange offer, such holder may be deemed to have
received restricted securities and may not rely on the applicable
interpretations of the staff of the Securities and Exchange Commission. Any
such holder will have to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction.
Each broker-dealer that receives exchange notes for its own account in
exchange for initial notes may be deemed to be an "underwriter" within the
meaning of the Securities Act and must acknowledge that it will
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deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such exchange notes. The letter of transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with offers to
resell, resales and other transfers of exchange notes received in exchange for
initial notes which were acquired by such broker-dealer as a result of market
making or other trading activities. We have agreed that we will make this
prospectus available to any broker-dealer for a period of time not to exceed
180 days after the consummation of the exchange offer for use in connection
with any such offer to resell, resale or other transfer. Please refer to the
section in this prospectus entitled "Plan of Distribution."
Shelf Registration Statement
In the event that:
. because of any change in law or its applicable interpretations by the
staff of the Securities and Exchange Commission, we are not permitted to
effect the exchange offer;
. for any other reason, the exchange offer is not consummated within 210
days from the closing date; or
. any holder of initial notes notifies us within 20 business days following
the consummation of the exchange offer that (a) such holder was
prohibited by law of policy of the Securities and Exchange Commission
from participating in the exchange offer, or (b) such holder may not
resell the exchange notes acquired by it in the exchange offer to the
public without delivering a prospectus and this prospectus is not
appropriate or available for such resale, or (c) such holder is a broker-
dealer and holds notes acquired directly from us or any of our
affiliates, within the meaning of the Securities Act;
we will be obligated, at our sole expense, to:
. use our reasonable best efforts, as promptly as practicable and in no
event more than 30 days following such request, to file with the
Securities and Exchange Commission a shelf registration statement
covering resales of the initial notes;
. use our reasonable best efforts to cause the shelf registration statement
to be declared effective under the Securities Act within 90 days after
the date we are required to file a shelf registration statement; and
. use our reasonable best efforts to keep the shelf registration statement
continuously effective, supplemented and amended as required by the
Securities Act to permit the prospectus which is a part of such shelf
registration statement to be usable by holders for a period of two years
after the shelf registration statement is declared effective or such
shorter period of time that will terminate when all of the applicable
initial notes have been sold thereunder.
We will, in the event that a shelf registration statement is filed, provide
to each holder of the initial notes being registered copies of the prospectus
that is a part of the shelf registration statement, notify each such holder
when the shelf registration statement has become effective and take certain
other actions as are required to permit unrestricted resales of the initial
notes being registered. A holder that sells initial notes under the shelf
registration statement will be required to be named as a selling security
holder in the related prospectus and to deliver a prospectus to purchasers,
will be subject to certain of the civil liability provisions under the
Securities Act in connection with such sales and will be bound by the
provisions of the registration rights agreement that are applicable to such a
holder, including certain indemnification rights and obligations.
Liquidated Damages
In the event that:
. we do not file the registration statement or the shelf registration
statement, as the case may be, with the Securities and Exchange
Commission on or before the dates specified above for such filings;
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. the registration statement or the shelf registration statement, as the
case may be, is not declared effective on or before the dates specified
above for such effectiveness;
. the exchange offer is not consummated within 30 days of the registration
statement being declared effective; or
. the shelf registration statement is filed and declared effective but
thereafter ceases to be effective or usable in connection with its
intended purpose;
each such event a "Registration Default," then we will be obligated to pay to
each holder of transfer restricted securities, as defined in the registration
rights agreement, liquidated damages. Liquidated damages will accrue and be
payable semi-annually on the initial notes and the exchange notes, in addition
to the stated interest on the initial notes and the exchange notes, in an
amount equal to 0.50% per year during the first 90-day period, which will
increase by 0.50% per year for each subsequent 90-day period, but in no event
will such rate exceed 1.50% per year in the aggregate, regardless of the number
of registration defaults. Liquidated damages will accrue from the date a
registration default occurs until the date on which:
. the registration statement is filed;
. the registration statement or shelf registration statement is declared
effective and the exchange offer is consummated;
. the shelf registration statement is declared effective; or
. the shelf registration statement again becomes effective or made usable,
as the case may be.
Following the cure of all registration defaults, the accrual of liquidated
damages will cease.
Upon consummation of the exchange offer, subject to certain exceptions,
holders of initial notes who do not exchange their initial notes for exchange
notes in the exchange offer will no longer be entitled to registration rights
and will not be able to offer or sell their initial notes, unless such initial
notes are subsequently registered under the Securities Act, which, subject to
certain limited exceptions, we will have no obligation to do, or under an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. Please refer to the section in this
prospectus entitled "Risk Factors--There could be negative consequences to you
if you do not exchange your initial notes for exchange notes."
Expiration of the Exchange Offer
The exchange offer will expire at 5:00 p.m., New York City time, on ,
2000. The expiration date will be at least 30 days after the commencement of
the exchange offer in accordance with Rule 14e-1(a) under the Securities
Exchange Act of 1934 and the registration rights agreement.
Procedures for Tendering Initial Notes
To tender your initial notes in the exchange offer, you must complete, sign
and date the letter of transmittal, or a facsimile of the letter of
transmittal, have the signatures thereon guaranteed if required by the letter
of transmittal, and mail or otherwise deliver the letter of transmittal or the
facsimile, or an agent's message, as defined below, together with the
certificates representing the initial notes being tendered and any other
required documents, to the exchange agent on or before 5:00 p.m., New York City
time, on the expiration date. Alternatively, you may either:
. send a timely confirmation of a book-entry transfer of such initial
notes, if such procedure is available, into the exchange agent's account
at The Depository Trust Company, or DTC, following the procedure for
book-entry transfer described below, on or before 5:00 p.m. on the
expiration date; or
. comply with the guaranteed delivery procedures described below.
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The term "agent's message" means a message, transmitted by DTC to, and
received by, the exchange agent and forming a part of a book-entry
confirmation, which states that DTC has received an express acknowledgment from
the participant in DTC tendering initial notes which are the subject of such
book-entry confirmation that such participant has received and agrees to be
bound by the terms of the letter of transmittal, and that we may enforce such
agreement against such participant.
The method of delivery of the initial notes, the letter of transmittal and
all other required documents is at your election and risk. Instead of delivery
by mail, we recommend that you use an overnight or hand-delivery service. If
such delivery is by mail, we recommend that you use registered mail, properly
insured, with return receipt requested. In all cases, you should allow
sufficient time to assure timely delivery. You should not send any letters of
transmittal or initial notes to us. You must deliver all documents to the
exchange agent at its address set forth below. You may also request your
respective brokers, dealers, commercial banks, trust companies or nominees to
effect such tender on your behalf.
Your tender of initial notes will constitute an agreement between you and us
in accordance with the terms and subject to the conditions set forth in this
prospectus and in the letter of transmittal.
Only a holder of initial notes may tender such initial notes in the exchange
offer. The term "holder" relating to the exchange offer means any person in
whose name initial notes are registered on our books or any other person who
has obtained a properly completed bond power from the registered holder.
If you are the beneficial owner of initial notes that are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
you wish to tender your initial notes, you should contact such registered
holder promptly and instruct such registered holder to tender on your behalf.
If you wish to tender on your own behalf, you must, before completing and
executing the letter of transmittal and delivering your initial notes, either
make appropriate arrangements to register ownership of the initial notes in
your name or obtain a properly completed bond power from the registered holder.
The transfer of registered ownership may take considerable time.
Signatures on a letter of transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor" institution within the meaning of Rule
17Ad-15 under the Securities Exchange Act of 1934, each, an "eligible
institution", unless the initial notes are tendered:
. by a registered holder, or by a participant in DTC whose name appears on
a security position listing as the owner, who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the letter of transmittal if the exchange notes are
being issued directly to such registered holder, or deposited into the
participant's account at DTC; or
. for the account of an eligible institution.
If the letter of transmittal is signed by the recordholder(s) of the initial
notes tendered, the signature must correspond with the name(s) written on the
face of the initial notes without alteration, enlargement or any change
whatsoever. If the letter of transmittal is signed by a participant in DTC, the
signature must correspond with the name as it appears on the security position
listing as the holder of the initial notes.
If the letter of transmittal is signed by a person other than the registered
holder of any initial notes listed, such initial notes must be endorsed or
accompanied by bond powers and a proxy that authorize such person to tender the
initial notes on behalf of the registered holder in satisfactory form to us as
determined in our sole discretion, in each case as the name of the registered
holder or holders appears on the initial notes.
If the letter of transmittal or any initial notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or
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representative capacity, such persons should so indicate when signing. Unless
waived by us, evidence satisfactory to us of their authority to so act must
also be submitted with the letter of transmittal.
A tender will be deemed to have been received as of the date when the
tendering holder's duly signed letter of transmittal accompanied by the initial
notes tendered, or a timely confirmation received of a book-entry transfer of
initial notes into the exchange agent's account at DTC with an agent's message,
or a notice of guaranteed delivery from an eligible institution is received by
the expiration date. Issuances of exchange notes in exchange for initial notes
tendered under a notice of guaranteed delivery by an eligible institution will
be made only against delivery of the letter of transmittal, and any other
required documents, and the tendered initial notes, or a timely confirmation
received of a book-entry transfer of initial notes into the exchange agent's
account at DTC with an agent's message, with the exchange agent.
All questions as to the validity, form, eligibility, including time of
receipt, acceptance and withdrawal of the tendered initial notes will be
determined by us in our sole discretion, which determination will be final and
binding. We reserve the absolute right to reject any and all initial notes not
properly tendered or any initial notes which, if accepted, would, in our
opinion or our counsel's opinion, be unlawful. We also reserve the absolute
right to waive any conditions of the exchange offer or irregularities or
defects in tender as to particular initial notes. Our interpretation of the
terms and conditions of the exchange offer, including the instructions in the
letter of transmittal, will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of initial notes must
be cured within such time as we shall determine. We, the exchange agent or any
other person will be under no duty to give notification of defects or
irregularities relating to tenders of initial notes. None of us or the exchange
agent will incur any liability for failure to give such notification. Tenders
of initial notes will not be deemed to have been made until such irregularities
have been cured or waived. Any initial notes received by the expiration date
that are not properly tendered and as to which the defects or irregularities
have not been cured or waived will be returned without cost by the exchange
agent to the tendering holders of such initial notes, unless otherwise provided
in the letter of transmittal, as promptly as practicable following the
expiration date.
In addition, we reserve the right in our sole discretion, subject to the
provisions of the indenture, to:
. purchase or make offers for any initial notes that remain outstanding
after the expiration date, or, as set forth under "--Expiration Date", to
terminate the exchange offer in accordance with the terms of the
registration rights agreement; and
. to the extent permitted by applicable law, purchase initial notes in the
open market, in privately negotiated transactions or otherwise. The terms
of any such purchases or offers could differ from the terms of the
exchange offer.
Acceptance of Initial Notes for Exchange; Delivery of Exchange Notes
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will accept all initial notes properly tendered, promptly after the
expiration date, and will issue the exchange notes promptly after the
expiration date and acceptance of the initial notes. Please refer to the
section of this prospectus entitled "--Conditions" below. For purposes of the
exchange offer, initial notes will be deemed to have been accepted as validly
tendered for exchange when, as and if we had given oral or written notice to
the exchange agent.
In all cases, issuance of exchange notes for initial notes that are accepted
for exchange in the exchange offer will be made only after timely receipt by
the exchange agent of certificates for such initial notes or a timely book-
entry confirmation of such initial notes into the exchange agent's account at
the book-entry transfer facility, a properly completed and duly executed letter
of transmittal or an agent's message and all other required documents, in each
case, in form satisfactory to us and the exchange agent. If any tendered
initial notes are not accepted for any reason set forth in the terms and
conditions of the exchange offer or if initial notes are submitted for a
greater principal amount than the holder desires to exchange, such unaccepted
or non-exchanged initial notes will be returned without expense to the
tendering holder, or, in the case
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of initial notes tendered by book-entry transfer procedures described below,
such non-exchanged initial notes will be credited to an account maintained with
such book-entry transfer facility, as promptly as practicable after withdrawal,
rejection of tender, the expiration date or earlier termination of the exchange
offer.
Book-Entry Transfer
The exchange agent will make a request to establish an account relating to
the initial notes at DTC for purposes of the exchange offer. Any financial
institution that is a participant in DTC's systems may make book-entry delivery
of initial notes by causing DTC to transfer such initial notes into the
exchange agent's account at DTC in accordance with DTC's procedures for
transfer.
However, although delivery of initial notes may be effected through book-
entry transfer into the exchange agent's account at DTC, an agent's message or
the letter of transmittal or facsimile of the letter of transmittal with any
required signature guarantees and any other required documents must, in any
case, be transmitted to and received by the exchange agent at the address set
forth below under "--Exchange Agent" on or before the expiration date or the
guaranteed delivery procedures described below must be complied with. Delivery
of documents to DTC does not constitute delivery to the exchange agent. All
references in the prospectus to deposit of initial notes will be deemed to
include DTC's book-entry delivery method.
Guaranteed Delivery Procedure
If you are a registered holder of initial notes and desire to tender such
initial notes, and the initial notes are not immediately available, or time
will not permit your initial notes or other required documents to reach the
exchange agent before the expiration date, or the procedures for book-entry
transfer cannot be completed on a timely basis and an agent's message
delivered, you may still tender in the exchange offer if:
. you tender through an eligible institution;
. before the expiration date, the exchange agent receives from such
eligible institution a properly completed and duly executed letter of
transmittal, or facsimile of the letter of transmittal, and notice of
guaranteed delivery, substantially in the form provided by us, by
facsimile transmission, mail or hand delivery, setting forth your name
and address as holder of the initial notes and the amount of initial
notes tendered, stating that the tender is being made thereby and
guaranteeing that within five business days after the expiration date
the certificates for all tendered initial notes, in proper form for
transfer, or a book-entry confirmation with an agent's message, as the
case may be, and any other documents required by the letter of
transmittal will be deposited by the eligible institution with the
exchange agent; and
. the certificates for all tendered initial notes, in proper form for
transfer, or a book-entry confirmation as the case may be, and all other
documents required by the letter of transmittal are received by the
exchange agent within five business days after the expiration date.
Withdrawal of Tenders
Except as otherwise provided in this prospectus, you may withdraw tenders of
initial notes at any time before 5:00 p.m., New York City time, on the
expiration date.
For a withdrawal to be effective, you must send a written or facsimile
transmission notice of withdrawal to the exchange agent before 5:00 p.m., New
York City time, on the expiration date at the address set forth below under "--
Exchange Agent" and before acceptance for exchange by us. Any such notice of
withdrawal must:
. specify the name of the person, or "depositor", having tendered the
initial notes to be withdrawn ;
. identify the initial notes to be withdrawn, including, if applicable,
the registration number or numbers and total principal amount of such
initial notes;
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. be signed by the depositor in the same manner as the original signature
on the letter of transmittal by which such initial notes were tendered,
including any required signature guarantees, or be accompanied by
documents of transfer sufficient to permit the trustee relating to the
initial notes to register the transfer of such initial notes into the
name of the depositor withdrawing the tender;
. specify the name in which any such initial notes are to be registered, if
different from that of the depositor; and
. if applicable because the initial notes have been tendered following the
book-entry procedures, specify the name and number of the participant's
account at DTC to be credited, if different than that of the depositor.
All questions as to the validity, form and eligibility, including time of
receipt, of such notices will be determined by us and our determination will be
final and binding on all parties. Any initial notes so withdrawn will be deemed
not to have been validly tendered for exchange for purposes of the exchange
offer. Any initial notes which have been tendered for exchange which are not
exchanged for any reason will be returned to their holder without cost to such
holder, or, in the case of initial notes tendered by book-entry transfer into
the exchange agent's account at DTC following the book-entry transfer
procedures described above, such initial notes will be credited to an account
maintained with DTC for the initial notes, as promptly as practicable after
withdrawal, rejection of tender, expiration date or earlier termination of the
exchange offer. Properly withdrawn initial notes may be retendered by following
one of the procedures described under "--Procedures for Tendering" and "--Book-
Entry Transfer" above at any time on or before the expiration date.
Conditions
Notwithstanding any other term of the exchange offer, we will not be
required to accept initial notes for exchange, or issue exchange notes in
exchange for any initial notes, if:
. a change in the current interpretation of the staff of the Securities and
Exchange Commission has occurred which current interpretation permits the
exchange notes issued in the exchange offer in exchange for the initial
notes to be offered for resale, resold or otherwise transferred by their
holders, other than in certain circumstances; or
. a law has been adopted or enacted which, in our judgment, would
reasonably be expected to impair our ability to proceed with the exchange
offer.
These conditions are for our sole benefit and may be asserted by us
regardless of the circumstances giving rise to any such condition or may be
waived by us, in whole or in part, at any time and from time to time, before
the expiration date, if we determine in our reasonable discretion that any of
the foregoing events or conditions has occurred or exists or has not been
satisfied, subject to applicable law. Our failure at any time to exercise any
of the foregoing rights will not be deemed a waiver of any such right and each
such right will be deemed an ongoing right which we may assert at any time and
from time to time before the expiration date.
If we determine that we may terminate the exchange offer, as provided above,
we may:
. refuse to accept any initial notes and return any initial notes that have
been tendered to their holders;
. extend the exchange offer and retain all initial notes tendered before
the expiration date, subject to the rights of such holders of tendered
initial notes to withdraw their tendered initial notes; or
. waive such termination event relating to the exchange offer and accept
all properly tendered initial notes that have not been withdrawn or
otherwise amend the terms of the exchange offer in any respect as
provided under the section in this prospectus entitled "--Expiration
Date; Extensions; Amendments; Termination."
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The exchange offer is not conditioned upon any minimum principal amount of
initial notes being tendered for exchange.
We have no obligation to, and will not knowingly, permit acceptance of
tenders of initial notes from our affiliates, within the meaning of Rule 405
under the Securities Act, or from any other holder or holders who are not
eligible to participate in the exchange offer under applicable law or its
interpretations by the Securities and Exchange Commission, or if the exchange
notes to be received by such holder or holders of initial notes in the exchange
offer, upon receipt, will not be tradable by such holder without restriction
under the Securities Act and the Securities Exchange Act of 1934 and without
material restrictions under the "blue sky" or securities laws of substantially
all of the states of the United States.
Accounting Treatment
We will record the exchange notes at the same carrying value as the initial
notes, as reflected in our accounting records on the date of the exchange.
Accordingly, we will not recognize any gain or loss for accounting purposes. We
will amortize the costs of the exchange offer and the unamortized expenses
related to the issuance of the exchange notes over the term of the exchange
notes.
Exchange Agent
We have appointed State Street Bank and Trust Company of California, N.A. as
exchange agent for the exchange offer. All questions and requests for
assistance and requests for additional copies of this prospectus or the letter
of transmittal should be directed to the exchange agent as follows:
By Mail:
State Street Bank and Trust Company of California, N.A.
c/o State Street Bank and Trust Company
P.O. Box 778
Boston, MA 02101-0778
ATTN: Ralph Jones
By Hand/Overnight Delivery:
State Street Bank and Trust Company of California, N.A.
c/o State Street Bank and Trust Company
2 Avenue de Layfayette
Corporate Trust Window, 5th Floor
Boston, MA 02111-1724
ATTN: Ralph Jones
Facsimile Transmission: (617) 662-1452
Confirm by Telephone: (617) 662-1548
Fees and Expenses
We will bear the expenses of soliciting tenders in the exchange offer. The
principal solicitation for tenders in the exchange offer is being made by mail;
however, our offices and regular employees may make additional solicitations by
telegraph, telephone, telecopy or in person.
We will not make any payments to brokers, dealers or other persons
soliciting acceptances of the exchange offer. However, we will pay the exchange
agent reasonable and customary fees for its services and will reimburse the
exchange agent for its reasonable out-of-pocket expenses in connection with the
exchange offer. We may also pay brokerage houses and other custodians, nominees
and fiduciaries the reasonable out-of-pocket expenses incurred by them in
forwarding copies of the prospectus, letters of transmittal and related
documents to the beneficial owners of the initial notes, and in handling or
forwarding tenders for exchange.
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We will pay the expenses incurred in connection with the exchange offer,
including fees and expenses of the exchange agent and trustee and accounting,
legal, printing and related fees and expenses.
We will pay all transfer taxes, if any, applicable to the exchange of
initial notes in the exchange offer. However, the amount of any such transfer
taxes, whether imposed on the registered holder or any other persons, will be
payable by the tendering holder if:
. certificates representing exchange notes or initial notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or
are to be registered or issued in the name of, any person other than the
registered holder of the initial notes tendered;
. tendered initial notes are registered in the name of any person other
than the person signing the letter of transmittal; or
. a transfer tax is imposed for any reason other than the exchange of
initial notes in the exchange offer.
If satisfactory evidence of payment of such taxes or exemption therefrom is
not submitted with the letter of transmittal, the amount of such transfer taxes
will be billed directly to such tendering holder.
The Failures to Participate in the Exchange Offer will have Adverse
Consequences
If you do not exchange your initial notes for exchange notes in the exchange
offer, you will not be able to resell, offer to resell or otherwise transfer
the initial notes unless they are registered under the Securities Act or unless
you resell them, offer to resell or otherwise transfer them under an exemption
from the registration requirements of, or in a transaction not subject to, the
Securities Act. In addition, you will no longer be able to obligate us to
register the initial notes under the Securities Act except in the limited
circumstances provided under the registration rights agreement. The
restrictions on transfer of your initial notes arise because we issued the
initial notes under exemptions from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable state securities
laws. In addition, if you want to exchange your initial notes in the exchange
offer for the purpose of participating in a distribution of the exchange notes,
you may be deemed to have received restricted securities, and, if so, will be
required to comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any resale transaction. To the extent
the initial notes are tendered and accepted in the exchange offer, the trading
market, if any, for the initial notes would be adversely affected. Please refer
to the section in this prospectus entitled "Risk Factors."
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DESCRIPTION OF THE EXCHANGE NOTES
General
The form and terms of the exchange notes are the same as the form and terms
of the initial notes, except that the exchange notes have been registered under
the Securities Act and therefore will not bear legends restricting their
transfer. We issued the initial notes and will issue the exchange notes under
an indenture, dated as of December 1, 1999, between Equinix and State Street
Bank and Trust Company of California, N.A., as trustee. The terms of the
exchange notes will include those stated in the indenture and those made part
of the indenture by reference to the Trust Indenture Act of 1939, as amended.
The exchange notes will be subject to all such terms, and holders are referred
to the indenture and the Trust Indenture Act for a statement of those terms.
Except as otherwise indicated, the following summary description of the
material provisions of the indenture relates both to the initial notes and the
exchange notes. We urge you to read the indenture because it, and not this
description, defines your rights as holder of the exchange notes. We have filed
copies of the indenture, escrow agreement and registration agreement as
exhibits to the registration statement which includes this prospectus. The
definitions of certain terms used in the following summary are set forth below
under "--Certain Definitions." For purposes of this summary, the term "Equinix"
refers only to Equinix, Inc. and not to any of its subsidiaries. Also, in this
description "initial notes" and "exchange notes" are collectively referred to
as the "notes."
As of the Issue Date, all of our Subsidiaries will be Restricted
Subsidiaries. Under certain circumstances, we will be able to designate
existing or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted
Subsidiaries will not be subject to many of the restrictive covenants contained
in the indenture.
Overview
The notes will mature on December 1, 2007. Interest on the notes will be
payable semi-annually in arrears on each June 1 and December 1, commencing on
June 1, 2000. The exchange notes will bear interest from the most recent date
to which interest has been paid on the initial notes.
We have deposited with an escrow agent cash to acquire U.S. government
securities totaling approximately $37.0 million that, together with the
proceeds from their investment, will be sufficient to pay, when due, the first
three interest payments on the notes, with us retaining any balance. The notes
will be collateralized by a first priority security interest in the escrow
account. Except for the security interest in the escrow account, the notes will
be general unsecured obligations and will rank without preference with all of
our other existing and future senior unsecured indebtedness. The notes will
also be effectively subordinated to all our existing and future secured
indebtedness to the extent of the value of the assets that secure such
indebtedness and to all of our subsidiaries' existing or future indebtedness,
whether or not secured.
Generally, we may not redeem the notes before December 1, 2003. On or after
December 1, 2003, we may redeem the notes, in whole or in part, at any time, at
the redemption prices set forth below under "Option Redemption" together with
accrued and unpaid interest, if any, to the redemption date.
Absent special circumstances, we cannot be required to redeem the notes.
However, in the event of a "Change of Control" as defined below, each holder
will have the right to require us to repurchase its notes at a repurchase price
equal to 101% of the aggregate principal amount of such notes, plus accrued and
unpaid interest, if any, through the date of repurchase.
The indenture will limit:
. the selling of our assets or the stock of our subsidiaries;
. the payment of dividends on, and repurchase or redemption of, our
capital stock and our subsidiaries' capital stock and the repurchase or
redemption of our subordinated obligations;
. our making of investments;
. the incurrence of additional indebtedness or preferred stock by us and
our subsidiaries;
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. the incurrence of additional liens;
. our ability to permit restrictions to exist on the ability of our
subsidiaries to pay dividends or make payments to us;
. our ability to engage in consolidations, mergers and transfers of all or
substantially all of our assets; and
. transactions with our affiliates.
All of these limitations and prohibitions are subject to a number of
important qualifications and exceptions. See "Certain Covenants."
In addition, the indenture defines certain events of default. See "Events of
Default and Remedies." In the event of default, the trustee or the holders of
at least 25% in principal amount of the then outstanding notes may declare all
principal of, premium, if any, on, and interest on the notes to be due and
payable immediately.
Terms of Notes
Except as set forth under "--Escrow Account; Disbursement of Funds," the
notes will be our senior unsecured obligations, ranking equally in right of
payment with all our other existing and future senior debt and senior to all
our existing and future subordinated debt. Holders of our secured Indebtedness,
however, will have claims that are before the claims of the holders relating to
the assets securing such other debt, except to the extent the notes are equally
and ratably secured by such assets. The indenture will permit us to incur
certain secured debt.
The notes will be effectively subordinated to all Indebtedness and other
liabilities and commitments, including trade payables and lease obligations, of
our subsidiaries, including any Guarantees of such subsidiaries. Any right of
ours to receive assets of any of our subsidiaries in the event of its
liquidation or reorganization, and the consequent right of the holders to
participate in those assets, will be effectively subordinated to the claims of
that subsidiary's creditors. To the extent that we are recognized as a creditor
of such subsidiary, our claims would still be subordinate to any secured claim
to the assets of such subsidiary and any Indebtedness of such subsidiary that
is senior to that held by us.
Principal, Maturity and Interest
The notes will be limited in aggregate principal amount to $200,000,000 and
will mature on December 1, 2007. Interest on the notes will accrue at the rate
of 13% per annum and will be payable semi-annually in arrears on June 1 and
December 1, commencing on June 1, 2000, to holders as of the immediately
preceding May 15 and November 15. Interest on the notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the date of original issuance. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months. Principal, premium,
if any, and interest on the notes will be payable at the office or agency of
Equinix maintained for such purpose in New York city or, at the option of
Equinix, payment of interest on the notes may be made by check mailed to the
holders at their respective addresses set forth in the register of holders.
Until otherwise designated by Equinix, Equinix's office or agency in New York
will be the office of the trustee maintained for such purpose. The notes will
be issued in denominations of $1,000 and integral multiples of $1,000. The
trustee initially will be paying agent and registrar under the indenture. We
may also act as paying agent or registrar under the indenture.
Escrow Account; Disbursement of Funds
The notes will be collateralized, pending disbursement, under an escrow
agreement dated as of December 1, 1999, among Equinix, the trustee and State
Street Bank and Trust Company of California, N.A., as escrow agent, by a pledge
of the escrow account referred to in the escrow agreement. The escrow account
will initially
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contain approximately $37.0 million of the net proceeds from the sale of the
notes. These funds, together with the proceeds from their investment, will be
sufficient to pay interest on the notes for three scheduled interest payments.
The funds will not be sufficient to pay any liquidated damages described under
"The Exchange Offer; Liquidated Damages."
The escrow agreement provides for the grant by Equinix to the trustee, for
the benefit of the holders, of a first priority security interest in the escrow
collateral. All such security interests will collateralize the payment and
performance when due of all our obligations under the indenture and the notes,
as provided in the escrow agreement. The Liens created by the escrow agreement
will be first priority security interests in the Escrow Collateral. The ability
of holders to realize upon any such funds or securities may be subject to
certain bankruptcy law limitations if there is a bankruptcy of Equinix.
Under the escrow agreement, funds may be disbursed from the escrow account
only to pay interest on the notes. If a portion of the notes has been retired
by Equinix, funds representing the lesser of:
. the excess of the amount sufficient to pay interest through and
including June 1, 2001 on the notes not so retired; and
. the interest payments which have not previously been made on such
retired notes for each interest payment date through and including the
interest payment date to occur on June 1, 2001;
shall be paid to Equinix if no default then exists under the indenture.
Pending such disbursements, all funds contained in the escrow account will
be invested in U.S. Government Securities. Interest earned on the U.S.
Government Securities will be placed in the escrow account. Upon the
acceleration of the maturity of the notes, the escrow agreement will provide
for the foreclosure by the trustee upon the net proceeds of the escrow account.
Under the terms of the indenture, the proceeds of the escrow account shall be
applied, first, to amounts owing to the trustee in respect of fees and expenses
of the trustee and, second, to all obligations under the notes and the
indenture. Under the escrow agreement, assuming that we make the first three
scheduled interest payments on the notes in a timely manner with funds or U.S.
Government Securities held in the escrow account, any remaining U.S. Government
Securities will be released from the escrow account.
Optional Redemption
Except as set forth below, the notes will not be redeemable at our option
before December 1, 2003. On or after December 1, 2003, the notes will be
subject to redemption at any time at our option, in whole or in part, upon not
less than 30 nor more than 60 days' notice. The notes may be redeemed at the
redemption prices, expressed as percentages of principal amount, below, plus
accrued and unpaid interest to the applicable redemption date. This right is
subject to the right of holders as of the relevant record date to receive
interest due on the relevant interest payment date, if redeemed during the
twelve-month period beginning on December 1 of the years indicated below.
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003.......................................................... 106.500%
2004.......................................................... 103.250%
2005 and thereafter........................................... 100.000%
</TABLE>
Selection and Notice
If less than all of the notes are to be redeemed at any time, selection of
notes for redemption will be made by the trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
the notes are then listed, or, if the notes are not so then listed, on a pro
rata basis, by lot or by such
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method as we shall deem fair and appropriate. No notes of $1,000 or less shall
be redeemed in part. Notices of redemption shall be mailed by first class mail
at least 30 but not more than 60 days before the redemption date to each holder
of notes to be redeemed at its registered address. Notices of redemption may
not be conditional. If any note is to be redeemed in part only, the notice of
redemption that relates to such note shall state the portion of the principal
amount of the note to be redeemed. A new note in principal amount equal to its
unredeemed portion will be issued in the name of its holder upon cancellation
of the original note. Notes called for redemption will become due on the date
fixed for redemption. On and after the redemption date, interest will cease to
accrue on notes or portions of notes called for redemption unless we default in
their payment.
Mandatory Redemption
Except as provided under "--Repurchase at the Option of Holders," we will
not be required to make mandatory redemption or sinking fund payments relating
to the notes.
Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, each holder will have the right
to require us to purchase all or any part, equal to $1,000 or an integral
multiple of $1,000, of such holder's notes in the offer described below at a
purchase price in cash equal to 101% of the aggregate principal amount of the
note, plus accrued and unpaid interest and liquidated damages, if any, to the
date of purchase. This right is subject to the right of holders as of a record
date to receive interest due on the relevant interest payment date. However, we
shall not be obligated to repurchase notes in a Change of Control offer in the
event that we have exercised our rights to redeem all of the notes under the
indenture. Within 30 days following any Change of Control, we will mail a
notice to each holder describing the transaction or transactions that
constitute the Change of Control and offering to purchase notes on the date
specified in such notice, which date shall be no earlier than 30 and no later
than 60 days from the date such notice is mailed, in accordance with the
procedures required by the indenture and described in such notice.
We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations to the extent such laws and
regulations are applicable in connection with the purchase of notes as a result
of a Change of Control. To the extent that the provisions of any securities
laws or regulations conflict with any of the provisions of this covenant, we
will comply with the applicable securities laws and regulations and will be
deemed not to have breached our obligations under this covenant by virtue of
such compliance.
On the Change of Control payment date, we will, to the extent lawful:
. accept for payment all notes or portions of notes properly tendered in
the Change of Control offer;
. deposit with the paying agent an amount equal to the Change of Control
payment plus accrued and unpaid interest and liquidated damages, if any,
in respect of all notes or portions of notes so tendered; and
. deliver or cause to be delivered to the trustee notes so accepted
together with an Officers' Certificate stating the aggregate principal
amount of notes or portions of notes being purchased by us.
The paying agent will promptly mail or deliver to each holder of notes so
tendered the Change of Control payment plus accrued and unpaid interest and
liquidated damages, if any, for such notes, and the trustee will promptly
authenticate and mail or deliver, or cause to be transferred by book entry, to
each holder a new note equal in principal amount to any unpurchased portion of
notes surrendered, if any. Each such new note will be in a principal amount of
$1,000 or an integral multiple of $1,000. We will publicly announce the results
of the Change of Control offer on or as soon as practicable after the Change of
Control payment date.
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The Change of Control provisions described above will be applicable whether
or not any other provisions of the indenture are applicable. Except as
described above relating to a Change of Control, the indenture will not contain
provisions that permit the holders to require that we purchase or redeem the
notes if there is a takeover, recapitalization or similar transaction. Our
ability to purchase notes upon a Change of Control may be limited by our then
existing financial resources. There can be no assurance that sufficient funds
will be available when necessary to make any such required purchases. We shall
not be required to make a Change of Control offer if a third party makes the
Change of Control offer in the manner, at the times and otherwise in compliance
with the requirements of the indenture and purchases all notes validly tendered
and not withdrawn. See "Risk Factors--We may not have sufficient funds to
purchase the exchange notes as required upon a change of control."
Asset Sales
We will not, and will not permit any of the Restricted Subsidiaries to,
directly or indirectly, consummate any Asset Sale, unless:
. we, or such Restricted Subsidiary, as the case may be, receive
consideration at the time of such Asset Sale at least equal to the fair
market value, as determined in good faith by our board of directors and
set forth in an Officer's Certificate delivered to the trustee, of the
assets or Equity Interests issued or sold or otherwise disposed of;
. at least 75% of the consideration is in the form of cash and/or Cash
Equivalents or Qualified Consideration; and
. the Net Cash Proceeds received by Equinix, or such Restricted
Subsidiary, as the case may be, from such Asset Sale are applied within
360 days following the receipt of such Net Cash Proceeds, to the extent
Equinix, or such Restricted Subsidiary, as the case may be, elects:
(a) to the redemption or repurchase of outstanding Indebtedness, (1)
that is either (A) secured Indebtedness or (B) Indebtedness of
Equinix that ranks equally with the notes but has an earlier
maturity date, in either case other than Subordinated Indebtedness,
or (2) that is Indebtedness of a Restricted Subsidiary; and/or
(b) to reinvest such Net Cash Proceeds, or any portion, in properties
or assets, including Equity Interests of a person that will become
a Restricted Subsidiary as a result of such investment, that will
be used in a Permitted Business.
The balance of such Net Cash Proceeds, after the application of such Net Cash
Proceeds as described in the immediately preceding clauses (a) and (b), shall
constitute Excess Proceeds.
When the aggregate amount of Excess Proceeds equals or exceeds $10 million,
taking into account income earned on such Excess Proceeds, we will be required
to make a pro rata offer to all holders of notes and equally-ranking
Indebtedness with comparable provisions requiring such Indebtedness to be
purchased with the proceeds of such Asset Sale, called an Asset Sale Offer. We
must offer to purchase the maximum principal amount, or accreted value in the
case of Indebtedness issued with an original issue discount, of notes and
equally-ranking Indebtedness that may be purchased out of the Excess Proceeds,
at a purchase price in cash in an amount equal to 100% of the principal amount
or the accreted value of the note, as applicable, plus accrued and unpaid
interest thereon to the date of purchase, subject to the right of holders as of
the relevant record date to receive interest due on the relevant interest
payment date, in accordance with the procedures set forth in the indenture and
the agreements governing such equally-ranking Indebtedness. To the extent that
any Excess Proceeds remain after consummation of an Asset Sale Offer, Equinix
may use such Excess Proceeds for any purpose not otherwise prohibited by the
indenture. If the aggregate principal amount of notes and equally-ranking
Indebtedness tendered in such Asset Sale Offer surrendered by their holders
exceeds the amount of Excess Proceeds, the trustee shall select the notes and
equally-ranking Indebtedness to be purchased on a pro rata basis in proportion
to the respective principal amounts, or accreted values in the case of
Indebtedness
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issued with an original issue discount, of the notes and such other
Indebtedness. On completion of such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero for purposes of the first sentence of this
paragraph.
The amount of:
. any liabilities, as shown on Equinix's or such Restricted Subsidiary's,
as the case may be, most recent balance sheet, other than Subordinated
Indebtedness, of Equinix or any Restricted Subsidiary, that are assumed
by the transferee of any such assets under an agreement that immediately
releases Equinix and all of the Restricted Subsidiaries from all
liability in respect of such liabilities;
. Indebtedness of any Restricted Subsidiary that is no longer a Restricted
Subsidiary as a result of such Asset Sale, if Equinix and all of the
Restricted Subsidiaries are immediately released from all Guarantees of
payment of such Indebtedness and such Indebtedness is no longer the
liability of Equinix or any of the Restricted Subsidiaries; and
. any securities, notes or other obligations received by Equinix, or such
Restricted Subsidiary, as the case may be, from such transferee that are
converted by Equinix, or such Restricted Subsidiary, as the case may be,
into cash and/or Cash Equivalents within 90 days of the date of such
Asset Sale, to the extent of the cash and/or Cash Equivalents received;
will be deemed to be cash and/or Cash Equivalents for purposes of this
provision.
Notwithstanding any provision of this covenant, its provisions will not
apply to any transaction constituting a Restricted Payment that is permitted by
the Restricted Payments covenant or that otherwise constitutes a Permitted
Investment.
Certain Covenants
Restricted Payments
We will not, and will not permit any of the Restricted Subsidiaries to,
directly or indirectly make any of the following Restricted Payments:
. declare or pay any dividend or make any other payment or distribution on
account of Equinix's Equity Interests or to the direct or indirect
holders of Equinix's Equity Interests in their capacity as stockholders,
other than dividends or distributions payable in Equity Interests, other
than Disqualified Stock of Equinix or to Equinix or a Restricted
Subsidiary of Equinix;
. purchase, redeem or otherwise acquire or retire for value any Equity
Interests of Equinix or any direct or indirect parent of Equinix, other
than any such Equity Interests owned by Equinix or any Restricted
Subsidiary of Equinix;
. make any payment on or relating to, or purchase, redeem, defease or
otherwise acquire or retire for value any Subordinated Indebtedness,
except a payment of interest or principal at any Stated Maturity; or
. make any Restricted Investment;
unless:
. at the time of and after giving effect to such Restricted Payment, no
default or Event of Default shall have occurred and be continuing;
. Equinix would, at the time of such Restricted Payment and after giving
pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable period, have been permitted to incur at
least $1.00 of additional Indebtedness as described below under
"Incurrence of Indebtedness and Issuance of Preferred Stock"; and
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. such Restricted Payment, together with the aggregate amount of all other
Restricted Payments made by Equinix and the Restricted Subsidiaries on
or after the Issue Date, is less than the sum, without duplication, of
(a) the amount of Equinix's (1) Cumulative Consolidated Cash Flow
determined at the time of such Restricted Payment less (2) 150% of
the cumulative consolidated interest expense, determined for the
period commencing on the first day of the fiscal quarter which
includes the Issue Date and ending on the last day of the last
fiscal quarter preceding the date on which such Restricted Payment
is to be made for which reports have been filed with the Commission
or provided to the trustee according to the "Reports" covenant;
plus
(b) 100% of the aggregate Net Cash Proceeds received by Equinix after
the Issue Date as a Capital Contribution or from the issue or sale,
other than to a Subsidiary of Equinix, of Equity Interests of
Equinix, other than Disqualified Stock, or from the issue or sale,
other than to a Subsidiary of Equinix, of Disqualified Stock or
debt securities of Equinix that have been converted or exchanged
into such Equity Interests, plus the amount of Net Cash Proceeds
received by Equinix upon such conversion or exchange, other than a
conversion or exchange by a Subsidiary of Equinix; plus
(c) the aggregate amount equal to the net reduction in Restricted
Investments in Unrestricted Subsidiaries on or after the Issue Date
resulting from (1) dividends, distributions, interest payments,
return of capital, repayments of Restricted Investments or other
transfers of assets to Equinix or any Restricted Subsidiary from
any Unrestricted Subsidiary and not otherwise included in the
calculation of Cumulative Consolidated Cash Flow required by
(a) above, (2) proceeds realized by Equinix or any Restricted
Subsidiary upon the sale of such Restricted Investment to a person
other than Equinix or any Subsidiary of Equinix, or (3) the
redesignation of any Unrestricted Subsidiary as a Restricted
Subsidiary, not to exceed in the case of any of the immediately
preceding clauses (1), (2) or (3) the aggregate amount of
Restricted Investments made by Equinix or any Restricted Subsidiary
in such Unrestricted Subsidiary on or after the Issue Date; plus
(d) to the extent that any Restricted Investment that was made on or
after the Issue Date is sold for cash or otherwise liquidated or
repaid for cash, the lesser of, to the extent paid to Equinix or a
Restricted Subsidiary, (1) the cash return of capital relating to
such Restricted Investment, less any cost of disposition and (2)
the initial amount of such Restricted Investment; minus
(e) 50% of the cumulative aggregate principal amount of any outstanding
Indebtedness incurred according to the second clause of the first
paragraph of the covenant described below under "Incurrence of
Indebtedness and Issuance of Preferred Stock."
So long as no default or Event of Default shall have occurred and be
continuing, the foregoing provisions will not prohibit:
. the payment of any dividend within 60 days after the date it is
declared, if at the time it is declared such payment would have complied
with the foregoing provisions;
. the redemption, repurchase, retirement, defeasance or other acquisition
of any Subordinated Indebtedness or Equity Interests of Equinix in
exchange for, or out of the Net Cash Proceeds of the substantially
concurrent sale, other than to a Subsidiary of Equinix, of, Equity
Interests of Equinix, other than any Disqualified Stock; provided that
the amount of any such Net Cash Proceeds that are utilized for, and the
Equity Interests issued or exchanged for, any such redemption,
repurchase, retirement, defeasance or other acquisition shall be
excluded from the third clause of the preceding paragraph and each other
clause of this paragraph;
. the defeasance, redemption, retirement, repurchase or other acquisition
of Subordinated Indebtedness with the Net Cash Proceeds from, or issued
in exchange for, a substantially concurrent incurrence of
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Permitted Refinancing Indebtedness; provided that the amount of any such
Net Cash Proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from the
third clause of the preceding paragraph and each other clause of this
paragraph;
. the repurchase, redemption or other acquisition or retirement for value
of any Equity Interests of Equinix held by any member of Equinix's or a
Restricted Subsidiary's management; provided that the aggregate price
paid for all such repurchased, redeemed, acquired or retired Equity
Interests shall not exceed $3 million in any fiscal year;
. Restricted Investments not to exceed the aggregate fair market value,
measured on the date each such Restricted Investment was made or
returned, as applicable, when taken together with all other Restricted
Investments made according to this clause that are at the time
outstanding, the sum of (a) $30 million, plus (b) the amount then
available for the making of Restricted Payments according to the third
clause of the preceding paragraph without giving effect to its subclause
(a);
. Restricted Investments the payment for which consists exclusively of
Equity Interests, other than Disqualified Stock, of Equinix; and
. the repurchase of Equity Interests of Equinix in accordance with, and
only to the extent required by, dissenters' rights of appraisal under
applicable law.
Each Restricted Payment permitted by the first, fourth, fifth, sixth and
seventh clauses above shall be included, and each Restricted Payment permitted
by the second, third and sixth clauses above shall be excluded, except as
specifically set forth in each such clause, for all purposes when performing
the calculation set forth in the last bullet point of the preceding paragraph
of this covenant.
Our board of directors may not designate any Subsidiary of Equinix as an
Unrestricted Subsidiary, unless:
. no default or Event of Default shall have occurred and be continuing at
the time of or after giving effect to such designation; and
. Equinix would not be prohibited under the indenture from making a
Restricted Investment at the time of such designation, assuming the
effectiveness of such designation for purposes of this covenant, in an
amount equal to the fair market value of the net Investment of Equinix
and all Restricted Subsidiaries in such Subsidiary on such date.
This prohibition shall not apply to a newly created Subsidiary in which no
investment, apart from any de minimis amount required to capitalize the
Subsidiary in connection with its organization, has previously been made.
If there is any such designation, all outstanding Investments owned by
Equinix and the Restricted Subsidiaries in the Subsidiary so designated will
be deemed to be a Restricted Investment made as of the time of such
designation and will reduce the amount available for Restricted Payments under
the first or second paragraph of this covenant. All such outstanding
Investments will be deemed to constitute Restricted Payments in an amount
equal to the fair market value of such Investments at the time of such
designation.
The indenture also provides that a designation may be revoked and an
Unrestricted Subsidiary may thus be redesignated as a Restricted Subsidiary by
a resolution of our board of directors delivered to the trustee. However,
Equinix will not make any revocation unless:
. no default or Event of Default shall have occurred and be continuing at
the time of, or after giving effect to, such revocation; and
. all Liens and Indebtedness of such Unrestricted Subsidiary outstanding
immediately following such revocation would, if incurred at such time,
have been permitted to be incurred at such time for all purposes under
the indenture.
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The amount of all Restricted Payments, other than cash, shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by Equinix, or such Restricted
Subsidiary, as the case may be, under the Restricted Payment. The fair market
value of any asset(s) or securities that are required to be valued by this
covenant shall be determined in good faith by our board of directors. Their
determination shall be supported by the opinion or appraisal of an accounting,
appraisal or investment banking firm of national standing if such fair market
value would exceed $10 million.
Incurrence of Indebtedness and Issuance of Preferred Stock
We will not, and will not permit any of the Restricted Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable for, contingently or otherwise, including
by way of merger, consolidation or acquisition, any Indebtedness and we will
not issue or incur any Disqualified Stock and will not permit any of the
Restricted Subsidiaries to issue or incur any shares of Preferred Stock.
However, we may incur Indebtedness or issue or incur shares of Disqualified
Stock and the Restricted Subsidiaries may incur Acquired Debt or Acquired
Preferred Stock if either:
. the Consolidated Leverage Ratio at the end of Equinix's most recently
ended fiscal quarter, for which a consolidated balance sheet of Equinix
which has been filed with the Commission or provided to the trustee,
immediately preceding the date on which such additional Indebtedness is
incurred or such Preferred Stock is issued or incurred would have been
less than 6.0 to 1.0, determined on a pro forma basis, including a pro
forma application of the net proceeds therefrom; or
. the Consolidated Capital Ratio at the end of the most recently ended
fiscal quarter, for which a consolidated balance sheet of Equinix has
been filed with the Commission or provided to the trustee, would have
been less than 2.0 to 1.0 determined on a pro forma basis, including a
pro forma application of the net proceeds therefrom.
Notwithstanding the foregoing, the provisions of the paragraph set forth
immediately above will not prohibit the incurrence of any of the following
items of Indebtedness (collectively, "Permitted Indebtedness"):
. Permitted Refinancing Indebtedness;
. the incurrence by Equinix of Indebtedness represented by the notes;
. the incurrence of Indebtedness by Equinix owing to any Restricted
Subsidiary or Indebtedness of any Restricted Subsidiary owing to Equinix
or any other Restricted Subsidiary, such Indebtedness deemed to be
incurred upon such Indebtedness being held by any person other than
Equinix or such Restricted Subsidiary including upon designation and
upon such Restricted Subsidiary otherwise no longer being a Restricted
Subsidiary; provided that in the case of Indebtedness of Equinix, such
obligations shall be unsecured and subordinated in all respects to
Equinix's obligations in accordance with the notes;
. the incurrence by Equinix of Indebtedness in an aggregate amount
incurred and outstanding at any time under this clause of up to $30
million;
. the incurrence (a) by Equinix or any Restricted Subsidiary, other than
any Foreign Subsidiary, of Senior Debt, including under one or more
Permitted Credit Facilities, and (b) by any Foreign Subsidiary of
Indebtedness under one or more Permitted Foreign Credit Facilities, in
an aggregate amount incurred and outstanding at any time under this
clause of up to the sum of (a) $125 million and (b) 85% of the aggregate
accounts receivable of Equinix and the Restricted Subsidiaries as of the
date of the most recently available balance sheet of Equinix which has
been included in a report filed with the Commission or provided to the
trustee;
. the incurrence by Equinix or any Foreign Subsidiary of Purchase Money
Indebtedness (a) under the terms of any Purchase Money Indebtedness
facility existing and as in effect on the Issue Date or (b) constituting
not more than 75% of the cost, including shipping, installation and
importation costs and
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sales, use and similar taxes, collectively "Costs", payable upon
acquisition of the subject property, determined in accordance with GAAP
in good faith by our board of directors, to Equinix or any such Foreign
Subsidiary, as applicable, of the property so purchased, developed,
acquired, constructed, improved or leased; provided, that relating to
any Purchase Money Indebtedness incurred under clause (b) above, at
least 25% of the Costs payable upon acquisition of the subject property
shall be funded from Newly Raised Capital; provided, further, that any
assets acquired by a Foreign Subsidiary under this clause are acquired
for use in the ordinary course of business of such Foreign Subsidiary;
. the incurrence by Equinix or any of the Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or
hedging interest or foreign currency exchange rate risk relating to any
floating rate Indebtedness or foreign currency based Indebtedness,
respectively, that is permitted by the terms of the indenture to be
outstanding; provided that the notional amount of any such Hedging
Obligation does not exceed the amount of Indebtedness or other liability
to which such Hedging Obligation relates; and
. the incurrence by Equinix and the Restricted Subsidiaries of
Indebtedness solely in respect of bankers acceptances, letters of credit
and performance bonds, all in the ordinary course of business.
Indebtedness or Preferred Stock of any person which is outstanding at the
time such person becomes a Restricted Subsidiary of Equinix, including upon
designation of any Subsidiary or other person as a Restricted Subsidiary or
upon a Revocation such that such Subsidiary becomes a Restricted Subsidiary, or
is merged with or into or consolidated with Equinix or a Restricted Subsidiary
of Equinix, shall be deemed to have been incurred at the time such person
becomes such a Restricted Subsidiary of Equinix or is merged with or into or
consolidated with Equinix or a Restricted Subsidiary of Equinix, as applicable.
Upon each incurrence, Equinix may designate under which provision of this
covenant such Indebtedness is being incurred. Such Indebtedness shall not be
deemed to have been incurred by Equinix under any other provision of this
covenant, except as stated otherwise in the foregoing provisions or in the next
sentence. For purposes of determining compliance with this covenant, in the
event that an item of Indebtedness meets the criteria of more than one of the
types of Indebtedness described in the clauses above, or is permitted under the
first paragraph of this covenant and under one or more of such clauses,
Equinix, in our sole discretion, may from time to time reclassify such item of
Indebtedness.
Equinix will not, and will not permit any of the Restricted Subsidiaries,
other than Foreign Subsidiaries, to, incur any Indebtedness, including
Permitted Indebtedness, that is contractually subordinated in right of payment
to any other Indebtedness unless such Indebtedness is also contractually
subordinated in right of payment to the notes on substantially identical terms.
However, no Indebtedness shall be deemed to be contractually subordinated in
right of payment to any other Indebtedness solely by virtue of being unsecured.
Liens
We will not, and will not permit any of the Restricted Subsidiaries to,
directly or indirectly, create, incur, assume or otherwise cause or suffer to
exist or become effective any Lien of any kind, other than Permitted Liens, to
secure Indebtedness upon any of our property or assets or upon any income or
profits therefrom unless all payments due under the indenture and the notes are
secured, except as provided in the next clause, on an equal and ratable basis
with the obligations so secured. No Lien shall be granted or be allowed to
exist which secures Subordinated Indebtedness except relating to Acquired Debt,
in which case, however, such Liens must be made junior and subordinate to the
Liens granted to the holders.
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Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
We will not, and will not permit any of the Restricted Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Restricted
Subsidiary to:
. (a) pay dividends or make any other distributions to Equinix or any of
the Restricted Subsidiaries on its Capital Stock or relating to any
other interest or participation in, or measured by, its profits, or
(b) pay any Indebtedness owed to Equinix or any of the Restricted
Subsidiaries;
. make loans or advances to Equinix or any of the Restricted Subsidiaries;
or
. transfer any of its properties or assets to Equinix or any of the
Restricted Subsidiaries.
The foregoing restrictions will not apply to encumbrances or restrictions
existing under or by reason of:
. Existing Indebtedness as in effect on the Issue Date;
. any Permitted Credit Facility or Permitted Foreign Credit Facility,
provided that (a) the aggregate outstanding amount of any such
Indebtedness does not exceed the amount permitted under the fifth clause
of the definition of Permitted Indebtedness, (b) relating to any
Permitted Credit Facility, such restrictions apply only if there is a
payment default under such Permitted Credit Facility, and (c) the chief
financial officer of Equinix determines in good faith that any such
restrictions contained in any such Permitted Credit Facility or
Permitted Foreign Credit Facilities are no more restrictive, taken as a
whole, than those contained in a similar credit facility with terms that
are commercially reasonable for a borrower engaged in a business
comparable to Equinix that has substantially comparable Indebtedness and
that any such restrictions will not materially affect Equinix's ability
to make principal, premium or interest payments on the notes;
. applicable law;
. any instrument governing Indebtedness or Capital Stock of a Person or
assets acquired by Equinix or any of the Restricted Subsidiaries as in
effect at the time of such acquisition, except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition, which encumbrance or restriction is not applicable to any
person, or the properties or assets of any person, other than the
person, or the property or assets of the person, so acquired; provided,
that in the case of Indebtedness, such Indebtedness was permitted by the
terms of the indenture to be incurred;
. customary non-assignment provisions in leases entered into in the
ordinary course of business;
. purchase money obligations for property acquired in the ordinary course
of business that impose restrictions on transfer on the property so
acquired, constructed, leased or improved;
. any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by that Restricted Subsidiary
pending its sale or other disposition, provided that the consummation of
such transaction would not result in an Event of Default or an event
that, with the passing of time or giving of notice or both, would
constitute an Event of Default, that such restriction terminates if such
transaction is not consummated and that the consummation or abandonment
of such transaction occurs within one year of the date such agreement
was entered into;
. Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded;
. Liens securing Indebtedness otherwise permitted to be incurred under the
provisions of the covenant governing Liens that limit the right of
Equinix or any of the Restricted Subsidiaries to dispose of the assets
subject to such Lien; and
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. provisions relating to the disposition or distribution of assets or
property in joint venture agreements and other similar agreements
entered into in the ordinary course of business.
Merger, Consolidation, or Sale of Assets
We may not, directly or indirectly, consolidate or merge with or into,
whether or not we are the surviving corporation, or sell, assign, transfer,
convey or otherwise dispose of all or substantially all of our properties or
assets, in one or more related transactions, to another person, or permit any
of the Restricted Subsidiaries to enter into any such transaction or series of
transactions, if it would result in such disposition of all or substantially
all of the assets of Equinix and the Restricted Subsidiaries on a consolidated
basis, unless:
. Equinix is the surviving corporation or the person formed by or
surviving any such consolidation or merger, if other than Equinix, or to
which such sale, assignment, transfer, conveyance or other disposition
shall have been made is a corporation organized or existing under the
laws of the United States, any state or the District of Columbia;
. the person formed by or surviving any such consolidation or merger, if
other than Equinix, or the person to which such sale, assignment,
transfer, conveyance or other disposition shall have been made assumes
all the obligations of Equinix under the registration agreement, the
notes, the exchange notes and the indenture under a supplemental
indenture in a form reasonably satisfactory to the trustee;
. no default or Event of Default, or an event that, with the passing of
time or giving of notice or both, would constitute an Event of Default,
shall exist or shall occur immediately after giving effect on a pro
forma basis to such transaction;
. except in the case of a merger of Equinix with or into a Wholly Owned
Restricted Subsidiary of Equinix, Equinix or the person formed by or
surviving any such consolidation or merger, if other than Equinix, or to
which such sale, assignment, transfer, conveyance or other disposition
shall have been made will immediately after such transaction and after
giving pro forma effect thereto and any related financing transactions
as if the same had occurred at the beginning of the applicable period,
be permitted to incur at least $1.00 of additional Indebtedness
according to the first paragraph of the "Incurrence of Indebtedness and
Issuance of Preferred Stock" covenant;
. if, as a result of any such transaction, property or assets of Equinix
would become subject to a Lien subject to the provisions of the
indenture described under the "Liens" covenant, Equinix or the successor
entity to Equinix shall have secured the notes as required by the
covenant; and
. Equinix shall have delivered to the trustee an Officers' Certificate and
an opinion of counsel, each stating that such consolidation, merger or
transfer and any supplemental indenture comply with the indenture.
The indenture also provides that Equinix may not, directly or indirectly,
lease all or substantially all of its properties or assets, in one or more
related transactions, to any other person.
Upon any consolidation or merger or any transfer of all or substantially all
of the assets of Equinix in accordance with the foregoing, the successor
corporation formed by such consolidation or into which Equinix is merged or to
which such transfer is made shall succeed to and be substituted for, and may
exercise every right and power of, Equinix under the indenture. The effect will
be as if the successor corporation had been named therein as Equinix, and
Equinix shall be released from the obligations under the notes and the
indenture except relating to any obligations that arise from, or are related
to, such transaction. The foregoing shall not apply in the case of a lease.
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Transactions with Affiliates
We will not, and will not permit any of the Restricted Subsidiaries to, make
any payment to, or sell, lease, transfer or otherwise dispose of any of our
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate, each an
Affiliate transaction, unless:
. such Affiliate Transaction is on terms that are not materially less
favorable to Equinix or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by Equinix or
such Restricted Subsidiary with an unrelated person; and
. relating to any Affiliate Transaction or series of related Affiliate
Transactions:
(a) involving aggregate consideration in excess of $5 million, Equinix
delivers to the trustee a resolution of the board of directors set
forth in an Officers' Certificate that such Affiliate Transaction
is approved by a majority of the disinterested members of the board
of directors and that such Affiliate Transaction complies with the
first clause above and is in the best interests of Equinix or such
Restricted Subsidiary; and
(b) if involving aggregate consideration in excess of $10 million, a
favorable written opinion as to the fairness to Equinix of such
Affiliate Transaction from a financial point of view is also
obtained by Equinix from an accounting, appraisal or investment
banking firm of national standing.
Notwithstanding the foregoing, the following items shall not be deemed to be
Affiliate Transactions:
. (a) the entering into, maintaining or performance of any employment
contract, collective bargaining agreement, benefit plan, program or
arrangement, related trust agreement or any other similar arrangement
for or with any employee, officer or director heretofore or hereafter
entered into in the ordinary course of business, including vacation,
health, insurance, deferred compensation, retirement, savings or other
similar plans or (b) the payment of compensation, performance of
indemnification or contribution obligations, or an issuance, grant or
award of stock, options, or other equity-related interests or other
securities, to employees, officers or directors in the ordinary course
of business;
. transactions between or among Equinix and/or the Restricted
Subsidiaries;
. payment of reasonable directors fees;
. any sale or other issuance of Equity Interests, other than Disqualified
Stock, of Equinix;
. Affiliate Transactions in effect or approved by the board of directors
on the Issue Date, including any amendments thereto, provided that the
terms of such amendments are not materially less favorable to Equinix
than the terms of such agreement before such amendment; and
. Restricted Payments that are permitted under the Restricted Payments
covenant and Permitted Investments described under clause (d) of its
definition.
Business Activities
We will not, and will not permit any of the Restricted Subsidiaries to,
engage to more than a de minimus extent in any business other than a Permitted
Business.
Status as Investment Company
The indenture provides that Equinix will not, and will not permit any of its
Subsidiaries or controlled affiliates to, conduct its business in a fashion
that would cause Equinix to be required to register as an investment company,
as that term is defined in the Investment Company Act of 1940, as amended, or
otherwise to become subject to regulation under the Investment Company Act. For
purposes of establishing Equinix's
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compliance with this provision, any exemption which is or would become
available under Section 3(c)(1) or Section 3(c)(7) of the Investment Company
Act will be disregarded.
Reports
The indenture provides that at all times from and after the date of the
commencement of an exchange offer or the effectiveness of a shelf registration
statement relating to the notes, a "Registration", whether or not Equinix is
then required to file reports with the Commission, Equinix shall file with the
Commission all such reports and other information as it would be required to
file with the Commission by Sections 13(a) or 15(d) under the Exchange Act if
it were subject thereto. Without cost, Equinix shall supply the applicable
trustee and each applicable holder, or shall supply to the applicable trustee
for forwarding to each such applicable holder, copies of such reports and other
information. At all times before the date of the Registration, Equinix shall,
at its cost, deliver to the trustee and each holder of the notes quarterly and
annual reports substantially equivalent to those which would be required by the
Exchange Act if Equinix were subject thereto. In addition, at all times before
the Registration, upon the request of any holder or any prospective purchaser
of the notes designated by a holder, Equinix shall supply to such holder or
such prospective purchaser the information required under Rule 144A under the
Securities Act.
Events of Default and Remedies
The indenture provides that each of the following will constitute an Event
of Default:
. default for 30 days in the payment when due of interest on the notes;
. default in the payment when due of the principal of, or premium, if
any, on, the notes;
. failure by Equinix or any of the Restricted Subsidiaries to comply with
the provisions described above under the captions "--Change of
Control," or "--Asset Sales";
. failure by Equinix or any of the Restricted Subsidiaries for 60 days
after notice to comply with any of its other agreements in the
indenture, the notes or the escrow agreement;
. the default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness of Equinix or any of the Restricted Subsidiaries, or the
payment of which is Guaranteed by Equinix or any of the Restricted
Subsidiaries, whether such Indebtedness or Guarantee now exists or is
created after the Issue Date, and either such Indebtedness is already
due and payable or such default results in the acceleration of such
Indebtedness before its express maturity and, in each case, the amount
of any such Indebtedness, together with the amount of any other such
Indebtedness the maturity of which has been so accelerated or which is
already due and payable, aggregates $10 million or more;
. one or more judgments, orders or decrees for the payment of money in
excess of $10 million, individually or in the aggregate, net of
applicable insurance coverage which is acknowledged in writing by the
insurer, shall be entered against Equinix or any Restricted Subsidiary
or any of their respective properties and shall not be discharged and
there shall have been a period of 60 days or more during which a stay
of enforcement of such judgment or order, by reason of pending appeal
or otherwise, shall not be in effect;
. Equinix shall assert or acknowledge in writing that the escrow
agreement is invalid or unenforceable; or
. certain events of bankruptcy or insolvency relating to Equinix or any
of its Significant Subsidiaries.
If any Event of Default occurs and is continuing, the trustee or the holders
of at least 25% in principal amount of the then outstanding notes may declare
all principal of, premium, if any, on and interest on the notes to be due and
payable immediately. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency relating to
Equinix or a Significant Subsidiary, all outstanding notes will become due and
payable without further action or notice.
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Holders may not directly enforce the indenture or the notes except as
provided in the indenture. Subject to certain limitations, holders of a
majority in principal amount of the then outstanding notes may direct the
trustee in its exercise of any trust or power.
Holders of a majority in aggregate principal amount of the then outstanding
notes, by notice to the trustee, may, on behalf of all holders, waive any
existing default or Event of Default and its consequences under the indenture,
except a continuing default or Event of Default in the payment of principal of,
premium, if any, or interest on the notes.
We will be required to deliver to the trustee annually a statement regarding
compliance with the indenture, and we will be required upon becoming aware of
any default or Event of Default to deliver to the trustee a statement
specifying such default or Event of Default. The trustee may withhold from
holders notice of any continuing default or Event of Default, except a default
or Event of Default relating to the payment of principal of, premium, if any,
or interest on, the notes, if it determines that withholding notice is in their
interest.
No Personal Liability of Directors, Officers, Employees, Incorporators or
Shareholders
No director, officer, employee, incorporator or shareholder of Equinix, as
such, will have any liability for any obligations of Equinix relating to the
notes or the indenture, or for any claim based on, or in respect or by reason
of, such obligations or their creation. Each holder of notes by accepting a
note will waive and release any and all such liability. Such waiver and release
are part of the consideration for issuance of the notes. Such waiver may not be
effective to waive liabilities under federal securities laws and it is the view
of the Commission that such a waiver is against public policy.
Legal Defeasance and Covenant Defeasance
The indenture provides that Equinix may, at its option and at any time,
elect to have all of its obligations discharged relating to the outstanding
notes, called legal defeasance, except for:
. the rights of holders to receive payments in respect of the principal
of, premium, if any, and interest on such notes when such payments are
due from the trust referred to below;
. Equinix's obligations relating to the notes concerning issuing temporary
notes, registration of notes, mutilated, destroyed, lost or stolen notes
and the maintenance of an office or agency for payment and money for
security payments held in trust;
. the rights, powers, trusts, duties and immunities of the trustee, and
Equinix's obligations in connection therewith; and
. the legal defeasance provisions of the indenture.
In addition, Equinix may, at its option and at any time, elect to have its
obligations released relating to certain covenants that are contained in the
indenture, called covenant defeasance, and, thereafter, any omission to comply
with such obligations will not constitute a default or Event of Default. In the
event covenant defeasance occurs, certain events, but not including non-
payment, bankruptcy, receivership, rehabilitation or insolvency events,
described under "--Events of Default and Remedies" will no longer constitute an
Event of Default.
To exercise either legal defeasance or covenant defeasance:
. Equinix must irrevocably deposit, or cause to be deposited, with the
trustee, in trust, for the benefit of the holders, cash in U.S. dollars,
non-callable Government Securities, or any combination, in such amounts
as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if
any, and interest on the outstanding notes on its stated maturity or on
the applicable redemption date, as the case may be, and Equinix must
specify whether the notes are being defeased to maturity or to a
particular redemption date;
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. in the case of legal defeasance, Equinix must deliver to the trustee an
opinion of United States counsel reasonably acceptable to the trustee
confirming that, since the Issue Date, Equinix has received from, or
there has been published by, the Internal Revenue Service a ruling, or
there has been a change in the applicable United States federal income
tax law, in either case to the effect that, and based thereon such
opinion of counsel shall confirm that, the holders will not recognize
income, gain or loss for United States federal income tax purposes as a
result of such legal defeasance, and will be subject to United States
federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such legal defeasance had not
occurred;
. in the case of covenant defeasance, Equinix must deliver to the trustee
an opinion of counsel in the United States reasonably acceptable to the
trustee confirming that the holders will not recognize income, gain or
loss for United States federal income tax purposes as a result of such
covenant defeasance, and such holders will be subject to United States
federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such covenant defeasance had
not occurred;
. no default or Event of Default shall have occurred and be continuing on
the date of such deposit, other than a default or Event of Default
resulting from the borrowing of funds to be applied to such deposit;
. such legal defeasance or covenant defeasance will not result in a breach
or violation of, or constitute a default under, any material agreement
or instrument, other than the indenture, to which Equinix or any of the
Restricted Subsidiaries is a party or by which Equinix or any of the
Restricted Subsidiaries is bound;
. Equinix must deliver to the trustee an Officers' Certificate stating
that the deposit was not made by Equinix with the intent of preferring
the holders over other creditors of Equinix, or with the intent of
defeating, hindering, delaying or defrauding creditors of Equinix or
others; and
. Equinix must deliver to the trustee an Officers' Certificate and an
opinion of United States counsel reasonably acceptable to the trustee,
each stating that the conditions precedent provided for or relating to
legal defeasance or covenant defeasance, as applicable, in the case of
the Officers' Certificate, in the first through sixth clauses and, in
the case of the opinion of counsel, in the first clause, relating to the
validity and perfection of the security interest, and the second and
third clauses of this paragraph, have been complied with.
Satisfaction and Discharge
The indenture will be discharged and will cease to be of further effect,
except as to surviving rights or registration of transfer or exchange of notes,
as to all outstanding notes when either:
. all such notes theretofore authenticated and delivered, except lost,
stolen or destroyed notes that have been replaced or paid and notes for
whose payment money has theretofore been deposited in trust or
segregated and held in trust by Equinix and thereafter repaid to Equinix
or discharged from such trust, have been delivered to the trustee for
cancellation; or
. (a) all such notes not theretofore delivered to the trustee for
cancellation have become due and payable and Equinix has irrevocably
deposited or caused to be deposited with the trustee as trust funds in
trust for the purpose an amount of money sufficient to pay and discharge
the entire indebtedness on the notes not theretofore delivered to the
trustee for cancellation, for principal amount, premium, if any, and
accrued interest to the date of such deposit; (b) Equinix has paid all
sums payable by it under the indenture; and (c) Equinix has delivered
irrevocable instructions to the trustee to apply the deposited money
toward the payment of the notes at Stated Maturity or on the redemption
date, as the case may be.
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In addition, Equinix must deliver an Officers' Certificate and an opinion of
counsel stating that all conditions precedent to satisfaction and discharge
have been complied with.
Transfer and Exchange
A holder may transfer or exchange notes in accordance with the procedures
set forth in the indenture. The registrar and the trustee may require a holder,
among other things, to furnish appropriate endorsements and transfer documents,
and Equinix may require a holder to pay any taxes and fees required by law or
permitted by the indenture. Equinix will not be required to transfer or
exchange any note selected for redemption. Also, Equinix will not be required
to transfer or exchange any note for a period of 15 days before:
. a selection of notes to be redeemed;
. an interest payment date; or
. the mailing of notice of a Change of Control Offer or Asset Sale Offer.
The registered holder of a note will be treated as the owner of it for all
purposes under the indenture.
Amendment, Supplement and Waiver
With the consent of the holders of not less than a majority in aggregate
principal amount of the notes at the time outstanding, Equinix and the trustee
are permitted to amend or supplement the indenture or any supplemental
indenture or modify the rights of the holders. However, that no such
modification may, without the consent of each holder affected thereby:
. reduce the principal amount of, change the fixed maturity of, or alter
the redemption provisions of, the notes;
. change the currency in which any notes or amounts owing thereon is
payable;
. reduce the percentage of the aggregate principal amount outstanding of
notes which must consent to an amendment, supplement or waiver or
consent to take any action under the indenture or the notes;
. impair the right to institute suit for the enforcement of any payment on
or relating to the notes;
. waive a default in payment relating to the notes;
. reduce the rate or change the time for payment of interest on the notes;
. following the occurrence of a Change of Control or an Asset Sale, alter
Equinix's obligation to purchase the notes as a result of such Change of
Control or Asset Sale in accordance with the indenture or waive any
default in its performance;
. affect the ranking of the notes in a manner adverse to the holder of the
notes; or
. release any Liens created by the escrow agreement except in accordance
with the terms of the escrow agreement.
Notwithstanding the foregoing, without the consent of any holder of notes,
Equinix and the trustee may amend or supplement the indenture or the notes;
. to cure any ambiguity, defect or inconsistency;
. to provide for uncertificated notes in addition to or in place of
certificated notes;
. to provide for the assumption of Equinix's obligations to holders in the
case of a merger or consolidation or sale of all or substantially all of
Equinix's assets in accordance with the terms of the indenture;
. to make any change that would provide any additional rights or benefits
to the holders or that does not adversely affect the legal rights under
the indenture of any such holder; or
. to comply with the requirements of the Commission to effect or maintain
the qualification of the indenture under the Trust Indenture Act.
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Concerning the Trustee
The indenture contains certain limitations on the rights of the trustee,
should it become a creditor of Equinix, to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any such claim
as security or otherwise. The trustee will be permitted to engage in other
transactions. However, if it acquires any conflicting interest, it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue, or resign.
Holders of a majority in principal amount of the then outstanding notes will
have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. In case an Event of Default shall occur which is not cured,
the trustee will be required, in the exercise of its power, to use the degree
of care of a prudent person in the conduct of their own affairs. Subject to
such provisions, the trustee will be under no obligation to exercise any of its
rights or powers under the indenture at the request of any holder, unless such
holder shall have offered to the trustee security and indemnity satisfactory to
it against any loss, liability or expense.
Governing Law
The indenture and the notes will be governed by and construed in accordance
with the laws of the State of New York.
Equinix will submit to the jurisdiction of the U.S. federal and New York
state courts located in the Borough of Manhattan, City and State of New York
for purposes of all legal actions and proceedings instituted in connection with
the notes and the indenture.
Certain Definitions
Set forth below are certain defined terms used in the indenture. Reference
is made to the indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" or "Acquired Preferred Stock" means, relating to any
specified person, Indebtedness or Preferred Stock of any other person existing
at the time such other person is merged with or into or became a Subsidiary of
such specified person, including by designation or revocation, provided such
Indebtedness or Preferred Stock is not incurred in connection with, or in
contemplation of, such other person merging with or into or becoming a
Subsidiary of such specified person.
"Affiliate" of any specified person means any other person directly or
indirectly controlling, controlled by or under direct or indirect common
control with such specified person. For purposes of this definition, "control",
including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with", as used relating to any person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a person shall be
deemed to be control.
"Asset Acquisition" means:
. any capital contribution, by means of transfers of cash or other property
to others or payments for property or services for the account or use of
others, or otherwise, by Equinix or any Restricted Subsidiary in any
other person, or any acquisition or purchase of Capital Stock of any
other person by Equinix or any Restricted Subsidiary, in either case by
which such person shall (a) become a Restricted Subsidiary or (b) shall
be merged with or into Equinix or any Restricted Subsidiary; or
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. any acquisition by Equinix or any Restricted Subsidiary of the assets of
any person which constitute substantially all of an operating unit or
line of business of such person or which is otherwise outside of the
ordinary course of business.
"Asset Sale" means:
. the sale, lease, transfer, conveyance or other disposition of any
property, asset or right, including, without limitation, by way of a sale
and leaseback, other than leases of space in an Exchange Facility entered
into in the ordinary course of business, of Equinix or any Restricted
Subsidiary; and
. the issue or sale by Equinix or any of the Restricted Subsidiaries of
Equity Interests of any Subsidiary.
Notwithstanding the foregoing, the following items shall not be deemed to be
Asset Sales:
. any disposition of properties and assets of Equinix subject to the
"Merger, Consolidation or Sale of Assets" covenant, provided that any
properties, assets or rights that are not included in any such
dispositions shall be deemed to have been sold in a transaction
constituting an Asset Sale;
. a transfer of properties, assets or rights by Equinix to a Restricted
Subsidiary or by a Subsidiary to Equinix or to a Restricted Subsidiary;
. a disposition of obsolete or worn out equipment or equipment that is no
longer useful in the conduct of a Permitted Business of Equinix and the
Restricted Subsidiaries;
. the surrender or waiver by Equinix or any of the Restricted Subsidiaries
of contract rights or the settlement, release or surrender of contract,
tort or other claims of any kind by Equinix or any of the Restricted
Subsidiaries or the grant by Equinix or any of the Restricted
Subsidiaries of a Lien not prohibited by the indenture; and
. sales, transfers, assignments and other dispositions of assets, or
related assets in related transactions (a) in the ordinary course of
business (b) with an aggregate fair market value of less than $500,000
in any fiscal year or (c) constituting the incurrence of a Capital Lease
Obligation.
"Board Resolution" means a duly authorized resolution of the board of
directors.
"Capital Contribution" means any contribution to the common equity of
Equinix from a direct or indirect parent of Equinix for which no consideration
other than the issuance of common stock with no redemption rights and no
special preferences, privileges or voting rights is given.
"Capital Lease Obligation" means, at the time any determination is to be
made, the amount of the liability in respect of a capital lease that would at
such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
. in the case of a corporation, corporate stock;
. in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents, however
designated, of corporate stock;
. in the case of a partnership or limited liability company, partnership
or membership interests, whether general or limited; and
. any other interest or participation that confers on a person the right
to receive a share of the profits and losses of, or distributions of
assets of, the issuing person.
"Cash Equivalents" means:
. United States dollars;
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. securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality of the United
States government, provided that the full faith and credit of the United
States is pledged in support of those securities, having maturities of
not more than six months from the date of acquisition;
. certificates of deposit and eurodollar time deposits with maturities of
six months or less from the date of acquisition, bankers' acceptances
with maturities not exceeding six months and overnight bank deposits, in
each case with any domestic commercial bank having capital and surplus
in excess of $500 million and a Thompson Bank Watch Rating of "B" or
better;
. repurchase obligations with a term of not more than seven days for
underlying securities of the types described in the second clause above
entered into with any financial institution meeting the qualifications
specified in the third clause above;
. commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Ratings Group and in each
case maturing within six months after the date of acquisition; and
. money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described above, provided that relating to any
Foreign Subsidiary, Cash Equivalents shall also mean those investments
that are comparable to the above clauses in such Foreign Subsidiary's
country of organization or country where it conducts business
operations.
"Change of Control" means the occurrence of any of the following:
. any "person" or "group," other than a Permitted Holder, is or becomes
the "beneficial owner", as such terms are used in Section 13(d)(3) of
the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has the right
to acquire, whether such right is exercisable immediately or only after
the passage of time, directly or indirectly, of 35% or more of the
Voting Stock, measured by voting power rather than number of shares, of
Equinix and the Permitted Holders own, in the aggregate, a lesser
percentage of the total Voting Stock, measured by voting power rather
than by number of shares, of Equinix than such person and do not have
the right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of Equinix;
. during any period of two consecutive years, Continuing Directors cease
for any reason to constitute a majority of the board of directors of
Equinix;
. Equinix consolidates or merges with or into any other person or Equinix
and/or any Restricted Subsidiaries sell, assign, convey, transfer, lease
or otherwise dispose of all or substantially all of the assets and
properties of Equinix and the Restricted Subsidiaries on a consolidated
basis to any other person, other than a Permitted Holder, other than a
consolidation or merger or disposition of assets (a) of or by Equinix
into or to a Wholly Owned Restricted Subsidiary of Equinix or (b)
subject to the first clause above, in a transaction in which the
outstanding Voting Stock of Equinix is changed into or exchanged for
securities or other property with the effect that the beneficial owners
of the outstanding Voting Stock of Equinix immediately before such
transaction, beneficially own, directly or indirectly, at least a
majority of the Voting Stock, measured by voting power rather than
number of shares, of the surviving corporation or the person to whom
Equinix's assets are transferred immediately following such transaction;
or
. the adoption of a plan relating to the liquidation or dissolution of
Equinix.
"Commission" means the Securities and Exchange Commission.
"Consolidated Capital Ratio" means, relating to Equinix as of any date, the
ratio of the aggregate amount of Indebtedness of Equinix and the Restricted
Subsidiaries then outstanding to the Consolidated Equity Capital of Equinix and
the Restricted Subsidiaries as of such date. For the purposes of calculating
the "Consolidated Capital Ratio";
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. any Subsidiary of Equinix that is a Restricted Subsidiary on the
Transaction Date shall be deemed to have been a Restricted Subsidiary at
the end of the most recently ended fiscal quarter, called the Reference
Date; and
. any Subsidiary of Equinix that is not a Restricted Subsidiary on the
Transaction Date shall be deemed not to have been a Restricted
Subsidiary on the Reference Date.
In addition to, and without limiting the foregoing, for the purposes of the
foregoing, "Consolidated Equity Capital" shall be calculated after giving
effect on a pro forma basis as of the Reference Date for, without duplication:
. any Asset Sales or Asset Acquisitions, including, without limitation,
any Asset Acquisition giving rise to the need to make such calculation
as a result of Equinix or one of the Restricted Subsidiaries, including
any person who becomes a Restricted Subsidiary as the result of the
Asset Acquisition, incurring, assuming or otherwise being liable for
Acquired Debt, occurring during the period commencing on the Reference
Date to and including the Transaction Date, as if such Asset Sale or
Asset Acquisition occurred on the Reference Date;
. any issue or sale of Equity Interests, other than Disqualified Stock but
including Equity Interests, other than Disqualified Stock, issued upon
the exercise of options, warrants or rights to purchase such Equity
Interests, of Equinix or any conversion of Disqualified Stock or debt
securities of Equinix into Equity Interests, other than Disqualified
Stock, occurring during the period commencing on the Reference Date to
and including the Transaction Date, as if such issue, sale or conversion
occurred on the Reference Date; and
. any Restricted Payments made by Equinix, and any sale, disposition or
repayment of any Restricted Investment constituting a Restricted
Payment, since the Reference Date to and including the Transaction Date,
as if such Restricted Payment occurred on the Reference Date.
"Consolidated Cash Flow" means, relating to Equinix for any period, the
Consolidated Net Income of Equinix and the Restricted Subsidiaries for such
period plus:
. to the extent that any of the following items were deducted in computing
such Consolidated Net Income, but without duplication, (a) provision for
taxes based on income or profits of Equinix and the Restricted
Subsidiaries for such period, plus (b) consolidated interest expense of
Equinix and the Restricted Subsidiaries for such period, whether paid or
accrued and whether or not capitalized, including, without limitation,
amortization of debt issuance costs and original issue discount, non-
cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments, if any, in Hedging Obligations, plus (c)
depreciation, amortization, including amortization of goodwill and other
intangibles, but excluding amortization of prepaid cash expenses that
were paid in a prior period, and other non-cash expenses, excluding any
such non-cash expense to the extent that it represents an accrual of or
reserve for cash expenses in any future period or amortization of a
prepaid cash expense that was paid in a prior period; of Equinix and the
Restricted Subsidiaries for such period; minus
. non-cash items increasing such Consolidated Net Income for such period,
other than items that were accrued in the ordinary course of business,
in each case, on a consolidated basis and determined in accordance with
GAAP.
Notwithstanding the foregoing, the provision for taxes on the income or profits
of, and the depreciation and amortization and other non-cash expenses of, a
Restricted Subsidiary of Equinix shall be added to Consolidated Net Income to
compute Consolidated Cash Flow of Equinix only to the extent that a
corresponding amount would be permitted at the date of determination to be
dividended or otherwise distributed to Equinix by such
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Restricted Subsidiary without prior governmental approval, that has not been
obtained, and without direct or indirect restriction under the terms of its
charter and all agreements, instruments, judgments, decrees, orders, statutes,
rules and governmental regulations applicable to that Restricted Subsidiary or
its shareholders.
"Consolidated Equity Capital" means, relating to Equinix as of any date,
the sum, without duplication, of
. the additional paid-in capital of the common shareholders reflected on
the consolidated balance sheet of Equinix and the Restricted
Subsidiaries as of such date; plus
. the respective amounts reported on Equinix's balance sheet as of such
date relating to any series of Capital Stock, other than Disqualified
Stock, not included in the first clause above; less
. (a) all write-ups, other than write-ups resulting from foreign currency
translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business,
after the Issue Date in the book value of any asset owned by Equinix or
a Restricted Subsidiary, (b) all outstanding net Investments as of such
date in persons that are not Restricted Subsidiaries, without giving
effect to any write-down or write-off, and (c) the aggregate amount of
all Restricted Payments declared or made on or after the Issue Date
other than (1) Investments in persons that are not Restricted
Subsidiaries and (2) Restricted Payments made according to the third
clause of the second paragraph of the "Restricted Payments" covenant.
"Consolidated Leverage Ratio" means, relating to Equinix, as of any date,
the ratio of:
. the aggregate consolidated amount of Indebtedness of Equinix and the
Restricted Subsidiaries then outstanding; to
. the annualized Consolidated Cash Flow of Equinix and the Restricted
Subsidiaries for the most recently ended fiscal quarter.
For purposes of calculating "Consolidated Cash Flow" for any fiscal quarter
for purposes of this definition:
. any Subsidiary of Equinix that is a Restricted Subsidiary on the
Transaction Date shall be deemed to have been a Restricted Subsidiary at
all times during such fiscal quarter; and
. any Subsidiary of Equinix that is not a Restricted Subsidiary on the
Transaction Date shall be deemed not to have been a Restricted
Subsidiary at any time during such fiscal quarter.
In addition to and without limitation of the foregoing, for purposes of this
definition, "Consolidated Cash Flow" shall be calculated after giving effect
on a pro forma basis for the applicable fiscal quarter to, without
duplication, any Asset Sales or Asset Acquisitions, including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of Equinix or one of the Restricted Subsidiaries,
including any person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition, incurring, assuming or otherwise being liable for Acquired
Debt, occurring during the period commencing on the first day of such fiscal
quarter to and including the Transaction Date, as if such Asset Sale or Asset
Acquisition occurred on the first day of such fiscal quarter.
"Consolidated Net Income" means, relating to Equinix for any period, the
aggregate of the Net Income of Equinix and the Restricted Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided that:
. the Net Income, but not loss, of any person that is accounted for by the
equity method of accounting shall be included only to the extent of the
amount of dividends or distributions paid in cash to Equinix or a
Restricted Subsidiary of Equinix by such person but not in excess of
Equinix's Equity Interests in such person;
. the Net Income of any Restricted Subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not
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at the date of determination permitted without any prior governmental
approval, that has not been obtained, or, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its shareholders, except
that Equinix's equity in the net income of any such Restricted
Subsidiary for such period may be included in such Consolidated Net
Income (a) up to the aggregate amount of cash that could have been
distributed by such Restricted Subsidiary during such period to Equinix
as a dividend and (b) if the only restriction on the declaration or
payment of dividends or similar distributions by such Restricted
Subsidiary is a restriction of the type described in the second clause
of the second paragraph of the "Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries" covenant;
. the Net Income of any person acquired in a pooling of interests
transaction for any period before the date of such acquisition shall be
excluded;
. the equity of Equinix or any Restricted Subsidiary in the net income, if
positive, of any Unrestricted Subsidiary shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Unrestricted Subsidiary during such period to
Equinix or a Restricted Subsidiary as a dividend or other distribution,
but not in excess of the amount of the Net Income of such Unrestricted
Subsidiary for such period;
. the cumulative effect of a change in accounting principles shall be
excluded;
. all extraordinary, unusual or nonrecurring gains or losses, net of fees
and expenses relating to the transaction giving rise thereto, shall be
excluded;
. any gain or loss, net of taxes, realized upon the termination of any
employee pension benefit plan shall be excluded; and
. gains or losses in respect of any Asset Sales, net of fees and expenses
relating to the transaction giving rise thereto, shall be excluded.
"Consolidated Tangible Assets" of Equinix as of any date means the total
amount of assets of Equinix and the Restricted Subsidiaries, less applicable
reserves, on a consolidated basis at the end of the fiscal quarter immediately
preceding such date, as determined in accordance with GAAP, less:
. unamortized debt and debt issuance expenses, deferred charges, goodwill,
patents, trademarks, copyrights, and all other items which would be
treated as intangibles on the consolidated balance sheet of Equinix and
the Restricted Subsidiaries prepared in accordance with GAAP; and
. appropriate adjustments on account of minority interests of other
Persons holding equity investments in Restricted Subsidiaries;
in the case of each of the clauses above, as reflected on the consolidated
balance sheet of Equinix and the Restricted Subsidiaries.
"Continuing Directors" means individuals who at the beginning of the period
of determination constituted the board of directors of Equinix, together with
any new directors whose election by the board of directors or whose nomination
for election by the shareholders of Equinix was approved by a vote of a
majority of the directors of Equinix then still in office who were either
directors at the beginning of the period or whose election or nomination for
election was previously so approved or is the designee of any one of the
Permitted Holders, or any combination of Permitted Holders, or was nominated
or elected by any such Permitted Holder(s) or any of their designees.
"Cumulative Consolidated Cash Flow" means, as of any date of determination,
the cumulative Consolidated Cash Flow realized during the period commencing on
the first day of the fiscal quarter which includes the Issue Date and ending
on the last day of the last fiscal quarter for which reports have been filed
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with the Commission or provided to the trustee preceding the date of the event
requiring such calculation to be made.
"Currency Agreement" means, relating to any person, any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
person is a party or beneficiary.
"Disqualified Stock" means any Equity Interest that, by its terms, or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of its holder, or upon the happening
of any event, matures or is mandatorily redeemable, under a sinking fund
obligation or otherwise, or redeemable at the option of its holder, in whole or
in part, on or before the date that is 91 days after the date on which the
notes mature; provided, however, that any Equity Interest that would constitute
Disqualified Stock solely because its holders have the right to require Equinix
to repurchase such Equity Interest upon the occurrence of a Change of Control
or an Asset Sale shall not constitute Disqualified Stock if the terms of such
Equity Interest provide that Equinix may not repurchase or redeem any such
Equity Interest under such provisions unless such repurchase or redemption
complies with the covenant described above under the "Restricted Payments"
covenant.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock, but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder.
"Exchange Facility" means a facility providing equipment colocation, direct
high-speed connections, switched interconnections and related services to third
party internet related businesses and operations.
"Existing Indebtedness" means Indebtedness of Equinix and the Restricted
Subsidiaries in existence on the Issue Date, until such amounts are repaid.
"Foreign Subsidiary" means any Restricted Subsidiary of Equinix which:
. is not organized under the laws of the United States, any state or the
District of Columbia; and
. conducts substantially all of its business operations outside the United
States of America.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
"Government Securities" means securities that are:
. direct obligations, or certificates representing an ownership interest
in such obligations, of the United States of America, including any
government agency or instrumentally, the payment of which the full faith
and credit of the United States of America is pledged;
. obligations of a person controlled or supervised by and acting as an
agency or instrumentality of the United States of America the payment of
which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America; or
. obligations of a person the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America.
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"Guarantee" means any obligation, contingent or otherwise, of any person
directly or indirectly guaranteeing any Indebtedness of any other person:
. to purchase or pay, or advance or supply funds for the purchase or
payment of, such Indebtedness of such other person, whether arising by
virtue of partnership arrangements, or by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement conditions or otherwise; or
. entered into for purposes of assuring in any other manner the obligee of
such Indebtedness of its payment of indebtedness or to protect such
obligee against any loss, in whole or in part;
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Hedging Obligations" means, relating to any person, the obligations of such
person under any Interest Rate Agreement or Currency Agreement.
"Indebtedness" means, relating to any person, any indebtedness of such
person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit, or
related reimbursement agreements, or banker's acceptances or representing
Capital Lease Obligations or the balance of the deferred and unpaid purchase
price of any property or representing any Hedging Obligations, except any such
balance that constitutes an accrued expense or trade payable, if and to the
extent any of the foregoing, other than letters of credit, or related
reimbursement agreements, banker's acceptances and Hedging Obligations, would
appear as a liability upon a balance sheet of such person prepared in
accordance with GAAP, as well as all Indebtedness of others secured by a Lien
on any asset of such person, whether or not such Indebtedness is assumed by
such person, Disqualified Stock of such person and Preferred Stock of such
person's Restricted Subsidiaries and, to the extent not otherwise included, the
Guarantee by such person of any Indebtedness of any other person. The amount of
any Indebtedness outstanding as of any date shall be:
. its accreted value, in the case of any Indebtedness issued with original
issue discount, but the accretion of original issue discount in
accordance with the original terms of Indebtedness issued with an
original issue discount will not be deemed to be an incurrence; or
. its principal amount, together with any interest thereon that is more
than 30 days past due, in the case of any other Indebtedness.
Notwithstanding the foregoing, money borrowed and set aside at the time of the
incurrence of any Indebtedness to prefund the payment of interest on such
Indebtedness shall not be deemed to be "Indebtedness" so long as such money is
held to secure the payment of such interest.
"Interest Rate Agreement" means, relating to any person, any interest rate
protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement to which such person is a party or beneficiary.
"Investments" means, relating to any person, all investments by such person
in other persons, including affiliates, in the forms of direct or indirect
loans, including Guarantees of Indebtedness or other obligations, advances or
capital contributions, excluding commission, travel and similar advances to
directors, officers and employees made in the ordinary course of business,
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If Equinix or any of the Restricted Subsidiaries sells or otherwise disposes of
any Equity Interests of any direct or indirect Restricted Subsidiary such that,
after giving effect to any such sale or disposition, such person is no longer a
Restricted Subsidiary, Equinix shall be deemed to have made an Investment on
the date of any such sale or disposition equal to the
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fair market value of the Equity Interests of such Restricted Subsidiary not
sold or disposed of in an amount determined as provided in the final paragraph
of the "Restricted Payments" covenant.
"Issue Date" means the date of first issuance of the notes under the
indenture.
"Lien" means, relating to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law, including
any conditional sale or other title retention agreement, any related lease, any
option or other agreement to sell or give a security interest in, and any
filing of or agreement to give any financing statement under the Uniform
Commercial Code, or equivalent statutes, of any jurisdiction.
"Net Cash Proceeds" means the aggregate amount of cash or Cash Equivalents
received by Equinix in the case of a sale, or Capital Contribution in respect,
of Capital Stock and by Equinix and the Restricted Subsidiaries in respect of
an Asset Sale plus, in the case of an issuance of Capital Stock upon any
exercise, exchange or conversion of securities, including options, warrants,
rights and convertible or exchangeable debt, of Equinix that were issued for
cash on or after the Issue Date, the amount of cash originally received by
Equinix upon the issuance of such securities, including options, warrants,
rights and convertible or exchangeable debt, less, in each case, the sum of all
payments, fees, commissions and reasonable and customary expenses, including,
without limitation, the fees and expenses of legal counsel and investment
banking fees and expenses, incurred in connection with such Asset Sale or sale
of Capital Stock, and, in the case of an Asset Sale only, less the amount,
estimated reasonably and in good faith by Equinix, of income, franchise, sales
and other applicable federal, state, provincial, foreign and local taxes
required to be paid or accrued as a liability by Equinix or any of its
respective Restricted Subsidiaries in connection with such Asset Sale in the
taxable year that such sale is consummated or in the immediately succeeding
taxable year, the computation of which shall take into account the reduction in
tax liability resulting from any available operating losses and net operating
loss carryovers, tax credits and tax credit carryforwards, and similar tax
attributes.
"Net Income" means, relating to any person, the net income (loss) of such
person, determined in accordance with GAAP and before any reduction in respect
of preferred stock dividends, excluding, however:
. any gain, but not loss, together with any related provision for taxes on
such gain, but not loss, realized in connection with (a) any Asset Sale
or (b) the disposition of any securities by such person or any of the
Restricted Subsidiaries; and
. any extraordinary gain or loss, together with any related provision for
taxes on such extraordinary gain or loss.
"Newly Raised Capital" means funds raised by Equinix and the Restricted
Subsidiaries after the Issue Date.
"Non-Recourse Debt" means Indebtedness:
. as to which neither Equinix nor an Restricted Subsidiary (a) provides
any Guarantee or credit support of any kind, including any undertaking,
guarantee, indemnity, agreement or instrument that would constitute
Indebtedness or (b) is directly or indirectly liable, as a guarantor or
otherwise; and
. no default relating to which, including any rights that its holders may
have to take enforcement action against an Unrestricted Subsidiary,
would permit, upon notice, lapse of time or both, any holder of any
other Indebtedness of Equinix or any Restricted Subsidiary to declare a
default under such other Indebtedness or cause its payment to be
accelerated or payable before its Stated Maturity.
"Officer" means the President, the Chief Executive Officer, the Chief
Financial Officer and any vice president of Equinix.
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"Officers' Certificate" means a certificate signed by two Officers.
"Permitted Business" means the business of designing, constructing, owning,
operating and leasing space within Exchange Facilities together with any other
activity reasonably related thereto.
"Permitted Credit Facility" means any senior commercial term loan and/or
revolving credit facility, including any letter of credit subfacility, entered
into principally with commercial banks and/or other persons typically party to
commercial loan agreements.
"Permitted Foreign Credit Facility" means any senior commercial term loan
and/or revolving credit facility, including any letter of credit subfacility,
entered into principally with commercial banks and/or other persons typically
party to commercial loan agreements having only Foreign Subsidiaries as
obligors thereunder; provided that Equinix may be a guarantor of any such
Permitted Foreign Credit Facility.
"Permitted Holder" means Benchmark Capital Partners II, L.P., Cisco Systems,
Inc., Microsoft Corporation, News Corp., Albert M. Avery, IV, Jay S. Adelson
and their respective Related Persons.
"Permitted Investments" means:
. any Investment in Equinix or in a Restricted Subsidiary of Equinix that
is engaged entirely or substantially entirely in a Permitted Business;
. any Investment in Cash Equivalents;
. any Investment by Equinix or any of the Restricted Subsidiaries in a
person, if as a result of such Investment (a) such person becomes a
Restricted Subsidiary of Equinix that is engaged entirely or
substantially entirely in a Permitted Business or (b) such person is
merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into,
Equinix or a Restricted Subsidiary of Equinix that is engaged entirely
or substantially entirely in a Permitted Business;
. loans or advances to employees of Equinix or any Restricted Subsidiary
in an amount not to exceed $5 million at any time outstanding;
. any Investment made as a result of the receipt of non-cash consideration
from an Asset Sale made in compliance with the "Asset Sales" covenant;
and
. Investments in securities of trade creditors or customers received under
any plan of reorganization or similar arrangement arising out of the
bankruptcy or insolvency of such trade creditors or customers.
"Permitted Liens" means:
. Liens to secure Indebtedness (a) permitted by the sixth and seventh
clauses of the second paragraph of the "Incurrence of Indebtedness and
Issuance of Preferred Stock" covenant, provided that relating to Liens
to secure Indebtedness permitted by the seventh clause of the covenant
or any Permitted Refinancing Indebtedness of such Indebtedness, such
Lien must cover only the assets acquired with such Indebtedness, and (b)
incurred under a Permitted Credit Facility or a Permitted Foreign Credit
Facility and permitted by the fifth clause of the second paragraph of
the "Incurrence of Indebtedness and Issuance of Preferred Stock"
covenant;
. Liens in favor of Equinix or any Restricted Subsidiary;
. Liens on property of a person existing at the time such person is merged
with or into or consolidated with Equinix or any of the Restricted
Subsidiaries, provided that such Liens were in existence before the
contemplation of such merger or consolidation and do not extend to any
assets other than those of the person merged into or consolidated with
Equinix or such Restricted Subsidiary;
. Liens on property existing at the time of its acquisition by Equinix or
any of the Restricted Subsidiaries, provided that such Liens were in
existence before the contemplation of such acquisition;
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. Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
. Liens existing on the Issue Date;
. Liens for taxes, assessments or governmental charges or claims that are
not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
. zoning restrictions, rights-of-way, easements and similar charges or
encumbrances incurred in the ordinary course which in the aggregate do
not detract from the value of the property;
. Liens securing the notes;
. Liens incurred in the ordinary course of business of Equinix or any of
the Restricted Subsidiaries relating to obligations that do not exceed
5% of Equinix's Consolidated Tangible Assets at any one time outstanding
and that (a) are not incurred in connection with the borrowing of money
or the obtaining of advances or credit, other than trade credit in the
ordinary course of business and (b) do not in the aggregate materially
detract from the value of the property or materially impair its use in
the operation of business by Equinix or such Restricted Subsidiary; and
. Liens securing money borrowed, or any securities purchased therewith,
which is, or are, in the case of securities, set aside at the time of
the incurrence of any Indebtedness permitted to be incurred under the
"Incurrence of Indebtedness and Issuance of Preferred Stock" covenant to
prefund the payment of interest on such Indebtedness.
"Permitted Recourse Debt" means Indebtedness as to which Equinix is
contingently liable as a guarantor or indemnitor or as to which Equinix has
agreed to otherwise provide credit support, in any such case to the extent that
the maximum possible liability of Equinix in respect of any such Indebtedness,
at the time of its incurrence by Equinix is permitted to be incurred as
Permitted Indebtedness under the fourth clause of its definition.
"Permitted Refinancing Indebtedness" means any Indebtedness of Equinix or
any of the Restricted Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of Equinix or any of the Restricted Subsidiaries, other than
Indebtedness incurred under the third, fourth, fifth, seventh or eighth clauses
of the definition of Permitted Indebtedness; provided that:
. the principal amount, or accreted value, if applicable, of such
Permitted Refinancing Indebtedness does not exceed the principal amount
of, or accreted value, if applicable, plus accrued interest on, the
Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded, plus the amount of any premium required to be paid in
connection with such refinancing under the terms of such Indebtedness or
otherwise reasonably determined by Equinix to be necessary and
reasonable expenses incurred in connection therewith;
. such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded;
. if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the notes,
such Permitted Refinancing Indebtedness is expressly subordinated in
right of payment to, the notes on terms at least as favorable to the
holders as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;
. if such Permitted Refinancing Indebtedness refinances Indebtedness of a
Restricted Subsidiary, such Permitted Refinancing Indebtedness is
incurred either by Equinix or by the Restricted Subsidiary who is the
obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and
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. such Permitted Refinancing Indebtedness is secured only by the assets,
if any, that secured the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
"Preferred Stock" means any Equity Interest of any class or classes of a
person, however designated, which is preferred as to payments of dividends, or
as to distributions upon any liquidation or dissolution, over Equity Interests
of any other class of such person.
"Purchase Money Indebtedness" means Indebtedness, including Acquired Debt,
in the case of Capital Lease Obligations, mortgage financings and purchase
money obligations, incurred for the purpose of financing all or any part of the
cost of the engineering, construction, installation, importation, acquisition,
lease, development or improvement of any assets used by Equinix or any
Restricted Subsidiary in a Permitted Business, including any related notes,
Guarantees, collateral documents, instruments and agreements executed in
connection therewith, as the same may be amended, supplemented, modified or
restated from time to time. Equinix in its sole discretion shall determine
whether any item of Indebtedness or portion of Indebtedness meeting the
foregoing criteria shall be classified as Purchase Money Indebtedness for the
purposes of the covenant "Incurrence of Indebtedness and Issuance of Preferred
Stock."
"Qualified Consideration" means all assets, rights, contractual or
otherwise, and properties, whether tangible or intangible, used or intended for
use in a Permitted Business and the Equity Interests of a person engaged
entirely or substantially entirely in a Permitted Business.
"Related Person" means any person who controls, is controlled by or is under
common control with a Permitted Holder; provided, that for purposes of this
definition "control" means the beneficial ownership of more than 50% of the
total voting power of a person normally entitled to vote in the election of
directors managers or trustees, as applicable, of a person; provided, further,
that relating to any natural person, each member of such person's immediate
family shall be deemed to be a Related Person of such person.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a person means any Subsidiary of the referent
person that is not an Unrestricted Subsidiary. Unless the context specifically
requires otherwise, Restricted Subsidiary includes a direct or indirect
Restricted Subsidiary of Equinix.
"Senior Debt" means all Indebtedness of Equinix which is not expressly by
its terms, subordinate or junior in right of payment to the notes.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated under the Act, as such Regulation is in effect on the Issue Date.
"Stated Maturity" means, relating to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal before the date
originally scheduled for its payment.
"Subordinated Indebtedness" means Indebtedness of Equinix that is
subordinated in right of payment by its terms or the terms of any document or
instrument or instrument relating thereto to the notes, in any respect.
"Subsidiary" means, relating to any person:
. any corporation, association or other business entity of which more than
50% of the total voting power of shares of Capital Stock entitled,
without regard to the occurrence of any contingency, to vote in the
election of directors, managers or trustees of the entity, is at the
time owned or controlled, directly or indirectly, by such person or one
or more of the other Subsidiaries of that person, or a combination; and
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. any partnership (a) the sole general partner or the managing general
partner of which is such person or a Subsidiary of such person or (b)
the only general partners of which are such person or one or more
Subsidiaries of such person, or any combination.
"Transaction Date" means the date of the transaction giving rise to the need
to calculate the Consolidated Leverage Ratio or the Consolidated Capital Ratio,
as the case may be.
"Unrestricted Subsidiary" means any Subsidiary of Equinix that is designated
by the board of directors as an Unrestricted Subsidiary by a Board Resolution;
but only to the extent that such Subsidiary at the time of such designation:
. has no Indebtedness other than Non Recourse Debt and Permitted Recourse
Debt;
. is a person relating to which neither Equinix nor any of the Restricted
Subsidiaries has any direct or indirect obligation to maintain or
preserve such person's financial condition or to cause such person to
achieve any specified levels of operating results; and
. has not Guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of Equinix or any of the Restricted
Subsidiaries.
Any such designation by the board of directors shall be evidenced by filing
with the trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by the "Restricted
Payments" covenant. The board of directors of Equinix may at any time designate
any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of Equinix of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if:
. such Indebtedness is permitted under the "Incurrence of Indebtedness and
Issuance of Preferred Stock" covenant, calculated on a pro forma basis
as if such designation had occurred at the beginning of the applicable
reference period; and
. no default or Event of Default would be in existence following such
designation.
"U.S. Government Securities" means securities that are direct obligations of
the United States of America for the payment of which its full faith and credit
is pledged.
"Voting Stock" of any person as of any date means the Capital Stock of such
person that is at the time entitled to vote in the election of the board of
directors of such person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
. the sum of the products obtained by multiplying (a) the amount of each
then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect of the Indebtedness, by (b) the number of years, calculated to
the nearest one-twelfth, that will elapse between such date and the
making of such payment; by
. the then outstanding principal amount of such Indebtedness.
"Wholly-Owned Restricted Subsidiary" of any person means a Restricted
Subsidiary of such person all of the outstanding Capital Stock or other
ownership interests of which, other than directors' qualifying shares, shall at
the time be owned by such person or by such person and one or more Wholly Owned
Restricted Subsidiaries of such person or by one or more Wholly Owned
Restricted Subsidiaries of such person.
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BOOK-ENTRY; DELIVERY AND FORM
Except as described below, we will initially issue the exchange notes in the
form of one or more registered exchange notes in global form without coupons.
We will deposit each global note on the date of the closing of the exchange
offer with, or one behalf of, DTC in New York, New York, and register the
exchange notes in the name of DTC or its nominee, or will leave such notes in
the custody of the trustee.
Depository Procedures
The descriptions of the operations and procedures of DTC, Euroclear and
Cedel set forth below are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to change by them from time to time. Equinix
takes no responsibility for these operations or procedures, and you are urged
to contact the relevant system or its participants directly to discuss these
matters.
DTC has advised us that it is:
. a limited purpose trust company organized under the laws of the State of
New York;
. a "banking organization" within the meaning of the New York Banking Law;
. a member of the Federal Reserve System;
. a "clearing corporation" within the meaning of the Uniform Commercial
Code, as amended; and
. a "clearing agency" registered under Section 17A of the Exchange Act.
DTC was created to hold securities for its participants and facilitates the
clearance and settlement of securities transactions between participants
through electronic book-entry changes to the accounts of its participants,
thereby eliminating the need for physical transfer and delivery of
certificates. DTC's participants include securities brokers and dealers,
including the initial purchasers, banks and trust companies, clearing
corporations and various other organizations. Indirect access to DTC's system
is also available to other entities such as banks, brokers, dealers and trust
companies, as indirect participants, that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. Investors who
are not participants may beneficially own securities held by or on behalf of
DTC only through participants or indirect participants.
Equinix expects that under procedures established by DTC:
. upon deposit of each global note, DTC will credit the accounts of
participants designated by the initial purchasers with an interest in
such global note; and
. ownership of the notes will be shown on, and the transfer of their
ownership will be effected only through, records maintained by DTC,
relating to the interests of participants, and the records of
participants and the indirect participants, relating to the interests of
persons other than participants.
The laws of some jurisdictions may require that purchasers of securities
take physical delivery of such securities in definitive form. Accordingly, the
ability to transfer interests in the notes represented by a global note to such
persons may be limited. In addition, because DTC can act only on behalf of its
participants, who in turn act on behalf of persons who hold interests through
participants, the ability of a person having an interest in notes represented
by a global note to pledge or transfer such interest to persons or entities
that do not participate in DTC's system, or to otherwise take actions in
respect of such interest, may be affected by the lack of a physical definitive
security in respect of such interest.
So long as DTC or its nominee is the registered owner of a global note, DTC
or such nominee, as the case may be, will be considered the sole owner or
holder of the notes represented by such global note for all purposes under the
indenture. Except as provided below, owners of beneficial interests in a global
note will not
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be entitled to have notes represented by such global note registered in their
names, will not receive or be entitled to receive physical delivery of
certificated notes, and will not be considered as owners or holders under the
indenture for any purpose, including relating to the giving of any direction,
instruction or approval to the trustee thereunder. Accordingly, each holder
owning a beneficial interest in a global note must rely on the procedures of
DTC and, if such holder is not a participant or an indirect participant, on the
procedures of the participant through which such holder owns its interest, to
exercise any rights of a holder of notes under the indenture or such global
note. Equinix understands that under existing industry practice, in the event
that Equinix requests any action of holders of notes, or a holder that is an
owner of a beneficial interest in a global note desires to take any action that
DTC, as the holder of such global note, is entitled to take, DTC would
authorize the participants to take such action and the participants would
authorize holders owning through such participants to take such action or would
otherwise act upon the instruction of such holders. Neither Equinix nor the
trustee will have any responsibility or liability for any aspect of the records
relating to or payments made on account of notes by DTC, or for maintaining,
supervising or reviewing any records of DTC relating to such notes.
Payments relating to any notes, including relating to the principal of, and
premium, if any, liquidated damages, if any, and interest on, any notes,
represented by a global note registered in the name of DTC or its nominee on
the applicable record date will be payable by the trustee, as applicable, to or
at the direction of DTC or its nominee in its capacity as the registered holder
of the global note representing such notes under the indenture. Under the terms
of the indenture, Equinix and the trustee may treat the persons in whose names
the notes, including the global notes representing such notes, are registered
as their owners for the purpose of receiving payment on the notes and for any
and all other purposes whatsoever. Accordingly, neither Equinix nor the trustee
has or will have any responsibility or liability for the payment of such
amounts to owners of beneficial interests in a global note (including
principal, premium, if any, liquidated damages, if any, and interest on any
notes). Payments by the participants and the indirect participants to the
owners of beneficial interests in a global note will be governed by standing
instructions and customary industry practice and will be the responsibility of
the participants or the indirect participants and DTC.
Transfers between participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
notes, cross-market transfers between the participants in DTC, on the one hand,
and Euroclear or Cedel participants, on the other hand, will be effected
through DTC in accordance with DTC's rules on behalf of Euroclear or Cedel, as
the case may be, by its respective depositary; however, such crossmarket
transactions will require delivery of instructions to Euroclear or Cedel, as
the case may be, by the counterparty in such system in accordance with the
rules and procedures and within the established deadlines, Brussels time, of
such system. Euroclear or Cedel, as the case may be, will, if the transaction
meets its settlement requirements, deliver instructions to its respective
depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant global notes in DTC, and
making or receiving payment in accordance with normal procedures for same-day
funds settlement applicable to DTC. Euroclear participants and Cedel
participants may not deliver instructions directly to the depositories for
Euroclear or Cedel.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a global note from a participant in
DTC will be credited, and any such crediting will be reported to the relevant
Euroclear or Cedel participant, during the securities settlement processing
day, which must be a business day for Euroclear and Cedel, immediately
following the settlement date of DTC. Cash received in Euroclear or Cedel as a
result of sales of interest in a global note by or through a Euroclear or Cedel
participant to a participant in DTC will be received with value on the
settlement date of DTC but will be available in the relevant Euroclear or Cedel
cash account only as of the business day for Euroclear or Cedel following DTC's
settlement date.
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Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to
facilitate transfers of interests in the global notes among participants in
DTC, Euroclear and Cedel, they are under no obligation to perform or to
continue to perform such procedures, and such procedures may be discontinued at
any time. Neither Equinix nor the trustee will have any responsibility for the
performance by DTC, Euroclear or Cedel or their respective participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
DTC and Year 2000 Problems. DTC's management is aware that some computer
applications, systems, and the like for processing data that are dependent upon
calendar dates, including dates before, on or after January 1, 2000, may
encounter "Year 2000 problems." DTC has informed participants and other members
of the financial community that it has developed and is implementing a program
so that its systems, as the same relate to the timely payment of distributions,
including principal and income payments, to securityholders, book-entry
deliveries, and settlement of trades within DTC, continue to function
appropriately. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, DTC's plan includes a testing
phase, which is expected to be completed within appropriate time frames.
However, DTC's ability to perform its services properly is also dependent upon
other parties, including but not limited to Equinix and its agents, as well as
third party vendors from whom DTC licenses software and hardware, and third
party vendors on whom DTC relies for information or the provision of services,
including telecommunication and electrical utility service providers, among
others. DTC has informed the financial community that it is contacting, and
will continue to contact, third party vendors from whom DTC acquires services
to impress upon them the importance of such services being Year 2000 compliant,
and to determine the extent of their efforts for Year 2000 remediation and, as
appropriate, testing of their services. In addition, DTC is in the process of
developing such contingency plans as it deems appropriate.
According to DTC, the foregoing information relating to DTC has been
provided to the financial community for informational purposes only and is not
intended to serve as a representation, warranty or contract modification of any
kind.
Certificated Notes
If:
. Equinix notifies the trustee in writing that DTC is no longer willing or
able to act as a depositary or DTC ceases to be registered as a clearing
agency under the Exchange Act and a successor depositary is not
appointed within 90 days of such notice or cessation;
. Equinix, at its option, notifies the trustee in writing that they elect
to cause the issuance of the notes in certificated form under the
indenture; or
. upon the occurrence of other events as provided in the indenture;
then, upon surrender by DTC of such global notes, Certificated Securities will
be issued to each person that DTC identifies as the beneficial owner of the
notes represented by such global notes. Upon any such issuance, the trustee is
required to register such certificated securities in the name of such person or
persons, or the nominee of any person or persons, and cause the same to be
delivered to such person or persons.
Neither the Equinix nor the trustee shall be liable for any delay by DTC or
any participant or indirect participant in identifying the beneficial owners of
the related notes and each such person may conclusively rely on, and shall be
protected in relying on, instructions from DTC for all purposes, including
relating to the registration and delivery, and the respective principal
amounts, of the notes to be issued.
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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of the material United States federal
income tax considerations relevant to the exchange of the initial notes for
exchange notes pursuant to the exchange offer and to the ownership and
disposition of the exchange notes. The discussion is based upon the Internal
Revenue Code of 1986, as amended (the "Code"), U.S. Treasury Regulations,
Internal Revenue Service ("IRS") rulings and pronouncements and judicial
decisions all in effect as of the date hereof, all of which are subject to
change at any time, and any such change may be applied retroactively in a
manner that could adversely affect a holder of the initial notes or the
exchange notes. The discussion does not address all of the U.S. federal income
tax consequences that may be relevant to a holder in light of such holder's
particular circumstances or to holders subject to special tax rules, such as
certain financial institutions, insurance companies, dealers in securities or
currencies, tax-exempt organizations and persons holding the initial notes or
exchange notes as part of a "straddle," "hedge" or "conversion transaction."
Moreover, the effect of any applicable state, local or foreign tax laws is not
discussed. The discussion below assumes that the initial notes and exchange
notes are held as "capital assets" within the meaning of Section 1221 of the
Code. For purposes of this summary, the term "Equinix" refers only to Equinix,
Inc. and not to any of its subsidiaries. Also, in this description the term
"notes" refers to the "initial notes" and "exchange notes" collectively.
As used herein, "U.S. holder" means a beneficial owner of an exchange note
who or that (i) is a citizen or resident of the United States, (ii) is a
corporation, partnership or other entity created or organized in or under the
laws of the United States, or political subdivision of the United States, (iii)
is an estate the income of which is subject to U.S. federal income taxation
regardless of its source, (iv) is a trust if (A) a U.S. court is able to
exercise primary supervision over the administration of the trust and (B) one
or more U.S. fiduciaries have authority to control all substantial decisions of
the trust, or (v) is otherwise subject to U.S. federal income tax on a net
income basis in respect of the exchange notes. As used herein, a "non-U.S.
holder" means a holder who or that is not a U.S. holder.
Persons considering exchanging their initial notes for exchange notes should
consult their own tax advisors with regard to the application of the united
states federal income tax considerations discussed below to their particular
situations as well as the application of any state, local, foreign or other tax
laws, including gift and estate tax laws and any applicable tax treaty.
Federal Income Tax Consequences of the Exchange Offer
The exchange of the initial notes for the exchange notes in accordance with
the exchange offer should not be treated as an exchange for federal income tax
purposes because the exchange notes should not be considered to differ
materially in kind or in extent from the initial notes. Rather, the exchange
notes received by a holder should be treated as a continuation of the initial
notes in the hands of such holder. As a result, there should be no federal
income tax consequences to holders exchanging the initial notes for exchange
notes in accordance with the exchange offer, and the federal income tax
consequences of holding and disposing of the exchange notes should be the same
as the federal income tax consequences of holding and disposing of the initial
notes. Accordingly, the holder must, among other things, continue to include
original issue discount ("OID") in income as if the exchange had not occurred.
See below, "--The Exchange Notes--Original Issue Discount", for a description
of the OID rules applicable to the exchange notes.
U.S. Holders
The Exchange Notes
Interest. The stated interest on the exchange notes generally will be
taxable to a U.S. holder as ordinary income at the time that it is paid or
accrued, in accordance with the U.S. holder's method of accounting for
94
<PAGE>
federal income tax purposes. Failure of Equinix to continue to cause the
registration statement of which this prospectus is a part to continue to be
effective or useable in connection with its intended purpose under the
registration rights agreement as described under "The Exchange Offer; Purpose
of the Exchange Offer" may result in the payment of predetermined liquidated
damages in the manner described therein, which payments will be treated as
additional interest on the notes. According to Treasury Regulations, the
possibility of a change in the interest rate will not affect the amount of
interest income recognized by a U.S. holder (or the timing of such recognition)
if the likelihood of the change, as of the date the initial notes were issued,
was remote. Equinix believes that as of the date the initial notes were issued,
the likelihood of a change in the interest rate on such notes was remote and
has not and does not intend to treat the possibility of a change in the
interest rate as affecting the yield to maturity of any initial notes or
exchange notes. There can be no assurance that the IRS will agree with such
position.
Original Issue Discount. The initial notes were issued as part of an
investment unit comprised of $1,000 principal amount of initial notes and one
warrant to purchase shares of the common stock of Equinix. Equinix and the
initial purchasers of the initial notes (the "Initial Purchasers") allocated in
the purchase agreement for the initial notes a purchase price of $909.96 to
each $1,000 principal amount at maturity of initial notes. This allocation
reflected Equinix's and the Initial Purchasers' judgement as to the relative
values of the initial notes and warrants at the time of issuance but is not
binding on the IRS.
Equinix's and the Initial Purchaser's allocation of the issue price of the
units will be binding on U.S. holders of exchange notes who acquire such notes
in the exchange offer in exchange for initial notes that were in turn acquired
by such holder directly from Equinix, unless the U.S. holder discloses the use
of a different allocation in a statement attached to its timely federal income
tax return for the year in which the unit was acquired. If a U.S. holder
acquired a unit at a price different from that on which Equinix's and the
Initial Purchaser's allocation is based, such holder may be treated as having
acquired the initial notes for an amount greater or less than the amount
allocated to such notes as set forth above thereby resulting in market discount
or bond premium, as discussed below. U.S. holders considering the use of an
issue price allocation different from that described above should consult their
tax advisors as to the consequences thereof.
The initial notes will have OID in an amount equal to the excess of the
stated redemption price at maturity over the issue price of such initial notes
(as discussed above) and the exchange notes that are acquired in the exchange
offer will have the same amount of OID. U.S. holders will be required to
include OID in ordinary income over the period that they hold the exchange
notes in advance of the receipt of cash attributable thereto. The amount of OID
to be included in income will be an amount equal to the sum of the daily
portions of OID for each day during the taxable year in which the exchange
notes are held.
The daily portions of OID are determined by allocating to each day in an
accrual period (which may be of any length and may vary over the term of the
exchange notes, at the option of the holder, provided that each accrual period
is no longer than one year and each scheduled payment of principal or interest
on the exchange notes occurs on the first or last day of an accrual period) the
pro rata portion of the OID allocable to the accrual period. The amount of OID
that is allocable to an accrual period generally will be the excess of the
product of the adjusted issue price of the exchange note at the beginning of
the accrual period (the issue price of the exchange note determined as
described above, generally increased by all prior accruals of OID) and the
yield to maturity of the exchange note (calculated on a constant yield basis
appropriately adjusted for the length of the accrual period) over the stated
interest paid during the accrual period or on the first day of the succeeding
accrual period. In general, the constant yield method will result in a greater
portion of such discount being included in income in the later part of the term
of the exchange note. Any amount of OID included in income will increase a U.S.
holder's tax basis in the exchange notes.
Equinix is required to furnish certain information to the IRS, and will
furnish annually to record holders of exchange notes, information relating to
OID accruing during the calendar year. That information will be based upon the
adjusted issue price of the initial notes that were exchanged for the exchange
notes as if the holder were the original holder of the initial notes.
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<PAGE>
A U.S. holder who purchases an exchange note for an amount other than the
adjusted issue price of the initial notes and/or on a date other than the end
of an accrual period will be required to determine for itself the amount of
OID, if any, it is required to include in gross income for U.S. federal income
tax purposes.
Optional Redemption. Under the Treasury Regulations, for purposes of
computing OID, Equinix will be presumed to exercise its option to redeem the
exchange notes if, by utilizing the date of exercise of the call option as the
maturity date and the redemption price as the stated redemption price at
maturity, the yield on the exchange notes would be lower than such yield would
be if the option were not exercised. See "Description of the Exchange Notes--
Optional Redemption."
If Equinix's option to redeem the exchange notes were presumed exercised on
a given date (the "Presumed Exercise Date"), the exchange notes would bear
additional OID in an amount equal to the amount for which the exchange notes
could be redeemed (the "Redemption Amount") over their issue price. For
purposes of calculating the current inclusion of such discount, the yield on
the exchange notes would be computed on their issue date by treating the
Presumed Exercise Date as the maturity date of the exchange notes and the
Redemption Amount as their stated principal amount due at maturity. If
Equinix's option to redeem the exchange notes were presumed exercised but were
not exercised in fact on the Presumed Exercise Date, the exchange notes would
be treated, for certain purposes, as if the option were exercised and new debt
instruments were issued on the Presumed Exercise Date for an amount of cash
equal to the Redemption Amount. In such case, it appears that any payment of
stated interest due under the exchange notes after the Presumed Exercise Date
would constitute qualified stated interest (rather than OID) and would be
taxable as ordinary interest income at the time such interest was accrued or
was received, in accordance with such U.S. holder's regular method of
accounting for tax purposes.
Market Discount and Bond Premium. If a U.S. holder purchases exchange notes
or has purchased initial notes for an amount that is less than the adjusted
issue price of such exchange notes or initial notes, as the case may be, the
amount of difference will generally be treated as market discount for U.S.
Federal income tax purposes. In such case, any principal payment on and gain
realized on the sale, exchange or retirement of the exchange notes and
unrealized appreciation on certain nontaxable dispositions of the exchange
notes will be treated as ordinary income to the extent of any market discount
that has not previously been included in gross income and that is treated as
having accrued on such exchange notes or initial notes that were exchanged for
such exchange notes, by the time of such payment or disposition. If a U.S.
holder makes a gift of exchange notes, accrued market discount, if any, will be
recognized as if such holder has sold such exchange notes for a price equal to
their fair market value. In addition, the U.S. holder may be required to defer,
until the maturity of the exchange notes or their earlier disposition in a
taxable transaction, the deduction of a portion of the interest expense on any
indebtedness incurred or continued to purchase or carry such exchange notes or
initial notes that were exchanged for such exchange notes.
Unless the U.S. holder elects to treat market discount as accruing on a
constant yield method, market discount will be treated as accruing on a
straight-line basis over the remaining term of the exchange notes. An election
made to include market discount in income as it accrues will apply to all debt
instruments acquired by the U.S. holder on or after the first day of the first
taxable year to which such election applies and may be revoked only with the
consent of the IRS.
If a U.S. holder purchases an exchange note for an amount in excess of all
amounts payable on the exchange note after the purchase date, other than
payments of stated interest, such excess will be treated as bond premium. In
general, a U.S. holder may elect to amortize bond premium over the remaining
term of the exchange note on a constant yield method. The amount of bond
premium allocable to any accrual period is offset against the stated interest
allocable to such accrual period (any excess may be deducted, subject to
certain limitations). An election to amortize bond premium applies to all
taxable debt instruments held at the beginning of the first taxable year to
which such election applies and thereafter acquired by the U.S. holder and may
be revoked only with the consent of the IRS.
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<PAGE>
Sale or Retirement of Exchange Notes. Upon the sale, retirement, redemption
or other taxable disposition of exchange notes, a U.S. holder will generally
recognize gain or loss in an amount equal to the difference between (a) the
amount of cash and the fair market value of other property received in exchange
therefor (other than amounts attributable to accrued but unpaid stated
interest) and (b) the U.S. holder's adjusted tax basis in such exchange notes.
Any gain or loss recognized will generally be capital gain or loss, and such
capital gain or loss will generally be long-term capital gain or loss if the
exchange notes have been held by the U.S. holder for more than one year
(including, in the case of a U.S. holder who acquired the exchange notes in
exchange for initial notes, the period of time the initial notes were held by
such U.S. holder) and otherwise will be a short-term capital gain or loss.
A U.S. holder's tax basis in an exchange note that was acquired in exchange
for an initial note that was in turn acquired in the initial issuance from
Equinix will generally be equal to the issue price allocated to such initial
note as described above under "--The Exchange Notes--Original Issue Discount",
increased by the amount of OID, if any, included in gross income before the
date of the disposition, and decreased by the amount of any payment, other than
stated interest, on such note before disposition.
U.S. holders should be aware that the resale of the exchange notes may be
affected by the market discount rules of the Code as described above under "--
The Exchange Notes--Market Discount and Bond Premium" under which a purchaser
of an initial note or an exchange note acquiring such note at a market discount
generally would be required to include as ordinary income a portion of the gain
realized upon the disposition or retirement of such note, to the extent of the
market discount that has accrued but not been included in income while such
note was held by such purchaser.
Non-U.S. Holders
Interest or redemption proceeds paid to non-U.S. holders of the exchange
notes generally will not be subject to U.S. Federal withholding tax provided
that (a) the non-U.S. holder does not actually or constructively own 10 percent
or more of a total combined voting power of all classes of stock of Equinix
entitled to vote, (b) the non-U.S. holder is not a "controlled foreign
corporation" (within the meaning of the Code) that is related to Equinix
through stock ownership, (c) either (1) the beneficial owner of the exchange
notes provides Equinix or its agent with a statement signed under penalties of
perjury that includes its name and address and certifies that it is not a
United States person or (2) a securities clearing organization, bank, or other
financial institution that holds customers' securities in the ordinary course
of its business (a "financial institution") certifies to Equinix or its agent,
under penalties of perjury, that such a statement has been received from the
beneficial owner by it or another financial institution and furnished to
Equinix or its agent a copy of the statement and (d) the exchange notes are in
registered form. If these requirements cannot be met, a non-U.S. holder will be
subject to U.S. withholding tax at a rate of 30 percent (or lower treaty rate,
if applicable) on interest payments. Although U.S. tax will also be imposed
against OID on the exchange notes before payment, such tax will only be
withheld from stated interest payments on the exchange notes. However, such
additional withholding may result in U.S. withholding tax on stated interest
payments exceeding 30 percent.
In general, any gain realized by any non-U.S. Holder upon the sale, exchange
or redemption of an exchange note will not be subject to Federal income or
withholding tax unless (i) a non-U.S. holder is an individual and is present in
the U.S. for a total of 183 days or more during the taxable year in which the
gain is realized, (ii) the gain is effectively connected with the conduct of a
trade or business of the holder in the U.S., or in the case of certain
residents of countries which have an income tax treaty in force with the U.S.,
attributable to a permanent establishment (or in the case of an individual a
fixed base) in the U.S. as such terms are defined in the applicable tax treaty,
(iii) the holder is subject to tax in accordance with the provisions of U.S.
tax law applicable to certain U.S. expatriates (including certain former
citizens or residents of the U.S.) or (iv) Equinix is or has been a "United
States real property holding corporation" at any time within the shorter of the
five-year period preceding such disposition or such holder's holding period.
Equinix does not believe that is its currently a "United States real property
holding corporation", or that it will become one in the future.
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<PAGE>
Deductibility of Interest and Original Issue Discount
The Code contains various limitations and restrictions on the deductibility
of interest and/or OID. Some of these limitations and restrictions may be
applicable to the interest and/or the OID associated with the notes. In such
event, some or all of the interest or OID associated with the notes may not be
deductible by Equinix.
Information Reporting and Backup Withholding
In general information reporting requirements will apply to OID, payments of
principal, premium, if any, and interest on the exchange notes and payments of
the proceeds of the sale of the exchange notes, and a 31% backup withholding
tax may apply to such payments if the holder either (i) fails to demonstrate
that the holder comes within certain exempt categories of holders or (ii) fails
to furnish or certify his correct taxpayer identification number to the payer
in the manner required, is notified by the IRS that he has failed to report
payments of interest and dividends properly, or under certain circumstances,
fails to certify that he has not been notified by the IRS that he is subject to
backup withholding for failure to report interest and dividend payments. Any
amounts withheld under the backup withholding rules from a payment to a holder
will be allowed as a credit against such holder's United States federal income
tax and may entitle the holder to a refund, provided that the required
information is furnished to the IRS.
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<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of those exchange notes. This prospectus, as it may be amended
or supplemented from time to time, may be used by a broker-dealer in connection
with resales of exchange notes received in the exchange offer where the
outstanding exchange notes were acquired as a result of market-making
activities or other trading activities. We have agreed that, for a period of
180 days after the consummation of the exchange offer, we will make this
prospectus, as amended and supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until , 2000, all dealers
effecting transactions in the exchange notes issued in the exchange offer may
be required to deliver a prospectus.
We will not receive any proceeds from any sale of exchange notes by broker-
dealers. exchange notes received by broker-dealers for their own account in the
exchange offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the exchange notes or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or at negotiated prices. Any such resale may be made
directly to purchasers or to or though brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer or the purchasers of any such exchange notes. Any broker-dealer that
resells exchange notes that were received by it for its own account in the
exchange offer and any broker or dealer that participates in a distribution of
such exchange notes may be deemed to be an "underwriter" within the meaning of
the Securities Act, and profit on any such resale of exchange notes issued in
the exchange and any commission or concessions received by any such persons may
be deemed to be underwriting compensation under the Securities Act. The letter
of transmittal states that, by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the consummation of the exchange offer, we
will promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the letter of transmittal. We have agreed to pay all expenses incident to
the exchange offer, including the expenses of one counsel for the holders of
the exchange notes, other than the commissions or concessions of any broker-
dealers and will indemnify the holders of the exchange notes, including any
broker-dealers, against certain liabilities, including liabilities under the
Securities Act. We note, however, that, in the opinion of the SEC,
indemnification against liabilities arising under federal securities laws is
against public policy and may be unenforceable.
LEGAL MATTERS
Legal matters as to the validity of the exchange notes offered by this
prospectus will be passed on for us by Dewey Ballantine LLP, New York, New York
and Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, Menlo Park,
California. As of the date of this prospectus, some partners of Gunderson
Dettmer Stough Villeneuve Franklin & Hachigian, LLP, our outside corporate
counsel, beneficially owned an aggregate of 75,000 shares of our Series A
preferred stock and 9,375 shares of our Series B preferred stock.
EXPERTS
The consolidated financial statements of Equinix, Inc. and subsidiary as of
December 31, 1998 and 1999 and for the period from June 22, 1998 (inception) to
December 31, 1998 and for the year ended December 31, 1999, have been included
herein and in the registration statement in reliance on the report of KPMG LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of that firm as experts in accounting and auditing.
99
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EQUINIX, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Report................................................ F-2
Consolidated Balance Sheets................................................. F-3
Consolidated Statements of Operations....................................... F-4
Consolidated Statements of Stockholders' Equity............................. F-5
Consolidated Statements of Cash Flows....................................... F-6
Notes to Consolidated Financial Statements.................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Equinix, Inc. and Subsidiary:
We have audited the accompanying consolidated balance sheets of Equinix,
Inc. and subsidiary (the "Company"), as of December 31, 1998 and 1999, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the period from June 22, 1998 (inception) to December 31, 1998 and
for the year ended December 31, 1999. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Equinix,
Inc. and subsidiary as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for the period from June 22, 1998 (inception)
to December 31, 1998 and for the year ended December 31, 1999, in conformity
with generally accepted accounting principles.
KPMG LLP
Mountain View, California
January 21, 2000, except as to Note 10,
which is as of January 28, 2000.
F-2
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December December March 31,
31, 1998 31, 1999 2000
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents............. $ 4,164,500 222,973,600 187,675,700
Short-term investments................ 5,000,000 -- 5,943,600
Accounts receivable................... -- 177,700 285,100
Current portion of restricted cash and
short-term investments............... -- 25,110,400 27,279,900
Prepaids and other current assets..... 167,600 1,596,900 1,507,500
----------- ----------- -----------
Total current assets................ 9,332,100 249,858,600 222,691,800
Property and equipment, net............. 482,000 31,932,400 53,350,400
Construction in progress................ 30,700 14,823,700 32,135,400
Restricted cash and short-term
investments, less current portion...... -- 13,498,300 13,773,200
Debt issuance costs, net................ -- 7,125,800 6,922,800
Other assets............................ 156,400 2,707,100 3,105,500
----------- ----------- -----------
Total assets........................ $10,001,200 319,945,900 331,979,100
=========== =========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued
expenses............................. $ 159,200 4,143,200 5,096,300
Accrued construction costs............ 252,300 9,772,200 23,947,000
Current portion of debt facilities and
capital lease obligations............ -- 4,394,600 4,144,300
Accrued interest payable.............. -- 2,166,700 8,930,300
Other current liabilities............. -- 204,600 174,000
----------- ----------- -----------
Total current liabilities........... 411,500 20,681,300 42,291,900
Debt facilities and capital lease
obligations, less current portion.... -- 8,808,400 7,863,100
Senior notes.......................... -- 183,954,700 184,441,100
Other liabilities..................... -- 802,400 1,159,500
----------- ----------- -----------
Total liabilities................... 411,500 214,246,800 235,755,600
----------- ----------- -----------
Commitments and contingencies
Stockholders' equity:
Series A convertible preferred stock,
$0.001 par value per share;
16,500,000 shares authorized in 1998,
32,000,000 shares authorized in 1999
and 2000; 15,697,500 shares issued
and outstanding in 1998; 18,682,500
shares issued and outstanding in 1999
and 2000; liquidation value of
$12,455,000.......................... 15,700 18,700 18,700
Series B convertible preferred stock,
$0.001 par value per share; none
authorized in 1998, 36,000,000 shares
authorized in 1999 and 2000; none
issued and outstanding in 1998;
15,762,373 issued and outstanding in
1999 and 2000; liquidation value of
$82,871,000.......................... -- 15,800 15,800
Common stock, $0.001 par value per
share; 43,500,000 shares authorized
in 1998, 132,000,000 shares
authorized in 1999 and 2000;
6,150,000, 11,672,196 and 12,540,006
shares issued and outstanding in
1998, 1999 and 2000, respectively.... 6,200 11,700 12,500
Additional paid-in capital............ 11,559,300 141,154,600 151,142,000
Deferred stock-based compensation..... (971,800) (13,705,500) (15,119,400)
Accumulated other comprehensive income
(loss)............................... -- 14,100 (27,000)
Accumulated deficit................... (1,019,700) (21,810,300) (39,819,100)
----------- ----------- -----------
Total stockholders' equity.......... 9,589,700 105,699,100 96,223,500
----------- ----------- -----------
Total liabilities and stockholders'
equity............................. $10,001,200 319,945,900 331,979,100
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from Three
June 22, 1998 Three months months
(inception) to Year ended ended ended
December 31, December March 31, March 31,
1998 31, 1999 1999 2000
-------------- ----------- ------------ -----------
(unaudited)
<S> <C> <C> <C> <C>
Revenues................. $ -- 37,100 -- 135,600
Costs and operating
expenses:
Cost of revenues
(includes stock-based
compensation of none
and $177,300 for the
periods ended December
31, 1998 and 1999
respectively, and none
and $105,500 for the
three months ended
March 31, 1999 and
2000, respectively).... -- 3,268,500 43,100 3,320,000
Sales and marketing
(includes stock-based
compensation of $13,200
and $1,631,000 for the
periods ended December
31, 1998 and 1999
respectively, and
$28,500 and $1,358,500
for the three months
ended March 31, 1999
and 2000,
respectively).......... 47,400 3,948,600 143,800 4,516,100
General and
administrative
(includes stock-based
compensation of
$150,700 and $4,819,000
for the periods ended
December 31, 1998 and
1999 respectively, and
$346,700 and $2,017,700
for the three months
ended March 31, 1999
and 2000,
respectively).......... 902,200 12,602,500 1,231,800 6,254,900
----------- ----------- ---------- -----------
Total costs and
operating expenses.. 949,600 19,819,600 1,418,700 14,091,000
----------- ----------- ---------- -----------
Loss from operations... (949,600) (19,782,500) (1,418,700) (13,955,400)
Interest income.......... 149,900 2,138,100 106,000 3,662,300
Interest expense......... (220,000) (3,146,200) (32,200) (7,715,700)
----------- ----------- ---------- -----------
Net loss................. $(1,019,700) (20,790,600) (1,344,900) (18,008,800)
=========== =========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Period from June 22, 1998 (inception) to March 31, 2000
<TABLE>
<CAPTION>
Series A Series B
convertible convertible Accumulated
preferred stock preferred stock Common stock Additional Deferred other
------------------- ------------------ ------------------- paid-in stock-based comprehensive
Shares Amount Shares Amount Shares Amount capital compensation income (loss)
---------- ------- ---------- ------- ---------- ------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of
common stock for
cash............ -- $ -- -- $ -- 6,060,000 $ 6,100 (2,100) -- --
Issuance of
common stock
upon exercise of
common stock
options......... -- -- -- -- 90,000 100 5,900 -- --
Issuance of
Series A
preferred
stock........... 15,037,500 15,000 -- -- -- -- 9,980,500 -- --
Deferred stock-
based
compensation.... -- -- -- -- -- -- 1,135,700 (1,135,700) --
Amortization of
stock-based
compensation.... -- -- -- -- -- -- -- 163,900 --
Conversion of
debt to Series A
preferred
stock........... 660,000 700 -- -- -- -- 439,300 -- --
Net loss........ -- -- -- -- -- -- -- -- --
---------- ------- ---------- ------- ---------- ------- ----------- ----------- -------
Balances as of
December 31,
1998............ 15,697,500 15,700 -- -- 6,150,000 6,200 11,559,300 (971,800) --
Issuance of
Series A
preferred
stock........... 3,000,000 3,000 -- -- -- -- 1,997,000 -- --
Repurchase of
Series A
preferred
stock........... (15,000) -- -- -- -- -- (10,000) -- --
Issuance of
Series B
preferred
stock........... -- -- 15,762,373 15,800 -- -- 81,690,200 -- --
Issuance of
common stock
upon exercise of
common stock
options......... -- -- -- -- 5,522,196 5,500 1,280,100 -- --
Issuance of
Series A
preferred stock
warrants........ -- -- -- -- -- -- 3,095,800 -- --
Issuance of
common stock
warrants........ -- -- -- -- -- -- 22,181,200 -- --
Deferred stock-
based
compensation.... -- -- -- -- -- -- 19,361,000 (19,361,000) --
Amortization of
stock-based
compensation.... -- -- -- -- -- -- -- 6,627,300 --
Comprehensive
income (loss):
Net loss........ -- -- -- -- -- -- -- -- --
Unrealized
appreciation on
short-term
investments..... -- -- -- -- -- -- -- -- 14,100
---------- ------- ---------- ------- ---------- ------- ----------- ----------- -------
Net
comprehensive
loss............ -- -- -- -- -- -- -- -- 14,100
---------- ------- ---------- ------- ---------- ------- ----------- ----------- -------
Balances as of
December 31,
1999............ 18,682,500 18,700 15,762,373 15,800 11,672,196 11,700 141,154,600 (13,705,500) 14,100
Issuance of
common stock
upon exercise of
common stock
options
(unaudited)..... -- -- -- -- 680,904 700 710,600 -- --
Issuance of
common stock
upon exercise of
common stock
warrants
(unaudited)..... -- -- -- -- 352,500 300 352,200 -- --
Issuance of
common stock
warrants
(unaudited)..... -- -- -- -- -- -- 4,039,800 -- --
Repurchase of
common stock
(unaudited)..... -- -- -- -- (165,594) (200) (10,800) -- --
Deferred stock-
based
compensation
(unaudited)..... -- -- -- -- -- -- 4,895,600 (4,895,600) --
Amortization of
stock-based
compensation
(unaudited)..... -- -- -- -- -- -- -- 3,481,700 --
Comprehensive
loss
(unaudited):
Net loss
(unaudited)..... -- -- -- -- -- -- -- -- --
Unrealized
depreciation on
short-term
investments
(unaudited)..... -- -- -- -- -- -- -- -- (41,100)
---------- ------- ---------- ------- ---------- ------- ----------- ----------- -------
Net
comprehensive
loss
(unaudited)..... -- -- -- -- -- -- -- -- (41,100)
---------- ------- ---------- ------- ---------- ------- ----------- ----------- -------
Balances as of
March 31, 2000
(unaudited)..... 18,682,500 $18,700 15,762,373 $15,800 12,540,006 $12,500 151,142,000 (15,119,400) (27,000)
========== ======= ========== ======= ========== ======= =========== =========== =======
<CAPTION>
Total
Accumulated stockholders'
deficit equity
------------ -------------
<S> <C> <C>
Issuance of
common stock for
cash............ -- 4,000
Issuance of
common stock
upon exercise of
common stock
options......... -- 6,000
Issuance of
Series A
preferred
stock........... -- 9,995,500
Deferred stock-
based
compensation.... -- --
Amortization of
stock-based
compensation.... -- 163,900
Conversion of
debt to Series A
preferred
stock........... -- 440,000
Net loss........ (1,019,700) (1,019,700)
------------ -------------
Balances as of
December 31,
1998............ (1,019,700) 9,589,700
Issuance of
Series A
preferred
stock........... -- 2,000,000
Repurchase of
Series A
preferred
stock........... -- (10,000)
Issuance of
Series B
preferred
stock........... -- 81,706,000
Issuance of
common stock
upon exercise of
common stock
options......... -- 1,285,600
Issuance of
Series A
preferred stock
warrants........ -- 3,095,800
Issuance of
common stock
warrants........ -- 22,181,200
Deferred stock-
based
compensation.... -- --
Amortization of
stock-based
compensation.... -- 6,627,300
Comprehensive
income (loss):
Net loss........ (20,790,600) (20,790,600)
Unrealized
appreciation on
short-term
investments..... -- 14,100
------------ -------------
Net
comprehensive
loss............ (20,790,600) (20,776,500)
------------ -------------
Balances as of
December 31,
1999............ (21,810,300) 105,699,100
Issuance of
common stock
upon exercise of
common stock
options
(unaudited)..... -- 711,300
Issuance of
common stock
upon exercise of
common stock
warrants
(unaudited)..... -- 352,500
Issuance of
common stock
warrants
(unaudited)..... -- 4,039,800
Repurchase of
common stock
(unaudited)..... -- (11,000)
Deferred stock-
based
compensation
(unaudited)..... -- --
Amortization of
stock-based
compensation
(unaudited)..... -- 3,481,700
Comprehensive
loss
(unaudited):
Net loss
(unaudited)..... (18,008,800) (18,008,800)
Unrealized
depreciation on
short-term
investments
(unaudited)..... -- (41,100)
------------ -------------
Net
comprehensive
loss
(unaudited)..... (18,008,800) (18,049,900)
------------ -------------
Balances as of
March 31, 2000
(unaudited)..... (39,819,100) 96,223,500
============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
June 22, 1998
(inception) Three months Three months
to Year ended ended ended
December 31, December 31, March 31, March 31,
1998 1999 1999 2000
------------- ------------ ------------ ------------
(unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss.................... $(1,019,700) (20,790,600) (1,344,900) (18,008,800)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation................ 4,200 609,300 51,300 1,636,200
Interest charge on
beneficial conversion of
convertible debt........... 220,000 -- -- --
Amortization of deferred
stock-based compensation... 163,900 6,627,300 375,200 3,481,600
Amortization of senior note
discount................... -- 161,900 -- 486,400
Amortization of debt
facilities and capital
lease obligation discount.. -- 578,900 32,200 228,100
Amortization of debt
issuance costs............. -- 67,600 -- 203,000
Amortization of sales
acquisition costs.......... -- 201,000 -- 150,800
Amortization of rent
discount................... -- -- -- 1,200
Issuance of common stock
warrant.................... -- -- -- --
Changes in operating assets
and liabilities:
Accounts receivable........ -- (177,700) -- (107,400)
Prepaids and other current
assets.................... (167,600) (1,429,300) 57,500 96,500
Other assets............... (156,400) (1,243,900) (46,900) (387,100)
Accounts payable and
accrued expenses.......... 159,200 2,313,800 129,200 953,100
Accrued interest payable... -- 2,166,700 -- 6,763,600
Other current liabilities.. -- 204,600 -- (30,600)
Other liabilities.......... -- 802,400 -- 357,100
------------ ------------ ----------- ------------
Net cash used in
operating activities.... (796,400) (9,908,000) (746,400) (4,176,300)
------------ ------------ ----------- ------------
Cash flows from investing
activities:
Purchase of short-term
investments................ (5,000,000) (28,800,000) -- (5,984,700)
Sales and maturities of
short-term investments..... -- 33,814,100 5,000,000 --
Purchases of property and
equipment.................. (486,200) (31,430,300) (471,000) (19,807,200)
Additions to construction in
progress................... (30,700) (10,956,200) (181,900) (16,689,400)
Accrued construction costs.. 252,300 9,519,900 20,000 14,174,800
Purchase of restricted cash
and short-term
investments................ -- (38,608,700) -- (2,444,400)
------------ ------------ ----------- ------------
Net cash provided by
(used in) investing
activities.............. (5,264,600) (66,461,200) 4,367,100 (30,750,900)
------------ ------------ ----------- ------------
Cash flows from financing
activities:
Proceeds from issuance of
common stock............... 4,000 -- -- --
Proceeds from exercise of
stock options.............. 6,000 1,285,600 20,600 1,064,000
Proceeds from issuance of
debt facilities and capital
lease obligations.......... -- 16,114,500 -- --
Repayment of debt facilities
and capital lease
obligations................ -- (988,000) -- (1,423,700)
Proceeds from issuance of
promissory notes........... 220,000 -- -- --
Proceeds from senior notes
and common stock warrants,
net........................ -- 193,890,200 -- --
Repurchase of preferred
stock...................... -- (10,000) -- --
Repurchase of common stock.. -- -- -- (11,000)
Proceeds from issuance of
convertible preferred
stock, net................. 9,995,500 84,886,000 2,000,000 --
------------ ------------ ----------- ------------
Net cash provided by
(used in) financing
activities.............. 10,225,500 295,178,300 2,020,600 (370,700)
------------ ------------ ----------- ------------
Net increase (decrease) in
cash and cash equivalents... 4,164,500 218,809,100 5,641,300 (35,297,900)
Cash and cash equivalents at
beginning of period......... -- 4,164,500 4,164,500 222,973,600
------------ ------------ ----------- ------------
Cash and cash equivalents at
end of period............... $ 4,164,500 222,973,600 9,805,800 187,675,700
============ ============ =========== ============
Noncash financing and
investing activities:
Cash paid for taxes......... $ -- 67,500 -- --
============ ============ =========== ============
Cash paid for interest...... $ -- 153,400 -- 365,900
============ ============ =========== ============
Noncash financing and
investing activities:
Preferred stock warrants
issued for financing
commitments................ $ -- 3,095,800 1,255,000 --
============ ============ =========== ============
Common stock warrants issued
for strategic agreement.... $ -- 1,507,800 -- --
============ ============ =========== ============
Common stock warrants issued
for services............... $ -- 4,466,200 -- 170,400
============ ============ =========== ============
Revaluation of common stock
warrants issued for
services................... -- -- -- 3,869,300
============ ============ =========== ============
Conversion of notes payable
to convertible preferred
stock...................... $ 440,000 -- -- --
============ ============ =========== ============
Unrealized
appreciation/(depreciation)
on investments............. $ -- 14,100 -- (41,100)
============ ============ =========== ============
Assets recorded under
capital lease.............. $ -- 660,700 -- --
============ ============ =========== ============
Deferred compensation on
grants of stock options.... $ 1,135,700 19,361,000 2,679,600 4,895,600
============ ============ =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1)Nature of Business and Summary of Significant Accounting Policies
Nature of Business
Equinix, Inc. ("Equinix" or the "Company") was incorporated as Quark
Communications, Inc. in Delaware on June 22, 1998. The Company changed its
name to Equinix, Inc. on October 13, 1998. Equinix designs, builds, and
operates neutral Internet Business Exchange ("IBX") centers.
For the period June 22, 1998 (inception) through December 31, 1998 and
the period ended September 30, 1999, the Company was a development stage
enterprise. Subsequent to this period, the Company opened its second IBX
center for commercial operation. In addition, the Company began to
recognize revenue from its IBX centers. As a result, the Company is no
longer a development stage enterprise as of and for the year ended December
31, 1999.
Unaudited Interim Results
The accompanying consolidated balance sheet as of March 31, 2000, the
consolidated statements of income and of cash flows for the three months
ended March 31, 1999 and 2000 and the consolidated statement of
stockholders' equity for the three months ended March 31, 2000 are
unaudited.
In the opinion of management, these statements have been prepared on the
same basis as the audited financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for the fair
presentation of the Company's financial position as of March 31, 2000 and
the results of its operations and cash flows for the three month periods
ended March 31, 1999 and 2000. The data disclosed in notes to the
consolidated financial statements for these periods is unaudited.
Basis of Presentation
The accompanying consolidated financial statements include the accounts
of Equinix and its wholly-owned subsidiary, Equinix-DC, Inc. ("Equinix-
DC"). All significant intercompany accounts and transactions have been
eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from these estimates.
Cash, Cash Equivalents and Short-Term Investments
The Company considers all highly liquid instruments with a maturity from
the date of purchase of three months or less to be cash equivalents. Cash
equivalents consist of money market mutual funds and certificates of
deposit with financial institutions with maturities of between 7 and 60
days. Short-term investments generally consist of certificates of deposits
with maturities of between 90 and 180 days and highly liquid debt and
equity securities of corporations, municipalities and the U.S. government.
Short-term investments are classified as "available-for-sale" and are
carried at fair value based on quoted market prices, with unrealized gains
and losses reported in stockholders' equity as a component of comprehensive
income. The cost of securities sold is based on the specific identification
method.
F-7
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Restricted Cash and Short-term Investments
Restricted cash and short-term investments as of December 31, 1999
consists of $37,011,500, plus accrued interest of $67,100, deposited with
an escrow agent to pay the first three interest payments on the Senior
Notes (see Note 4) and restricted cash of $1,530,100 provided as collateral
under three separate security agreements for standby letters of credit
entered into and in accordance with certain lease agreements. Restricted
cash and short-term investments as of March 31, 2000 consists of
$37,011,500, plus accrued interest of $554,500, deposited with an escrow
agent to pay the first three interest payments on the Senior Notes (see
Note 4) and restricted cash of $3,451,200, plus accrued interest of $35,900
for four standby letters of credit and an escrow account entered into and
pursuant to certain lease agreements. These agreements expire at various
dates through 2014.
Financial Instruments and Concentration of Credit Risk
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist of cash, cash equivalents and short-
term investments to the extent these exceed federal insurance limits and
accounts receivable. Risks associated with cash, cash equivalents and
short-term investments are mitigated by the Company's investment policy,
which limits the Company's investing to only those marketable securities
rated at least A-1 or P-1 investment grade, as determined by independent
credit rating agencies.
The Company's customer base is primarily composed of businesses
throughout the United States. The Company performs ongoing credit
evaluations of its customers.
Property and Equipment
Property and equipment are stated at original cost. Depreciation is
computed using the straight-line method over the estimated useful lives of
the respective assets, generally two to five years for non-IBX center
equipment and seven to ten years for IBX center equipment. Leasehold
improvements and assets acquired under capital lease are amortized over the
shorter of the lease term or the estimated useful life of the asset or
improvement.
Construction in Progress
Construction in progress includes direct and indirect expenditures for
the construction of IBX centers and is stated at original cost. The Company
has contracted out substantially all of the construction of the IBX centers
to independent contractors under construction contracts. Construction in
progress includes certain costs incurred under a construction contract
including project management services, site identification and evaluation
services, engineering and schematic design services, design development and
construction services and other construction-related fees and services. In
addition, the Company has capitalized certain interest costs during the
construction phase. Once an IBX center becomes operational, these
capitalized costs are depreciated at the appropriate rate consistent with
the estimated useful life of the underlying asset.
Included within construction in progress is the value attributed to the
unearned portion of the MCI warrant and the Bechtel warrant totaling
$2,639,100 and $1,197,700, respectively, as of December 31, 1999 and
$1,802,100 and $2,657,000, respectively, as of March 31, 2000 (See Note 5).
Interest incurred is capitalized in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 34, Capitalization of Interest
Costs. Total interest cost incurred and total interest capitalized during
the year ended December 31, 1999, was $2,791,400 and $177,400,
respectively. Total interest cost incurred and total interest capitalized
during the three months ended March 31, 2000, was $7,512,800 and $193,600,
respectively.
F-8
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of
In accordance with SFAS No. 121, Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of, the Company
considers the impairment of long-lived assets and certain identifiable
intangibles whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying
amount of an asset to future net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the
assets exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs to
sell. No impairment of long-lived assets has been recorded as of December
31, 1998 and 1999.
Revenue Recognition
Revenues consist of monthly recurring fees for colocation and
interconnection services at the IBX centers, service fees associated with
the delivery of professional services and non-recurring installation fees.
Revenues from colocation and interconnection services are billed monthly
and recognized ratably over the term of the contract, generally one to
three years. Professional service fees are recognized in the period in
which the services were provided and represent the culmination of the
earnings process. Non-recurring installation fees are deferred and
recognized ratably over the term of the related contract.
Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. Valuation allowances are
established when necessary to reduce tax assets to the amounts expected to
be realized.
Stock-Based Compensation
The Company accounts for its stock-based compensation plans in
accordance with SFAS No. 123, Accounting for Stock-Based Compensation. As
permitted under SFAS No. 123, the Company uses the intrinsic value-based
method of Accounting Principles Board ("APB") Opinion No. 25, Accounting
for Stock Issued to Employees, to account for its employee stock-based
compensation plans.
The Company accounts for stock-based compensation arrangements with
nonemployees in accordance with the Emerging Issues Task Force Abstract
("EITF") No. 96-18, Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling Goods or
Services. Accordingly, unvested options and warrants held by nonemployees
are subject to revaluation at each balance sheet date based on the then
current fair market value.
Unearned deferred compensation resulting from employee and nonemployee
option grants is amortized on an accelerated basis over the vesting period
of the individual options, in accordance with FASB Interpretation No. 28,
Accounting for Stock Appreciation Rights and Other Variable Stock Option or
Award Plans ("FASB Interpretation No. 28").
Segment Reporting
The Company has adopted the provisions of SFAS No. 131, Disclosures
about Segments of an Enterprise and Related Information. SFAS No. 131
establishes annual and interim reporting standards for
F-9
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
operating segments of a company. The statement requires disclosures of
selected segment-related financial information about products, major
customers and geographic areas.
Comprehensive Income
The Company has adopted the provisions of SFAS No. 130, Reporting
Comprehensive Income. SFAS No. 130 establishes standards for the reporting
and display of comprehensive income and its components; however, the
adoption of this statement had no impact on the Company's net loss or
stockholders' equity. SFAS 130 requires unrealized gains or losses on the
Company's available-for-sale securities to be included in other
comprehensive income (loss). Comprehensive income (loss) consists of net
loss and other comprehensive income.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. SFAS No.
133 establishes accounting and reporting standards for derivative
instruments, including derivative instruments embedded in other contracts,
and for hedging activities. SFAS No. 133, as amended by SFAS No. 137,
Deferral of the Effective Date of FASB Statement No. 133, is effective for
all fiscal quarters of fiscal years beginning after September 15, 2000.
This statement does not currently apply to the Company as the Company does
not have any derivative instruments or hedging activities.
In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") 101,
Revenue Recognition, which outlines the basic criteria that must be met to
recognize revenue and provides guidance for presentation of revenue and for
disclosure related to revenue recognition policies in financial statements
filed with the SEC. The Company believes the adoption of SAB 101 will not
have a material impact on the Company's financial position and results of
operations.
In March 2000, the FASB issued Interpretation No. 44, ("FIN 44"),
Accounting for Certain Transactions Involving Stock Compensation - an
Interpretation of APB 25. This Interpretation clarifies (a) the definition
of employee for purposes of applying Opinion 25, (b) the criteria for
determining whether a plan qualifies as a noncompensatory plan, (c) the
accounting consequence of various modifications to the terms of a
previously fixed stock option or award, and (d) the accounting for an
exchange of stock compensation awards in a business combination. This
Interpretation is effective July 1, 2000, but certain conclusions in this
Interpretation cover specific events that occur after either December 15,
1998, or January 12, 2000. To the extent that this Interpretation covers
events occurring during the period after December 15, 1998, or January 12,
2000, but before the effective date of July 1, 2000, the effects of
applying this Interpretation are recognized on a prospective basis from
July 1, 2000. The Company has not yet determined the impact, if any, of
adopting this interpretation.
(2)Balance Sheet Components
Cash, Cash Equivalents and Short-term Investments
As of December 31, 1998 and 1999, cost approximated market value of
cash, cash equivalents and short-term investments; unrealized gains and
losses were not significant. As of December 31, 1999, cash equivalents
included investments in corporate debt securities with various contractual
maturity dates which do not exceed 90 days.
F-10
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Property & Equipment
Property and equipment is comprised of the following:
<TABLE>
<CAPTION>
December 31,
-------------------
March 31,
1998 1999 2000
-------- ---------- -----------
(unaudited)
<S> <C> <C> <C>
Leasehold improvements....................... $240,600 20,152,600 37,435,600
IBX plant and machinery...................... -- 8,235,400 8,895,000
Computer equipment and software.............. 77,000 3,126,000 6,880,500
IBX equipment................................ -- 658,700 1,892,300
Furniture and fixtures....................... 168,600 373,200 496,700
-------- ---------- ----------
486,200 32,545,900 55,600,100
Less accumulated depreciation................ 4,200 613,500 2,249,700
-------- ---------- ----------
$482,000 31,932,400 53,350,400
======== ========== ==========
</TABLE>
Leasehold improvements and certain computer equipment and software and
furniture and fixtures, recorded under capital leases, aggregated none as
of December 31, 1998 and $660,700 as of December 31, 1999 and March 31,
2000. Amortization on the assets recorded under capital leases is included
in depreciation expense.
Included within leasehold improvements is the value attributed to the
earned portion of the MCI Warrant and the Bechtel Warrant totaling $329,000
and $299,500, respectively, as of December 31, 1999 and $3,576,900 and
$299,500, respectively, as of March 31, 2000 (see Note 5). Amortization on
such warrants is included in depreciation expense.
Restricted Cash and Short-term Investments
Restricted cash and short-term investments consisted of the following;
<TABLE>
<CAPTION>
December 31, March 31,
1999 2000
------------ -----------
(unaudited)
<S> <C> <C>
United States treasury notes:
Due within one year........................... $ 25,110,400 25,439,400
Due after one year through two years.......... 11,968,200 12,126,500
Restricted cash in accordance with security
agreements..................................... 1,530,100 3,487,200
------------ -----------
38,608,700 41,053,100
Less current portion............................ (25,110,400) (27,279,900)
------------ -----------
$ 13,498,300 13,773,200
============ ===========
</TABLE>
As of December 31, 1999 and March 31, 2000, cost approximated market
value of restricted cash and short-term investments; unrealized gains and
losses were not significant.
F-11
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the following:
<TABLE>
<CAPTION>
December 31,
------------------ March 31,
1998 1999 2000
-------- --------- -----------
(unaudited)
<S> <C> <C> <C>
Accounts payable............................. $ 33,800 1,978,200 3,938,800
Accrued preferred stock issuance costs....... -- 1,180,000 --
Accrued compensation......................... 23,200 303,000 602,100
Deferred rent................................ 42,400 18,000 8,900
Income taxes payable......................... 39,800 -- --
Accrued debt issuance costs.................. -- 490,200 404,600
Other........................................ 20,000 173,800 141,900
-------- --------- ---------
$159,200 4,143,200 5,096,300
======== ========= =========
</TABLE>
(3)Debt Facilities and Capital Lease Obligations
Debt facilities and capital lease obligations consisted of the following
as of December 31, 1999:
<TABLE>
<S> <C>
Comdisco Loan and Security Agreement (net of unamortized discount of
$901,000).................................................................. $ 4,141,000
Venture Leasing Loan Agreement (net of unamortized discount of $1,034,200).. 8,417,400
Comdisco Master Lease Agreement and Addendum (net of unamortized discount of
$11,800)................................................................... 644,600
-----------
13,203,000
Less current portion........................................................ (4,394,600)
-----------
$ 8,808,400
===========
</TABLE>
Comdisco Loan and Security Agreement
In March 1999, Equinix-DC entered into a $7,000,000 Loan and Security
Agreement with Comdisco, Inc. ("Comdisco" and the "Comdisco Loan and
Security Agreement"). Under the terms of the Comdisco Loan and Security
Agreement, Comdisco may lend the Company up to $3,000,000 for equipment
(referred to as the "hard" loan) and up to $4,000,000 for software and
tenant improvements ("soft" loan) for the Ashburn, Virginia IBX center
buildout. The loans, which are collateralized by the assets of the Ashburn
IBX, are available in minimum advances of $1,000,000 and each loan is
evidenced by a secured promissory note. The hard and soft loans issued bear
interest at rates of 7.5% and 9% per annum, respectively, and are repayable
in 42 and 36 equal monthly installments, respectively, plus a final balloon
interest payment equal to 15% of the original advance amount due at
maturity. The Comdisco Loan and Security Agreement has an effective
interest rate of 18.1% per annum. As of December 31, 1999, $5,042,000 was
outstanding under the Comdisco Loan and Security Agreement.
In connection with the Comdisco Loan and Security Agreement, the Company
granted Comdisco a warrant to purchase 765,000 shares of the Company's
Series A preferred stock at $0.67 per share (the "Comdisco Loan and
Security Agreement Warrant"). This warrant is immediately exercisable and
expires in ten years from the date of grant. The fair value of the warrant,
using the Black-Scholes option pricing model with the following
assumptions: deemed fair market value per share of $1.80, dividend yield of
0%, expected volatility of 80%, risk-free interest rate of 5.0% and a
contractual life of 10 years, was $1,255,000, was recorded as a discount to
the applicable debt, and is being amortized to interest expense, using the
effective interest method, over the life of the agreement.
F-12
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Comdisco Master Lease Agreement
In May 1999, the Company entered into a Master Lease Agreement with
Comdisco (the "Comdisco Master Lease Agreement"). Under the terms of the
Comdisco Master Lease Agreement, the Company sells equipment to Comdisco,
which it will then lease back. The amount of financing to be provided is up
to $1,000,000. Repayments are made monthly over 42 months with a final
balloon interest payment equal to 15% of the balance amount due at
maturity. Interest accrues at 7.5% per annum. The Comdisco Master Lease
Agreement has an effective interest rate of 14.6% per annum. As of December
31, 1999, $590,600 was outstanding under the Comdisco Master Lease
Agreement.
The Company leases certain leasehold improvements, computer equipment
and software and furniture and fixtures under capital leases under the
Comdisco Master Lease Agreement. These leases were entered into as sales-
leaseback transactions. The Company has deferred a gain of $77,700 related
to the sale-leaseback in July 1999, which is being amortized in proportion
to the amortization of the leased assets.
In connection with the Comdisco Master Lease Agreement, the Company
granted Comdisco a warrant to purchase 30,000 shares of the Company's
Series A preferred stock at $1.67 per share (the "Comdisco Master Lease
Agreement Warrant"). This warrant is immediately exercisable and expires in
ten years from the date of grant. The fair value of the warrant using the
Black-Scholes option pricing model with the following assumptions: deemed
fair market value per share of $3.00, dividend yield 0%, expected
volatility of 80%, risk-free interest rate of 5.0% and a contractual life
of 10 years, was $79,800 and was recorded as a discount to the applicable
capital lease obligation, and is being amortized to interest expense, using
the effective interest method, over the life of the agreement.
Comdisco Master Lease Agreement Addendum
In August 1999, the Company amended the Comdisco Master Lease Agreement.
Under the terms of the Comdisco Master Lease Agreement Addendum, the
Company sells equipment (hard items) and software and tenant improvements
(soft items) in its San Jose IBX center to Comdisco, which it then leases
back. The amount of financing available under the Comdisco Master Lease
Agreement Addendum is up to $2,150,000 for hard items and up to $2,850,000
for soft items. Amounts drawn under this addendum will be collateralized by
the underlying hard and soft assets of the San Jose IBX center that were
funded under the Comdisco Master Lease Agreement Addendum. Repayments are
made monthly over the course of 42 months. Interest accrues at 8.5% per
annum, with a final balloon interest payment equal to 15% of the original
acquisition cost of the property financed. The Comdisco Master Lease
Agreement Addendum has an effective interest rate of 15.3% per annum. As of
December 31, 1999, $65,800 was outstanding under the Comdisco Master Lease
Agreement Addendum.
In connection with the Comdisco Master Lease Agreement Addendum, the
Company granted Comdisco a warrant to purchase 150,000 shares of the
Company's Series A preferred stock at $3.00 per share (the "Comdisco Master
Lease Agreement Addendum Warrant"). This warrant is immediately exercisable
and expires in seven years from the date of grant or three years from the
effective date of the Company's initial public offering, whichever is
shorter. The fair value of the warrant using the Black-Scholes option
pricing model with the following assumptions: deemed fair market value per
share of $4.80, dividend yield 0%, expected volatility of 80%, risk-free
interest rate of 5.0% and a contractual life of seven years, was $587,000,
was recorded as a discount to the applicable capital lease obligation, and
is being amortized to interest expense, using the effective interest
method, over the life of the agreement.
Venture Leasing Loan Agreement
In August 1999, the Company entered into a Loan Agreement with Venture
Lending & Leasing II, Inc. and other lenders ("VLL" and the "Venture
Leasing Loan Agreement"). The Venture Leasing Loan Agreement provides
financing for equipment and tenant improvements at the Newark, New Jersey
IBX
F-13
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
center and a secured term loan facility for general working capital
purposes. The amount of financing to
be provided is up to $10,000,000, which may be used to finance up to 85% of
the projected cost of tenant improvements and equipment for the Newark IBX
center and is collateralized by the assets of the Newark IBX. Notes issued
bear interest at a rate of 8.5% per annum and are repayable in 42 monthly
installments plus a final balloon interest payment equal to 15% of the
original advance amount due at maturity and are collateralized by the
assets of the New Jersey IBX. The Venture Leasing Loan Agreement has an
effective interest rate of 14.7% per annum. As of December 31, 1999,
$9,451,600 was outstanding under the Venture Leasing Loan Agreement.
In connection with the Venture Leasing Loan Agreement, the Company
granted VLL a warrant to purchase 300,000 shares of the Company's Series A
preferred stock at $3.00 per share (the "Venture Leasing Loan Agreement").
This warrant is immediately exercisable and expires on June 30, 2006. The
fair value of the warrant using the Black-Scholes option pricing model with
the following assumptions: deemed fair market value per share of $4.80,
dividend yield 0%, expected volatility of 80%, risk-free interest rate of
5.0% and a contractual life of seven years, was $1,174,000, was recorded as
a discount to the applicable debt, and is being amortized to interest
expense, using the effective interest method, over the life of the
agreement.
Maturities
Combined aggregate maturities for debt facilities and future minimum
capital lease obligations are as follows:
<TABLE>
<CAPTION>
Capital
Debt lease
facilities obligations Total
----------- ----------- ----------
<S> <C> <C> <C>
2000.................................. $ 4,220,300 231,900 4,452,200
2001.................................. 4,596,000 214,100 4,810,100
2002.................................. 4,534,600 215,200 4,749,800
2003.................................. 1,142,700 169,400 1,312,100
2004.................................. -- -- --
----------- -------- ----------
14,493,600 830,600 15,324,200
Less amount representing interest... -- (174,200) (174,200)
----------- -------- ----------
14,493,600 656,400 15,150,000
Less amount representing unamortized
discount........................... (1,935,200) (11,800) (1,947,000)
----------- -------- ----------
12,558,400 644,600 13,203,000
Less current portion................ (4,220,300) (174,300) (4,394,600)
----------- -------- ----------
$ 8,338,100 470,300 8,808,400
=========== ======== ==========
</TABLE>
(4)Senior Notes and Debt Issuance Costs
On December 1, 1999, the Company issued 200,000 units, each consisting
of a $1,000 principal amount 13% Senior Note due 2007 (the "Senior Notes")
and one warrant to purchase 16.8825 shares (for an aggregate of 3,376,500
shares) of common stock for $0.0067 per share (the "Senior Note Warrants"),
for aggregate net proceeds of $193,400,000, net of offering expenses. Of
the $200,000,000 gross proceeds, $16,207,200 was allocated to additional
paid-in capital for the deemed fair value of the Senior Note Warrants and
recorded as a discount to the Senior Notes. The discount on the Senior
Notes is being amortized to interest expense, using the effective interest
method, over the life of the debt. The Senior Notes have an effective
interest rate of 14.1% per annum. The fair value attributed to the Senior
Note Warrants was consistent with the Company's treatment of its other
common stock transactions prior to the issuance of the Senior
F-14
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Notes. The fair value was based on recent equity transactions by the
Company. The amount of the Senior Notes, net of the unamortized discount,
is $183,954,700 as of December 31, 1999.
As of December 31, 1999, restricted cash and short-term investments,
including accrued interest thereon, includes $37,078,600 deposited with an
escrow agent that will be used to pay the first three interest payments.
Interest is payable semi-annually, in arrears, on June 1 and December 1 of
each year, commencing on June 1, 2000. The Senior Notes are partially
collateralized by the restricted cash and short-term investments. Except
for this security interest, the notes are unsecured, senior obligations of
the Company and are effectively subordinated to all existing and future
indebtedness of the Company, whether or not secured.
The Senior Notes are governed by the Indenture dated December 1, 1999,
between the Company, as issuer, and State Street Bank and Trust Company of
California, N.A., as trustee (the "Indenture"). Subject to certain
exceptions, the Indenture restricts, among other things, the Company's
ability to incur additional indebtedness and the use of proceeds therefrom,
pay dividends, incur certain liens to secure indebtedness or engage in
merger transactions.
The costs related to the issuance of the Senior Notes were capitalized
and are being amortized to interest expense using the effective interest
method, over the life of the Senior Notes. Debt issuance costs, net of
amortization, are $7,125,800 as of December 31, 1999.
(5) Stockholders' Equity
Stock Split
In January 2000, the Company's stockholders approved a three-for-two
stock split effective January 19, 2000 whereby three shares of common stock
and preferred stock were exchanged for every two shares of common stock and
preferred stock then outstanding. All share and per share amounts in these
financial statements have been adjusted to give effect to the stock split
(see Note 10).
Preferred Stock
On September 10, 1998, 15,037,500 shares of Series A preferred stock
were issued at a price of $0.67 per share. Concurrent with the issuance of
the Series A preferred stock, promissory notes of $220,000 were converted
into 660,000 shares of Series A preferred stock. During July 1998, the
Company had borrowed $220,000 in the aggregate under a convertible loan
arrangement with a number of individual investors. The loans accrued
interest of 5.83% per annum while outstanding, which was paid in cash.
During the period ended December 31, 1998, the Company recorded a charge of
$220,000 to account for the "in the money" conversion right of the
convertible loan arrangement. On January 27, 1999, 3,000,000 shares of
Series A preferred stock were issued, at a price of $0.67 per share in the
second closing of the Series A financing.
In August 1999, the Company amended and restated its Certificate of
Incorporation to increase the authorized share capital to 75,000,000 shares
of common stock and 30,000,000 shares of preferred stock, of which
14,000,000 has been designated as Series A and 16,000,000 as Series B.
In January 2000, the Company amended and restated its Certificate of
Incorporation to increase the authorized share capital to 132,000,000
shares of common stock and 68,000,000 shares of preferred stock, of which
32,000,000 has been designated as Series A and 36,000,000 as Series B (See
Note 10).
Between August and December 1999, the Company completed its Series B
preferred stock financing. The Company issued 15,762,373 shares of Series B
preferred stock, at a price of $5.33 per share.
F-15
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The rights, preferences, and privileges of the Series A and Series B
preferred stock are as follows:
. Dividends are noncumulative and are payable only upon declaration by
the Board of Directors at a rate of $0.05 and $0.43 per share for
Series A and B, respectively.
. Holders of Series A and B preferred stock have a liquidation
preference of $0.67 and $5.33 per share, respectively, plus all
declared but unpaid dividends.
. Each share of Series A and B preferred stock is convertible, at the
option of the holder, into common stock at a conversion price equal
to the respective original preferred stock issue price. The
conversion price is subject to adjustment for stock splits and
combinations and will automatically convert into common stock in the
event of either (i) an underwritten public offering with an aggregate
gross offering price of at least $25,000,000 or (ii) upon a vote of
the holders of a majority of the then outstanding shares of each
class of preferred stock.
. Each share of Series A and Series B preferred stock has voting rights
equal to that of common stock on an "as if converted" basis.
. The holders of Series A and B preferred stock are entitled to elect
two and one directors, respectively, to the Company's Board of
Directors so long as 25% of the shares of Series A and B preferred
stock originally issued remain outstanding.
. Series A and B preferred stock is not redeemable at any time.
. Holders of greater than 1,500,000 shares of Series A and/or Series B
preferred stock have the right to purchase their pro rata share of
securities subsequently sold or otherwise issued by the Company,
subject to standard exceptions.
. Holders of Series A and Series B preferred stock have the right to
veto:
. any increase in the number of Series B preferred stock or the
issuance of any securities with rights senior to those of the
Series B preferred stock;
. the redemption of any securities by the Company, other than in
connection with an employee's termination of employment; and
. any increase to the size of the Company's board of directors.
. Holders of Series A and Series B preferred stock may require the
Company to file a registration statement with the SEC to register the
holders' stock, and have the right to force the Company to include
their shares in any registered public offering following the
Company's initial public offering.
. Holders of Series A and Series B preferred stock have the right to
receive financial and other information from the Company.
Common Stock
The Company's founders purchased 6,060,000 shares of stock.
Approximately 5,454,000 shares are subject to restricted stock purchase
agreements whereby the Company has the right to repurchase the stock upon
voluntary or involuntary termination of the founder's employment with the
Company at $0.00033 per share. The Company's repurchase right lapses at a
rate of 25% per year. As of December 31, 1998 and 1999, and March 31, 2000,
4,888,875, 3,522,375 and 3,180,750 shares are subject to repurchase at a
price of $0.00033 per share, respectively.
Upon the exercise of certain unvested stock options, the Company issued
to employees common stock which is subject to repurchase by the Company at
the original exercise price of the stock option.
F-16
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
This right lapses over the vesting period. As of December 31, 1998 and 1999
and March 31, 2000, there were 45,000, 4,590,735 and 4,883,704 shares,
respectively, subject to repurchase.
Stock Option Plan
In September 1998, the Company adopted the 1998 Stock Plan (the "Plan")
under which nonstatutory stock options and restricted stock may be granted
to employees, outside directors, and consultants, and incentive stock
options may be granted to employees. Accordingly, the Company has reserved
a total of 8,262,810 shares of the Company's common stock for issuance upon
the grant of restricted stock or exercise of options granted in accordance
with the Plan. Options granted under the Plan generally expire 10 years
following the date of grant and are subject to limitations on transfer. The
Plan is administered by the Board of Directors.
The Plan provides for the granting of incentive stock options at not
less than 100% of the fair market value of the underlying stock at the
grant date. Nonstatutory options may be granted at not less than 85% of the
fair market value of the underlying stock at the date of grant.
Option grants under the Plan are subject to various vesting provisions,
all of which are contingent upon the continuous service of the optionee and
may not impose vesting criterion more restrictive than 20% per year. Stock
options may be exercised at anytime subsequent to grant. Stock obtained
through exercise of unvested options is subject to repurchase at the
original purchase price. The Company's repurchase right decreases as the
shares vest under the original option terms.
Options granted to stockholders who own greater than 10% of the
outstanding stock must have vesting periods not to exceed five years and
must be issued at prices not less than 110% of the fair market value of the
stock on the date of grant as determined by the Board of Directors. Upon a
change of control, all shares granted under the Plan shall immediately
vest. Unless otherwise terminated by the Board of Directors, the Plan
automatically terminates in September 2008.
A summary of the Plan is as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------------
1998 1999 March 31, 2000
-------------------- --------------------- --------------------
(unaudited)
Weighted- Weighted- Weighted-
average average average
exercise exercise exercise
Shares price Shares price Shares price
--------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. -- $ -- 2,074,050 $0.07 2,780,988 0.64
Granted................. 2,164,050 0.07 6,404,040 0.46 952,075 3.97
Forfeited............... -- -- (340,500) 0.06 (155,594) 0.07
Exercised............... (90,000) 0.07 (5,356,602) 0.24 (680,904) 1.05
--------- ---------- ---------
Outstanding at end of
period................. 2,074,050 0.07 2,780,988 0.64 2,896,565 1.67
========= ========== =========
Shares available for
future grant........... 6,098,760 35,220 2,988,739
========= ========== =========
Exercisable at end of
period................. 20,001 76,431 83,931
========= ========== =========
Weighted-average grant
date fair value of
options granted to
employees during the
period at below deemed
fair value............. 0.54 3.19 5.08
Weighted-average grant
date fair value of
options granted to non-
employees during the
period at below deemed
fair value............. 0.38 1.75 9.16
</TABLE>
F-17
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table summarizes information about stock options
outstanding as of December 31, 1999:
<TABLE>
<CAPTION>
Outstanding Exercisable
------------------------------- ----------------
Weighted-
average Weighted- Weighted-
remaining average Number average
Number of contractual exercise of exercise
Range of exercise prices shares life price shares price
------------------------ --------- ----------- --------- ------ ---------
<S> <C> <C> <C> <C> <C>
$0.01 to $0.13.......... 1,548,738 9.23 $0.07 76,431 $0.07
$0.67................... 180,750 9.78 0.67 -- --
$1.00................... 753,000 9.86 1.00 -- --
$2.67................... 298,500 9.93 2.67 -- --
--------- ------
2,780,988 9.53 0.67 76,431 0.07
========= ======
</TABLE>
The weighted-average remaining contractual life of options outstanding
at December 31, 1999 and March 31, 2000 was 9.53 years and 9.70 years,
respectively.
Stock-Based Compensation
Employees
The Company uses the intrinsic-value method prescribed in APB No. 25 in
accounting for its stock-based compensation arrangements with employees.
Stock-based compensation expense is recognized for employee stock option
grants in those instances in which the deemed fair value of the underlying
common stock was subsequently determined to be greater than the exercise
price of the stock options at the date of grant. The Company recorded
deferred stock-based compensation related to employees of $19,785,800 in
respect to stock options granted through December 31, 1999, of which
$135,300 and $6,067,300 has been amortized to stock-based compensation
expense for the period and year ended December 31, 1998 and 1999,
respectively, on an accelerated basis over the vesting period of the
individual options, in accordance with FASB Interpretation No. 28. For the
three months ended March 31, 2000, the Company recorded additional deferred
stock-based compensation related to employees of $4,200,600, in respect of
stock option grants during the three months ended March 31, 2000. During
the three months ended March 31, 2000, the Company amortized $2,941,200 of
compensation related to employees to stock-based compensation expense, on
an accelerated basis in accordance with FASB Interpretation No. 28.
Had compensation costs been determined using the fair value method for
the Company's stock-based compensation plans, net loss would have been
changed to the amounts indicated below:
<TABLE>
<CAPTION>
Period from
June 22, 1998 Three
(inception) months
to Year ended ended
December 31, December March 31,
1998 31, 1999 2000
------------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
Net loss:
As reported...................... $(1,019,700) (20,790,600) (18,008,800)
Pro forma........................ (1,021,600) (20,844,500) (18,117,400)
</TABLE>
The Company's calculations for employee grants were made using the
minimum value method with the following weighted average assumptions for
the period from June 22, 1998 (inception) to December 31, 1998 and the year
ended December 31, 1999: dividend yield of 0%; expected volatility of 0%;
risk-free interest rates of 5.77% in the period from June 22, 1998
(inception) to December 31, 1998 and 5.66% in the year ended December 31,
1999; and expected lives of 2.67 years in the period from June 22, 1998
(inception) to December 31, 1998 and 2.52 years in the year ended December
31, 1999.
F-18
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Non-Employees
The Company uses the fair value method to value options granted to non-
employees. In connection with its grant of options to non-employees, the
Company has recognized deferred stock-based compensation of $710,900 and
$695,000 through December 31, 1999 and for the three months ended March 31,
2000, respectively, of which $28,600, $560,000 and $540,500 has been
amortized to stock-based compensation expense for the period and year ended
December 31, 1998 and 1999, respectively, and for the three months ended
March 31, 2000, respectively, on an accelerated basis over the vesting
period of the individual options, in accordance with FASB Interpretation
No. 28.
The Company's calculations for non-employee grants were made using the
Black-Scholes option pricing model with the following weighted average
assumptions for the period from June 22, 1998 (inception) to December 31,
1998, the year ended December 31, 1999 and the three month period ended
March 31, 2000: dividend yield of 0%; expected volatility of 80%; risk-free
interest rates of 4.99% in the period from June 22, 1998 (inception) to
December 31, 1998, 5.48% in the year ended December 31, 1999 and 5.51% in
the three month period ended March 31, 2000; and contractual life of
10 years.
Warrants
In August 1999, the Company entered into a strategic agreement with
NorthPoint Communications, Inc. ("NorthPoint"). Under the terms of the
strategic agreement, NorthPoint has agreed to use certain of the Company's
domestic IBX centers and install their operational nodes in such centers.
In exchange, the Company granted NorthPoint a warrant to purchase 338,145
shares of the Company's common stock at $0.53 per share (the "NorthPoint
Warrant"). The NorthPoint Warrant was earned upon execution of the
strategic agreement as Northpoint's performance commitment was complete.
The NorthPoint Warrant is immediately exercisable and expires five years
from date of grant. The NorthPoint Warrant was valued at $1,507,800 using
the Black-Scholes option-pricing model, which was capitalized on the
accompanying consolidated balance sheet in other assets as a customer
acquisition cost and is being amortized over the term of the agreement as a
reduction of revenues recognized. The following assumptions were used in
determining the fair value of the warrant: deemed fair market value per
share of $4.80, dividend yield of 0%, expected volatility of 80%, risk-free
interest rate of 5.0% and a contractual life of 5 years.
In November 1999, the Company entered into a definitive agreement with
MCI Worldcom, or MCI, whereby MCI agreed to install high-bandwidth local
connectivity services to the Company's first seven IBX centers by a pre-
determined date in exchange for a warrant to purchase 675,000 shares of
common stock of the Company at $0.67 per share (the "MCI Warrant"). The MCI
Warrant is immediately exercisable and expires five years from the date of
grant. As of December 31, 1999, warrants for 525,000 shares are subject to
repurchase at the original exercise price if MCI's performance commitments
are not completed. The MCI Warrant was valued at $2,969,000 using the
Black-Scholes option-pricing model and was recorded to construction in
progress on the accompanying consolidated balance sheet as of December 31,
1999. Under the applicable guidelines in EITF 96-18, the underlying shares
of common stock associated with the MCI Warrant subject to repurchase are
revalued at each balance sheet date to reflect their current fair value
until MCI's performance commitment is complete. Any resulting increase in
fair value of the warrants is recorded as an additional cost component of
the IBX center. In addition, the following assumptions were used in
determining the fair value of the warrant: deemed fair market value per
share of $4.80, dividend yield of 0%, expected volatility of 80%, risk-free
interest rate of 5.5% and a contractual life of 5 years.
In November 1999, the Company entered into a master agreement with
Bechtel Corporation, or Bechtel, whereby Bechtel agreed to act as the
exclusive contractor under a Master Agreement to provide program
management, site identification and evaluation, engineering and
construction services to build
F-19
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
approximately 29 IBX centers over a four year period under mutually agreed
upon guaranteed completion dates. As part of the agreement, the Company
granted Bechtel a warrant to purchase 352,500 shares of the Company's
common stock at $1.00 per share (the "Bechtel Warrant"). The Bechtel
Warrant is immediately exercisable and expires five years from date of
grant. As of December 31, 1999, warrants for 253,800 shares are subject to
repurchase at the original exercise price, if Bechtel's performance
commitments are not complete. The Bechtel Warrant was valued at $1,497,200
using the Black-Scholes option-pricing model and was recorded to
construction in progress on the accompanying consolidated balance sheet as
of December 31, 1999. Under EITF 96-18, the underlying shares of common
stock associated with the Bechtel Warrant subject to repurchase are
revalued at each balance sheet date to reflect their current fair value
until Bechtel's performance commitment is complete. Any resulting increase
in fair value of the warrants is recorded as an additional cost component
of the IBX center. In addition, the following assumptions were used in
determining the fair value of the warrant: deemed fair market value per
share of $4.80, dividend yield of 0%, expected volatility of 80%, risk-free
interest rate of 5.5% and a contractual life of 5 years.
In addition, the Company has issued several warrants in connection with
its debt facilities and capital lease obligations (see Note 3) and the
Senior Notes (see Note 4). The Company has the following warrants
outstanding as of December 31, 1999:
<TABLE>
<CAPTION>
Warrants Exercise
Series A preferred stock warrants outstanding price
--------------------------------- ----------- --------
<S> <C> <C>
Comdisco Loan and Security Agreement Warrant......... 765,000 $ 0.67
Comdisco Master Lease Agreement Warrant.............. 30,000 1.67
Comdisco Master Lease Agreement Addendum Warrant..... 150,000 3.00
Venture Leasing Loan Agreement Warrant............... 300,000 3.00
---------
1,245,000
=========
<CAPTION>
Warrants Exercise
Common stock warrants outstanding price
--------------------- ----------- --------
<S> <C> <C>
Senior Note Warrants................................. 3,376,500 $0.0067
NorthPoint Warrant................................... 338,145 0.53
MCI Warrant.......................................... 675,000 0.67
Bechtel Warrant...................................... 352,500 1.00
---------
4,742,145
=========
</TABLE>
(6) Income Taxes
The components of the provision for income taxes (benefit) are as follows:
<TABLE>
<CAPTION>
1998 1999
-------- -------
<S> <C> <C>
Current:
Federal................................................. $ 29,300 (18,600)
State................................................... 10,500 (1,500)
-------- -------
39,800 (20,100)
-------- -------
Deferred:
Federal................................................. (29,300) 29,300
State................................................... (10,500) 10,500
-------- -------
(39,800) 39,800
-------- -------
$ -- 19,700
======== =======
</TABLE>
F-20
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Income tax expense is included in selling, general and administrative
expenses for the year ended December 31, 1999.
Actual income tax expense differs from the expected tax benefit computed by
applying the statutory federal income tax rate of approximately 24.8% and 35%
for the periods ended December 31, 1998 and December 31, 1999, respectively, as
a result of the following:
<TABLE>
<CAPTION>
1998 1999
--------- ----------
<S> <C> <C>
Computed tax (benefit) at statutory rate............ $(212,300) (5,166,600)
State taxes......................................... -- 6,000
Net operating losses and temporary differences for
which no tax benefit is recognized................. 211,900 2,594,000
Net operating losses not benefitted................. -- 2,572,000
Other............................................... 400 14,300
--------- ----------
$ -- 19,700
========= ==========
</TABLE>
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets as of December 31, 1998 and December 31,
1999 is presented as follows:
<TABLE>
<CAPTION>
1998 1999
--------- ----------
<S> <C> <C>
Deferred tax assets:
Other assets........................................ $ 1,100 --
Start-up expenses................................... 326,000 3,301,000
Net operating loss.................................. -- 3,169,000
--------- ----------
Total deferred tax assets......................... 327,100 6,470,000
Less valuation allowance............................ (287,300) (6,470,000)
--------- ----------
Net deferred tax assets........................... $ 39,800 --
========= ==========
</TABLE>
Net deferred tax assets are included in prepaids and other current assets at
December 31, 1998.
The net change in the total valuation allowance for the period from June 22,
1998 (inception) to December 31, 1998 and the year ended December 31, 1999, was
an increase of $287,300 and $6,182,700, respectively.
The Company has established a valuation allowance against that portion of
deferred tax assets where management has determined that it is more likely than
not that the asset will not be realized.
At December 31, 1999, the Company had net operating loss carryforwards of
approximately $7,300,000 for federal and state tax purposes. If not earlier
utilized, the federal net operating loss carryforward will expire in 2019 and
the state loss carryforward will expire in 2006.
The Company's future ability to utilize net operating loss carryforwards may
be subject to ownership changes as defined in the Internal Revenue Code of
1986.
F-21
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(7) Commitments and Contingencies
Operating Lease Commitments
The Company leases its IBX centers and certain equipment under
noncancelable operating lease agreements expiring through 2014. The
centers' lease agreements typically provide for base rental rates which
increase at defined intervals during the term of the lease. In addition,
the Company has negotiated rent expense abatement periods to better match
the phased build-out of its centers. The Company accounts for such
abatements and increasing base rentals using the straight-line method over
the life of the lease. The difference between the straight-line expense and
the cash payment is recorded as deferred rent.
Minimum future operating lease payments as of December 31, 1999 are
summarized as follows:
<TABLE>
<S> <C>
Year ending:
2000........................................................... 4,949,700
2001........................................................... 8,321,500
2002........................................................... 8,578,700
2003........................................................... 8,775,500
2004........................................................... 9,045,300
Thereafter..................................................... 90,244,300
-----------
Total........................................................ 129,915,000
===========
</TABLE>
Total rent expense was approximately $165,000 and $1,739,100 for the
period from June 22, 1998 (inception) to December 31, 1998 and for the year
ended December 31, 1999, respectively.
Deferred rent included in accrued expenses was $42,400 and $18,000 as of
December 31, 1998 and 1999, respectively. Deferred rent included in other
liabilities was none and $566,600 as of December 31, 1998 and 1999,
respectively.
Employment Agreement
The Company has agreed to indemnify an officer of the Company for any
claims brought by his former employer under an employment and non-compete
agreement the officer had with this employer.
Employee Benefit Plan
During the year ended December 31, 1999, the Company adopted the Equinix
401(k) Plan (the "401(k) Plan"). The 401(k) Plan allows eligible employees
to contribute up to 15% of their compensation, limited to $10,000 in 1999.
Employee contributions and earnings thereon vest immediately. Although the
Company may make discretionary contributions to the 401(k) Plan, none have
been made as of December 31, 1999.
(8) Related Party Transactions
The Company advanced an aggregate of $750,000 to an officer of the
Company, which is evidenced by a promissory note. The proceeds of this loan
were used to fund the purchase of a personal residence. The loan is due
September 13, 2004, but is subject to certain events of acceleration,
including an initial public offering of the Company's common stock and is
secured by a second deed of trust on the officer's residence. The loan is
non-interest bearing. This loan is presented in other assets on the
accompanying consolidated balance sheet as of December 31, 1999.
F-22
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In March 1999, the Company entered into an equipment lease facility with
a preferred stockholder under which the Company leased $137,300 of
equipment for a 24-month term.
In August 1999, the Company entered into a strategic agreement with
NorthPoint. Under the terms of the strategic agreement, NorthPoint has
agreed to use certain of the Company's domestic IBX centers and install
their operational nodes in such centers. In exchange, the Company granted
NorthPoint a warrant to purchase 338,145 shares of the Company's common
stock at $0.53 per share. The NorthPoint Warrant was earned upon execution
of the strategic agreement as NorthPoint's performance commitment was
complete. The NorthPoint Warrant is immediately exercisable and expires
five years from date of grant. The NorthPoint Warrant was valued at
$1,507,800 using the Black-Scholes option-pricing model (see Note 5).
(9) Segment Information
During the year ended December 31, 1999, the Company adopted the
provisions of SFAS No. 131, Disclosures about Segments of an Enterprise and
Related Information. SFAS No. 131 requires disclosures of selected segment-
related financial information about products, major customers and
geographic areas.
The Company and its subsidiary are principally engaged in the design,
build-out and operation of neutral IBX centers. All revenues result from
the operation of these IBX centers. Accordingly, the Company considers
itself to operate in a single segment for purposes of disclosure under SFAS
No. 131. The Company's chief operating decision-maker evaluates
performance, makes operating decisions and allocates resources based on
financial data consistent with the presentation in the accompanying
consolidated financial statements.
As of December 31, 1998 and 1999, all of the Company's operations and
assets are based in the United States.
(10) Subsequent Events
In January 2000, the Company's stockholders approved an amendment to the
1998 Stock Plan increasing the aggregate number of common shares available
for issuance over the term of the Plan by 3,750,000 to a total of
12,012,810 shares.
In January 2000, the Company's stockholders approved a three-for-two
stock split of its common and preferred stock effective January 19, 2000.
The Company amended and restated its Certificate of Incorporation to
increase the authorized share capital to 132,000,000 shares of common stock
and 68,000,000 shares of preferred stock, of which 32,000,000 has been
designated as Series A and 36,000,000 as Series B, to give effect to the
three-for-two stock split. The accompanying consolidated financial
statements have been adjusted to reflect this stock split.
In January 2000, the Company entered into an operating lease for its
Dallas, Texas IBX center. The agreement is for a minimum of 10 years, with
annual rent payments increasing from $1,131,000 to $1,357,200 over the
lease term.
In January 2000, the Company entered into an operating lease agreement
for its new corporate headquarters facility in Mountain View, California.
The agreement is for a minimum of seven years, with annual rent payments
increasing from $1,662,600 to $2,103,800 over the lease term. In connection
with the lease agreement, the Company granted the lessor a warrant to
purchase up to 33,100 shares of the
F-23
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Company's common stock at $6.00 per share. The warrant is exercisable upon
certain defined events occurring through May 28, 2000 and expire in 10
years from the date of grant. The warrant was valued at $185,700 using the
Black-Scholes option pricing model and will be recorded as additional rent
expense over the life of the lease. The following assumptions were used in
determining the fair value of the warrant: deemed fair value per share of
$6.55, dividend yield of 0%, expected volatility of 80%, risk-free interest
rate of 6.0% and a contractual life of 10 years.
In January 2000, the Company advanced an aggregate of $250,000 to an
officer of the Company, which is evidenced by a promissory note. The
proceeds of this loan were used to fund the purchase of a principal
residence. The loan is due January 13, 2005, but is subject to certain
events of acceleration, including an initial public offering of the
Company's common stock. The loan is secured by a second deed of trust on
the officer's residence and is non-interest bearing.
(11) Subsequent Events (unaudited)
In April 2000, the Company entered into a definitive agreement with a
fiber carrier whereby the fiber carrier agreed to install high-bandwidth
local connectivity services to a number of the Company's IBX centers in
exchange for colocation space and related benefits in such IBX centers. In
connection with this agreement, the Company granted the fiber carrier a
warrant to purchase up to 540,000 shares of the Company's common stock at
$4.00 per share. The warrant is immediately exercisable and expires five
years from date of grant. Warrants for 140,000 shares are immediately
vested and warrants for 400,000 shares are subject to repurchase at the
original exercise price if certain performance commitments are not
completed by a pre-determined date. The fiber carrier is not obligated to
install high-bandwidth local connectivity services and, apart from
forfeiting the relevant number of warrants and colocation space, will not
be penalized for not installing. The warrant was valued at $5,371,800 using
the Black-Scholes option-pricing model. The following assumptions were used
in determining the fair value of the warrant: deemed fair market value per
share of $11.82, dividend yield of 0%, expected volatility of 80%, risk-
free interest rate of 6.56% and a contractual life of 5 years.
In April 2000, the Company entered into an operating lease agreement for
its Amsterdam, The Netherlands, IBX center. The Agreement is for a minimum
of 15 years, with annual rent payments of 3,244,300 Dutch Guilders
(approximately $1,336,300), adjusted annually according to the consumer
price index (CPI).
In April and May 2000, the Company granted additional stock options to
employees to purchase 593,100 shares of common stock under the 1998 Stock
Plan resulting in an additional deferred stock-based compensation charge of
approximately $4.9 million.
In May 2000, the Company amended and restated its Certificate of
Incorporation to change the authorized share capital to 80,000,000 shares
of common stock and 41,000,000 shares of preferred stock, of which
20,000,000 has been designated as Series A, 16,000,000 has been designated
as Series B and 5,000,000 has been designated as Series C.
In May 2000, the Company's stockholders approved an amendment to the
1998 Stock Plan increasing the aggregate number of common shares available
for issuance over the term of the Plan by 3,000,000 to a total of
15,012,810 shares.
F-24
<PAGE>
In May 2000, the Company completed the first closing of the Series C
convertible preferred stock financing. The Company raised $50,000,000 and
issued 3,315,649 shares of Series C convertible preferred stock. The
rights, preferences and privileges of the Series C convertible preferred
stock are consistent with those outlined for Series A and B in Note 5
except as follows:
. Dividends are payable at a rate of $1.21 per share
. Holders have a liquidation preference of $15.08 per share plus all
declared but unpaid dividends.
F-25
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Equinix, Inc.
Exchange Offer for
$200,000,000 13% Senior Notes due 2007
[LOGO OF EQUINIX, INC.]
, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
Information Not Required in Prospectus
Item 20. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes a court to
award or a corporation's board of directors to grant indemnification to
directors and officers in terms sufficiently broad to permit indemnification
under limited circumstances for liabilities, including reimbursement for
expenses incurred, arising under the Securities Act of 1933, as amended (the
"Securities Act"). Article VII, Section 7.6 of our bylaws provides for
mandatory indemnification of our directors and permissive indemnification of
our officers and employees to the maximum extent permitted by the Delaware
General Corporation Law. Our Certificate of Incorporation provides that our
directors shall not be liable for monetary damages for breach of the directors'
fiduciary duty as directors to our stockholders and us to the fullest extent
permitted by the Delaware General Corporation Law. This provision in the
Certificate of Incorporation does not eliminate the directors' fiduciary duty,
and in appropriate circumstances, equitable remedies like injunctive or other
forms of non-monetary relief will remain available under Delaware law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to us for acts or omissions not in good faith or
involving intentional misconduct, for knowing violations of law, for actions
leading to improper personal benefit to the director, and for payment of
dividends or approval of stock repurchases or redemptions that are unlawful
under Delaware law. The provision also does not affect a director's
responsibilities under any other law, like the federal securities laws or state
or federal environmental laws. We have entered into indemnification agreements
with our officers and directors, a form of which is attached as Exhibit 10.5
and incorporated herein by reference. The indemnification agreements provide
our officers and directors with further indemnification to the maximum extent
permitted by the Delaware General Corporation Law.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of the Registrant,
as amended to date.
3.2** Bylaws of the Registrant.
4.1** Reference is made to Exhibits 3.1 and 3.2.
4.2** Form of Old Note.
4.3** Form of New Note.
4.4** Escrow agreement, dated as of December 1, 1999, by and among the
Registrant and State Street Bank
and Trust Company of California, N.A. (as escrow agent and trustee).
4.5** Indenture (See Exhibit 10.1).
4.6** Common Stock Registration Rights Agreement (See Exhibit 10.3).
4.7** Registration Rights Agreement (See Exhibit 10.4).
4.8** Purchase Agreement, dated as of November 24, 1999, by and among the
Registrant and Salomon Smith Barney Inc., Morgan Stanley & Co.
Incorporated and Goldman, Sachs & Co. (collectively, the "Initial
Purchasers").
4.9 Amended and Restated Investors' Rights Agreement (See Exhibit 10.6).
5.1 Opinions of Dewey Ballantine LLP and Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP.
10.1** Indenture, dated as of December 1, 1999, by and among the Registrant
and State Street Bank and Trust Company of California, N.A. (as
trustee).
10.2** Warrant Agreement, dated as of December 1, 1999, by and among the
Registrant and State Street Bank and Trust Company of California, N.A.
(as warrant agent).
10.3** Common Stock Registration Rights Agreement, dated as of December 1,
1999, by and among the Registrant, Benchmark Capital Partners II,
L.P., Cisco Systems, Inc., Microsoft Corporation, ePartners, Albert M.
Avery, IV and Jay S. Adelson (as investors), and the Initial
Purchasers.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.4** Registration Rights Agreement, dated as of December 1, 1999, by and
among the Registrant and the Initial Purchasers.
10.5** Form of Indemnification Agreement between the Registrant and each of
its officers and directors.
10.6 Amended and Restated Investors' Rights Agreement, dated as of May 8,
2000, by and between the Registrant, the Series A Purchasers, the
Series B Purchasers, the Series C Purchasers and members of the
Registrant's management.
10.8** The Registrant's 1998 Stock Option Plan.
10.9+ Lease Agreement with Carlyle-Core Chicago LLC, dated as of September
1, 1999.
10.10**+ Lease Agreement with Market Halsey Urban Renewal, LLC, dated as of
May 3, 1999.
10.11+ Lease Agreement with Laing Beaumeade, dated as of November 18, 1998.
10.12+ Lease Agreement with Rose Ventures II, Inc., dated as of June 10,
1999.
10.13**+ Lease Agreement with 600 Seventh Street Associates, Inc., dated as of
August 6, 1999.
10.14+ First Amendment to Lease Agreement with Trizechahn Centers, Inc. (dba
Trizechahn Beaumeade Corporate Management), dated as of October 28,
1999.
10.15+ Lease Agreement with Nexcomm Asset Acquisition I, L.P., dated as of
January 21, 2000.
10.16**+ Lease Agreement with Trizechahn Centers, Inc. (dba Trizechahn
Beaumeade Corporate Management), dated as of December 15, 1999.
10.17** Lease Agreement with ARE-2425/2400/2450 Garcia Bayshore LLC, dated as
of January 28, 2000.
10.18** Sublease Agreement with Insweb Corporation, dated as of November 1,
1998.
10.19**+ Master Agreement for Program Management, Site Identification and
Evaluation, Engineering and Construction Services between Equinix,
Inc. and Bechtel Corporation, dated November 3, 1999.
10.20**+ Agreement between Equinix, Inc. and MCI Worldcom, Inc., dated
November 16, 1999.
10.21** Customer Agreement between Equinix, Inc. and MCI Worldcom, Inc.,
dated November 16, 1999.
16.1 Letter regarding change in certifying accountant.
21.1** List of Subsidiaries of the Registrant.
23.1 Consent of KPMG LLP, independent auditors.
23.2** Consent of Counsel. Reference is made to Exhibit 5.1.
24.1** Power of Attorney.
25.1** Form of T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 of State Street Bank and Trust Company of
California, N.A.
27.1** Financial Data Schedule.
99.1** Form of Letter of Transmittal relating to the Exchange Offer.
99.2** Form of Notice of Guaranteed Delivery.
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
+ Confidential treatment has been requested for certain portions which are
omitted in the copy of the exhibit electronically filed with the Securities
and Exchange Commission. The omitted information has been filed separately
with the Securities and Exchange Commission pursuant to Equinix's application
for confidential treatment.
(b) Financial Statement Schedules
All schedules have been omitted because the information required to be
presented in them is not applicable or is shown in the consolidated financial
statements or related notes.
II-2
<PAGE>
Item 22. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the Registrant in accordance with the provisions described in Item
20 above, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission this 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 this issue.
The undersigned Registrant hereby undertakes that:
(1) It will respond to requests for information that is incorporated
by reference into the prospectus in accordance with Item 4, 10(b), 11, or
13 of this form, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed after the
effective date of the registration statement through the date of responding
to the request.
(2) It will supply by means of a post-effective amendment all
information concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in the
registration statement when it became effective.
(3) It will file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this 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 in accordance with 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;
(c) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement.
(4) For the purpose of determining any liability under the 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.
(5) It will 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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 3 to the registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Redwood City, State of California, on this 9th day of May, 2000.
Equinix, Inc.
/s/ Albert M. Avery, IV
By:__________________________________
Albert M. Avery, IV
President, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the registration statement has been signed by the following
persons on behalf of the Registrant and in the capacities and on the dates
indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Albert M. Avery, IV President, Chief Executive May 9, 2000
______________________________________ Officer (Principal
Albert M. Avery, IV Executive Officer) and
Director
Jay S. Adelson* Vice President, May 9, 2000
______________________________________ Engineering and Site
Jay S. Adelson Development, Chief
Technology Officer and
Director
/s/ Philip J. Koen Chief Financial Officer May 9, 2000
______________________________________ (Principal Financial and
Philip J. Koen Accounting Officer)
Andrew S. Rachleff* Director May 9, 2000
______________________________________
Andrew S. Rachleff
Michelangelo Volpi* Director May 9, 2000
______________________________________
Michelangelo Volpi
Director
______________________________________
John Taysom
/s/ Albert M. Avery, IV
*By: _________________________________
Albert M. Avery
Attorney-in-fact
/s/ Philip J. Koen
*By: _________________________________
Philip J. Koen
Attorney-in-fact
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of the Registrant,
as amended to date.
3.2** Bylaws of the Registrant.
4.1** Reference is made to Exhibits 3.1 and 3.2.
4.2** Form of Old Note.
4.3** Form of New Note.
4.4** Escrow agreement, dated as of December 1, 1999, by and among the
Registrant and State Street Bank
and Trust Company of California, N.A. (as escrow agent and trustee).
4.5** Indenture (See Exhibit 10.1).
4.6** Common Stock Registration Rights Agreement (See Exhibit 10.3).
4.7** Registration Rights Agreement (See Exhibit 10.4).
4.8** Purchase Agreement, dated as of November 24, 1999, by and among the
Registrant and Salomon Smith Barney Inc., Morgan Stanley & Co.
Incorporated and Goldman, Sachs & Co. (collectively, the "Initial
Purchasers").
4.9 Amended and Restated Investors' Rights Agreement (See Exhibit 10.6).
5.1 Opinions of Dewey Ballantine LLP and Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP.
10.1** Indenture, dated as of December 1, 1999, by and among the Registrant
and State Street Bank and Trust Company of California, N.A. (as
trustee).
10.2** Warrant Agreement, dated as of December 1, 1999, by and among the
Registrant and State Street Bank and Trust Company of California,
N.A. (as warrant agent).
10.3** Common Stock Registration Rights Agreement, dated as of December 1,
1999, by and among the Registrant, Benchmark Capital Partners II,
L.P., Cisco Systems, Inc., Microsoft Corporation, ePartners, Albert
M. Avery, IV and Jay S. Adelson (as investors), and the Initial
Purchasers.
10.4** Registration Rights Agreement, dated as of December 1, 1999, by and
among the Registrant and the Initial Purchasers.
10.5** Form of Indemnification Agreement between the Registrant and each of
its officers and directors.
10.6 Amended and Restated Investors' Rights Agreement, dated as of May 8,
2000, by and between the Registrant, the Series A Purchasers, the
Series B Purchasers, the Series C Purchasers and members of the
Registrant's management.
10.8** The Registrant's 1998 Stock Option Plan.
10.9+ Lease Agreement with Carlyle-Core Chicago LLC, dated as of September
1, 1999.
10.10**+ Lease Agreement with Market Halsey Urban Renewal, LLC, dated as of
May 3, 1999.
10.11+ Lease Agreement with Laing Beaumeade, dated as of November 18, 1998.
10.12+ Lease Agreement with Rose Ventures II, Inc., dated as of June 10,
1999.
10.13**+ Lease Agreement with 600 Seventh Street Associates, Inc., dated as of
August 6, 1999.
10.14+ First Amendment to Lease Agreement with Trizechahn Centers, Inc. (dba
Trizechahn Beaumeade Corporate Management), dated as of October 28,
1999.
10.15+ Lease Agreement with Nexcomm Asset Acquisition I, L.P., dated as of
January 21, 2000.
10.16**+ Lease Agreement with Trizechahn Centers, Inc. (dba Trizechahn
Beaumeade Corporate Management), dated as of Decmber 15, 1999.
10.17** Lease Agreement with ARE-2425/2400/2450 Garcia Bayshore LLC, dated as
of January 28, 2000.
10.18** Sublease Agreement with Insweb Corporation, dated as of November 1,
1998.
10.19**+ Master Agreement for Program Management, Site Identification and
Evaluation, Engineering and Construction Services between Equinix,
Inc. and Bechtel Corporation, dated November 3, 1999.
10.20**+ Agreement between Equinix, Inc. and MCI Worldcom, Inc., dated
November 16, 1999.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
10.21** Customer Agreement between Equinix, Inc. and MCI Worldcom, Inc., dated November 16, 1999.
16.1 Letter regarding change in certifying accountant.
21.1** List of Subsidiaries of the Registrant.
23.1 Consent of KPMG LLP, independent auditors.
23.2** Consent of Counsel. Reference is made to Exhibit 5.1.
24.1** Power of Attorney.
25.1** Form of T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of
State Street Bank and Trust Company of California, N.A.
27.1** Financial Data Schedule.
99.1** Form of Letter of Transmittal relating to the Exchange Offer.
99.2** Form of Notice of Guaranteed Delivery.
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
+ Confidential treatment has been requested for certain portions which are
omitted in the copy of the exhibit electronically filed with the Securities
and Exchange Commission. The omitted information has been filed separately
with the Securities and Exchange Commission pursuant to Equinix's application
for confidential treatment.
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EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
EQUINIX, INC.
(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)
Equinix, Inc., a corporation organized and existing under and by
virtue of the provisions of the General Corporation Law of the State of Delaware
(the "General Corporation Law"), originally incorporated on June 22, 1998, under
the name Quark Communications, Inc.
DOES HEREBY CERTIFY:
FIRST: That the name of this corporation is Equinix, Inc.
SECOND: That the Board of Directors duly adopted resolutions
proposing to amend and restate the Certificate of Incorporation of this
corporation, declaring said amendment and restatement to be advisable and in the
best interests of this corporation and its stockholders, and authorizing the
appropriate officers of this corporation to solicit the consent of the
stockholders therefor, which resolution setting forth the proposed amendment and
restatement is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended and restated in its entirety as follows:
ARTICLE I
The name of this corporation is Equinix, Inc.
ARTICLE II
The address of the registered office of this corporation in the State
of Delaware is 15 E. North St., P.O. Box 899, in the City of Dover, County of
Kent. The name of its registered agent at such address is Incorporating
Services, Ltd.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE IV
A. Classes of Stock. This corporation is authorized to issue two
classes of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares that this corporation is authorized to issue
is one hundred twenty-one million
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(121,000,000) shares. Eighty million (80,000,000) shares shall be Common Stock
and forty-one million (41,000,000) shares shall be Preferred Stock, each with a
par value of $0.001 per share.
B. Rights, Preferences and Restrictions of Preferred Stock. The
Preferred Stock authorized by this Restated Certificate of Incorporation may be
issued from time to time in one or more series. The rights, preferences,
privileges, and restrictions granted to and imposed on the Series A Preferred
Stock, which series shall consist of twenty million (20,000,000) shares (the
"Series A Preferred Stock"), the Series B Preferred Stock, which series shall
consist of sixteen million (16,000,000) shares (the "Series B Preferred Stock"),
and the Series C Preferred Stock, which series shall consist of five million
(5,000,000) shares (the "Series C Preferred Stock"), are as set forth below in
this Article IV(B).
1. Dividend Provisions.
(a) The holders of the Series A Preferred Stock, Series B Preferred
Stock, and Series C Preferred Stock shall be entitled to receive dividends at
the rate of $0.05 per share, $0.43 per share, and $1.21 per share (as adjusted
for any stock dividends, combinations or splits with respect to such shares) per
annum, respectively, payable out of funds legally available therefor. Such
dividends shall be payable only when, as, and if declared by the Board of
Directors and shall be noncumulative.
(b) No dividends (other than those payable solely in the Common Stock
of the corporation) shall be paid on any Common Stock of the corporation during
any fiscal year of the corporation until dividends in the total amount of $0.05
per share, $0.43 per share, and $1.21 per share (as adjusted for any stock
dividends, combinations or splits with respect to such shares) on the Series A
Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock,
respectively, shall have been paid or declared and set apart during that fiscal
year and no dividends shall be paid on any share of Common Stock unless a
dividend (including the amount of any dividends paid pursuant to the provisions
of subsection (a) above) is paid with respect to all outstanding shares of
Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock
in an amount for each such share of Series A Preferred Stock, Series B Preferred
Stock, and Series C Preferred Stock equal to or greater than the aggregate
amount of such dividends for all shares of Common Stock into which each such
share of Series A Preferred Stock, Series B Preferred Stock, or Series C
Preferred Stock could then be converted.
(c) In the event of a conversion of the Series A Preferred Stock,
Series B Preferred Stock, or Series C Preferred Stock pursuant to Section 4
hereof, any accrued and unpaid dividends shall be paid at the election of the
holder in cash or Common Stock at its then fair market value, as determined by
the Board of Directors.
2. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of
this corporation, either voluntary or involuntary, the holders of Preferred
Stock shall be entitled to receive, prior and in preference to any distribution
of any of the assets of this corporation to the holders of Common Stock by
reason of their ownership thereof, (A) in the case of the Series A Preferred
Stock, an amount per share equal to the sum of (i) $0.67 for each outstanding
share of
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Series A Preferred Stock (the "Original Series A Issue Price"), and (ii) an
amount equal to declared but unpaid dividends on such share (subject to
adjustment of such fixed dollar amounts for any stock splits, stock dividends,
combinations, recapitalizations or the like), (B) in the case of the Series B
Preferred Stock, an amount per share equal to the sum of (i) $5.33 for each
outstanding share of Series B Preferred Stock (the "Original Series B Issue
Price"), and (ii) an amount equal to declared but unpaid dividends on such share
(subject to adjustments of such fixed dollar amounts for any stock splits, stock
dividends, combinations, recapitalizations or the like), and (C) in the case of
the Series C Preferred Stock, an amount per share equal to the sum of (i) $15.08
for each outstanding share of Series C Preferred Stock (the "Original Series C
Issue Price"), and (ii) an amount equal to declared but unpaid dividends on such
share (subject to adjustments of such fixed dollar amounts for any stock splits,
stock dividends, combinations, recapitalizations or the like). If upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Series A Preferred Stock, Series B Preferred Stock, and Series C
Preferred Stock shall be insufficient to permit the payment to such holders of
the full aforesaid preferential amounts, then, the entire assets and funds of
this corporation legally available for distribution shall be distributed ratably
among the holders of Series A Preferred Stock, Series B Preferred Stock, and
Series C Preferred Stock in proportion to the full preferential amount each such
holder is otherwise entitled to receive under this subsection (a).
(b) Upon the completion of the distribution required by subsection
(a) of this Section 2 all of the remaining assets of this corporation available
for distribution to stockholders shall be distributed among the holders of
Common Stock pro rata based on the number of shares of Common Stock held by
each.
(c)
(i) For purposes of this Section 2, a liquidation, dissolution
or winding up of this corporation shall be deemed to be occasioned by, or to
include (unless the holders of at least a majority of the Preferred Stock then
outstanding shall determine otherwise), (A) the acquisition of this corporation
by another entity by means of any transaction or series of related transactions
(including, without limitation, any reorganization, merger or consolidation)
that results in the transfer of fifty percent (50%) or more of the outstanding
voting power of this corporation; or (B) a sale of all or substantially all of
the assets of this corporation.
(ii) In any of such foregoing events, if the consideration
received by this corporation is other than cash, its value will be deemed its
fair market value. Any securities shall be valued as follows:
(A) Securities not subject to investment letter or other
similar restrictions on free marketability covered by (B) below:
(1) If traded on a securities exchange or through the
Nasdaq National Market, the value shall be deemed to be the average of the
closing prices of the securities on such exchange or system over the thirty (30)
day period ending three (3) days prior to the closing;
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(2) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid or sale prices (whichever
is applicable) over the thirty (30) day period ending three (3) days prior to
the closing; and
(3) If there is no active public market, the value
shall be the fair market value thereof, as mutually determined by this
corporation and the holders of at least a majority of the voting power of all
then outstanding shares of Preferred Stock.
(B) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in (A) (1), (2) or (3) to reflect the approximate fair
market value thereof, as mutually determined by this corporation and the holders
of at least a majority of the voting power of all then outstanding shares of
such Preferred Stock.
(iii) In the event the requirements of this subsection 2(c) are
not complied with, this corporation shall forthwith either:
(A) cause such closing to be postponed until such time as
the requirements of this Section 2 have been complied with; or
(B) cancel such transaction, in which event the rights,
preferences and privileges of the holders of the Preferred Stock shall revert to
and be the same as such rights, preferences and privileges existing immediately
prior to the date of the first notice referred to in subsection 2(c)(iv) hereof.
(iv) This corporation shall give each holder of record of
Preferred Stock written notice of such impending transaction not later than
twenty (20) days prior to the stockholders' meeting called to approve such
transaction, or twenty (20) days prior to the closing of such transaction,
whichever is earlier, and shall also notify such holders in writing of the final
approval of such transaction. The first of such notices shall describe the
material terms and conditions of the impending transaction and the provisions of
this Section 2, and this corporation shall thereafter give such holders prompt
notice of any material changes. The transaction shall in no event take place
sooner than twenty (20) days after this corporation has given the first notice
provided for herein or sooner than ten (10) days after this corporation has
given notice of any material changes provided for herein; provided, however,
that such periods may be shortened upon the written consent of the holders of
Preferred Stock that are entitled to such notice rights or similar notice rights
and that represent at least a majority of the voting power of all then
outstanding shares of such Preferred Stock.
3. Redemption. The Preferred Stock is not redeemable.
4. Conversion. The holders of the Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock, Series
B Preferred Stock, and Series C Preferred Stock shall be convertible, at the
option of the holder thereof, at any time after the date of issuance of such
share, at the office of this corporation or
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any transfer agent for such stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the Original
Issue Price for such series by the Conversion Price applicable to such share,
determined as hereafter provided, in effect on the date the certificate is
surrendered for conversion. The initial Conversion Price for shares of Series A
Preferred Stock shall be the Original Series A Issue Price, the initial
Conversion Price for shares of Series B Preferred Stock shall be the Original
Series B Issue Price, and the initial Conversion Price for shares of Series C
Preferred Stock shall be the Original Series C Issue Price, subject to
adjustment as set forth in Section 4(d) hereof.
(b) Automatic Conversion. Each share of Series A Preferred Stock,
Series B Preferred Stock, and Series C Preferred Stock shall automatically be
converted into shares of Common Stock at the Conversion Price at the time in
effect for such series immediately upon the earlier of (i) this corporation's
sale of its Common Stock in a firm commitment underwritten public offering
pursuant to a registration statement on Form S-1 or Form SB-2 under the
Securities Act of 1933, as amended, provided that the aggregate gross offering
price is at least $25,000,000 or (ii) upon vote of the holders of a majority of
the then outstanding shares of Preferred Stock (which provision may be amended
only by a majority vote of the holders of the Preferred Stock).
(c) Mechanics of Conversion. Before any holder of Preferred Stock
shall be entitled to convert the same into shares of Common Stock, he or she
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of this corporation or of any transfer agent for the Preferred Stock, and
shall give written notice to this corporation at its principal corporate office,
of the election to convert the same and shall state therein the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued. This corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Preferred Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such date. If the
conversion is in connection with an underwritten offering of securities
registered pursuant to the Securities Act of 1933, the conversion may, at the
option of any holder tendering Preferred Stock for conversion, be conditioned
upon the closing with the underwriters of the sale of securities pursuant to
such offering, in which event the persons entitled to receive the Common Stock
upon conversion of the Preferred Stock shall not be deemed to have converted
such Preferred Stock until immediately prior to the closing of such sale of
securities.
(d) Conversion Price Adjustments of Preferred Stock for Certain
Splits and Combinations. The Conversion Price of the Series A Preferred Stock,
Series B Preferred Stock, and Series C Preferred Stock shall be subject to
adjustment from time to time as follows:
(i) (A) If this corporation shall issue, after the date upon
which any shares of Series C Preferred Stock were first issued (the "Purchase
Date"), any Additional Stock (as defined below) without consideration or for a
consideration per share less than the Conversion Price for such series in effect
immediately prior to the issuance of such Additional
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Stock, the Conversion Price for such series in effect immediately prior to each
such issuance shall forthwith (except as otherwise provided in this clause (i))
be adjusted to a price determined by multiplying such Conversion Price by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issuance (including shares of Common Stock
deemed to be issued pursuant to subsection 4(d)(i)(E)(1) or (2)) plus the number
of shares of Common Stock that the aggregate consideration received by this
corporation for such issuance would purchase at such Conversion Price; and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance (including shares of Common Stock deemed to
be issued pursuant to subsection 4(d)(i)(E)(1) or (2)) plus the number of shares
of Additional Stock.
(B) No adjustment of the Conversion Price for the Series A
Preferred Stock, Series B Preferred Stock, or Series C Preferred Stock shall be
made in an amount less than one cent per share, provided that any adjustments
that are not required to be made by reason of this sentence shall be carried
forward and shall be either taken into account in any subsequent adjustment made
prior to three (3) years from the date of the event giving rise to the
adjustment being carried forward, or shall be made at the end of three (3) years
from the date of the event giving rise to the adjustment being carried forward.
Except to the limited extent provided for in subsections (E)(3) and (E)(4), no
adjustment of such Conversion Price pursuant to this subsection 4(d)(i) shall
have the effect of increasing the Conversion Price above the Conversion Price in
effect immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock for cash,
the consideration shall be deemed to be the amount of cash paid therefor before
deducting any reasonable discounts, commissions or other expenses allowed, paid
or incurred by this corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
(D) In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined by the Board of
Directors as determined in good faith irrespective of any accounting treatment.
(E) In the case of the issuance (whether before, on or
after the applicable Purchase Date) of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities, the following provisions shall
apply for all purposes of this subsection 4(d)(i) and subsection 4(d)(ii):
(1) The aggregate maximum number of shares of Common
Stock deliverable upon exercise (assuming the satisfaction of any conditions to
exercisability, including without limitation, the passage of time, but without
taking into account potential antidilution adjustments) of such options to
purchase or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in subsections
4(d)(i)(C) and (d)(i)(D)), if any, received by this corporation upon the
issuance of such options or rights plus the minimum exercise price provided in
such options or rights (without taking into account potential antidilution
adjustments) for the Common Stock covered thereby.
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(2) The aggregate maximum number of shares of Common
Stock deliverable upon conversion of, or in exchange (assuming the satisfaction
of any conditions to convertibility or exchangeability, including, without
limitation, the passage of time, but without taking into account potential
antidilution adjustments) for, any such convertible or exchangeable securities
or upon the exercise of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration equal to
the consideration, if any, received by this corporation for any such securities
and related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the minimum additional consideration, if
any, to be received by this corporation (without taking into account potential
antidilution adjustments) upon the conversion or exchange of such securities or
the exercise of any related options or rights (the consideration in each case to
be determined in the manner provided in subsections 4(d)(i)(C) and (d)(i)(D)).
(3) In the event of any change in the number of shares
of Common Stock deliverable or in the consideration payable to this corporation
upon exercise of such options or rights or upon conversion of or in exchange for
such convertible or exchangeable securities, including, but not limited to, a
change resulting from the antidilution provisions thereof (unless such options
or rights or convertible or exchangeable securities were merely deemed to be
included in the numerator and denominator for purposes of determining the number
of shares of Common Stock outstanding for purposes of subsection 4(d)(i)(A)),
the Conversion Price of the Series A Preferred Stock, Series B Preferred Stock,
or Series C Preferred Stock, to the extent in any way affected by or computed
using such options, rights or securities, shall be recomputed to reflect such
change, but no further adjustment shall be made for the actual issuance of
Common Stock or any payment of such consideration upon the exercise of any such
options or rights or the conversion or exchange of such securities.
(4) Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable securities,
the Conversion Price of the Series A Preferred Stock, Series B Preferred Stock,
or Series C Preferred Stock, to the extent in any way affected by or computed
using such options, rights or securities or options or rights related to such
securities (unless such options or rights were merely deemed to be included in
the numerator and denominator for purposes of determining the number of shares
of Common Stock outstanding for purposes of subsection 4(d)(i)(A)), shall be
recomputed to reflect the issuance of only the number of shares of Common Stock
(and convertible or exchangeable securities that remain in effect) actually
issued upon the exercise of such options or rights, upon the conversion or
exchange of such securities or upon the exercise of the options or rights
related to such securities.
(5) The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to subsections 4(d)(i)(E)(1)
and (2) shall be appropriately adjusted to reflect any change, termination or
expiration of the type described in either subsection 4(d)(i)(E)(3) or (4).
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(ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 4(d)(i)(E))
by this corporation after the Purchase Date other than:
(A) Shares of Common Stock issuable or issued to
employees, consultants, directors or vendors (if in transactions with primarily
non-financing purposes) of this corporation directly or pursuant to a stock
option plan or restricted stock plan approved by the Board of Directors of this
corporation;
(B) The issuance of stock, warrants or other
securities or rights upon approval by the Company's Board of Directors
(including the Series B Director) to persons or entities with which the Company
has business relationships provided such issuances are for other than primarily
equity financing purposes;
(C) The issuance of securities pursuant to a bona
fide, firmly underwritten public offering of shares of Common Stock, registered
under the Act resulting in proceeds to the Company of at least $25,000,000 in
the aggregate;
(D) The issuance of securities pursuant to the
conversion or exercise of convertible or exercisable securities; or
(E) The issuance of securities in connection with a
bona fide business acquisition of or by the Company, whether by merger,
consolidation, sale of assets, sale or exchange of stock or otherwise.
(iii) In the event this corporation should at any time or
from time to time after the Purchase Date fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock without a
corresponding adjustment to the Conversion Price of the Preferred Stock, the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of the Series A Preferred Stock, Series B Preferred Stock, and Series C
Preferred Stock shall be appropriately decreased so that the number of shares of
Common Stock issuable on conversion of each share of such series shall be
increased in proportion to such increase of the aggregate of shares of Common
Stock outstanding and those issuable with respect to such Common Stock
Equivalents.
(iv) If the number of shares of Common Stock outstanding at
any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for the Series A Preferred Stock, Series B
Preferred Stock, and Series C Preferred Stock shall be appropriately increased
so that the number of shares of Common Stock issuable on conversion of each
share of such series shall be decreased in proportion to such decrease in
outstanding shares.
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(e) Other Distributions. In the event this corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4(d)(i), then, in
each such case for the purpose of this subsection 4(e), the holders of the
Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock
shall be entitled to a proportionate share of any such distribution as though
they were the holders of the number of shares of Common Stock of this
corporation into which their shares of Series A Preferred Stock, Series B
Preferred Stock, and/or Series C Preferred Stock are convertible as of the
record date fixed for the determination of the holders of Common Stock of this
corporation entitled to receive such distribution.
(f) Recapitalizations. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4 or Section 2 provision shall be made so that the holders of the
Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock
shall thereafter be entitled to receive upon conversion of the Series A
Preferred Stock, Series B Preferred Stock, and/or Series C Preferred Stock the
number of shares of stock or other securities or property of the Corporation or
otherwise, to which a holder of Common Stock deliverable upon conversion would
have been entitled on such recapitalization. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 4
with respect to the rights of the holders of the Series A Preferred Stock,
Series B Preferred Stock, and Series C Preferred Stock after the
recapitalization to the end that the provisions of this Section 4 (including
adjustment of the Conversion Price then in effect and the number of shares
purchasable upon conversion of the Series A Preferred Stock, Series B Preferred
Stock, and Series C Preferred Stock) shall be applicable after that event as
nearly equivalent as may be practicable.
(g) No Impairment. This corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred Stock, Series B
Preferred Stock, and Series C Preferred Stock against impairment.
(h) No Fractional Shares and Certificate as to Adjustments.
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series A Preferred Stock, Series B
Preferred Stock, or Series C Preferred Stock, and the number of shares of Common
Stock to be issued shall be rounded to the nearest whole share. Whether or not
fractional shares are issuable upon such conversion shall be determined on the
basis of the total number of shares of Series A Preferred Stock, Series B
Preferred Stock, and/or Series C Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.
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(ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series A Preferred Stock, Series B Preferred Stock,
or Series C Preferred Stock pursuant to this Section 4, this corporation, at its
expense, shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of Series A
Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock a
certificate executed by the Corporation's President or Chief Financial Officer
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. This corporation shall,
upon the written request at any time of any holder of Series A Preferred Stock,
Series B Preferred Stock, or Series C Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (A) such adjustment
and readjustment, (B) the Conversion Price for such series of Preferred Stock at
the time in effect, and (C) the number of shares of Common Stock and the amount,
if any, of other property that at the time would be received upon the conversion
of a share of Series A Preferred Stock, Series B Preferred Stock, or Series C
Preferred Stock.
(i) Notices of Record Date. In the event of any taking by this
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A Preferred Stock, Series B
Preferred Stock, and Series C Preferred Stock, at least twenty (20) days prior
to the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. This
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock, Series B Preferred
Stock, and Series C Preferred Stock, such number of its shares of Common Stock
as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred Stock, Series B Preferred Stock,
and Series C Preferred Stock; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of the Series A Preferred Stock, Series B
Preferred Stock, and Series C Preferred Stock, in addition to such other
remedies as shall be available to the holder of such Preferred Stock, this
corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes,
including, without limitation, engaging in best efforts to obtain the requisite
shareholder approval of any necessary amendment to this Restated Certificate of
Incorporation.
(k) Notices. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Series A Preferred Stock,
Series B Preferred Stock, and Series C Preferred Stock shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of this corporation.
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5. Voting Rights.
(a) General Voting Rights. Subject to the provisions of Section 5(b)
hereof, the holder of each share of Preferred Stock shall have the right to one
vote for each share of Common Stock into which such Preferred Stock could then
be converted, and with respect to such vote, such holder shall have full voting
rights and powers equal to the voting rights and powers of the holders of Common
Stock, and shall be entitled, notwithstanding any provision hereof, to notice of
any stockholders' meeting in accordance with the bylaws of this corporation, and
shall be entitled to vote, together with holders of Common Stock, with respect
to any question upon which holders of Common Stock have the right to vote.
Fractional votes shall not, however, be permitted and any fractional voting
rights available on an as-converted basis (after aggregating all shares into
which shares of Preferred Stock held by each holder could be converted) shall be
rounded to the nearest whole number (with one-half being rounded upward).
(b) Voting for the Election of Directors. As long as at least
twenty-five percent (25%) of the shares of Series A Preferred Stock originally
issued remain outstanding, the holders of such shares of Series A Preferred
Stock shall be entitled to elect two (2) directors of this corporation at each
annual election of directors. The holders of outstanding Common Stock shall be
entitled to elect two (2) directors of this corporation at each annual election
of directors. As long as at least twenty-five percent (25%) of the shares of
Series B Preferred Stock originally issued remain outstanding, the holders of
such shares of Series B Preferred Stock shall be entitled to elect one (1)
director of this corporation at each annual election of directors acceptable to
the other directors. The holders of Series A Preferred Stock and Common Stock
(voting together as a single class and not as separate series, and on an as-
converted basis) shall be entitled to elect any remaining directors of this
corporation, provided such directors are approved by the directors elected by
the holders of Common Stock and the directors elected by the holders of
Preferred Stock.
In the case of any vacancy (other than a vacancy caused by removal) in
the office of a director occurring among the directors elected by the holders of
a class or series of stock pursuant to this Section 5(b), the remaining
directors so elected by that class or series may by affirmative vote of a
majority thereof (or the remaining director so elected if there be but one, or
if there are no such directors remaining, by the affirmative vote of the holders
of a majority of the shares of that class or series), elect a successor or
successors to hold office for the unexpired term of the director or directors
whose place or places shall be vacant. Any director who shall have been elected
by the holders of a class or series of stock or by any directors so elected as
provided in the immediately preceding sentence hereof may be removed during the
aforesaid term of office, either with or without cause, by, and only by, the
affirmative vote of the holders of the shares of the class or series of stock
entitled to elect such director or directors, given either at a special meeting
of such stockholders duly called for that purpose or pursuant to a written
consent of stockholders, and any vacancy thereby created may be filled by the
holders of that class or series of stock represented at the meeting or pursuant
to unanimous written consent.
6. Protective Provisions. So long as 4,500,000 shares of Preferred
Stock are outstanding, this corporation shall not without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of at
least a majority of the then outstanding shares of Series A Preferred Stock,
Series B Preferred Stock, and Series C Preferred Stock (voting together
11
<PAGE>
as a single class and not as a separate series, and on an as-converted basis);
provided, however that such majority vote shall include the vote of at least
1,876,173 shares of the holders of Series B Preferred Stock:
(a) sell, convey, or otherwise dispose of all or substantially all of
its property or business or merge into or consolidate with any other corporation
(other than a wholly-owned subsidiary corporation) or effect any transaction or
series of related transactions in which more than fifty percent (50%) of the
voting power of this corporation is disposed of;
(b) increase the total number of authorized shares of Series A
Preferred Stock, Series B Preferred Stock, and/or Series C Preferred Stock;
(c) authorize or issue, or obligate itself to issue, any equity
security other than that authorized herein, including any other security
convertible into or exercisable for any equity security having a preference over
or greater rights than the Series A Preferred Stock, Series B Preferred Stock,
or Series C Preferred Stock with respect to dividends, liquidation, redemption,
conversion or voting;
(d) redeem, purchase or otherwise acquire (or pay into or set aside
for a sinking fund for such purpose) any share or shares of Preferred Stock or
Common Stock; provided, however, that this restriction shall not apply to the
repurchase of shares of Common Stock from employees, officers, directors,
consultants or other persons performing services for this corporation or any
subsidiary pursuant to agreements under which this corporation has the option to
repurchase such shares at cost upon the occurrence of certain events, such as
the termination of employment;
(e) alter or change the rights, preferences or privileges of the
shares of Series A Preferred Stock, Series B Preferred Stock, or Series C
Preferred Stock so as to affect adversely the shares;
(f) pay any dividends on this corporation's Common Stock; or
(g) increase the authorized number of directors of this corporation.
7. Status of Converted Stock. In the event any shares of Series A
Preferred Stock, Series B Preferred Stock, or Series C Preferred Stock shall be
converted pursuant to Section 4 hereof, the shares so converted shall be
cancelled and shall not be issuable by this corporation. The Restated
Certificate of Incorporation of this corporation shall be appropriately amended
to effect the corresponding reduction in this corporation's authorized capital
stock.
C. Common Stock. The rights, preferences, privileges and
restrictions granted to and imposed on the Common Stock are as set forth below
in this Article IV(C).
1. Dividend Rights. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of this corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
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<PAGE>
2. Liquidation Rights. Upon the liquidation, dissolution or winding
up of this corporation, the assets of this corporation shall be distributed as
provided in Section 2 of Division (B) of Article IV hereof.
3. Redemption. The Common Stock is not redeemable.
4. Voting Rights. The holder of each share of Common Stock shall
have the right to one vote for each such share, and shall be entitled to notice
of any stockholders' meeting in accordance with the bylaws of this corporation,
and shall be entitled to vote upon such matters and in such manner as may be
provided by law.
ARTICLE V
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors is expressly authorized to make, repeal, alter, amend and rescind
any or all of the Bylaws of this corporation.
ARTICLE VI
The number of directors of this corporation shall be fixed from time
to time by a bylaw or amendment thereof duly adopted by the Board of Directors
or by the stockholders.
ARTICLE VII
Elections of directors need not be by written ballot unless the Bylaws
of this corporation shall so provide.
ARTICLE VIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of this corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of this corporation.
ARTICLE IX
A director of this corporation shall, to the fullest extent permitted
by the General Corporation Law as it now exists or as it may hereafter be
amended, not be personally liable to this corporation 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 this
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 General Corporation Law, or (iv) for any transaction from
which the director derived any improper personal benefit. If the General
Corporation Law is amended, after approval by the stockholders of this Article,
to authorize corporation action further eliminating or limiting the personal
liability of directors, then the liability of a director of this corporation
shall be eliminated or limited to the fullest extent permitted by the General
Corporation Law, as so amended.
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<PAGE>
Any amendment, repeal or modification of this Article IX, or the
adoption of any provision of this Amended and Restated Certificate of
Incorporation inconsistent with this Article IX, by the stockholders of this
corporation shall not apply to or adversely affect any right or protection of a
director of this corporation existing at the time of such amendment, repeal,
modification or adoption.
ARTICLE X
This corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
ARTICLE XI
To the fullest extent permitted by applicable law, this corporation is
authorized to provide indemnification of (and advancement of expenses to) agents
of this corporation (and any other persons to which General Corporation Law
permits this corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the General Corporation Law,
subject only to limits created by applicable General Corporation Law (statutory
or non-statutory), with respect to actions for breach of duty to this
corporation, its stockholders, and others.
Any amendment, repeal or modification of the foregoing provisions of
this Article XI shall not adversely affect any right or protection of a
director, officer, agent, or other person existing at the time of, or increase
the liability of any director of this corporation with respect to any acts or
omissions of such director, officer or agent occurring prior to, such amendment,
repeal or modification.
* * *
THIRD: The foregoing amendment and restatement was approved by the
holders of the requisite number of shares of said corporation in accordance with
Section 228 of the General Corporation Law.
FOURTH: That said amendment and restatement was duly adopted in
accordance with the provisions of Section 242 and 245 of the General Corporation
Law.
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<PAGE>
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been executed by the President of this corporation on this 8th
day of May, 2000.
/s/ Albert M. Avery, IV
-------------------------------------
Albert M. Avery, IV
President and Chief Executive Officer
<PAGE>
EXHIBIT 5.1
May 9, 2000
Equinix, Inc.
901 Marshall Street
Redwood City, CA 94063
Ladies and Gentlemen:
We have acted as special New York counsel to Equinix, Inc., a Delaware
corporation (the "Company"), in connection with the Company's offer to exchange
(the "Exchange Offer") up to $200,000,000 aggregate principal amount of its 13%
Senior Notes due 2007 (the "Exchange Notes") which have been registered under
the Securities Act of 1933, as amended (the "Securities Act") for its existing
13% Senior Notes due 2007 (the "Old Notes"), as described in the Prospectus (the
"Prospectus") contained in the Registration Statement on Form S-4 (as amended or
supplemented, the "Registration Statement"), to be filed with the Securities and
Exchange Commission. The Old Notes were issued, and the Exchange Notes are
proposed to be issued, under an indenture dated as of December 1, 1999 (the
"Indenture"), between the Company and State Street Bank and Trust Company of
California, N.A., as Trustee.
In arriving at the opinion expressed below, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of such
documents, corporate records, certificates, agreements and other matters as we
have deemed necessary or advisable for the purposes of rendering this opinion.
In such examination, we have assumed, without independent investigation,
(i) the genuineness of all signatures; (ii) the legal capacity of all
individuals who have executed any of the documents reviewed by us; (iii) the
authenticity of all documents submitted to us as originals; (iv) the conformity
to executed documents of all unexecuted copies submitted to us; and (v) the
authenticity of, and the conformity to original documents of, all documents
submitted to us as certified or photocopied copies. In addition, we have relied
upon the opinion of Gunderson, Dettmer, Stough, Villeneuve, Franklin &
Hachigian, LLP, corporate and securities counsel to the Company, rendered May 9,
2000 stating that (i) the Company has taken all necessary action, corporate
and otherwise, to authorize the issuance and delivery of the Exchange Notes;
(ii) the Company has the power, corporate and otherwise, to issue and deliver
the Exchange Notes; and (iii) the Exchange Notes have been duly executed and
delivered. The opinions expressed herein are subject in all respects to the
assumptions, limitations and qualifications expressed therein. As to certain
factual matters material to our opinion, we have relied upon oral statements,
written information and certificates of officials and representatives of the
Company and others, and we have not independently verified the accuracy of the
statements contained therein.
<PAGE>
Equinix, Inc.
May 9, 2000
Based on the foregoing, and subject to the assumptions, limitations,
exceptions and qualifications set forth herein, we are of the opinion that the
Exchange Notes, when authenticated, issued and delivered in exchange for the Old
Notes in accordance with the terms of the Indenture and the Exchange Offer, will
constitute valid and binding obligations of the Company, enforceable in
accordance with their terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws
affecting creditors' rights generally or by general equitable principles.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York as in effect on the date
hereof.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference made to this firm under the caption
"Legal Matters" in the Prospectus. In giving this consent, we do not thereby
admit that we are included within the category of persons whose consent is
required under Section 7 of the Securities Act, or the rules and regulations of
the Securities and Exchange Commission promulgated thereunder.
Very truly yours,
/s/ Dewey Ballantine LLP
Dewey Ballantine LLP
--------------------
2
<PAGE>
May 9, 2000
Equinix, Inc.
901 Marshall Street
Redwood City, CA 94063
Ladies and Gentlemen:
We have acted as counsel to Equinix, Inc., a Delaware corporation (the
"Company"), in connection with the offer to exchange by the Company of 13%
senior notes due 2007 in exchange for 13% senior notes due 2007 which have been
registered under the Securities Act of 1933, as amended (the "Exchange
Securities"), as described in the Prospectus (the "Prospectus") contained in the
Registration Statement on Form S-4 (Registration No. 333-93749) (as amended or
supplemented, the "Registration Statement") filed with the Securities and
Exchange Commission.
In our capacity as counsel to the Company, we have examined, among
other things, originals, or copies identified to our satisfaction as being true
copies, of the following:
(i) The Certificate of Incorporation of the Company, including all
amendments and restatements thereto, as in effect at the date
hereof;
(ii) The Bylaws of the Company, including all amendments thereto, as
in effect at the date hereof;
(iii) Resolutions of the Board of Directors of the Company
authorizing the issuance and sale of the Units sold by the
Company, and certain other actions with respect thereto; and
(iv) The indenture, dated as of December 1, 1999, by and among the
Company and State Street Bank and Trust Company of
California, N.A. (as trustee) (the "Indenture").
In addition, we have obtained from public officials and from officers
and other representatives of the Company such other certificates and assurances
as we consider necessary for purposes of this opinion. In connection with the
opinions expressed herein, we have made such examinations of matters of law and
of fact as we considered appropriate or advisable for purposes hereof.
<PAGE>
Equinix, Inc.
May 9, 2000
Page 2
We have assumed for the purpose of this opinion that the signatures on
all documents examined by us are genuine and the accuracy of all copies provided
to us, which assumptions we have not independently verified.
This opinion relates solely to the laws of the General Corporation Law
of the State of Delaware, and we express no opinion with respect to the effect
or applicability of the laws in other areas or of other jurisdictions. We
express no opinion as to the Company's compliance or noncompliance with
applicable federal or state antifraud or antitrust statutes, laws, rules and
regulations.
On the basis of our examination and in reliance thereon and on our
consideration of such other matters of fact and questions of law as we consider
relevant in the circumstances, we are of the opinion that (i) the Company has
the requisite corporate power and authority to issue and deliver the Exchange
Securities; (ii) the Exchange Securities have been duly and validly authorized
by the Company for issuance; and (iii) the Exchange Securities, when issued in
accordance with the terms of the Indenture, will be duly executed and delivered.
We consent to the use of this opinion as an exhibit to the
Registration Statement, and further consent to the use of our name wherever
appearing in said Registration Statement, including the Prospectus constituting
a part thereof, and in any amendment or supplement thereto.
Very truly yours,
/s/ Gunderson Dettmer Stough Villeneuve Franklin
& Hachigian, LLP
GUNDERSON DETTMER STOUGH VILLENEUVE
FRANKLIN & HACHIGIAN, LLP
<PAGE>
EXHIBIT 10.6
EQUINIX, INC.
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
May 8, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Registration Rights.................................................. 1
1.1 Definitions................................................... 1
1.2 Request for Registration...................................... 2
1.3 Company Registration.......................................... 4
1.4 Form S-3 Registration......................................... 5
1.5 Obligations of the Company.................................... 6
1.6 Information from Holder....................................... 7
1.7 Expenses of Registration...................................... 7
1.8 Delay of Registration......................................... 8
1.9 Indemnification............................................... 8
1.10 Reports Under Securities Exchange Act of 1934................. 10
1.11 Assignment of Registration Rights............................. 10
1.12 "Market Stand-Off" Agreement.................................. 11
1.13 Termination of Registration Rights............................ 11
1.14 Limitations on Subsequent Registration Rights................. 12
2. Covenants of the Company............................................. 12
2.1 Delivery of Financial Statements.............................. 12
2.2 Inspection.................................................... 13
2.3 Termination of Information and Inspection Covenants........... 13
2.4 Right of First Offer.......................................... 13
2.5 Board Representation.......................................... 14
2.6 Termination of Certain Covenants.............................. 15
3. Miscellaneous........................................................ 15
3.1 Successors and Assigns........................................ 15
3.2 Governing Law................................................. 15
3.3 Counterparts.................................................. 15
3.4 Titles and Subtitles.......................................... 15
3.5 Notices....................................................... 15
3.6 Expenses...................................................... 15
3.7 Entire Agreement: Amendments and Waivers...................... 15
3.8 Severability.................................................. 16
3.9 Aggregation of Stock.......................................... 16
3.10 Prior Agreement............................................... 16
</TABLE>
i
<PAGE>
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT is made as of
the 8th day of May, 2000, by and among Equinix, Inc., a Delaware corporation
(the "Company"), Albert M. Avery, IV and Jay Adelson (the "Common Holders") and
the investors listed on Schedule A hereto, each of which is herein referred to
as an "Investor."
RECITALS
--------
WHEREAS, certain of the Investors and the Common Holders possess
registration rights and certain of the Investors possess other investor rights
granted pursuant to that certain Amended and Restated Investors' Rights
Agreement, dated August 26, 1999, among the Company and the persons listed on
the Schedule of Investors attached thereto, as amended effective November 30,
1999 (the "Prior Agreement");
WHEREAS, certain of the Investors (the "Series C Investors") are
parties to the Series C Preferred Stock Purchase Agreement of even date herewith
(the "Series C Agreement") among the Company and the investors listed on the
Schedule of Investors attached thereto, pursuant to which the Series C Investors
are purchasing shares of Series C Preferred Stock of the Company;
WHEREAS, in order to induce the Company and the Common Holders to
approve the issuance of the Series C Preferred Stock and to induce the Investors
to invest funds in the Company pursuant to the Series C Agreement, the Investors
and the Common Holders hereby agree to waive their rights under the Prior
Agreement, and the Investors, the Common Holders and the Company hereby agree
that this Agreement shall govern the rights of the Investors and the Common
Holders to cause the Company to register shares of Common Stock issued or
issuable to them and certain other matters as set forth herein; and
WHEREAS, the Series C Investors and the Company have agreed to enter
into this Agreement;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as
amended.
(b) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1.11 hereof; provided, however, that the Common Holders shall not
be deemed to be Holders for purposes of Section 1.2.
<PAGE>
(c) The term "Initial Offering" means the Company's first
firm commitment underwritten public offering of its Common Stock under the Act.
(d) The term "1934 Act" means the Securities Exchange Act of
1934, as amended.
(e) The term "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.
(f) The term "Registrable Securities" means (i) the Common
Stock issuable or issued upon conversion of the Series A Preferred Stock, Series
B Preferred Stock, and Series C Preferred Stock, (ii) the 1,954,645 shares of
stock issuable upon exercise of warrants issued, or to be issued, in favor of
Northpoint Communications, Inc., MCI Worldcom, Bechtel Corporation, AT&T Corp.,
Alexandria Real Estate Equities, L.P., and Malcolm Brown, and (iii) the
6,060,000 shares of Common Stock issued to the Common Holders; provided,
however, that such shares of Common Stock held by the Common Holders shall not
be deemed Registrable Securities for the purposes of Section 1.2 and (iv) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security that is issued as) a dividend
or other distribution with respect to, or in exchange for, or in replacement of,
the shares referenced in (i), (ii) and (iii) above, excluding in all cases,
however, any Registrable Securities sold by a person in a transaction in which
his rights under this Section 1 are not assigned.
(g) The number of shares of "Registrable Securities"
outstanding shall be determined by the number of shares of Common Stock
outstanding that are, and the number of shares of Common Stock issuable pursuant
to then exercisable or convertible securities that are, Registrable Securities.
(h) The term "SEC" shall mean the Securities and Exchange
Commission.
(i) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
1.2 Request for Registration.
(a) Subject to the conditions of this Section 1.2, if the
Company shall receive at any time after six months after the Company's Initial
Offering a written request from the Holders of at least thirty (30%) of the
Registrable Securities then outstanding (the "Initiating Holders") that the
Company file a registration statement under the Act covering the registration of
Registrable Securities with an anticipated aggregate offering price of at least
twelve million, five hundred thousand dollars ($12,500,000), then the Company
shall, within twenty (20) days of the receipt thereof, give written notice of
such request to all Holders, and subject to the limitations of this Section 1.2,
use its most diligent efforts to effect
2
<PAGE>
the registration under the Act of all Registrable Securities (including, without
limitation, appropriate qualification under applicable blue sky or other state
securities laws) that the Holders request to be registered in a written request
received by the Company within twenty (20) days of the mailing of the Company's
notice pursuant to this Section 1.2(a).
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 1.2 and the Company shall include such information in the written
notice referred to in Section 1.2(a). In such event the right of any Holder to
include its Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder) to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by the Company (which underwriter or underwriters shall be
reasonably acceptable to a majority in interest of the Initiating Holders).
Notwithstanding any other provision of this Section 1.2, if the underwriter
advises the Company in writing that marketing factors require a limitation of
the number of securities underwritten (including Registrable Securities), then
the Company, in writing, shall so advise all Holders of Registrable Securities
that would otherwise be underwritten pursuant hereto, and the number of shares
that may be included in the underwriting shall be allocated to the Holders of
such Registrable Securities on a pro rata basis based on the number of
Registrable Securities held by all such Holders (including the Initiating
Holders). Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from the registration.
(c) The Company shall not be required to effect a
registration pursuant to this Section 1.2:
(i) in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, unless the Company is already subject to service in
such jurisdiction and except as may be required under the Act; or
(ii) after the Company has effected two (2)
registrations pursuant to this Section 1.2, and such registrations have been
declared or ordered effective; or
(iii) during the period starting with the date twenty
(20) days prior to the Company's good faith estimate of the date of the filing
of, and ending on a date ninety (90) days following the effective date of, a
Company-initiated registration subject to Section 1.3 below, provided that the
Company is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(iv) if the Company shall furnish to Holders requesting
a registration statement pursuant to this Section 1.2, a certificate signed by
the Company's Chief Executive Officer or Chairman of the Board stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its
3
<PAGE>
stockholders for such registration statement to be effected at such time, in
which event the Company shall have the right to defer such filing for a period
of not more than one hundred twenty (120) days after receipt of the request of
the Initiating Holders, provided that such right to delay a request shall be
exercised by the Company not more than once in any twelve (12)-month period.
1.3 Company Registration.
(a) If (but without any obligation to do so) the Company
proposes to register (including for this purpose a registration effected by the
Company for stockholders other than the Holders) any of its Common Stock under
the Act in connection with the public offering of such securities (other than a
registration relating solely to the sale of securities to participants in a
Company stock plan, a registration relating to a corporate reorganization or
other transaction under Rule 145 of the Act, a registration on any form that
does not include substantially the same information as would be required to be
included in a registration statement covering the sale of the Registrable
Securities, a registration in which the only Common Stock being registered is
Common Stock issuable upon conversion of debt securities that are also being
registered, or a registration of debt securities relating to a registered
exchange offer), the Company shall, at such time, promptly give each Holder
written notice of such registration. Upon the written request of each Holder
given within twenty (20) days after mailing of such notice by the Company in
accordance with Section 3.5, the Company shall, subject to the provisions of
Section 1.3(c), use all reasonable best efforts to cause to be registered under
the Act all of the Registrable Securities that each such Holder has requested to
be registered.
(b) Right to Terminate Registration. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 1.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The expenses of
such withdrawn registration shall be borne by the Company in accordance with
Section 1.6 hereof.
(c) Underwriting Requirements. In connection with any
offering involving an underwriting of shares of the Company's capital stock, the
Company shall not be required under this Section 1.3 to include any of the
Holders' securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it (or by other persons entitled to select the underwriters) and enter into an
underwriting agreement in customary form with an underwriter or underwriters
selected by the Company, and then only in such quantity as the underwriters
determine in their sole discretion will not jeopardize the success of the
offering by the Company. If the total amount of securities, including
Registrable Securities, requested by stockholders to be included in such
offering exceeds the amount of securities sold other than by the Company that
the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
that the underwriters determine in their sole discretion will not jeopardize the
success of the offering (the securities so included to be apportioned pro rata
among the selling Holders according to the total amount of securities entitled
to be included therein owned by each selling Holder or in such other proportions
as shall mutually be agreed to
4
<PAGE>
by such selling Holders), but in no event shall (i) the amount of securities of
the selling Holders included in the offering be reduced below thirty percent
(30%) of the total amount of securities included in such offering, unless such
offering is the initial public offering of the Company's securities, in which
case the selling Holders may be excluded if the underwriters make the
determination described above and no other shareholder's securities are
included. For purposes of the preceding parenthetical concerning apportionment,
for any selling stockholder that is a Holder of Registrable Securities and that
is a partnership or corporation, the partners, retired partners and stockholders
of such Holder, or the estates and family members of any such partners and
retired partners and any trusts for the benefit of any of the foregoing persons
shall be deemed to be a single "selling Holder," and any pro rata reduction with
respect to such "selling Holder" shall be based upon the aggregate amount of
Registrable Securities owned by all such related entities and individuals.
1.4 Form S-3 Registration. In case the Company shall receive from
the Holders of Registrable Securities, with an aggregate market value of at
least $20,000,000, a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company shall:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and
(b) use all reasonable best efforts to effect, as soon as
practicable, such registration and all such qualifications and compliances as
may be so requested and as would permit or facilitate the sale and distribution
of all or such portion of such Holders' Registrable Securities as are specified
in such request, together with all or such portion of the Registrable Securities
of any other Holders joining in such request as are specified in a written
request given within fifteen (15) days after receipt of such written notice from
the Company, provided, however, that the Company shall not be obligated to
effect any such registration, qualification or compliance, pursuant to this
section 1.4:
(i) if Form S-3 is not available for such offering by
the Holders;
(ii) if the Holders, together with the holders of any
other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public (net of any underwriters' discounts or
commissions) of less than $1,000,000;
(iii) if the Company shall furnish to the Holders a
certificate signed by the Chief Executive Officer or Chairman of the Board of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
shareholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than one hundred twenty (120)
days after receipt of the request of the Holder or Holders under this Section
1.4; provided, however, that the Company shall not utilize this right more than
once in any twelve month period; or
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(iv) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. Registrations effected pursuant to this
Section 1.4 shall not be counted as requests for registration effected pursuant
to Sections 1.2.
1.5 Obligations of the Company. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) prepare and file (and promptly notify each participating
Holder of such filing) with the SEC a registration statement with respect to
such Registrable Securities and use its reasonable best efforts to cause such
registration statement to become effective, and keep such registration statement
effective for a period of at least one-hundred twenty (120) days or until the
distribution contemplated in the Registration Statement has been completed,
whichever first occurs; provided, however, that such 120-day period shall be
extended for a period of time equal to the period the Holder refrains from
selling any securities included in such registration at the request of an
underwriter of Common Stock (or other securities) of the Company.
(b) prepare and file (and promptly notify each participating
Holder of such filing) with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement;
(c) furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them;
(d) use its reasonable best efforts to register and qualify
the securities covered by such 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;
(e) in the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement;
(f) notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be
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delivered under the Act or the happening of any event as a result of which the
prospectus included in such 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, and the Company
shall promptly prepare and file with the SEC, and at the request of any such
Holder prepare and furnish to such Holder a reasonable number of copies of, a
supplement to or an amendment of such prospectus as may be necessary so that
such prospectus shall not include such untrue statement or fail to omit such
material fact;
(g) cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed;
(h) provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration; and
(i) 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, (1) 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 (2) 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.
1.6 Information from Holder. It shall be a condition precedent
to the obligations of the Company to take any action pursuant to this Section 1
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company, at its request, such information regarding
itself, the Registrable Securities held by it, and the intended method of
disposition of such securities as shall be required to effect the registration
of such Holder's Registrable Securities.
1.7 Expenses of Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to this Section 1, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company. Notwithstanding the foregoing, the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable
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Securities to be registered (in which case all participating Holders shall bear
such expenses pro rata based upon the number of Registrable Securities that were
to be requested in the withdrawn registration), unless the Holders of a majority
of the Registrable Securities agree to forfeit their right to one demand
registration pursuant to Section 1.2; provided, however, that if at the time of
such withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Company not known to the Holders at the
time of their request for such registration and have withdrawn their request for
registration with reasonable promptness after learning of such material adverse
change, then the Holders shall not be required to pay any of such expenses and
shall retain their rights pursuant to Section 1.2.
1.8 Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.9 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the partners or officers, directors and
stockholders of each Holder, legal counsel and accountants for each Holder, any
underwriter (as defined in the Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Act or the 1934
Act, against any losses, claims, damages or liabilities (joint or several) to
which they may become subject under the Act, the 1934 Act or any state
securities laws, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively, a "Violation"): (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Act, the 1934
Act, any state securities laws or any rule or regulation promulgated under the
Act, the 1934 Act or any state securities laws; and the Company will reimburse
each such Holder, underwriter or controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this subsection l.9(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable in
any such case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon a Violation that occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder, underwriter or
controlling person; provided further, however, that the foregoing indemnity
agreement with respect to any preliminary prospectus shall not inure to the
benefit of any Holder or underwriter, or any person controlling such Holder or
underwriter, from whom the person asserting any such losses, claims, damages or
liabilities purchased shares in the offering, if a copy of the prospectus (as
then amended or supplemented if the Company shall have furnished to such Holder
or underwriter
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any amendments or supplements thereto) was not sent or given by or on behalf of
such Holder or underwriter to such person, if required by law so to have been
delivered, at or prior to the written confirmation of the sale of the shares to
such person, and if the prospectus (as so amended or supplemented) would have
cured the defect giving rise to such loss, claim, damage or liability.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, legal counsel and
accountants for the Company, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any such
underwriter or other Holder, against any losses, claims, damages or liabilities
(joint or several) to which any of the foregoing persons may become subject,
under the Act, the 1934 Act or any state securities laws, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will reimburse any person intended
to be indemnified pursuant to this subsection l.9(b), for any legal or other
expenses reasonably incurred by such person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this subsection l.9(b) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Holder (which
consent shall not be unreasonably withheld), provided that in no event shall any
indemnity under this subsection l.9(b) exceed the net proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under
this Section 1.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties that may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 1.9, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 1.9.
(d) If the indemnification provided for in this Section 1.9
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to
herein, then the indemnifying party, in
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lieu of indemnifying such indemnified party hereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such loss,
liability, claim, damage or expense in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions
that resulted in such loss, liability, claim, damage or expense, as well as any
other relevant equitable considerations. The relative fault of the indemnifying
party and of the indemnified party shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 1.9 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.10 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after ninety (90)
days after the effective date of the Initial Offering;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the 1934 Act; and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the Initial Offering), the Act and the
1934 Act (at any time after it has become subject to such reporting
requirements), or that it qualifies as a registrant whose securities may be
resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company, and (iii) such other information as may
be reasonably requested in availing any Holder of any rule or regulation of the
SEC that permits the selling of any such securities without registration or
pursuant to such form.
1.11 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only
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with all related obligations) by a Holder to a transferee or assignee of such
securities that (i) is a subsidiary, parent, member, affiliate, partner, limited
partner, retired partner or stockholder of a Holder, (ii) is a Holder's family
member or trust for the benefit of an individual Holder, (iii) after such
assignment or transfer, holds at least one million five hundred thousand
(1,500,000) of the then outstanding Registrable Securities (subject to
appropriate adjustment for stock splits, stock dividends, combinations and other
recapitalizations), or (iv) is approved by the Company in writing, provided: (a)
the Company is, within a reasonable time after such transfer, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned;
(b) such transferee or assignee agrees in writing to be bound by and subject to
the terms and conditions of this Agreement, including without limitation the
provisions of Section 1.12 below; and (c) such assignment shall be effective
only if immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Act.
1.12 "Market Stand-Off" Agreement. Each Holder hereby agrees that
it will not, without the prior written consent of the managing underwriter,
during the period commencing on the date of the final prospectus relating to the
Company's initial public offering and ending on the date specified by the
Company and the managing underwriter (such period not to exceed one hundred
eighty (l80) days) (i) lend, offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock (whether such shares or any
such securities are then owned by the Holder or are thereafter acquired;
provided, however, that such prohibition shall not apply to shares purchased in
the initial public offering or in open market transactions following such
offering), or (ii) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise, provided that all officers and directors of the Company and
all other persons who hold one percent (1%) or more of the then outstanding
Capital Stock of the Company also agree to such restrictions. The underwriters
in connection with the Company's initial public offering are intended third
party beneficiaries of this Section 1.12 and shall have the right, power and
authority to enforce the provisions hereof as though they were a party hereto.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.13 Termination of Registration Rights.
(a) No Holder shall be entitled to exercise any right
provided for in this Section 1 after three (3) years following the Company's
Initial Offering.
(b) In addition, the right of any Holder to request
registration or inclusion in any registration pursuant to Section 1.3 shall
terminate if and when such Holder's Registrable Securities (and any affiliate of
the Holder with whom such Holder must aggregate its
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sales under Rule 144) (i) can be sold in any three (3)-month period without
registration in compliance with Rule 144 of the Act and (ii) constitute less
than 1% of the outstanding Common Stock of the Company.
1.14 Limitations on Subsequent Registration Rights. Unless
unanimously approved by the Board of Directors, from and after the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of a majority of the Registrable Securities, enter into any agreement
with any holder or prospective holder of any securities of the Company that
would (a) allow such holder or prospective holder to include such securities in
any registration filed under Section 1.3 hereof, unless under the terms of such
agreement, such holder or prospective holder may include such securities in any
such registration only to the extent that the inclusion of such securities will
not reduce the amount of the Registrable Securities of the Holders that are
included or (b) grant such holder or prospective holder demand registration
rights preferential to those granted to the Holders herein.
2. Covenants of the Company.
2.1 Delivery of Financial Statements. Each Holder shall be
entitled to receive:
(a) As soon as practicable, but in any event within ninety
(90) days after the end of each fiscal year of the Company, an income statement
for such fiscal year, a balance sheet of the Company and statement of
stockholder's equity as of the end of such year, and a statement of cash flows
for such year, such year-end financial reports to be in reasonable detail,
prepared in accordance with generally accepted accounting principles ("GAAP"),
and audited and certified by independent public accountants of nationally
recognized standing selected by the Company;
(b) as soon as practicable, but in any event within forty-
five (45) days after the end of each of the first three (3) quarters of each
fiscal year of the Company, an unaudited profit or loss statement, a statement
of cash flows for such fiscal quarter and an unaudited balance sheet as of the
end of such fiscal quarter;
(c) within thirty (30) days of the end of each month, an
unaudited income statement and a statement of cash flows and balance sheet for
and as of the end of such month, including a comparison of the Company's actual
results with its budget;
(d) with respect to the financial statements called for in
subsections (b) and (c) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such
financials were prepared in accordance with GAAP consistently applied with prior
practice for earlier periods (with the exception of footnotes that may be
required by GAAP) and fairly present the financial condition of the Company and
its results of operation for the period specified, subject to year-end audit
adjustment;
(e) as soon as practicable, but in any event within thirty
(30) days after the end of each fiscal year, a budget for the next fiscal year,
including balance sheets
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and sources and applications of funds statements and, as soon as prepared, any
other budgets or revised budgets prepared by the Company; and
(f) such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as the
Holders may from time to time request, provided, however, that the Company shall
not be obligated under this subsection (f) or any other subsection of Section
2.1 to provide information which it deems in good faith to be a trade secret or
similar confidential information.
2.2 Inspection. The Company shall permit each Investor that
holds at least one million five hundred thousand (1,500,000) shares of Preferred
Stock (and/or Common Stock issued upon conversion thereof), at such Investor's
expense, to visit and inspect the Company's properties, to examine its books of
account and records and to discuss the Company's affairs, finances and accounts
with its officers, all at such reasonable times as may be requested by the
Investor; provided, however, that the Company shall not be obligated pursuant to
this Section 2.2 to provide access to any information that it reasonably
considers to be a trade secret or similar confidential information; and,
provided further, that the Investors coordinate their visitations and
inspections so as to minimize the disruptions and interruptions to the Company.
2.3 Termination of Information and Inspection Covenants. The
covenants set forth in Sections 2.1 and 2.2 shall terminate as to Investors and
be of no further force or effect when the sale of securities pursuant to a
registration statement filed by the Company under the Act in connection with the
firm commitment underwritten offering of its securities to the general public is
consummated or when the Company first becomes subject to the periodic reporting
requirements of Sections 12(g) or 15(d) of the 1934 Act, whichever event shall
first occur.
2.4 Right of First Offer. Subject to the terms and conditions
specified in this paragraph 2.4, the Company hereby grants to each Major
Investor (as hereinafter defined) a right of first offer with respect to future
sales by the Company of its Shares (as hereinafter defined). For purposes of
this Section 2.4, a Major Investor shall mean any Investor or transferee that
holds at least one million five hundred thousand (1,500,000) shares of Preferred
Stock (or the Common Stock issued upon conversion thereof) issued pursuant to
the Series A Preferred Stock Purchase Agreement, the Series B Preferred Stock
Purchase Agreement or the Series C Preferred Stock Purchase Agreement (as
adjusted for stock splits, stock dividends, combinations and other
recapitalizations). For purposes of this Section 2.4, Investor includes any
general partners and affiliates of an Investor. An Investor shall be entitled to
apportion the right of first offer hereby granted it among itself and its
partners and affiliates in such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exchangeable or exercisable for any shares of, any class of
its capital stock, whether now authorized or not, ("Shares"), the Company shall
first make an offering of such Shares to each Major Investor in accordance with
the following provisions.
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(a) The Company shall deliver a notice in accordance with
Section 3.5 ("Notice") to the Major Investors stating (i) its bona fide
intention to offer such Shares, (ii) the number of such Shares to be offered,
and (iii) the price and terms upon which it proposes to offer such Shares.
(b) By written notification received by the Company, within
twenty (20) calendar days after receipt of the Notice, the Major Investor may
elect to purchase or obtain, at the price and on the terms specified in the
Notice, up to that portion of such Shares that equals the proportion that the
number of shares of Common Stock issued and held, or issuable upon conversion of
the Series A Preferred Stock, Series B Preferred Stock, or Series C Preferred
Stock then held, by such Major Investor bears to the total number of shares of
Common Stock of the Company then outstanding (assuming full conversion of all
convertible securities). Each Investor shall have a right of over-allotment such
that if any Investor fails to exercise its right hereunder to purchase such
portion of the shares, the other Investors may purchase the Non-Purchasing
Investor's portion on a pro rata basis (based upon the procedure set forth in
this Section 2.4(b)) within ten (10) days from the date such Non-Purchasing
Investor fails to exercise its right to purchase its portion of the Shares.
(c) If all Shares that Investors are entitled to obtain
pursuant to subsection 2.4(b) are not elected to be obtained as provided in
subsection 2.4(b) hereof, the Company may, during the ninety (90) day period
following the expiration of the period (including the over-allotment period)
provided in subsection 2.4(b) hereof, offer the remaining unsubscribed portion
of such Shares to any person or persons at a price not less than, and upon terms
no more favorable to the offeree than those specified in the Notice. If the
Company does not enter into an agreement for the sale of the Shares within such
period, or if such agreement is not consummated within ninety (90) days of the
execution thereof, the right provided hereunder shall be deemed to be revived
and such Shares shall not be offered unless first reoffered to the Major
Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.4 shall not
be applicable to (i) the issuance or sale of shares of Common Stock (or options
therefor) upon approval by the Company's Board of Directors to employees,
directors and consultants for the primary purpose of soliciting or retaining
their services; (ii) the issuance of securities pursuant to a bona fide, firmly
underwritten public offering of shares of Common Stock, registered under the
Act, (iii) the issuance of securities pursuant to the conversion or exercise of
convertible or exercisable securities, (iv) the issuance of securities upon
approval by the Company's Board of Directors in connection with a bona fide
business acquisition of or by the Company, whether by merger, consolidation,
sale of assets, sale or exchange of stock or otherwise, (v) the issuance of
stock, warrants or other securities or rights upon approval by the Company's
Board of Directors to persons or entities with which the Company has business
relationships provided such issuances are for other than primarily equity
financing purposes, or (vi) the issuance of any shares of Series A Preferred
Stock, Series B Preferred Stock, or Series C Preferred Stock, authorized as of
the date hereof.
2.5 Board Representation. Immediately upon the Closing, the
Board shall consist of Albert M. Avery, IV, Jay Adelson, Andy Rachleff, Mike
Volpi, John Taysom and two vacancies.
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2.6 Termination of Certain Covenants. The covenants set forth in
Sections 2.4 shall terminate and be of no further force or effect upon the
consummation of the Company's Initial Offering.
3. Miscellaneous.
3.1 Successors and Assigns. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
3.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
3.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
delivery by telephonically confirmed facsimile transmission, nationally
recognized overnight courier service, or upon deposit with the United States
Post Office, by registered or certified mail, postage prepaid and addressed to
the party to be notified at the address indicated for such party on the
signature page hereof, or at such other address as such party may designate by
ten (10) days' advance written notice to the other parties, or with respect to
any party with an address outside the United States such notice shall be deemed
received within three (3) business days upon deposit with a reputable
international express courier.
3.6 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.7 Entire Agreement: Amendments and Waivers. This Agreement
(including the Exhibits hereto, if any) constitutes the full and entire
understanding and agreement among the parties with regard to the subjects hereof
and thereof. Any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the holders of a majority of the Registrable
Securities;
15
<PAGE>
provided, however, that in the event that such amendment or waiver adversely
affects the obligations and/or rights of the Common Holders in a different
manner than the other Holders, such amendment or waiver shall also require the
written consent of the holders of a majority in interest of the Common Holders.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any Registrable Securities each future holder of all
such Registrable Securities, and the Company.
3.8 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
3.9 Aggregation of Stock. All shares of Registrable Securities
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
3.10 Prior Agreement. The Prior Agreement is hereby superseded in
its entirety and shall be of no further force or effect.
16
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
EQUINIX, INC.
By: /s/ Albert M. Avery, IV
-------------------------
Name: Albert M. Avery, IV
Title: Chief Executive Officer
COMMON HOLDERS:
/s/ Albert M. Avery, IV
------------------------------
Name: Albert M. Avery, IV
/s/ Jay Adelson
------------------------------
Name: Jay Adelson
SIGNATURE PAGE TO THE INVESTORS' RIGHTS AGREEMENT
<PAGE>
INVESTOR:
BENCHMARK CAPITAL PARTNERS IV, L.P.
as nominee for
Benchmark Capital Partners, IV, L.P.
Benchmark Founders Fund IV, L.P.
Benchmark Founders Fund IV-A, L.P.
and related individuals
By: Benchmark Capital Management Co. IV, L.L.C.,
its general partner
By: /s/ Andrew S. Rachleff
---------------------------------------------------
Managing Member
SIGNATURE PAGE TO THE INVESTORS' RIGHTS AGREEMENT
<PAGE>
INVESTOR:
CISCO SYSTEMS, INC.
By: /s/ Michelangelo Volpi
----------------------------------
Name: Michelangelo Volpi
--------------------------------
Title:
-------------------------------
SIGNATURE PAGE TO THE INVESTORS' RIGHTS AGREEMENT
<PAGE>
INVESTOR:
MORGAN STANLEY DEAN WITTER
EQUITY FUNDING, INC.
By: /s/ Thomas A. Clayton
-----------------------------------
Title: Vice President
--------------------------------
SIGNATURE PAGE TO THE INVESTORS' RIGHTS AGREEMENT
<PAGE>
INVESTOR:
JOHN MAYES
By: /s/ John Mayes
-----------------------------------
Title:
--------------------------------
SIGNATURE PAGE TO THE INVESTORS' RIGHTS AGREEMENT
<PAGE>
INVESTOR:
CAPITAL RESEARCH AND MANAGEMENT COMPANY, ON BEHALF
OF THE NEW ECONOMY FUND
By: /s/ Michael Downer
---------------------------------------------
Michael J. Downer, Secretary
CAPITAL RESEARCH AND MANAGEMENT COMPANY, ON BEHALF
OF AMERICAN VARIABLE INSURANCE SERIES, GROWTH FUND
By: /s/ Michael Downer
---------------------------------------------
Michael J. Downer, Secretary
SIGNATURE PAGE TO THE INVESTORS' RIGHTS AGREEMENT
<PAGE>
Schedule A
----------
Schedule of Investors
---------------------
<TABLE>
<CAPTION>
Name Number of Shares Purchased Total Purchase Price
of Shares
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
The New Economy Fund 2,000,000 $30,160,000.00
c/o Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071
- ----------------------------------------------------------------------------------------------------------------------
American Variable Insurance Series, Growth Fund 1,315,649 $19,839,986.92
c/o Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
S-1
<PAGE>
INVESTOR:
CAPITAL RESEARCH AND MANAGEMENT COMPANY, ON BEHALF
OF THE NEW ECONOMY FUND
By: /s/ Michael Downer
---------------------------------------------
Michael J. Downer, Secretary
CAPITAL RESEARCH AND MANAGEMENT COMPANY, ON BEHALF
OF AMERICAN VARIABLE INSURANCE SERIES, GROWTH FUND
By: /s/ Michael Downer
---------------------------------------------
Michael J. Downer, Secretary
SIGNATURE PAGE TO THE INVESTORS' RIGHTS AGREEMENT
<PAGE>
EXHIBIT 10.9
[*]
[*]
Chicago, Illinois
LEASE AGREEMENT
BETWEEN
CARLYLE-CORE CHICAGO LLC, a Delaware limited liability company
("Landlord")
AND
EQUINIX, INC., a Delaware corporation
("Tenant")
_________________
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
1. BASIC LEASE INFORMATION................................... 1
2. LEASE GRANT............................................... 4
3. TERM; POSSESSION.......................................... 4
4. RENT...................................................... 4
5. COMPLIANCE WITH LAWS; USE................................. 9
6. EQUIPMENT SPACE........................................... 10
7. SERVICES.................................................. 11
8. ALTERATIONS............................................... 13
9. MAINTENANCE............................................... 15
10. ENTRY BY LANDLORD......................................... 15
11. ASSIGNMENT AND SUBLETTING................................. 15
12. LIENS..................................................... 17
13. INDEMNITY AND WAIVER OF CLAIMS............................ 18
14. INSURANCE................................................. 19
15. SUBROGATION............................................... 19
16. CASUALTY DAMAGE........................................... 19
17. CONDEMNATION.............................................. 20
18. SECURITY DEPOSIT.......................................... 20
19. EVENTS OF DEFAULT......................................... 22
20. REMEDIES.................................................. 22
21. LIMITATION OF LIABILITY; LANDLORD'S TRANSFER.............. 23
22. NO WAIVER................................................. 23
23. QUIET ENJOYMENT........................................... 24
24. RELOCATION................................................ 24
25. HOLDING OVER.............................................. 24
26. SUBORDINATION TO MORTGAGES; ESTOPPEL CERTIFICATE.......... 24
27. ATTORNEYS' FEES........................................... 24
28. NOTICES................................................... 25
29. EXCEPTED RIGHTS........................................... 25
30. SURRENDER OF PREMISES..................................... 25
31. PARKING................................................... 25
32. ENVIRONMENTAL MATTERS/HAZARDOUS MATERIALS................. 26
33. MISCELLANEOUS............................................. 28
34. ENTIRE AGREEMENT.......................................... 30
</TABLE>
<PAGE>
EXHIBITS
- --------
EXHIBIT A - PREMISES
EXHIBIT B - EQUIPMENT SPACE
EXHIBIT C - BUILDINGS RULES AND REGULATIONS
EXHIBIT D - COMMENCEMENT LETTER
EXHIBIT E - HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE
EXHIBIT F - TENANT OPTIONS
EXHIBIT G - SAMPLE LETTER OF CREDIT
EXHIBIT H - AGREEMENT REGARDING LENDER'S SECURITY INTEREST IN TENANT'S PERSONAL
PROPERTY
<PAGE>
LEASE AGREEMENT
This Lease ("Lease") is made and entered into as of September 1, 1999, by
and between CARLYLE-CORE CHICAGO LLC, a Delaware limited liability company
("Landlord") and EQUINIX, INC., a Delaware corporation ("Tenant").
1. Basic Lease Information.
------------------------
(a) "Building" shall mean the building located at [*], Chicago, Illinois.
(b) "Rentable Square Footage of the Building" is estimated to be [*]
rentable square feet, subject to Landlord's Confirmation (defined
below).
(c) "Premises" shall mean the area shown on Exhibit A to this Lease. The
Premises consist of the entire fifth floor of the Building. The
"Rentable Square Footage of the Premises" is approximately [*]
Rentable Square Feet. As the Premises includes a floor in its
entirety, all corridors, elevator lobbies and restroom facilities
located on such full floor shall be considered part of the Premises.
Landlord and Tenant stipulate and agree that the Rentable Square
Footage of the Building and the Rentable Square Footage of the
Premises as stated above are estimates, subject to final measurement
by Landlord ("Landlord's Confirmation"). Such measurement shall be
performed in accordance with ANSI/BOMA Z65.1-1996. ("BOMA Standard").
As used herein "Rentable Square Feet", "Rentable Area" and/or
"Rentable Square Footage" shall be the amounts determined by
Landlord, based upon calculation of usable areas and rentable areas
in accordance with the BOMA Standard, as a result of Landlord's
Confirmation. Following Landlord's Confirmation (i) Landlord shall
deliver a copy of Landlord's Confirmation to Tenant for Tenant's
review and confirmation, and (ii) Landlord will set forth the final
measurements in a Commencement Letter in the form of Exhibit D
attached hereto.
(d) "Equipment Space" shall mean the Rooftop Equipment Space, Generator
Space and Electrical Space (as described in Article 6 herein) and
shown on Exhibit B to this Lease. The Rentable Square Footage of the
Equipment Space is estimated to be [*] Rentable Square Feet, subject
to Landlord's Confirmation.
(e) "Base Rent":
Annual Rate
Period Per Rentable Square Foot
------ ------------------------
Year 1 $[*]
Year 2 $[*]
Year 3 $[*]
Year 4 $[*]
Year 5 $[*]
Year 6 $[*]
Year 7 $[*]
Year 8 $[*]
Year 9 $[*]
Year 10 $[*]
Year 11 $[*]
Year 12 $[*]
Year 13 $[*]
Year 14 $[*]
Year 15 $[*]
Notwithstanding the foregoing, during the initial [*] ([*]) months following the
Rent Commencement Date, Base Rent for [*] ([*]) of the Rentable Square Footage
of the Premises (ie, [*] rentable square feet) shall be abated, provided Tenant
is not in default
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
hereunder beyond the giving of any applicable notices and the passage of any
applicable grace periods. If, at any time following the Rent Commencement Date,
Tenant is in monetary default hereunder (beyond the giving of applicable notice
and the passage of applicable grace periods) Landlord shall have the right, in
addition to any other rights or remedies provided under this Lease, to declare
immediately due and payable any Base Rent abated pursuant to the provisions of
the foregoing sentence.
(f) "Equipment Space Rent":
Annual Rate
Period Per Rentable Square Foot
------ ------------------------
Year 1 $[*]
Year 2 $[*]
Year 3 $[*]
Year 4 $[*]
Year 5 $[*]
Year 6 $[*]
Year 7 $[*]
Year 8 $[*]
Year 9 $[*]
Year 10 $[*]
Year 11 $[*]
Year 12 $[*]
Year 13 $[*]
Year 14 $[*]
Year 15 $[*]
(g) "Tenant's Pro Rata Share": The ratio (expressed as a percentage) that
the Rentable Area of the Premises bears to the Rentable Area of the
Building; said amount to be determined by Landlord's Confirmation.
(h) "Commencement Date": The date Landlord delivers possession of the
Premises to Tenant with the Landlord Work completed.
(i) "Rent Commencement Date": The date that is [*] ([*]) days from the
Commencement Date.
(j) "Term": A period commencing on the Commencement Date and expiring on
the date ("Expiration Date") that is one hundred eighty (180) months
(fifteen (15) years) from the Rent Commencement Date. The Commencement
Date is estimated to be September 30, 1999.
(k) "Security Deposit": [*] Dollars ($[*]) in cash or, at Tenant's option,
in the form of an irrevocable letter of credit ("Letter of Credit").
(l) "Guarantor(s)": Not applicable.
(m) "Broker": Core Location Realty Associates of Chicago LLC, representing
Landlord.
(n) "Permitted Use": Installation, operation and maintenance of
telecommunication, switching and transmission equipment (including Co-
location as defined in Article 11, subject to the limitations set
forth in this Lease) as the primary use and associated general office
use required to support, monitor and maintain the equipment located
within the Premises or Equipment Space; the amount of office use shall
be subject to Landlord's prior written approval.
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
(o) "Notice Addresses":
Tenant:
Notices shall be sent to Tenant at the following address:
Equinix, Inc.
901 Marshall Street, 2/nd/ Floor
Redwood City, California 94063
Attn: Mr. Art Chinn
On and after the Rent Commencement Date, a copy of all notices shall be
sent to Tenant at the Premises.
Landlord:
CARLYLE-CORE CHICAGO LLC
c/o Core Location Realty Associates of Chicago LLC
4520 East-West Highway, Suite 650
Bethesda, Maryland 20814
Attention: Mark Ezra
With a copy to:
Shartsis, Friese & Ginsburg LLP
One Maritime Plaza, 18/th/ Floor
San Francisco, California 94111
Attention: Jonathan M. Kennedy, Esq.
and
The Carlyle Group
1001 Pennsylvania Avenue
Suite 220 South
Washington, DC 20004
Attention: Gary Block
(p) "Rent Payment Address":
CARLYLE-CORE CHICAGO LLC
c/o Core Location Realty Associates of Chicago LLC
4520 East-West Highway, Suite 650
Bethesda, Maryland 20814
Attention: Management Agent
(q) "Business Day(s)" are Monday through Friday of each week, exclusive of
New Year's Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day and any other union-recognized
holidays (ie, days which labor unions serving Landlord recognize as
holidays) ("Holidays"). Landlord may reasonably designate additional
Holidays.
(r) "Landlord Work" shall mean the completion by Landlord of demolition,
pursuant to a demolition plan prepared by Landlord, of existing
partitions within the Premises as well as the demolition of existing
wood block floor covering, existing HVAC, existing steam and domestic
water (ie, excluding sprinkler systems), electrical and other pipes
and conduit, non-load bearing walls, and asbestos that is exposed
and/or friable (the Landlord Work shall not include the demolition of
masonry partitions, lighting, all vertical penetrations, power panels
and main ducts) and the delivery of the Premises in broom clean
condition.
<PAGE>
(s) "Law(s)" means all applicable statutes, codes, ordinances, orders,
rules and regulations of any municipal or governmental entity.
(t) "Property" means the Building, the parking lot serving the Building
and the parcel(s) of land on which they are located and, at Landlord's
reasonable discretion, other improvements serving the Building
generally, if any, and the parcel(s) of land on which they are
located.
2. Lease Grant.
-----------
(a) Premises. Landlord leases the Premises to Tenant and Tenant leases
--------
the Premises from Landlord, together with the right in common with
others to use any portions of the Property that are designated by
Landlord for the common use of tenants and others, such as sidewalks,
unreserved parking areas, common corridors, elevator foyers,
restrooms, vending areas and lobby areas (the "Common Areas").
(b) Equipment Space. Additionally, pursuant to the provisions of Article
---------------
6 below, Tenant shall have the right to place certain equipment in the
Equipment Space.
3. Term; Possession. The Term shall commence on the Commencement Date and
----------------
shall expire, if not sooner terminated pursuant to the provisions of this
Lease, on the Expiration Date. On the Commencement Date, the Premises and
Equipment Space are accepted by Tenant in "as is" condition and
configuration (subject to the completion of the Landlord Work). By taking
possession of the Premises and Equipment Space, Tenant agrees that the
Premises and Equipment Space are in good order and satisfactory condition,
and that there are no representations or warranties by Landlord regarding
the condition of the Premises, Equipment Space or the Building except as
may be expressly set forth herein. If Landlord is delayed in delivering
possession of the Premises and Equipment Space or any other space, Landlord
shall use reasonable efforts to obtain possession of the space, but no such
delay shall nullify this Lease or give rise to any claim for damages on the
part of Tenant. If Tenant takes possession of the Premises or Equipment
Space before the Commencement Date, such possession shall be subject to the
terms and conditions of this Lease except that, prior to the Rent
Commencement Date, Tenant will not be required to pay Rent hereunder.
Notwithstanding the foregoing, if the Commencement Date does not occur by
the date that is one hundred fifty (150) days following the mutual
execution and delivery of this Lease (the "Outside Delivery Date"), Tenant,
as its sole remedy, may terminate this Lease by giving Landlord written
notice of termination after the Outside Delivery Date. In such event, and
subject to the provisions set forth below in this Article 3, this Lease
shall be deemed null and void and of no further force and effect and
Landlord shall promptly refund any prepaid Rent and Security Deposit
previously advanced by Tenant under this Lease and the parties hereto shall
have no further responsibilities or obligations to each other with respect
to this Lease. Landlord and Tenant acknowledge and agree that the Outside
Delivery Date shall be postponed by the number of days the Commencement
Date is delayed due to events of Force Majeure (as defined herein).
Notwithstanding the foregoing to the contrary, if Tenant exercises its
right to terminate this Lease as set forth above but Landlord delivers the
Premises to Tenant in the condition required by this Lease within thirty
(30) days after the date of Tenant's delivery of Tenant's termination
notice, this Lease shall continue in full force and effect the same as if
Tenant had not delivered its termination notice, and Tenant's termination
notice will be null and void. Tenant's right to terminate as described
herein shall be null and void as of the Commencement Date.
4. Rent.
----
(a) Payments. As consideration for this Lease, Tenant shall pay Landlord
--------
at the Rent Payment Address (or such other address as Landlord may
from time to time specify in writing as the Rent Payment Address),
without any setoff or deduction, the total amount of Base Rent,
Equipment Space Rent and Additional Rent due for the Term, commencing
as of the Rent Commencement Date. "Additional Rent" means all sums
(exclusive of Base Rent and Equipment Space Rent) that Tenant is
required to pay Landlord. Additional Rent, Base Rent and Equipment
Space Rent are sometimes collectively referred to as "Rent". Tenant
shall pay and be liable for all rental, sales and use taxes (but
excluding income taxes), if any, imposed upon or measured by Rent
under applicable Law. Base Rent, Equipment Space Rent and recurring
monthly charges of Additional Rent shall be due and payable in advance
on the first day of each calendar month without notice or demand,
provided that the installment of Base Rent (based upon the estimated
Rentable Area of the Premises described in Section 1(c) above) and
Equipment Space Rent for the first full calendar month following the
Rent Commencement Date shall be payable upon the execution of this
Lease by Tenant (such payment to
<PAGE>
be calculated taking into account the abatement described in Section
1(e) above). All other items of Rent shall be due and payable by
Tenant on or before thirty (30) days after billing by Landlord. All
payments of Rent shall be by good and sufficient check or by other
means (such as automatic debit or electronic transfer) acceptable to
Landlord. If Tenant fails to pay any item or installment of Rent when
due, Tenant shall pay Landlord an administration fee equal to five
percent (5%) of the past due Rent; provided, that Tenant will be
allowed a grace period of five (5) days after notice from Landlord of
late payment for the first two (2) late payments in any calendar year
prior to the imposition of such administration fee. If the Term
commences on a day other than the first day of a calendar month or
terminates on a day other than the last day of a calendar month, the
Rent for the month shall be prorated based on the number of days in
such calendar month. Landlord's acceptance of less than the correct
amount of Rent shall be considered a payment on account of the
earliest Rent due. No endorsement or statement on a check or letter
accompanying a check or payment shall be considered an accord and
satisfaction, and Landlord may accept the check or payment without
prejudice to Landlord's right to recover the balance or pursue other
available remedies. Tenant's covenant to pay Rent is independent of
every other covenant in this Lease.
(b) Payment of Tenant's Pro Rata Share of Operating Expenses and Property
---------------------------------------------------------------------
Taxes.
------
(i) Generally. Commencing as of the Rent Commencement Date,
---------
Tenant shall pay as Additional Rent, Tenant's Pro Rata Share of
the total amount of Operating Expenses (defined below) and
Property Taxes (defined below) for each calendar year thereafter
during the Term. Landlord shall provide Tenant with a good faith
estimate of the total amount of Operating Expenses and Property
Taxes for each calendar year during the Term. On or before the
first day of each month, Tenant shall pay to Landlord a monthly
installment equal to one-twelfth of Tenant's Pro Rata Share of
Landlord's estimate of the total amount of Operating Expenses
and Property Taxes. If Landlord determines that its estimate was
incorrect, Landlord may provide Tenant with a revised estimate.
After its receipt of the revised estimate, Tenant's monthly
payments shall be based upon the revised estimate. If Landlord
does not provide Tenant with an estimate of the total amount of
Operating Expenses and Property Taxes by January 1 of a calendar
year, Tenant shall continue to pay monthly installments based on
the previous year's estimate until Landlord provides Tenant with
the new estimate. Upon delivery of the new estimate, an
adjustment shall be made for any month for which Tenant paid
monthly installments based on the previous year's estimate.
Tenant shall pay Landlord the amount of any underpayment within
thirty (30) days after receipt of the new estimate. Any
overpayment shall be refunded to Tenant within thirty (30) days
or credited against the next due future installment(s) of
Additional Rent.
(ii) Reconciliation Statement. As soon as is reasonably practical
------------------------
following the end of each calendar year, Landlord shall furnish
Tenant with a statement ("Reconciliation Statement") of the
actual amount of Operating Expenses and Property Taxes for the
prior calendar year and Tenant's Pro Rata Share of same. If the
amount of Operating Expenses and Property Taxes actually paid by
Tenant for the prior calendar year is more than the actual
amount of Operating Expenses and Property Taxes for the prior
calendar year, Landlord shall apply any overpayment by Tenant
against Additional Rent due or refund such amount within thirty
(30) days after the Reconciliation Statement is provided to
Tenant, provided if the Term expires before the determination of
the overpayment, Landlord shall refund any overpayment to Tenant
after first deducting the amount of Rent due. If the amount of
Operating Expenses and Property Taxes paid by Tenant for the
prior calendar year is less than the actual amount of Operating
Expenses and Property Taxes for such prior year, Tenant shall
pay Landlord, within thirty (30) days after its receipt of the
Reconciliation Statement of Operating Expenses and Property
Taxes, any underpayment for the prior calendar year. The
obligations of Tenant under this Section 4(b) shall survive the
expiration or sooner termination of the Term.
(iii) Audit.
-----
(A) Provided that Tenant is not in default under this Lease, as
of the date of Tenant's exercise of its audit rights,
within thirty (30) days after receipt of a Reconciliation
Statement ("Audit Period"), Tenant shall be entitled, upon
at least ten (10) days prior written notice to Landlord and
during normal business hours at Landlord's office, or such
other place as
<PAGE>
Landlord shall designate, to cause a certified public
accountant ("CPA") to copy (at Tenant's expense), inspect,
examine and audit those books and records of Landlord
relating to the determination of Operating Expenses and
Property Taxes for the calendar year for which such
statement was prepared. The initial inspection of
Landlord's records may be conducted by a current employee
of Tenant, a recognized regional or national accounting
firm (but not a tenant of the Property) or such other
person designated by Tenant and reasonably acceptable to
Landlord. In connection therewith, Tenant acknowledges that
it shall be reasonable for Landlord to object to the
proposed use by Tenant of any persons engaged in the
business of auditing Landlord's books and records on a
contingent fee basis.
(B) If, after inspection and examination of such books and
records during the Audit Period, Tenant disputes the amount
of Operating Expenses or Property Taxes charged by
Landlord, Tenant shall have ten (10) days following the
date of completion of Tenant's audit ("Request Period") to
request an independent audit of such books and records,
such request to be made by written notice to Landlord
("Audit Request"), which notice shall specify with
particularity all disputed items and shall contain a true,
correct and complete copy of any report or summary prepared
by Tenant's initial auditor. The independent audit of the
books and records shall be conducted by a CPA acceptable to
both Landlord and Tenant. If, within ten (10) days after
Landlord's receipt of Tenant's notice requesting an audit,
Landlord and Tenant are unable to agree on the CPA to
conduct such audit, then Landlord shall designate a
nationally recognized accounting firm (other than
Landlord's then current accounting firm) to conduct such
audit. The audit shall be limited to the determination of
the proper amount of Operating Expenses and Property Taxes
payable by Tenant specified by Tenant as disputed items in
Tenant's Audit Request.
(C) If the audit discloses that the amount of such disputed
Operating Expenses and/or Property Taxes billed to Tenant
was incorrect, the appropriate party shall, within thirty
(30) days following the date of such determination, pay to
the other party the deficiency or overpayment, as
applicable. All costs and expenses of any audit shall be
paid by Tenant unless the audit shows that Landlord
overstated Operating Expenses and Property Taxes for the
subject calendar year by more than five percent (5%), in
which case Landlord shall pay all costs and expenses of the
audit.
(D) Tenant shall keep any information gained from any such
audit (including Tenant's initial review of Landlord's
books and records) confidential and shall not disclose, or
allow the disclosure of, any such information to any other
party except where Tenant is legally required to do so (or
in the case of litigation or where such disclosure occurs
as part of litigation between Landlord and Tenant), and
shall indemnify, defend, protect and hold Landlord harmless
from and against any and all loss, cost, damage or
liability incurred by Landlord arising out of Tenant's (or
Tenant's accountants', consultants' or employees') failure
to maintain such confidentiality.
(E) The exercise by Tenant of any audit rights hereunder shall
not relieve Tenant of its obligation to pay, prior to the
request for an inspection and examination of Landlord's
books and records or any audit, all sums due hereunder,
including, without limitation, any disputed Operating
Expenses and/or Property Taxes. If Tenant does not elect to
exercise its rights to audit during the Audit Period, or
does not elect to cause an independent audit of the books
and records during the Request Period, then Landlord's
Reconciliation Statement shall conclusively be deemed to be
correct, and Tenant shall be bound by Landlord's
determination.
(c) Operating Expenses Defined. "Operating Expenses" means all costs and
--------------------------
expenses incurred in each calendar year in connection with the
operation, ownership, management, maintenance and repair of the
Building and the Property, including, but not limited to:
<PAGE>
(i) Labor costs, including, wages, salaries, social security and
employment taxes, medical and other types of insurance,
uniforms, training, and retirement and pension plans.
(ii) Management fees payable either to Landlord (if Landlord manages
the Building and Property) or to a third party (such management
fees not to exceed three percent (3%) of gross Building revenue
during the initial five (5) years of the Term, and four percent
(4%) of gross Building revenue thereafter provided that the
management fee shall only increase to four percent (4%) if such
level of management fee is, at the time, customary for buildings
in the Chicago, Illinois vicinity), as well as the cost,
including rent or imputed rent of equipping and maintaining a
management office (if applicable), accounting and bookkeeping
services, legal fees not attributable to leasing or collection
activity, and other administrative costs.
(iii) The cost of services, including amounts paid to service
providers and the rental and purchase cost of parts, supplies,
tools and equipment.
(iv) Premiums and commercially reasonable deductibles (ie, customary
for Buildings in the Chicago, Illinois vicinity) paid by
Landlord for insurance, including workers compensation, fire and
extended coverage, earthquake (if the owners of similar
buildings in the Chicago, Illinois vicinity at the time
customarily carry earthquake insurance on their buildings; and
provided that Tenant's Pro Rata Share of any individual
deductible payment under such earthquake insurance shall not
exceed $10,000.00), general liability, rental loss, elevator,
boiler and other insurance customarily carried from time to time
by owners of comparable buildings.
(v) Costs of electricity and charges for water, gas, steam and sewer
and other utilities, but excluding (a) those charges for which
Landlord is reimbursed by tenants and (b) the cost of
electricity provided to any tenant who is billed directly by the
applicable utility provider for the cost of such tenant's
electricity consumption.
(vi) The amortized cost of capital improvements made to the Property
which are: (A) performed primarily to reduce operating expense
costs or otherwise improve the operating efficiency of the
Property, (B) required to comply with any Laws that are enacted,
or first interpreted to apply to the Property, after the date of
this Lease, or (C) replacements of existing capital improvements
or equipment. The cost of capital improvements, together with
interest, shall be amortized by Landlord over such reasonable
period as Landlord may determine.
(d) Exclusions to Operating Expenses. Operating Expenses do not include:
--------------------------------
(i) the cost of capital improvements (except as set forth above);
(ii) depreciation;
(iii) interest (except as provided above for the amortization of
capital improvements);
(iv) principal and interest payments of mortgage and other non-
operating debts of Landlord;
(v) the cost of repairs or other work to the extent Landlord is
reimbursed by insurance or condemnation proceeds or is
reimbursed directly by any other tenant of the Building (ie,
not as an Operating Expense);
(vi) the cost of leasing space in the Building, including attorneys'
fees incurred in the negotiation of leases and the cost of
constructing improvements for tenants, as well as brokerage
commissions;
(vii) costs incurred in connection with the sale, financing or
refinancing of the Building;
(viii) organizational expenses associated with the creation and
operation of the entity which constitutes Landlord;
<PAGE>
(ix) the cost of any services which are provided to other tenants in
the Building or the Property which are not also provided to
Tenant;
(x) executive salaries or salaries of service personnel to the
extent that such executives or service personnel perform
services other than in connection with the management,
operation, repair or maintenance of the Building or the
Property ;
(xi) any cost or expense incurred by reason of the remediation or
clean-up of any contamination of the Building or the Property
or the soils or ground water underlying the Building or the
Property by Hazardous Materials (defined in Article 32 below),
except to the extent such contamination results from Tenant's
(or Tenant's agents', contractors', invitees', or employees')
activities; and
(xii) overhead costs and profit increments paid to subsidiaries or
affiliates of Landlord for services (other than management fees
which are limited pursuant to Section 4(c)(ii) above) on or for
the Building or the Property, to the extent only that the cost
of such service materially exceeds competitive costs of such
services were not so rendered by a subsidiary or affiliate.
(e) Property Taxes Defined. "Property Taxes" shall mean: (1) all real
-----------------------
estate taxes and other assessments on the Building and/or Property,
including, but not limited to, assessments for special improvement
districts and building improvement districts, taxes and assessments
levied in substitution or supplementation in whole or in part of any
such taxes and assessments and the Property's share of any real estate
taxes and assessments under any reciprocal easement agreement, common
area agreement or similar agreement as to the Property; (2) all
personal property taxes for property that is owned by Landlord and
used in connection with the operation, maintenance and repair of the
Property; and (3) all costs and fees incurred in connection with
seeking reductions in any tax liabilities described in (1) and (2),
including, without limitation, any costs incurred by Landlord for
compliance, review and appeal of tax liabilities. Notwithstanding the
foregoing, Property Taxes shall not include any income, capital levy,
capital stock, gift, estate or inheritance tax, unless imposed as a
replacement for, or in lieu of Property Taxes.
(f) Gross Up. If the Building is not at least one hundred percent (100%)
--------
occupied or fully tax assessed during any calendar year, Operating
Expenses and Property Taxes shall be determined as if the Building had
been one hundred percent (100%) occupied and fully taxed assessed
during that calendar year. In addition, if any particular work or
service otherwise included in Operating Expenses is not furnished to a
tenant or occupant of the Building who is undertaking to perform such
work or service itself, Operating Expenses shall be deemed to be
increased by an amount equal to the additional Operating Expenses
which would have incurred if Landlord had furnished such work to such
tenant or occupant.
5. Compliance with Laws; Use.
-------------------------
(a) Generally. The Premises shall be used only for the Permitted Use and
---------
for no other use whatsoever. The Equipment Space shall be used only
for the uses described in Article 6 below. Tenant shall not use or
permit the use of the Premises or Equipment Space for any purpose
which is illegal, dangerous to persons or property or which, in
Landlord's reasonable opinion, unreasonably disturbs or interferes
with the operations of any other tenants of the Building or in any way
interferes with the operation of the Building. Any equipment to be
installed within the Building, Premises or Equipment Space by Tenant
that, in Landlord's reasonable determination, may cause unsafe (in
Landlord's reasonable determination) vibrations which may be
transmitted to the structure of the Building or unreasonable levels of
noise shall be installed and maintained by Tenant, at Tenant's sole
cost and expense, in such a manner as Landlord may determine to be
necessary in order to eliminate such vibration or noise. Tenant shall
comply with all Laws, including the Americans with Disabilities Act,
regarding the operation of Tenant's business and the use, condition,
configuration and occupancy of the Premises and Equipment Space.
Tenant shall comply with the rules and regulations of the Building
attached as Exhibit C and such other reasonable rules and regulations
adopted by Landlord from time to time promptly following notice by
Landlord of the adoption of such rules and regulations. Tenant shall
also cause its agents, contractors, subcontractors, employees,
customers, and subtenants to comply with all rules and regulations.
Notwithstanding the foregoing to the contrary, Tenant shall not be
responsible for (a) making any alterations to the Building (excluding
any Leasehold Improvements [defined in Section 8(b) below]), except to
the extent such alterations are required due to
<PAGE>
Tenant's particular use of the Premises or Equipment Space or
alterations made by or on behalf of Tenant to the Premises or
Equipment Space, or (b) any remediation of Hazardous Materials which
exist in the Premises prior to the Commencement Date.
(b) Labor Relations. Tenant shall not take any action which would violate
---------------
Landlord's labor contracts or which would cause a work stoppage,
picketing, labor disruption or dispute, or interfere with Landlord's
or any other tenant's or occupant's business or with the rights and
privileges of any person lawfully in the Building ("Labor
Disruption"). Tenant shall take the actions necessary to resolve the
Labor Disruption, and shall have pickets removed and, at the request
of Landlord, immediately terminate any work in the Premises that gave
rise to the Labor Disruption, until Landlord gives its written consent
for the work to resume. Tenant shall have no claim for damages against
Landlord or any of the Landlord Related Parties, nor shall the
Commencement Date be extended as a result of the above actions.
(c) Riser Use. Tenant, at Tenant's sole cost and expense, shall have
---------
the right in common with other tenants in the Building to install
Tenant's conduit (said conduits and the contents thereof being
referred to herein as "Cable") in the Building's horizontal and
vertical pathways, risers and ducts ("Risers") in an amount not to
exceed the following:
(i) for the purposes of installing and maintaining Tenant's fiber to
the Premises, up to eight (8) 4" conduits originating from two
diverse fiber entrances (for a total of sixteen (16) 4" conduits
to the Premises);
(ii) for the purposes of routing Tenant's Rooftop Equipment to the
Premises, up to four (4) 16" outside diameter conduits; and
(iii) for the purposes of routing Tenant's Electrical Equipment to the
Premises, a quantity reasonably required by Tenant and approved
by Landlord to accommodate the reasonable needs of such
Electrical Equipment.
All such work of installation will be carried out in compliance with Article 8;
provided that all work within the Risers shall be performed by a contractor
specified by Landlord or chosen from Landlord's list of approved contractors or
otherwise reasonably approved by Landlord; subject to the compliance of Tenant's
contractor, Carlson Associates, Inc. ("Carlson"), with the provisions of Section
5(b) above and Article 8 below, Landlord hereby approves Tenant's selection of
Carlson to perform work within the Risers pursuant to this Section 5(c).
6. Equipment Space. Tenant shall have the right to use the Equipment Space as
---------------
follows:
(a) Equipment Space Generally. Tenant, at Tenant's sole cost and
-------------------------
expense, may:
(i) utilize up to a total of [*] Rentable Square Feet on the Building
roof and Building penthouse (made up of approximately [*]
Rentable Square Feet on the Building roof and approximately [*]
Rentable Square Feet in the Building penthouse) in the areas
generally identified in Exhibit B ("Rooftop Equipment Space") to
install, maintain and operate Tenant's supplemental air
conditioning equipment and/or transmission equipment which Tenant
uses for purposes of providing telecommunication and data
services used in the operation of Tenant's internal business
activities ("Rooftop Equipment");
(ii) use:
(A) up to [*] Rentable Square Feet of space on the first floor
of the Building in the areas identified in Exhibit B for the
purpose of installing, maintaining and operating up to
twelve (12) generators; and
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
(B) an area to be located underground outside of the Building
(such location to be mutually agreed upon by Landlord and
Tenant, provided that Tenant's consent to Landlord's
proposed location will not be unreasonably withheld) to
accommodate up to a 15,000 gallon fuel storage tank (as of
the date of this Lease, Landlord is currently in the process
of procuring a variance to allow, in part, Tenant to place
underground fuel storage tanks in Landlord's desired
location outside of the Building; Landlord will use diligent
efforts to promptly procure such variance and shall keep
Tenant apprised of the anticipated schedule of such
procurement process, including any material delays or
changes. If Landlord fails to procure such variance on or
before December 31, 1999, and such failure will materially
delay the time period for Tenant to commence its business
operations in the Premises, Landlord will allow Tenant to
place such fuel storage in the lower level of the Building);
and
(iii) use reasonable quantity of space required by Tenant's equipment
("Tenant's Equipment") in the lower level of the Building
("Electrical Space") in a location to be mutually agreed upon by
Landlord and Tenant for Tenant's Electrical service as provided
for in Section 7(a)(iv).
The items in subsection (ii) (A) and (ii) (B) above shall be collectively
referred to as the "Generator". The areas utilized by the Generator are
referred to herein as "Generator Space". The Rooftop Equipment, Generator and
Electrical Equipment are collectively herein referred to as "Site Equipment".
As described in Article 1, the area of the Equipment Space shall be determined
by Landlord upon the final designation of the location of the Equipment Space,
and the area of the Equipment Space (as well as the Equipment Space Rent payable
hereunder) will be confirmed by the parties in the Commencement Letter issued by
Landlord. Tenant shall be required to install generators which are not smaller
than 1,500 KW each. Tenant shall have the right, at Tenant's expense, to
install up to two (2) 2" pipes from Tenant's fuel storage tank to each
individual generator actually installed by Tenant. Tenant shall be required to
route all electrical distribution from each generator to the Electrical Space.
Within sixty (60) days after the Commencement Date, Tenant may elect, by
irrevocable written notice to Landlord, to reduce the amount of the Equipment
Space; Tenant's notice will specify the amount and location of such reduced
Equipment Space. The area of such reduction shall be mutually agreed upon by
Landlord and Tenant and shall leave Landlord areas which, in Landlord's
reasonable opinion, may be used by Landlord or other tenants of the Building.
Additionally, at any time after the 24/th/ month following the Commencement
Date, Landlord may, by written notice to Tenant, reduce the Equipment Space by
removing therefrom any Equipment Space which Tenant has not, as of the date of
Landlord's notice, used (for example, if Tenant has as of the date of such
notice, installed ten (10) 1,500 KW generators, Landlord may reduce the
Generator Space as necessary to accommodate two generators); if Landlord so
elects to reduce the Equipment Space, the Equipment Space Rent shall be adjusted
accordingly. The exact location and configuration of Tenant's Site Equipment is
subject to Landlord's approval, in accordance with Article 8, and the Site
Equipment shall be installed in locations which, in Landlord's reasonable
opinion, may be used by Landlord or other tenants if Landlord elected to reduce
the Equipment Space as provided for above.
(b) [INTENTIONALLY OMITTED]
(c) Equipment Space Interference. If, any electrical, electromagnetic,
----------------------------
radio frequency or other interference of equipment existing prior to
Tenant's installation shall result from the operation of any Site
Equipment located in the Equipment Space, Landlord will notify Tenant,
and if such interference is not cured within one (1) business day
following delivery of such notice, Tenant agrees that Landlord may, at
Landlord's option, shut down Tenant's equipment upon eight (8) hours
prior notice to Tenant; provided, however, if an emergency situation
exists, which Landlord reasonably determines in its sole discretion to
be attributable to Tenant's Site Equipment, Landlord shall immediately
notify Tenant verbally, who shall act immediately to remedy the
emergency situation. Should Tenant fail to so remedy said emergency
situation, Landlord may then act to shut down Tenant's equipment.
Tenant shall indemnify Landlord and hold it harmless from all
expenses, costs, damages, losses, claims or other liabilities arising
out of said shutdown. Tenant agrees to cease operations (except for
intermittent testing on a schedule approved by Landlord) until the
interference has been corrected to the satisfaction of Landlord. If
such interference has not been corrected within thirty (30) days,
Landlord may, at its option, either terminate Tenant's right to use
the Equipment Space forthwith, or require that Tenant immediately
remove the specific item of Equipment Space causing such interference.
(d) Generator Use. Tenant agrees that will only run the Generator during
-------------
emergency circumstances and during customary testing hours as
determined by Landlord in its reasonable discretion.
<PAGE>
(e) Subleasing/Use by Third Parties. Subject to Tenant's Co-location
-------------------------------
rights pursuant to Section 11(a) below, Tenant shall not be permitted
to sublicense, license or share its Equipment Space with third parties
without the prior written consent of Landlord, which consent Landlord
may withhold in its sole discretion. In addition, Tenant shall not use
the Rooftop Equipment Space to enable other providers of
Communications Services (defined below) to provide Communications
Services to any tenant, occupant or licensee of the Building or to any
tenant, occupant or licensee of any other building. Tenant may not
allow any other provider of telecommunications, video, data or related
services ("Communications Services") to locate any equipment in the
Rooftop Equipment Space for any purpose whatsoever.
7. Services.
--------
(a) Landlord's Obligation. Landlord will provide the following services:
---------------------
(i) Water to restrooms in Common Areas;
(ii) Janitorial service to the Common Areas on Business Days. Tenant
shall provide, and pay directly for, janitorial services to the
Premises pursuant to a janitorial contract with a provider
approved by Landlord (such approval not to be unreasonably
withheld);
(iii) Elevator service;
(iv) Electricity as follows: Following the Rent Commencement Date,
dedicated commercial utility power consisting of the
availability of two (2) 4,000 amp services, one out of each
utility vault in the lower level of the Building (Tenant, at
Tenant's expense, may provide for additional power). Tenant
shall be responsible for all costs and expenses required to
utilize such power including but not limited to bringing power
from service entrances, transient voltage surge suppressors,
meter cabinets and distribution to the Premises and Equipment
Space. Meter cabinets and paralleling switchgear for Tenant's
use will be placed by Tenant, at Tenant's expense, in the lower
level of the Building. Landlord's obligation to furnish
electrical and other utility services shall be subject to the
rules and regulations of the supplier of such electricity of
other utility services and the rules and regulations of any
municipal or other governmental authority regulating the
business of providing electricity and other utility services.
Notwithstanding the foregoing, and subject to the provisions of
Section 7(c)(ii) below, Landlord shall at all times be able to
shut down the utility services to the Premises or to the
Equipment Space in connection with any maintenance operation
conducted for the Building. Landlord agrees to use reasonable
efforts to cooperate with Tenant in obtaining temporary
alternative power during scheduled maintenance operations, but
shall have no obligation hereunder to provide alternative power
from emergency power sources. Prior to shutting down any
electrical power servicing Tenant's Site Equipment, Landlord
agrees to give Tenant reasonable prior written notice, except
in emergency situations.
(v) Security Service as follows: manned security 24-hours per day,
365 days per year. Landlord shall not be deemed to have
warranted the efficiency or efficacy of any security personnel,
services, procedures or equipment and Landlord shall not be
liable in any manner for the failure of such security
personnel, services, procedures or equipment to prevent or
control, or apprehend anyone suspected of personal injury,
property damage or any criminal conduct in, on or about the
Property.
(vi) Heating, ventilation and air conditioning in reasonable
quantities to Common Areas.
(vii) Upon Tenant's request, if available at Landlord's sole
discretion, hot or cold water for Tenant's heating and air-
conditioning use within the Premises.
(viii) Access. Tenant access to the Building and the Premises 24 hours
per day 365 days per year.
(ix) Fiber Optic Access. Access to the Building, to Tenant's fiber
access providers. All costs associated with such installation
shall be born by Tenant or Tenant's fiber access providers.
<PAGE>
(b) Utilities Generally. Tenant, at Tenant's sole cost, shall cause
-------------------
electricity and other utilities serving the Premises and Equipment
Space to be separately metered (where possible) and Tenant will pay
the cost of all consumption and excess utility charges in the Premises
and/or the Equipment Space directly to the utility provider. If, at
any time, it is no longer feasible for Tenant to contract directly
with the utility provider for any services, Tenant shall reimburse
Landlord, within thirty (30) days on invoice therefore, for the actual
cost of the consumption of any such service and excess utility charges
in the Premises and/or the Equipment Space, as directly billed by the
utility provider as reasonably determined by Landlord.
(c) Interruptions; Failures.
-----------------------
(i) No failure to furnish, or any stoppage of, any services herein
resulting from any cause (including, without limitation, any
interruption in electrical service or other utilities to the
Premises and/or Equipment Space) shall make Landlord liable in
any respect for damages to any person, property or business, to
be construed as an eviction of Tenant, or entitle Tenant to any
abatement of Rent or other relief from any of Tenant's
obligations under this Lease. Additionally, Tenant expressly
acknowledges that Landlord reserves the right from time to time
upon reasonable advance notice to Tenant (except in the case of
emergency) to discontinue some or all of the services provided
by Landlord hereunder if necessary in Landlord's judgment to
effect any repair or maintenance obligations. Should any
malfunction of any systems or facilities occur within the
Property or should maintenance or alterations of such systems
or facilities become necessary, Landlord shall repair the same
promptly and with reasonable diligence, and Tenant shall in no
event have any claim for rebate, abatement of Rent, or damages
because of any malfunctions in or any interruptions of any
service to be provided however, regardless of the case. Tenant
hereby waives the provisions of any applicable existing or
future law, ordinance or governmental regulation permitting the
termination of this Lease due to an interruption, failure or
inability to provide any services. Notwithstanding the
foregoing, if: (a) Landlord ceases to furnish any service to
the Premises for a period in excess of five (5) consecutive
days after Tenant notifies Landlord (and any Mortgagee,
provided Tenant has been notified of the name and address of
such Mortgagee) of such cessation; (b) such cessation arises
out of the act or omission of Landlord and does not arise as a
result of an act or omission of Tenant; (c) such cessation is
not caused by a fire or other casualty (in which case Article
16 shall control) or by Force Majeure; (d) the restoration of
such service is reasonably within the control of Landlord; and
(e) as a result of such cessation, the Premises, or a material
portion thereof, is rendered untenantable (meaning that Tenant
is unable to use the Premises in the normal course of its
business) and Tenant in fact ceases to use the Premises, or
material portion thereof, then Tenant, as its sole remedy,
shall be entitled to receive an abatement of Base Rent payable
hereunder during the period beginning on the sixth (6th)
consecutive day of such cessation and ending on the day when
the service in question has been restored. In the event the
entire Premises has not been rendered untenantable by the
cessation in service, the amount of abatement that Tenant is
entitled to receive shall be prorated based upon the percentage
of the Premises so rendered untenantable and not used by
Tenant. The requirements set forth in clauses (b) and (d)
above, as well as the requirement that the cessation not be due
to Force Majeure as set forth in clause (c) above, shall not
apply to the extent Landlord receives rental interruption
insurance proceeds.
(ii) Notwithstanding any other provisions of this Lease to the
contrary, neither Landlord nor any of Landlord's agents,
employees or contractors shall unreasonably interfere with the
Site Equipment or Leasehold Improvements. Landlord agrees that,
except in the case of emergency (in which event Landlord will
use diligent efforts to provide advance written facsimile or
telephonic notice) prior to carrying out any construction,
maintenance or repair activities which are reasonably
anticipated to affect the Premises or the Site Equipment,
Landlord shall provide reasonable written or telephonic notice
to Tenant of the intent to carry out such work. Tenant shall
have the right, at Tenant's sole cost and expense and at
Tenant's own risk, to monitor and inspect such work, provided
that such actions do not unreasonably interfere with the
performance of such work on behalf of Landlord. Landlord and
Landlord's contractors, employees and agents shall exercise due
care in carrying out any such work so as to minimize
disturbance to Tenant. If any such work performed by Landlord
materially interferes with Tenant's ability to use the Premises
or Site Equipment for a period of three (3) consecutive
Business Days, Tenant may send notice to Landlord (and to any
Mortgagee,
<PAGE>
provided Tenant has been notified of the name and address of
such Mortgagee) ("Interference Notice") specifying the nature
of the interference and the cause of such interference. If
Landlord does not commence to cure such interference within two
(2) Business Days following delivery of Tenant's Interference
Notice and use its best efforts to continue such cure, Tenant
may send a second Interference Notice to Landlord (and to any
Mortgagee, provided Tenant has been notified of the name and
address of such Mortgagee) stating that if Landlord does not
commence to cure such interference within two (2) additional
Business Days (and thereafter use its best efforts to continue
such cure), Tenant intends to use its self-help rights set
forth below. If Landlord (or Landlord's Mortgagee) fails to
commence the cure of such interference within three (3)
additional Business Days following delivery of such second
(2nd) Interference Notice, Tenant may effect the cure of such
interference, and Landlord shall reimburse Tenant for the
reasonable cost actually incurred by Tenant in performing such
work. To the fullest extent permitted under applicable law,
Tenant will indemnify, defend, protect and hold Landlord
harmless from and against any and all loss, cost, damage or
liability arising in any manner out of any damage to the
Project or to the equipment of other Building occupants or
interruption to the operation of the Project or other Building
occupants as a consequence of the performance of such work
performed by Tenant or Tenant's contractors, agents,
representatives or employees. The foregoing shall not be deemed
to prohibit Tenant from seeking injunctive relief to prevent or
remedy such interference.
8. Alterations.
-----------
(a) Initial Tenant Improvements. Prior to the Rent Commencement Date,
---------------------------
Landlord shall substantially complete the Landlord Work. Tenant, upon
the full and final execution and delivery of this Lease and all
prepaid Rent and the Security Deposit required hereunder, shall have
the right to perform initial alterations and improvements in the
Premises and the Equipment Space, as well as the installation of Site
Equipment and the installation of Cable in the Risers (the "Initial
Tenant Improvements").
(b) Notice and Plans Regarding Subsequent Alterations. Tenant shall not
-------------------------------------------------
make alterations, additions or improvements in the Premises, Equipment
Space or Risers following the completion of the Initial Tenant
Improvements (collectively referred to as "Alterations") (all
improvements to the Premises or Equipment Space, as well as Tenant's
Cable placed in the Risers, including without limitation, the Initial
Tenant Improvements and any Alterations, are referred to herein as
"Leasehold Improvements") without first obtaining the written consent
of Landlord in each instance, which consent shall not be unreasonably
withheld or delayed. Notwithstanding the foregoing, Landlord's consent
shall not be required for any Alteration that satisfies all of the
following criteria: 1) costs less than $25,000.00; 2) is of a cosmetic
nature such as painting, wallpapering, hanging pictures and installing
carpeting; and 3) will not affect the systems or structure of the
Building and does not require work to be performed inside the walls or
above the ceiling of the Premises; provided that even if consent is
not required, Tenant shall still comply with all the other provisions
of this Article 8 (including, without limitation, the obligation to
provide Landlord with advance notice of any such work). Landlord will
approve or disapprove any proposed Alteration within three (3) weeks
following Tenant's submission to Landlord of all information required
hereunder, together with a request for Landlord's consent.
(c) Procedures. Prior to installing any Leasehold Improvements, Tenant
----------
shall submit to Landlord for Landlord's approval, detailed plans and
specifications of the planned installation, the contractors to be
retained by Tenant to perform any Leasehold Improvements or Risers. In
no event will Landlord's approval of Tenant's plans be deemed a
representation that they comply with applicable laws, ordinances,
rules or regulations or that they will not cause interference with
other communications operations, such responsibility being solely
Tenant's. Landlord's approval of the general contractor to perform any
Leasehold Improvements shall not be unreasonably withheld, but will
not be considered to be unreasonably withheld if any such general
contractor (i) does not have trade references reasonably acceptable to
Landlord, (ii) does not maintain insurance (including, without
limitation, builder's risk insurance) as reasonably required by
Landlord, (iii) does not have the ability to be bonded for the work in
an amount of no less than one million dollars ($1,000,000.00), (iv)
does not provide current financial statements reasonably acceptable to
Landlord, (v) would violate Section 5(b) above or (vi) is not licensed
as a contractor in the State in which the Building is located. The
foregoing is not intended to be an exclusive list of the reasons why
Landlord may reasonably withhold its consent to a general contractor.
Landlord will have the right to require that Tenant procure
<PAGE>
payment and performance bonds equal to one hundred ten percent (110%)
of the contract price in each instance. Prior to starting work, Tenant
shall furnish Landlord with copies of contracts; necessary permits and
approvals; evidence of contractor's and subcontractor's insurance in
amounts reasonably required by Landlord; and any security for
performance that is reasonably required by Landlord. Tenant will be
responsible to pay for all utilities consumed during construction. No
such work will commence unless and until Tenant has given Landlord all
necessary permits and approvals and sufficient notice and opportunity
to post appropriate notices of non-responsibility. All work shall be
constructed in a good and workmanlike manner using materials of a
quality that is at least equal to the quality reasonably designated by
Landlord as the minimum standard for the Building and shall not
interfere with any work being performed by Landlord or other tenants
in the Building. Upon completion of any Leasehold Improvements, Tenant
shall furnish Landlord with: (1) general contractor and architect's
completion affidavits, (2) full and final waivers of lien (other than
the lien of any Lender (as defined in Article 12 below), (3) receipted
bills covering all labor and materials expended and used, (4) as-built
plans of the Leasehold Improvements, and (5) the certification of
Tenant and its architect that the Leasehold Improvements have been
installed in a good and workmanlike manner in accordance with the
approved plans, and in accordance with applicable laws, codes and
ordinances. Landlord may designate reasonable rules, regulations and
procedures for the performance of work in the Building and, to the
extent reasonably necessary to avoid disruption to the occupants of
the Building, shall have the right to designate the time when any such
work may be performed. Tenant shall reimburse Landlord within thirty
(30) days after receipt of an invoice for reasonable sums paid by
Landlord for third party examination of Tenant's plans for any such
work. In addition, within thirty (30) days after receipt of an invoice
from Landlord, Tenant shall pay Landlord a fee for Landlord's
oversight and coordination of any Leasehold Improvements equal to
Landlord's reasonable cost of review of plans and construction
supervision. If Landlord determines that the Building has been damaged
during installation of the Leasehold Improvements, Landlord shall
notify Tenant and Tenant immediately shall repair the damage. If
Tenant fails to immediately repair the damage, Tenant shall pay to
Landlord upon demand the cost, as reasonably determined by Landlord,
of repairing any damage to the Building caused by such installation.
9. Maintenance.
-----------
(a) Tenant's Maintenance and Repair Obligations. Tenant, at Tenant's own
-------------------------------------------
expense, will keep the interior of the Premises, including but not
limited to all Tenant's Property, and any Equipment Space and Site
Equipment, including, without limitation, including all light
fixtures, all mechanical, electrical and plumbing facilities and
equipment, lamps, fans and any exhaust, fire suppression or air
conditioning equipment and systems, electrical motors and all other
appliances and equipment of every kind and nature located in the
Premises and/or Equipment Space in good order, repair and condition at
all times during the Term. In addition, Tenant, at Tenant's sole cost
and expense subject to the prior approval of Landlord, and within any
reasonable period of time specified by Landlord, will promptly and
adequately repair all damage to the Premises and/or Equipment Space
and replace or repair all damaged or broken fixtures and
appurtenances; provided however, that, at Landlord's option, if Tenant
fails to make such repairs within a reasonable time after written
request by Landlord, Landlord may, but need not, make such repairs and
replacements, and Tenant shall pay Landlord the cost thereof upon
being billed for same. Tenant shall also be responsible for all pest
control within the Premises and for all trash removal for the
Premises.
(b) Landlord's Maintenance Obligations. Landlord shall keep in good order
-----------------------------------
repair and condition (i) the Common Areas, (ii) the foundation and
subflooring of the Building and the structural condition of the roof,
and the exterior walls of the Building (but excluding the interior
surfaces of exterior walls and the interior and exterior of all
windows, doors, ceiling and plateglass, which shall be maintained and
repaired by Tenant), and (iii) the Building's elevators.
10. Entry by Landlord Landlord, its agents, contractors and representatives may
-----------------
enter the Premises to inspect or show the Premises (during the final nine
(9) months of the Term), make repairs, alterations or additions to the
Premises, and to conduct or facilitate repairs, alterations or additions to
any portion of the Building, including other tenants' premises. Except in
emergencies, Landlord shall provide Tenant with reasonable prior notice of
entry into the Premises, which may be given orally, will use reasonable
efforts to schedule any such entry so as to cooperate with Tenant's
schedule, and will allow Tenant to accompany Landlord during any such
entry. Entry by Landlord shall not constitute constructive eviction or
entitle Tenant to an abatement or reduction of Rent.
<PAGE>
11. Assignment and Subletting.
-------------------------
(a) Generally. Except in connection with a Permitted Transfer (defined
---------
below), Tenant shall not assign, sublease, transfer or encumber any
interest in this Lease or allow any third party to use any portion of
the Premises (collectively or individually, a "Transfer") without the
prior written consent of Landlord, which consent shall not be
unreasonably withheld if Landlord does not elect to exercise its
termination rights below. It is agreed that Landlord's consent shall
not be considered unreasonably withheld if: (1) the proposed use is
not the Permitted Use; (2) the proposed transferee's financial
condition does not meet the criteria Landlord uses to select Building
tenants having similar leasehold obligations; (3) the proposed
transferee's business is not suitable for the Building considering the
business of the other tenants, or would result in a violation of
another tenant's rights; (4) the proposed transferee is a governmental
agency or a present or prospective occupant of the Building; (5)
Tenant is in default after the expiration of the notice and cure
periods in this Lease; or (6) any portion of the Building or Premises
would likely become subject to additional or different Laws as a
consequence of the proposed Transfer. Notwithstanding the foregoing,
Landlord will not withhold its consent solely because the proposed
subtenant or assignee is a present or prospective occupant of the
Building if (i) Landlord does not have space available for lease in
the Building that is sufficient to meet the space requirements of the
proposed subtenant or assignee, as reasonably determined by Landlord
or if (ii) the assignee or subtenant is a prospective occupant of the
Building who proposes to occupy less than [*] rentable square feet of
space. Notwithstanding the foregoing, so-called "co-location" (ie, the
leasing or licensing of a portion of the Premises or on an equipment,
equipment rack or services basis to third parties (as used herein,
"Co-location")) will not be considered a Transfer hereunder; provided,
that in the event greater than fifty percent (50%) of the Premises is
used for Co-location for a single third party (or for third parties
who are affiliated with each other and thus are, in effect, a single
third party, as reasonably determined by Landlord), then it will be
considered a Transfer and subject to the provisions of this Article.
Tenant shall not be entitled to receive monetary damages based upon a
claim that Landlord unreasonably withheld its consent to a proposed
Transfer and Tenant's sole remedy shall be an action to enforce any
such provision through specific performance or declaratory judgment.
Any attempted Transfer in violation of this Article shall, at
Landlord's option, be void. Consent by Landlord to one or more
Transfer(s) shall not operate as a waiver of Landlord's rights to
approve any subsequent Transfers. In no event shall any Transfer or
Permitted Transfer release or relieve Tenant from any obligation under
this Lease.
(b) Request; Landlord's Options. As part of its request for Landlord's
consent to a Transfer, Tenant shall provide Landlord with financial
statements (audited if available) for the proposed transferee, a
complete copy of the proposed assignment, sublease and other
contractual documents and such other information as Landlord may
reasonably request. Landlord shall, by written notice to Tenant within
twenty (20) days of its receipt of the required information and
documentation, either: (1) consent to the Transfer by the execution of
a consent agreement in a form reasonably designated by Landlord or
reasonably refuse to consent to the Transfer in writing; or (2) if the
proposed Transfer is an assignment of Tenant's interest in this Lease
(other than a Permitted Transfer) or is a sublease (other than a
Permitted Transfer) for a term (including any option or renewal terms
or any subsequently negotiated option or renewal terms) in excess of
five (5) years or which runs through substantially the remainder of
the Term, exercise the right to terminate this Lease with respect to
the portion of the Premises that Tenant is proposing to assign or
sublet, together with a pro rata share of the Equipment Space. Any
such termination described in clause (2) above, shall be effective on
the proposed effective date of the Transfer for which Tenant requested
consent. Tenant shall pay to Landlord, Landlord's actual costs
(including reasonable attorney's fees) incurred in Landlord's review
of any Permitted Transfer (defined below) or requested Transfer.
Notwithstanding the foregoing, if Landlord would be entitled, pursuant
to clause (2) above to terminate this Lease with respect to all or any
portion of the Premises (and the applicable pro rata share of the
Equipment Space), Tenant, prior to entering into such a Transfer,
shall have the right to advise Landlord (the "Prior Notice") of its
intention to enter into such Transfer. Such Prior Notice shall
describe the space Tenant intends to sublet or assign and the
effective date thereof. Landlord, within twenty (20) days after
receipt of the Prior Notice, shall have the right to terminate this
Lease with respect to the space that Tenant intends to sublet or
assign (inclusive of a pro rata share of the Equipment Space) as of
the effective date set forth in the Prior Notice. If Landlord fails to
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
exercise its right to terminate within twenty (20) days after the
Prior Notice, for the next six (6) months thereafter Landlord may not
elect to terminate in connection with a proposed subletting or
assignment of the space described in the Prior Notice.
(c) Excess Consideration. Tenant shall pay Landlord fifty percent (50%) of
--------------------
all rent and other consideration which Tenant receives as a result of
a Transfer that is in excess of the Rent payable to Landlord for the
portion of the Premises and Term covered by the Transfer, following
the recovery by Tenant of Tenant's reasonable costs of the following
costs incurred by Tenant in connection with the Transfer:
(i) commercially reasonable brokerage commissions;
(ii) reasonable attorneys' fees; and
(iii) tenant improvement costs incurred by Tenant in constructing
space to be occupied by the assignee or subtenant, as opposed to
improvements to be constructed in space in which Tenant shall
retain occupancy.
Tenant shall pay Landlord for Landlord's share of any excess within
thirty (30) days after Tenant's receipt of such excess consideration.
If Tenant is in Monetary Default (defined below), Landlord may require
that all sublease payments be made directly to Landlord, in which case
Tenant shall receive a credit against Rent in the amount of any
payments received (less Landlord's share of any excess).
(d) Transfer of Shares/Rights; Permitted Transfers. Except as provided
----------------------------------------------
below with respect to a Permitted Transfer, if Tenant is a
corporation, limited liability company, partnership, or similar
entity, and if the ownership of a majority of the voting shares/rights
of Tenant at any time changes for any reason (including but not
limited to a merger, consolidation or reorganization), such change of
ownership or control, shall constitute a Transfer. The foregoing shall
not apply so long as Tenant is an entity whose outstanding stock is
listed on a recognized security exchange, or if at least eighty
percent (80%) of its voting stock is owned by another entity, the
voting stock of which is so listed. Notwithstanding the foregoing to
the contrary, Tenant may assign its entire interest under this Lease
or sublet the Premises to a wholly owned corporation, partnership or
other legal entity or affiliate, subsidiary or parent of Tenant or to
any successor to Tenant by purchase, merger, consolidation or
reorganization (hereinafter, collectively, referred to as "Permitted
Transfer") without the consent of Landlord, provided: (i) Tenant is
not in default under this Lease; (ii) if such proposed transferee is a
successor to Tenant by purchase, merger, consolidation or
reorganization, (A) if Tenant does not survive such transaction as an
ongoing enterprise, the continuing or surviving entity shall own all
or substantially all of the assets of Tenant and shall have a net
worth which is at least equal to the greater of Tenant's net worth at
the date of this Lease or Tenant's net worth at the date of the
Transfer; and (B) if Tenant survives such transaction as an ongoing
enterprise, the continuing or surviving entity shall own all or
substantially all of the assets of Tenant at the Premises and the
surviving Tenant and the assignee or sublessee, in the aggregate,
shall have a net worth which is at least equal to the greater of
Tenant's net worth at the date of this Lease or Tenant's net worth at
the date of the Transfer; (iii) such proposed transferee operates the
business in the Premises for the Permitted Use and no other purpose;
and (iv) in no event shall any Permitted Transfer release or relieve
Tenant from any of its obligations under this Lease. Tenant shall give
Landlord written notice at least ten (10) days prior to the effective
date of such Permitted Transfer. As used herein: (a) "parent" shall
mean a company which owns a majority of Tenant's voting equity; (b)
"subsidiary" shall mean an entity wholly owned by Tenant or at least
fifty-one percent (51%) of whose voting equity is owned by Tenant; and
(c) "affiliate" shall mean an entity controlled, controlling or under
common control with Tenant. Notwithstanding the foregoing, sale of a
controlling interest in shares of equity of any affiliate or
subsidiary to which this Lease has been assigned or transferred other
than to another parent, subsidiary or affiliate of the original Tenant
named hereunder shall be deemed to be an assignment requiring the
consent of Landlord hereunder. Additionally, no public offering of
Tenant's stock or private placement of Tenant's stock shall be
considered a Transfer or included when aggregating a transfer of
voting shares or rights under this Section.
<PAGE>
12. Liens.
-----
(a) Generally. Tenant shall not permit mechanic's or other liens to be
---------
placed upon the Property, Premises or Tenant's leasehold interest in
connection with any work or service done or purportedly done by or for
benefit of Tenant. If a lien is so placed, Tenant shall, within ten
(10) days of notice from Landlord of the filing of the lien, fully
discharge the lien by settling the claim which resulted in the lien or
by bonding or insuring over the lien in the manner prescribed by the
applicable lien Law. If Tenant fails to discharge the lien, then, in
addition to any other right or remedy of Landlord, Landlord may bond
or insure over the lien or otherwise discharge the lien. Tenant shall
reimburse Landlord for any amount paid by Landlord to bond or insure
over the lien or discharge the lien, including, without limitation,
reasonable attorneys' fees within thirty (30) days after receipt of an
invoice from Landlord.
(b) Subordination. Notwithstanding the provisions of Section 12(a) above,
-------------
provided Tenant is not in default hereunder, Landlord agrees to
subordinate any statutory or other lien for Rent to Tenant's lenders
("Lender"), if any, requiring a priority position under the following
circumstances:
(i) Lender is financing Tenant's purchase of the trade fixtures,
equipment or inventory in which Landlord is subordinating its
lien rights (the "Equipment");
(ii) Tenant shall furnish Landlord, for Landlord's prior written
consent and approval, with a complete schedule of the Equipment
financed pursuant to the terms hereof and a copy of any UCC-1 or
other financing statement which Lender and Tenant intend to file
with respect to such Equipment, which shall be updated, subject
to Landlord's prior written approval, in the event of any
changes;
(iii) Tenant shall be prohibited from financing any non-moveable
fixture or permanent improvement to the leasehold or Building
(provided that Landlord acknowledges that Tenant intends to
include, as part of the Equipment to be financed, some or all of
the following: supplemental HVAC units, generators, chillers,
cages and racks);
(iv) Tenant shall cause any and all Lenders to give Landlord notice
of any public or private sale by such Lender of Tenant's
Equipment;
(v) no public or private sale by any Lender shall be held on the
Premises or Property; and
(vi) Lender can enter the Premises or Property for purpose of removal
of the Equipment only if:
(A) permitted by the agreement between Lender and Tenant; and
(B) Lender agrees to restore or repair all damage to the
Premises, Equipment Space and Property caused by such
removal; and
(C) Lender gives Landlord notice in the event that any of
Tenant's moveable trade fixtures or Equipment are removed
from the Premises, Equipment Space and Property; and
(D) Lender indemnifies Landlord for any claim, liability or
expense (including reasonable attorney's fees) arising out
of or in connection with Lender's removal of the Equipment
and Lender's entry and activities upon the Premises,
Equipment Space and Property.
(vii) Landlord's subordination shall not be effective unless and until
a separate agreement is entered into between Lender and Landlord
respecting the foregoing items; Landlord agrees to enter into an
agreement in the form of Exhibit G attached hereto.
---------
13. Indemnity and Waiver of Claims.
------------------------------
(a) Tenant's Indemnity. Except to the extent caused by the negligence or
------------------
willful misconduct of Landlord or any Landlord Related Parties
(defined below), Tenant shall indemnify, defend and hold Landlord, its
trustees,
<PAGE>
members, principals, beneficiaries, partners, officers, directors,
employees, Mortgagee(s) (defined in Article 26) and agents ("Landlord
Related Parties") harmless against and from all liabilities,
obligations, damages, penalties, claims, actions, costs, charges and
expenses, including, without limitation, reasonable attorneys' fees
and other professional fees, which may be imposed upon, incurred by or
asserted against Landlord or any of the Landlord Related Parties and
arising out of or in connection with any damage or injury occurring in
the Premises, Equipment Space, or Risers (provided such damage or
injury to Risers is the result of any act or omission of Tenant or
Tenant Related Parties) or any acts or omissions (including violations
of Law) of Tenant, its trustees, members, principals, beneficiaries,
partners, officers, directors, employees and agents ("Tenant Related
Parties") or any of Tenant's transferees, contractors or licensees.
(b) Exculpation. Landlord and the Landlord Related Parties shall not be
-----------
liable for, and Tenant waives, all claims for loss or damage to
Tenant's business or loss, theft or damage to Leasehold Improvements
or Tenant's Property or the property of any person claiming by,
through or under Tenant resulting from: (1) wind or weather; (2) the
failure of any sprinkler, heating or air-conditioning equipment, any
electric wiring or any gas, water or steam pipes; (3) the backing up
of any sewer pipe or downspout; (4) the bursting, leaking or running
of any tank, water closet, drain or other pipe; (5) water, snow or ice
upon or coming through the roof, skylight, stairs, doorways, windows,
walks or any other place upon or near the Building; (6) any act or
omission of any party other than Landlord or Landlord Related Parties;
and (7) any causes not reasonably within the control of Landlord.
Tenant shall insure itself against such losses under Article 14 below.
14. Insurance. Tenant shall carry and maintain the following insurance
---------
("Tenant's Insurance"), at its sole cost and expense: (1) Commercial
General Liability Insurance applicable to the Premises, the Equipment
Space, the portion of any Risers containing Tenant's Cable and their
respective appurtenances providing, on an occurrence basis, a minimum
combined single limit of $5,000,000.00; (2) All Risk Property Insurance,
including flood, written at replacement cost value and with a replacement
cost endorsement covering all of Tenant's trade fixtures, equipment,
furniture and other personal property within or serving the Premises, any
Leasehold Improvements, and Site Equipment as well as all Cable ("Tenant's
Property"); (3) Workers' Compensation Insurance as required by the state in
which the Premises is located and in amounts as may be required by
applicable statute; and (4) Employers Liability Coverage of at least
$1,000,000.00 per occurrence; and (5) such other amounts, types or levels
of insurance as Landlord may reasonable prescribe, including, without
limitation, increases in the levels of coverage described above. Any
company writing any of Tenant's Insurance shall have an A.M. Best rating of
not less than A-VIII. All Commercial General Liability Insurance policies
shall name Tenant as a named insured and Landlord (or any successor), any
property manager retained by Landlord to manage the Building, and their
respective members, principals, beneficiaries, partners, officers,
directors, employees, and agents, and other designees of Landlord as the
interest of such designees shall appear, as additional insureds. All
policies of Tenant's Insurance shall contain endorsements that the
insurer(s) shall give Landlord and its designees at least thirty (30) days'
advance written notice of any change, cancellation, termination or lapse of
insurance. Tenant shall provide Landlord with a certificate of insurance
evidencing Tenant's Insurance prior to the earlier to occur of the
Commencement Date or the date Tenant is provided with possession of the
Premises for any reason, and upon renewals at least fifteen (15) days prior
to the expiration of the insurance coverage. So long as the same is
available at commercially reasonable rates, Landlord shall maintain so
called All Risk property insurance on the Building at replacement cost
value, as reasonably estimated by Landlord, as well as commercially
reasonable levels of liability insurance coverage. Except as specifically
provided to the contrary, the limits of either party's insurance shall not
limit such party's liability under this Lease.
15. Subrogation. Notwithstanding anything in this Lease to the contrary,
-----------
Landlord and Tenant shall cause their respective insurance carriers to
waive any and all rights of recovery, claim, action or causes of action
against the other and their respective trustees, principals, beneficiaries,
partners, officers, directors, agents, and employees, for any loss or
damage that may occur to Landlord or Tenant or any party claiming by,
through or under Landlord or Tenant, as the case may be, with respect to
Tenant's Property, the Building, the Premises and the Equipment Space, any
additions or improvements to the foregoing, or any contents thereof,
including all rights of recovery, claims, actions or causes of action
arising out of the negligence of Landlord or any Landlord Related Parties
or the negligence of Tenant or any Tenant Related Parties, which loss or
damage is (or would have been, had the insurance required by this Lease
been carried) covered by insurance.
16. Casualty Damage.
---------------
<PAGE>
(a) Landlord's Options. If all or any part of the Premises is damaged by
------------------
fire or other casualty, Tenant shall immediately notify Landlord in
writing. During any period of time that all or a material portion of
the Premises is rendered untenantable as a result of a fire or other
casualty, the Rent shall abate for the portion of the Premises that is
untenantable and not used by Tenant. Landlord shall have the right to
terminate this Lease if: (1) the Building shall be damaged so that, in
Landlord's reasonable judgment, substantial alteration (ie, work which
will take in excess of one hundred eighty (180) days) or
reconstruction of the Building shall be required (whether or not the
Premises has been damaged); (2) Landlord is not permitted by Law to
rebuild the Building in substantially the same form as existed before
the fire or casualty; (3) the Premises have been materially damaged
and there is less than one (1) year of the Term remaining on the date
of the casualty; or (4) a material uninsured loss to the Building
occurs (provided that Landlord has complied with Article 14 above
regarding insurance to be maintained by Landlord). Landlord may
exercise its right to terminate this Lease by notifying Tenant in
writing within one hundred twenty (120) days after the date of the
casualty. If Landlord does not terminate this Lease, Landlord shall
commence and proceed with reasonable diligence to repair and restore
the Building (excluding any Tenant's Property, which Tenant shall
repair). In no event shall Landlord be required to spend more than the
insurance proceeds received by Landlord. Landlord shall not be liable
for any loss or damage to Tenant's Property or to the business of
Tenant resulting in any way from the fire or other casualty or from
the repair and restoration of the damage. Landlord and Tenant hereby
waive the provisions of any Law relating to the matters addressed in
this Article, and agree that their respective rights for damage to or
destruction of the Premises shall be those specifically provided in
this Lease.
(b) Tenant's Option. If all or any portion of the Premises shall be made
---------------
untenantable by fire or other casualty, Landlord shall, with
reasonable promptness, cause an architect or general contractor
selected by Landlord to provide Landlord and Tenant with a written
estimate of the amount of time required to substantially complete the
repair and restoration of the Premises and make the Premises
tenantable again, using standard working methods ("Completion
Estimate"). If the Completion Estimate indicates that the Premises
cannot be made tenantable within two hundred ten (210) days from the
date the repair and restoration is started, then regardless of
anything in Section 16(a) above to the contrary, either party shall
have the right to terminate this Lease by giving written notice to the
other of such election within ten (10) days after receipt of the
Completion Estimate. Tenant, however, shall not have the right to
terminate this Lease if the fire or casualty was caused by the
negligence or intentional misconduct of Tenant, any Tenant Related
Parties or any of Tenant's transferees, contractors or licensees.
17. Condemnation. Either party may terminate this Lease if the whole or any
------------
material part of the Premises shall be taken or condemned for any public or
quasi-public use under Law, by eminent domain or private purchase in lieu
thereof (a "Taking"). Landlord shall also have the right to terminate this
Lease if there is a Taking of any portion of the Building or Property which
would leave the remainder of the Building unsuitable for use in a manner
comparable to the Building's use prior to the Taking. In order to exercise
its right to terminate the Lease, Landlord or Tenant, as the case may be,
must provide written notice of termination to the other within forty-five
(45) days after the terminating party first receives notice of the Taking.
Any such termination shall be effective as of the date the physical taking
of the Premises or the portion of the Building or Property occurs. If this
Lease is not terminated, the Rentable Square Footage of the Building, the
Rentable Square Footage of the Premises and Tenant's Pro Rata Share shall,
if applicable, be appropriately adjusted. In addition, Rent for any portion
of the Premises taken or condemned shall be abated during the unexpired
Term of this Lease effective when the physical taking of the portion of the
Premises occurs. All compensation awarded for a Taking, or sale proceeds,
shall be the property of Landlord, any right to receive compensation or
proceeds being expressly waived by Tenant. However, Tenant may file a
separate claim at its sole cost and expense for Tenant's Property and
Tenant's reasonable relocation expenses, provided the filing of the claim
does not diminish the award which would otherwise be receivable by
Landlord.
18. Security Deposit.
----------------
(a) Tenant's Security Deposit, which shall be delivered by Tenant to
Landlord, together with the first (1st) month's payment of Base Rent
and Equipment Space Rent concurrently with Tenant's delivery to
Landlord of this Lease as executed by Tenant, shall be held by
Landlord, without liability for interest, as security for the
performance of Tenant's obligations under this Lease. Landlord shall
not be required to keep the Security Deposit segregated from other
funds of Landlord. Tenant shall not assign or in any way encumber the
Security Deposit. Upon the occurrence of any default by Tenant (beyond
the giving of acceptable notice and
<PAGE>
the passage of applicable grace periods), Landlord shall have the
right, without prejudice to any other remedy, to use the Security
Deposit, or portions thereof, to the extent necessary to pay any
arrearages in Rent, and any other damage, injury or expense. Following
any such application of all or any portion of the Security Deposit,
Tenant shall pay to Landlord, on demand, the amount so applied in
order to restore the Security Deposit to its original amount (or if
the Security Deposit is a Letter of Credit, Tenant may either deliver
cash, a replacement Letter of Credit, or an additional Letter of
Credit). Provided Tenant is not in default hereunder, Landlord will
return any unapplied portion of the Security Deposit to Tenant within
thirty (30) days following the later to occur of (i) the expiration of
the Term, and (ii) Tenant's vacancy of the Premises and Building in
accordance with the provisions of this Lease.
(b) If the Security Deposit is in the form of a Letter of Credit , the
Letter of Credit shall
(i) be in form and substance satisfactory to Landlord;
(ii) name Landlord as its beneficiary;
(iii) be drawn on an FDIC insured financial institution satisfactory
to the Landlord;
(iv) expressly allow Landlord to draw upon it:
(A) in the event that the Tenant is in default under the Lease
by delivering to the issuer of the Letter of Credit
written notice that Landlord is entitled to draw
thereunder pursuant to the terms of this Lease; or
(B) if Tenant, within sixty (60) days prior to expiration of
the Letter of Credit then held by Landlord, fails to
provide Landlord with a replacement Letter of Credit
meeting the requirements herein;
(v) expressly state that it will be honored by the issuer without
inquiry into the accuracy of any such notice or statement made
by Landlord;
(vi) expressly permit multiple or partial draws up to the stated
amount of the Letter of Credit;
(vii) expressly provide that it is transferable to any successor of
Landlord; and
(viii) expire no earlier than sixty (60) days after the Expiration
Date (alternatively, the Letter of Credit [and any renewals or
replacements thereof] may be for a term of not less than one
(1) year; in such event Tenant agrees that it shall from time
to time, as necessary, [whether as a result of a draw on the
Letter of Credit by Landlord pursuant to the terms hereof or as
a result of the expiration of the Letter of Credit then in
effect], renew or replace the original and any subsequent
Letter of Credit so that a Letter of Credit, in the amount
required hereunder, is in effect until a date which is at least
sixty (60) days after the Expiration Date. If Tenant fails to
furnish such renewal or replacement at least thirty (30) days
prior to the stated expiration date of the Letter of Credit
then held by Landlord, Landlord may draw upon such Letter of
Credit and hold the proceeds thereof [and such proceeds need
not be segregated] as a Security Deposit pursuant to the terms
of this Article 18).
(c) Any renewal of or replacement for the original or any subsequent
Letter of Credit shall meet the requirements for the original Letter
of Credit as set forth above, except that such replacement or renewal
shall be issued by a national bank satisfactory to Landlord at the
time of the issuance thereof. Landlord agrees that in the event of any
event which would give Landlord the right to draw upon the Letter of
Credit, Landlord shall only draw down such amount as Landlord
reasonably believes to be necessary to cure or remedy any default on
the part of Tenant and to reimburse Landlord for any costs, expenses
or liability incurred in connection with such default; notwithstanding
the foregoing, if the amount of any draw upon the Letter of Credit
exceeds the amount necessary to reimburse Landlord for such costs,
expenses or liability, any excess proceeds of any draw on the Letter
of Credit shall be held by Landlord as a Security Deposit pursuant to
the provisions of this Article 18.
<PAGE>
19. Events of Default. Tenant shall be considered to be in default of this
-----------------
Lease upon the occurrence of any of the following events of default:
(a) Monetary Default. Tenant's failure to pay when due all or any portion
----------------
of the Rent ("Monetary Default"), five (5) days after written notice
to Tenant; provided, that Landlord shall be required to deliver any
such notice only twice during any twelve (12) month period, and any
subsequent failure to pay any Rent when due in any twelve (12) month
period following Landlord's delivery of written notice of Monetary
Default shall automatically be a default, without the necessity of
written notice from Landlord or a five (5) day grace period.
(b) Non-Monetary Default. Tenant's failure (other than a Monetary Default)
--------------------
to comply with any term, provision or covenant of this Lease, if the
failure is not cured within fifteen (15) days after written notice to
Tenant. However, if Tenant's failure to comply cannot reasonably be
cured within fifteen (15) days, Tenant shall be allowed additional
time (not to exceed sixty (60) days) as is reasonably necessary to
cure the failure so long as: (1) Tenant commences to cure the failure
within fifteen (15) days, and (2) Tenant diligently pursues a course
of action that will cure the failure and bring Tenant back into
compliance with the Lease. However, if Tenant's failure to comply
creates a hazardous condition, the failure must be cured immediately
upon notice to Tenant. In addition, if Landlord provides Tenant with
notice of Tenant's failure to comply with any particular term,
provision or covenant of the Lease on three (3) occasions during any
twelve (12) month period, Tenant's subsequent violation of such term,
provision or covenant shall, at Landlord's option, be an incurable
event of default by Tenant.
(c) Insolvency Matters. Tenant becomes insolvent, makes a transfer in
------------------
fraud of creditors, or files a petition in bankruptcy, or makes an
assignment for the benefit of creditors, or admits in writing its
inability to pay its debts when due.
(d) Taking of Leasehold Estate. The leasehold estate is taken by process
--------------------------
or operation of Law.
20. Remedies.
--------
(a) Generally. Upon any default, Landlord shall have the right without
---------
notice or demand (except as provided in Article 19) to pursue any of
its rights and remedies at Law or in equity, including any one or more
of the following remedies:
(i) Terminate this Lease, in which case Tenant shall immediately
surrender the Premises and Equipment Space to Landlord. If
Tenant fails to surrender the Premises and/or Equipment Space,
Landlord may, in compliance with applicable Law and without
prejudice to any other right or remedy, enter upon and take
possession of the Premises and/or Equipment Space and expel and
remove Tenant, Tenant's Property and any party occupying all or
any part of the Premises and/or Equipment Space. Tenant shall
pay Landlord on demand the amount of all past due Rent and other
losses and damages which Landlord may suffer as a result of
Tenant's default, whether by Landlord's inability to relet the
Premises and/or Equipment Space on satisfactory terms or
otherwise, including, without limitation, all Costs of Reletting
(defined below) and any deficiency that may arise from reletting
or the failure to relet the Premises and/or Equipment Space.
"Costs of Reletting" shall include all costs and expenses
incurred by Landlord in reletting or attempting to relet the
Premises and/or Equipment Space, including, without limitation,
reasonable legal fees, brokerage commissions, the cost of
alterations and the value of other concessions or allowances
granted to a new tenant.
(ii) Terminate Tenant's right to possession of the Premises and/or
Equipment Space and, in compliance with applicable Law, expel
and remove Tenant, Tenant's Property and any parties occupying
all or any part of the Premises and/or Equipment Space. Landlord
may (but shall not be obligated to) relet all or any part of the
Premises and/or Equipment Space, without notice to Tenant, for a
term that may be greater or less than the balance of the Term
and on such conditions (which may include concessions, free rent
and alterations of the Premises and/or Equipment Space) and for
such uses as Landlord in its absolute discretion shall
determine. Landlord may collect and receive all rents and other
income from the reletting. Tenant shall pay Landlord on demand
all past
<PAGE>
due Rent, all Costs of Reletting and any deficiency arising from
the reletting or failure to relet the Premises and/or Equipment
Space. Landlord shall not be responsible or liable for the
failure to relet all or any part of the Premises and/or
Equipment Space or for the failure to collect any Rent. The re-
entry or taking of possession of the Premises and/or Equipment
Space shall not be construed as an election by Landlord to
terminate this Lease unless a written notice of termination is
given to Tenant.
(iii) In lieu of calculating damages under Sections 20(a)(i) or
20(a)(ii) above, Landlord may elect to receive as damages the
sum of (a) all Rent accrued through the date of termination of
this Lease or Tenant's right to possession, and (b) an amount
equal to the total Rent that Tenant would have been required to
pay for the remainder of the Term discounted to present value at
the Prime Rate (defined in Section 20(b) below) then in effect,
minus the then present fair rental value of the Premises for the
remainder of the Term, similarly discounted, after deducting all
anticipated Costs of Reletting.
(b) Remedies; Cumulative Interest. Unless expressly provided in this
-----------------------------
Lease, the repossession or re-entering of all or any part of the
Premises and/or Equipment Space shall not relieve Tenant of its
liabilities and obligations under the Lease. No right or remedy of
Landlord shall be exclusive of any other right or remedy. Each right
and remedy shall be cumulative and in addition to any other right and
remedy now or subsequently available to Landlord at Law or in equity.
If Landlord declares Tenant to be in default, Landlord shall be
entitled to receive interest on any unpaid item of Rent at an annual
rate equal to the Prime Rate plus four percent (4%). For purposes
hereof, the "Prime Rate" shall be the per annum interest rate publicly
announced as its prime or base rate by a federally insured bank
selected by Landlord in the state in which the Building is located.
Forbearance by Landlord to enforce one or more remedies shall not
constitute a waiver of any default.
(c) Mitigation. Landlord agrees to use reasonable efforts to mitigate
----------
damages, provided that such reasonable efforts shall not require
Landlord to relet the Premises or Equipment Space in preference to any
other space in the Building or to relet the Premises or Equipment
Space to any party that Landlord could reasonably reject as a
transferee pursuant to Article 11 hereof.
21. Limitation of Liability; Landlord's Transfer. Notwithstanding anything to
--------------------------------------------
the contrary contained in this Lease, the liability of Landlord (and of any
successor Landlord) to Tenant shall be limited to the equity interest of
Landlord in the Building. Tenant shall look solely to Landlord's equity
interest in the Building for the recovery of any judgment or award against
Landlord. Neither Landlord nor any Landlord Related Party shall be
personally liable for any judgment or deficiency. Before filing suit for an
alleged default by Landlord, Tenant shall give Landlord and the
Mortgagee(s) (defined in Article 26 below) whom Tenant has been notified
hold Mortgages (defined in Article 26 below) on the Property, Building,
Premises or Equipment Space, notice and reasonable time to cure the alleged
default. Landlord shall have the right to transfer and assign all of its
rights and obligations under this Lease and in the Building and/or Property
referred to herein, and upon such transfer Landlord shall be released from
any further obligations hereunder, and Tenant agrees to look solely to the
successor in interest of Landlord for the performance of such obligations.
22. No Waiver. Either party's failure to declare a default immediately upon
---------
its occurrence, or delay in taking action for a default shall not
constitute a waiver of the default. Either party's failure to enforce its
rights for a default shall not constitute a waiver of its rights regarding
any subsequent default. Receipt by Landlord of Tenant's keys to the
Premises shall not constitute an acceptance or surrender of the Premises.
23. Quiet Enjoyment. Tenant shall, and may peacefully have, hold and enjoy the
---------------
Premises and Equipment Space, subject to the terms of this Lease, provided
Tenant pays the Rent and fully performs all of its covenants and
agreements. This covenant and all other covenants of Landlord shall be
binding upon Landlord and its successors only during its or their
respective periods of ownership of the Building, and shall not be a
personal covenant of Landlord or the Landlord Related Parties.
24. Relocation. [INTENTIONALLY OMITTED]
----------
<PAGE>
25. Holding Over. If Tenant fails to surrender the Premises and Equipment
------------
Space at the expiration or earlier termination of this Lease, occupancy of
the Premises and/or Equipment Space after the termination or expiration
shall be that of a tenancy at sufferance. Tenant's occupancy of the
Premises and/or Equipment Space during the holdover shall be subject to all
the terms and provisions of this Lease and Tenant shall pay an amount (on a
per month basis without reduction for partial months during the holdover)
equal to one hundred fifty percent (150%) of the Rent due for the period
immediately preceding the holdover. No holdover by Tenant or payment by
Tenant after the expiration or early termination of this Lease shall be
construed to extend the Term or prevent Landlord from immediate recovery of
possession of the Premises and/or Equipment Space by summary proceedings or
otherwise. In addition to the payment of the amounts provided above, Tenant
shall be liable to Landlord for all damages, including, without limitation,
consequential damages, that Landlord suffers from the holdover.
26. Subordination to Mortgages; Estoppel Certificate. Tenant accepts this
------------------------------------------------
Lease subject and subordinate to any mortgage(s), deed(s) of trust, ground
lease(s) or other lien(s) now or subsequently arising upon the Building or
the Property, and to renewals, modifications, refinancings and extensions
thereof (collectively referred to as a "Mortgage"). The party having the
benefit of a Mortgage shall be referred to as a "Mortgagee". Upon request
from a Mortgagee, Tenant shall execute a commercially reasonable
subordination agreement in favor of the Mortgagee. In lieu of having the
Mortgage be superior to this Lease, a Mortgagee shall have the right at any
time to subordinate its Mortgage to this Lease. If requested by a
successor-in-interest to all or a part of Landlord's interest in the Lease,
Tenant shall, without charge, attorn to the successor-in-interest. Landlord
and Tenant shall each, within ten (10) days after receipt of a written
request from the other, execute and deliver an estoppel certificate to
those parties as are reasonably requested by the other (including a
Mortgagee or prospective purchaser). The estoppel certificate shall include
a statement certifying that this Lease is unmodified (except as identified
in the estoppel certificate) and in full force and effect, describing the
dates to which Rent and other charges have been paid, representing that, to
such party's actual knowledge, there is no default (or stating the nature
of the alleged default) and indicating other matters with respect to the
Lease that may reasonably be requested. Tenant agrees to modify this Lease
as reasonably requested by any Mortgagee, provided such modifications do
not materially impair Tenant's rights or increase Tenant's obligations
under the Lease. Notwithstanding the foregoing, upon written request by
Tenant, Landlord will use reasonable efforts to obtain a non-disturbance,
subordination and attornment agreement from Landlord's then current-
Mortgagee on such Mortgagee's then current standard form of agreement.
"Reasonable efforts" of Landlord shall not require Landlord to incur any
cost, expense or liability to obtain such agreement, it being agreed that
Tenant shall be responsible for any fee or review costs charged by
Mortgagee. Upon request of Landlord, Tenant will execute the Mortgagee's
form of non-disturbance, subordination and attornment agreement (subject to
Tenant's approval, which will not be unreasonably withheld, conditioned or
delayed) and return the same to Landlord for execution by the Mortgagee.
Landlord's failure to obtain a non-disturbance, subordination and
attornment agreement for Tenant shall have no effect on the rights,
obligations and liabilities of Landlord and Tenant or be considered to be a
default by Landlord hereunder but in the event that Landlord fails to
procure such agreement from Landlord's Mortgagee, Tenant will not be
obligated to subordinate its interest in this Lease to the lien of the
Mortgagee in question. As of the date of this Lease, Landlord represents to
Tenant that there is no Mortgage encumbering the Building or the Property.
27. Attorneys' Fees. If either party institutes a suit against the other for
---------------
violation of or to enforce any covenant or condition of this Lease, or if
either party intervenes in any suit in which the other is a party to
enforce or protect its interest or rights, the prevailing party shall be
entitled to all of its costs and expenses, including, without limitation,
reasonable attorneys' fees.
28. Notices. If a demand, request, approval, consent or notice (collectively
-------
referred to as a "Notice") shall or may be given to either party by the
other, the Notice shall be in writing and delivered by hand or sent by
registered or certified mail with return receipt requested, or sent by
overnight or same day courier service at the party's respective Notice
Address(es) set forth in Article 1, except that if Tenant has vacated the
Premises (or if the Notice Address for Tenant is other than the Premises,
and Tenant has vacated such address) without providing Landlord a new
Notice Address, Landlord may serve Notice in any manner described in this
Article or in any other manner permitted by Law. Notice shall be deemed to
have been received or given on the earlier to occur of (i) actual delivery,
or the date on which delivery is refused, or (ii) if Tenant has vacated the
Premises or the other Notice Address of Tenant without providing a new
Notice Address, three (3) days after Notice is deposited in the U.S. mail
or with a courier service in the manner described above. Either party may,
at any time, change its Notice Address by giving the other party written
Notice of the new address in the manner described in this Article.
<PAGE>
29. Excepted Rights. This Lease does not grant any rights to light or air over
---------------
or about the Building. Except as expressly set forth in this Lease,
Landlord excepts and reserves exclusive to itself the use of: (1) roofs,
(2) telephone, electrical and janitorial closets, (3) equipment rooms, (4)
rights to the land and improvements below the floor of the Premises, (5)
the improvements and air rights above the Premises, (6) the improvements
and air rights outside the demising walls of the Premises, and (7) the
areas within the Premises used for the installation of utility lines and
other installations serving all occupants of the Building. Landlord has the
right to change the Building's name or (if required by governmental
authority) address. Landlord also has the right to make such other changes
to the Property and Building as Landlord deems appropriate (including the
right to add additional floors to the Building or to reduce the size of the
Building), provided the changes do not materially affect Tenant's ability
to use the Premises or the Equipment Space. Landlord shall also have the
right (but not the obligation) to temporarily close the Building if
Landlord reasonably determines that there is an imminent danger of
significant damage to the Building or of personal injury to Landlord's
employees or the occupants of the Building. The circumstances under which
Landlord may temporarily close the Building shall include, without
limitation, electrical interruptions, hurricanes and civil disturbances. A
closure of the Building under such circumstances shall not constitute a
constructive eviction nor entitle Tenant to an abatement or reduction of
Rent. Landlord reserves the right to temporarily reduce Tenant's allocation
of parking spaces as required during modifications to the Property.
30. Surrender of Premises. At the expiration or earlier termination of this
---------------------
Lease or Tenant's right of possession, Tenant shall remove Tenant's
Property from the Premises, Equipment Space and Risers, and quit and
surrender the Premises, Equipment Space and the Risers (using Landlord's
specified contractor to perform any such work affecting the Risers) to
Landlord, broom clean, and in good order, condition and repair and in
compliance with all applicable laws, ordinary wear and tear excepted; any
such work will be performed in accordance with Article 8 above. If Tenant
fails to so remove any of Tenant's Property prior to the termination of
this Lease or of Tenant's right to possession, Landlord, at Tenant's sole
cost and expense, shall be entitled (but not obligated) to remove and store
Tenant's Property, Tenant shall pay Landlord, upon demand, the expenses and
storage charges incurred for Tenant's Property. Landlord shall not be
responsible for the value, preservation or safekeeping of Tenant's
Property. In addition, if Tenant fails to remove Tenant's Property from the
Premises or storage, as the case may be, within thirty (30) days after
written Notice, Landlord may deem all or any part of Tenant's Property to
be abandoned, and title to Tenant's Property shall be deemed to be
immediately vested in Landlord.
31. Parking. Tenant shall be allowed in common with all other Building
-------
occupants to use the parking area associated with the Building for Tenant's
parking requirements up to fifteen (15) spaces. Tenant shall pay Landlord
as Additional Rent hereunder, the monthly parking rates as established by
Landlord. Tenant shall not exceed its allocation of parking spaces as
described herein.
32. Environmental Matters/Hazardous Materials:
-----------------------------------------
(a) Hazardous Materials Disclosure Certificate: Prior to executing this
------------------------------------------
Lease, Tenant has completed, executed and delivered to Landlord
Tenant's initial Hazardous Materials Disclosure Certificate (the
"Initial HazMat Certificate"), a copy of which is attached hereto as
Exhibit E and incorporated herein by this reference. Tenant covenants,
represents and warrants to Landlord that, to the best of Tenant's
knowledge after due inquiry, the information on the Initial HazMat
Certificate is true and correct and accurately describes the use(s) of
Hazardous Materials which will be made and/or used on the Premises or
the Equipment Space by Tenant. Commencing with the date which is one
year from the Commencement Date, and continuing every year thereafter
after Landlord's written request, Tenant will complete, execute, and
deliver to Landlord, a Hazardous Materials Disclosure Certificate (the
"HazMat Certificate") describing Tenant's present use of Hazardous
Materials on the Premises or the Equipment Space, and any other
reasonably necessary documents as requested by Landlord. The HazMat
Certificate required hereunder shall be in substantially the form as
that which is attached hereto as Exhibit E.
(b) Definition of Hazardous Materials: As used in this Lease, the term
---------------------------------
Hazardous Materials shall mean and include (i) any hazardous or toxic
wastes, materials or substances, and other pollutants or contaminants,
which are or become regulated by any Environmental Laws; (ii)
petroleum, petroleum by products, gasoline, diesel fuel, crude oil or
any fraction thereof; (iii) asbestos and asbestos containing material,
in any form, whether friable or non-friable; (iv) polychlorinated
biphenyls; (v) radioactive materials; (vi) lead and lead-containing
materials; (vii) any other material, waste or substance displaying
toxic, reactive, ignitable or corrosive characteristics, as all such
terms are used in their broadest sense, and are defined or become
<PAGE>
defined by any Environmental Law (defined below); or (h) any materials
which cause or threatens to cause a nuisance upon or waste to any
portion of the Premises, Equipment Space, the Building, the Property
or any surrounding property; or poses or threatens to pose a hazard to
the health and safety of persons on the Premises, Equipment Space,
Building, the Property or any surrounding property.
(c) Prohibition; Environmental Laws: Except for, and to the extent of, the
-------------------------------
Hazardous Materials specified in the Initial HazMat Certificate,
Tenant shall not be entitled to use nor store any Hazardous Materials
on, in, or about the Premises, Equipment Space, the Building, the
Property, or any portion of the foregoing, without, in each instance,
obtaining Landlord's prior written consent thereto. If Landlord
consents to any such usage or storage, then Tenant shall be permitted
to use and/or store only those Hazardous Materials that are necessary
for Tenant's business and to the extent disclosed in the HazMat
Certificate and as expressly approved by Landlord in writing, provided
that such usage and storage is only to the extent of the quantities of
Hazardous Materials as specified in the then applicable HazMat
Certificate as expressly approved by Landlord and provided further
that such usage and storage is in full compliance with any and all
local, state and federal environmental, health and/or safety-related
laws, statutes, orders, standards, courts' decisions, ordinances,
rules and regulations (as interpreted by judicial and administrative
decisions), decrees, directives, guidelines, permits or permit
conditions, currently existing and as amended, enacted, issued or
adopted in the future which are or become applicable to Tenant or all
or any portion of the Premises (collectively, the "Environmental
Laws"). Tenant agrees that any changes to the type and/or quantities
of Hazardous Materials specified in the most recent HazMat Certificate
may be implemented only with the prior written consent of Landlord,
which consent may be given or withheld in Landlord's reasonable
discretion. Landlord shall have the right at all times during the
Term, upon reasonable advance notice to Tenant (except in the case of
emergency) to (i) inspect the Premises and Equipment Space, (ii)
conduct tests and investigations to determine whether Tenant is in
compliance with the provisions of this Article 32, and (iii) request
lists of all Hazardous Materials used, stored or otherwise located on,
under or about the Building, Premises, Equipment Space, and the
Property. The cost of all such inspections, tests and investigations
shall be proportionately borne by Tenant commensurate with the extent
of Hazardous Materials revealed by any such inspection, test or
investigation to be present in, on or about the Premises, Equipment
Space, Building or Property arising from or related to the intentional
or negligent acts or omissions of Tenant or any of Tenant's employees,
agents, contractors or representatives and all other costs and
expenses shall be borne by parties other than Tenant. However, in the
event any such inspection, test or investigation reveals that there
are not any Hazardous Materials present in, on or about the Premises,
Building, Equipment Space or Property arising from or related to the
intentional or negligent acts or omissions of Tenant or Tenant's
employees, agents, contractors or representatives then Tenant shall
not be responsible for any of the cost of such inspections, tests and
investigations. The aforementioned rights granted herein to Landlord
and its representatives shall not create (a) a duty on Landlord's part
to inspect, test, investigate, monitor or otherwise observe the
Premises, Building, Equipment Space, Property or the activities of
Tenant and Tenant's employees, agents, contractors or representatives
or invitees with respect to Hazardous Materials, including without
limitation, Tenant's operation, use and any remediation related
thereto, or (b) liability on the part of Landlord and its
representatives for Tenant's use, storage, disposal or remediation of
Hazardous Materials, it being understood that Tenant shall be solely
responsible for all liability in connection therewith.
(d) Tenant's Environmental Obligations: Tenant shall give to Landlord
----------------------------------
immediate verbal and follow-up written Notice of any spills, releases,
discharges, disposals, emissions, migrations, removals or
transportation of Hazardous Materials on, under or about the Premises,
Equipment Space, Building or Property. Tenant, at its sole cost and
expense, covenants and warrants to promptly investigate, clean up,
remove, restore and otherwise remediate (including, without
limitation, preparation of any feasibility studies or reports and the
performance of any and all closures) any spill, release, discharge,
disposal, emission, migration or transportation of Hazardous Materials
arising from or related to the intentional or negligent acts or
omissions of Tenant or Tenant's employees, agents, contractors or
representatives such that the affected portions of the Premises,
Equipment Space, Building, Property and any adjacent property are
returned to the condition existing prior to the appearance of such
Hazardous Materials. Any such investigation, clean up, removal,
restoration and other remediation shall only be performed after Tenant
has obtained Landlord's prior written consent, which consent shall not
be unreasonably withheld so long as such actions would not potentially
have a material adverse long-term or short-term effect on any portion
of the Premises, Equipment Space, the Building, or the Property.
Notwithstanding the foregoing, Tenant shall be entitled to respond
immediately to an emergency without first obtaining Landlord's prior
written consent. Tenant, at its sole cost and
<PAGE>
expense, shall conduct and perform, or cause to be conducted and
performed, all closures as required by any Environmental Laws or any
agencies or other governmental authorities having jurisdiction
thereof. If Tenant fails to so promptly investigate, clean up, remove,
restore, provide closure or otherwise so remediate, Landlord may, but
without obligation to do so, take any and all steps necessary to
rectify the same and Tenant shall promptly reimburse Landlord, upon
demand, for all costs and expenses to Landlord of performing
investigation, clean up, removal, restoration, closure and remediation
work. All such work undertaken by Tenant, as required herein, shall be
performed in such a manner so as to enable Landlord to make full
economic use of the Premises, Equipment Space, the Building and
Property, and after the satisfactory completion of such work.
(e) Environmental Indemnity: In addition to Tenant's obligations as set
-----------------------
forth hereinabove, to the fullest extent permitted under applicable
law, Tenant agrees to, and shall, protect, indemnify, defend (with
counsel reasonably acceptable to Landlord) and hold Landlord and,
Landlord's Related Parties harmless from and against any and all
claims, judgments, damages, penalties, fines, liabilities, losses
(including, without limitation, diminution in value of any portion of
the Premises, Equipment Space, the Building, the Property, damages for
the loss of or restriction on the use of rentable or usable space, and
from any adverse impact of Landlord's marketing of any space within
the Premises, Equipment Space, Building and/or Property), suits,
administrative proceedings and costs (including, but not limited to,
attorneys' and consultant fees and court costs) arising at any time
during or after the Term of this Lease in connection with or related
to, directly or indirectly, the use, presence, transportation,
storage, disposal, migration, removal, spill, release or discharge of
Hazardous Materials on, in or about any portion of the Premises,
Equipment Space, the Building, or the Property as a result (directly
or indirectly) and to the extent of the acts or omissions of Tenant or
any of Tenant's employees, agents, invitees, contractors or
representatives. Neither the written consent of Landlord to the
presence, use or storage of Hazardous Materials in, on, under or about
any portion of the Premises, Equipment Space, the Building, and/or the
Property, nor the strict compliance by Tenant with all Environmental
Laws shall excuse Tenant and Tenant's officers and directors from its
obligations of indemnification pursuant hereto. Tenant shall not be
relieved of its indemnification obligations under the provisions of
this Section 32(e) due to Landlord's status as either an "owner" or
"operator" under any Environmental Laws.
(f) Survival: Tenant's obligations and liabilities pursuant to the
--------
provisions of this Article 32 shall survive the expiration or earlier
termination of this Lease. If it is determined by Landlord that the
condition of all or any portion of the Premises, Equipment Space, the
Building, and/or the Property is not in compliance with the provisions
of this Lease with respect to Hazardous Materials, including without
limitation all Environmental Laws at the expiration or earlier
termination of this Lease, then in Landlord's sole discretion,
Landlord may require Tenant to hold over possession of the Premises
and/or Equipment Space until Tenant can surrender the Premises and/or
Equipment Space to Landlord in the condition in which the Premises
and/or Equipment Space existed as of the Commencement Date and prior
to the appearance of such Hazardous Materials except for reasonable
wear and tear, including without limitation, the conduct or
performance of any closures as required by any Environmental Laws. For
purposes hereof, the term "reasonable wear and tear" shall not include
any deterioration in the condition or diminution of the value of any
portion of the Premises, Equipment Space, the Building, and/or the
Property in any manner whatsoever related to directly, or indirectly,
Hazardous Materials. Any such holdover by Tenant will be with
Landlord's consent, will not be terminable by Tenant in any event or
circumstance and will otherwise be subject to the provisions of this
Lease.
33. Miscellaneous.
-------------
(a) Governing Law. This Lease and the rights and obligations of the
-------------
parties shall be interpreted, construed and enforced in accordance
with the Laws of the state in which the Building is located and
Landlord and Tenant hereby irrevocably consent to the jurisdiction and
proper venue of such state. If any term or provision of this Lease
shall to any extent be invalid or unenforceable, the remainder of this
Lease shall not be affected, and each provision of this Lease shall be
valid and enforced to the fullest extent permitted by Law. The
headings and titles to the Articles and Sections of this Lease are for
convenience only and shall have no effect on the interpretation of any
part of the Lease.
<PAGE>
(b) Memorandum of Lease. Following the mutual execution and delivery of
-------------------
this Lease, Tenant, upon written request to Landlord, should have the
right to record a Memorandum of Lease reflecting Tenant's leasehold
interest as created hereby; provided, that such Memorandum is in form
and substance satisfactory to Landlord, in Landlord's reasonable
determination, and that Landlord shall have the right to require
Tenant to simultaneously deliver to Landlord a quitclaim deed of
Tenant's leasehold interest in form and substance reasonably
satisfactory to Landlord for recording by Landlord upon the expiration
or sooner termination of this Lease.
(c) Waiver of Jury Trial. Landlord and Tenant hereby waive any right to
--------------------
trial by jury in any proceeding based upon a breach of this Lease.
(d) Force Majeure. Whenever a period of time is prescribed for the taking
-------------
of an action by Landlord or Tenant, the period of time for the
performance of such action shall be extended by the number of days
that the performance is actually delayed due to fire, windstorm,
flood, explosion, collapse of structures, governmental preemption or
prescription, unavailability of utilities, strikes, acts of God,
shortages of labor or materials, war, civil disturbances and other
causes beyond the reasonable control of the performing party ("Force
Majeure"). However, events of Force Majeure shall not extend or delay
any date or period of time for the payment of Rent or other sums
payable by either party or any period of time for the written exercise
of an option or right by either party.
(e) Brokers. Tenant represents that it has dealt directly with and only
-------
with the Broker(s) described in Article 1 as a broker in connection
with this Lease. Tenant shall indemnify and hold Landlord and the
Landlord Related Parties harmless from all claims of any other brokers
claiming to have represented Tenant in connection with this Lease.
Landlord agrees to indemnify and hold Tenant and the Tenant Related
Parties harmless from all claims of any brokers claiming to have
represented Landlord in connection with this Lease.
(f) Authorizations, Etc.. Tenant covenants, warrants and represents that:
--------------------
(1) each individual executing, attesting and/or delivering this Lease
on behalf of Tenant is authorized to do so on behalf of Tenant; (2)
this Lease is binding upon Tenant; and (3) Tenant is duly organized
and legally existing in the state of its organization and is qualified
to do business in the state in which the Premises are located. If
there is more than one Tenant, or if Tenant is comprised of more than
one party or entity, the obligations imposed upon Tenant shall be
joint and several obligations of all the parties and entities.
Notices, payments and agreements given or made by, with or to any one
person or entity shall be deemed to have been given or made by, with
and to all of them.
(g) Time of Essence. Time is of the essence with respect to Tenant's
---------------
exercise of any expansion, renewal or extension rights granted to
Tenant (if any). This Lease shall create only the relationship of
landlord and tenant between the parties, and not a partnership, joint
venture or any other relationship. This Lease and the covenants and
conditions in this Lease shall inure only to the benefit of and be
binding only upon Landlord and Tenant and their permitted successors
and assigns.
(h) Survival. The expiration of the Term, whether by lapse of time or
--------
otherwise, shall not relieve either party of any obligations which
accrued prior to or which may continue to accrue after the expiration
or early termination of this Lease.
(i) No Offer. Landlord has delivered a copy of this Lease to Tenant for
--------
Tenant's review only, and the delivery of it does not constitute an
offer to Tenant or an option. This Lease shall not be effective
against any party hereto until an original copy of this Lease has been
signed and delivered by such party.
(j) Integration. All understandings and agreements previously made between
-----------
the parties are superseded by this Lease, and neither party is relying
upon any warranty, statement or representation not contained in this
Lease. This Lease may be modified only by a written agreement signed
by Landlord and Tenant.
(k) Graphics. Tenant shall have the right to (i) one listing in the
--------
Building's directory on the ground floor lobby, to be provided by
Landlord using the Building's standard lettering and (ii) one
Building-standard entry sign on or adjacent to the entrance to the
Premises, to be provided at Tenant's expense.
<PAGE>
(l) [INTENTIONALLY OMITTED]
(m) Confidentiality.
---------------
(i) Landlord shall use reasonable efforts to keep all Confidential
Information of Tenant (defined below) confidential; as used
herein "Confidential Information of Tenant" shall mean any data
or information pertaining to Tenant or Tenant's business,
regardless of medium that is provided by Tenant to Landlord,
including Tenant's plans and specifications or electrical power
requirements, site plans, or copies of any such information but
shall exclude any information (a) approved in writing by Tenant
for release to third parties, (b) that Landlord possess
independently of Tenant, (c) that Tenant places in the public
domain or (d) except as may be approved in writing by Tenant for
release to third parties or as may be required by applicable law
or as Landlord may , in Landlord's good faith business judgment,
disclose in confidence to Landlord's counsel, lenders, or
investors, contractors, engineers, architects, project managers
in the course of the operation of the Building and Property.
(ii) Tenant agrees to use reasonable efforts to keep confidential the
terms and conditions of this Lease, and not to disclose the terms
and conditions of this Lease to any third parties except as may
be approved in writing by Landlord for release to third parties
or as may be required by applicable law or as Tenant may, in
Tenant's good faith business judgment, disclose in confidence to
Tenant's counsel, lenders, or investors.
(n) Financial Information. Tenant, within 15 days after request (but no
---------------------
more often than once per calendar quarter), shall provide Landlord
with a current financial statement and such other information as
Landlord may reasonably request. Landlord shall use reasonable efforts
to maintain such information as confidential.
34. Entire Agreement.
----------------
This Lease and the following exhibits and attachments constitute the entire
agreement between the parties and supersede all prior agreements and
understandings related to the Premises, including all lease proposals, letters
of intent and other documents:
Exhibit A (Outline and Location of Premises)
Exhibit B (Outline and Location of Equipment Space)
Exhibit C (Rules and Regulations)
Exhibit D (Commencement Letter)
Exhibit E (Haz Mat Certificate)
Exhibit F (Tenant Options)
Exhibit G (Form Agreement Regarding Lender's Security Interest)
LANDLORD: CARLYLE-CORE CHICAGO LLC,
a Delaware limited liability company
By: /s/ Fred Ezra
---------------------------------------------
Name: Fred Ezra
-------------------------------------------
Title: Manager
------------------------------------------
TENANT: EQUINIX, INC.,
a Delaware corporation
By: /s/ Albert M. Avery, IV
---------------------------------------------
Name: Albert M. Avery, IV
-------------------------------------------
Title: President
------------------------------------------
By: /s/ Jay S. Adelson
---------------------------------------------
Name: Jay S. Adelson
-------------------------------------------
Title: Vice President
------------------------------------------
<PAGE>
EXHIBIT A
---------
PREMISES
--------
[GRAPHIC OF FLOOR PLAN OF PREMISES]
EXHIBIT A - Page 1
<PAGE>
EXHIBIT B
---------
EQUIPMENT SPACE
---------------
[GRAPHIC OF FLOOR PLAN OF EQUIPTMENT SPACE]
EXHIBIT B - Page 1
<PAGE>
EXHIBIT C
---------
BUILDING RULES AND REGULATIONS
------------------------------
The following rules and regulations shall apply, where applicable, to the
Premises, the Building, the parking garage (if any), the Property and the
appurtenances. Capitalized terms have the same meaning as defined in the Lease.
1. Sidewalks, doorways, vestibules, halls, stairways and other similar areas
shall not be obstructed by Tenant or used by Tenant for any purpose other
than ingress and egress to and from the Premises. No rubbish, litter,
trash, or material shall be placed, emptied, or thrown in those areas. At
no time shall Tenant permit Tenant's employees to loiter in Common Areas or
elsewhere about the Building or Property.
2. Plumbing fixtures and appliances shall be used only for the purposes for
which designed, and no sweepings, rubbish, rags or other unsuitable
material shall be thrown or placed in the fixtures or appliances. Damage
resulting to fixtures or appliances by Tenant, its agents, employees or
invitees, shall be paid for by Tenant, and Landlord shall not be
responsible for the damage.
3. No signs, advertisements or notices shall be painted or affixed to windows,
doors or other parts of the Building, except those of such color, size,
style and in such places as are first approved in writing by Landlord as
specifically provided for in the Lease.
5. Landlord will be provided with keys to the Premises.
6. All contractors, contractor's representatives and installation technicians
performing work in the Building shall be subject to Landlord's prior
approval and shall be required to comply with Landlord's standard rules,
regulations, policies and procedures, which may be revised from time to
time.
7. Tenant shall not: (1) make or permit any improper, objectionable or
unpleasant noises or odors in the Building, or otherwise interfere in any
way with other tenants or persons having business with them; (2) solicit
business or distribute, or cause to be distributed, in any portion of the
Building, handbills, promotional materials or other advertising; or (3)
conduct or permit other activities in the Building that might, in
Landlord's sole opinion, constitute a nuisance.
8. No animals, except those assisting handicapped persons, shall be brought
into the Building or kept in or about the Premises.
9. Tenant shall not use or occupy the Premises in any manner or for any
purpose which might injure the reputation or impair the present or future
value of the Premises or the Building. Tenant shall not use, or permit any
part of the Premises to be used, for lodging, sleeping or for any illegal
purpose.
10. Tenant shall not install, operate or maintain in the Premises or in any
other area of the Building, electrical equipment that would overload the
electrical system beyond its capacity for proper, efficient and safe
operation as determined solely by Landlord.
11. Tenant shall not operate or permit to be operated a coin or token operated
vending machine or similar device (including, without limitation,
telephones, lockers, toilets, scales, amusement devices and machines for
sale of beverages, foods, candy, cigarettes and other goods), except for
machines for the exclusive use of Tenant's employees.
12. Bicycles and other vehicles are not permitted inside the Building or on the
walkways outside the Building, except in areas designated by Landlord.
13. Landlord may from time to time adopt systems and procedures for the
security and safety of the Building, its occupants, entry, use and
contents. Tenant, its agents, employees, contractors, guests and invitees
shall comply with Landlord's systems and procedures.
EXHIBIT C - Page 1
<PAGE>
14. Landlord shall have the right to prohibit the use of the name of the
Building or any other publicity by Tenant that in Landlord's sole opinion
may impair the reputation of the Building or its desirability. Upon
written notice from Landlord, Tenant shall refrain from and discontinue
such publicity immediately.
15. Tenant shall not canvass, solicit or peddle in or about the Building or the
Property.
16. Neither Tenant nor its agents, employees, contractors, guests or invitees
shall smoke or permit smoking anywhere in the Building.
EXHIBIT C - Page 2
<PAGE>
EXHIBIT D
---------
COMMENCEMENT LETTER
-------------------
(EXAMPLE)
Date:
Tenant:
Address:_______________________________
_______________________________________
_______________________________________
Re: Commencement Letter with respect to that certain Lease dated as of
______________, _____ by and between CARLYLE-CORE CHICAGO LLC, a Delaware
limited liability company, as Landlord, and ______________________________,
as Tenant, for ____________ square feet of Rentable Area on the _______
floor of the Building located at [*], Chicago, Illinois.
Dear :
In accordance with the terms and conditions of the above referenced Lease,
Tenant accepts possession of the Premises and agrees:
1. The Commencement Date is _________________;
2. The Rent Commencement Date is __________________;
3. The Rentable Area of the Building is __________ Rentable Square Feet;
4. The Rentable Area of the Premises is _________ Rentable Square Feet;
5. Tenant's Pro Rata Share is _________%;
6. The Rentable Area of the Equipment Space is _________ Rentable Square Feet;
7. The schedule of Base Rent payable during the Term is as follows:
8. The schedule of Equipment Space Rent payable during the term is as follows:
9. The Expiration Date is _____________________.
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT D - Page 1
<PAGE>
Please acknowledge your acceptance of possession and agreement to the terms set
forth above by signing all 3 counterparts of this Commencement Letter in the
space provided and returning 2 fully executed counterparts to my attention.
Sincerely,
_______________________________
Agreed and Accepted:
Tenant:____________________________
By:_____________________________________
Name:___________________________________
Title::_________________________________
Date:___________________________________
EXHIBIT D - Page 2
<PAGE>
EXHIBIT E
---------
HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE
------------------------------------------
Your cooperation in this matter is appreciated. Initially, the information
provided by you in this Hazardous Materials Disclosure Certificate is necessary
for the Landlord (identified below) to evaluate and finalize a lease agreement
with you as tenant. After a lease agreement is signed by you and the Landlord
(the "Lease"), on an annual basis in accordance with the provisions of the
Lease, you are to provide an update to the information initially provided by you
in this certificate. The information contained in the initial Hazardous
Materials Disclosure Certificate and each annual certificate provided by you
thereafter will be maintained in confidentiality by Landlord subject to release
and disclosure as required by (i) any lenders and owners and their respective
environmental consultants, (ii) any prospective purchaser(s) of all or any
portion of the property on which the Premises are located, (iii) Landlord to
defend itself or its lenders, partners or representatives against any claim or
demand, and (iv) any laws, rules, regulations, orders, decrees, or ordinances,
including, without limitation, court orders or subpoenas. Any and all
capitalized terms used herein, which are not otherwise defined herein, shall
have the same meaning ascribed to such term in the signed Lease. Any questions
regarding this certificate should be directed to, and when completed, the
certificate should be delivered to:
Landlord: CARLYLE-CORE CHICAGO LLC
c/o Core Location Realty Associates of Chicago LLC
4520 East-West Highway, Suite 650
Bethesda, Maryland 20814
Name of Tenant: _____________________________________________________________
Mailing Address: _____________________________________________________________
_______________________________________________________________________________
Contact Person, Title and Telephone Number(s): ________________________________
_______________________________________________________________________________
_______________________________________________________________________________
Contact Person for Hazardous Waste Materials Management and Manifests and
Telephone Number(s): __________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
Address of Premises: [*], Chicago, Illinois
1. GENERAL INFORMATION:
Describe the initial proposed operations to take place in, on, or about the
Premises or Equipment Space, including, without limitation, principal products
processed, manufactured or assembled services and activities to be provided or
otherwise conducted. Existing tenants should describe any proposed changes to
on-going operations.
_______________________________________________________________________________
_______________________________________________________________________________
2. USE, STORAGE AND DISPOSAL OF HAZARDOUS MATERIALS
2.1 Will any Hazardous Materials be used, generated, stored or disposed of
in, on or about the Premises or Equipment Space? Existing tenants should
describe any Hazardous Materials which continue to be used, generated, stored or
disposed of in, on or about the Premises or Equipment Space.
Wastes Yes [_] No [_]
Chemical Products Yes [_] No [_]
Other Yes [_] No [_]
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT E - Page 1
<PAGE>
If Yes is marked, please explain: ___________________________________
_______________________________________________________________________________
_______________________________________________________________________________
2.2 If Yes is marked in Section 2.1, attach a list of any Hazardous
Materials to be used, generated, stored or disposed of in, on or about the
Premises or Equipment Space, including the applicable hazard class and an
estimate of the quantities of such Hazardous Materials at any given time;
estimated annual throughput; the proposed location(s) and method of storage
(excluding nominal amounts of ordinary household cleaners and janitorial
supplies which are not regulated by any Environmental Laws); and the proposed
location(s) and method of disposal for each Hazardous Material, including, the
estimated frequency, and the proposed contractors or subcontractors. Existing
tenants should attach a list setting forth the information requested above and
such list should include actual data from on-going operations and the
identification of any variations in such information from the prior year's
certificate.
3. STORAGE TANKS AND SUMPS
3.1 Is any above or below ground storage of gasoline, diesel, petroleum,
or other Hazardous Materials in tanks or sumps proposed in, on or about the
Premises or Equipment Space? Existing tenants should describe any such actual or
proposed activities.
Yes [_] No [_]
If yes, please explain: _____________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
4. WASTE MANAGEMENT
4.1 Has your company been issued an EPA Hazardous Waste Generator I.D.
Number? Existing tenants should describe any additional identification numbers
issued since the previous certificate.
Yes [_] No [_]
4.2 Has your company filed a biennial or quarterly reports as a hazardous
waste generator? Existing tenants should describe any new reports filed.
Yes [_] No [_]
If yes, attach a copy of the most recent report filed.
5. WASTEWATER TREATMENT AND DISCHARGE
5.1 Will your company discharge wastewater or other wastes to:
______ storm drain? ______ sewer?
______ surface water? ______ no wastewater or other wastes discharged
Existing tenants should indicate any actual discharges. If so,
describe the nature of any proposed or actual discharge(s).
_______________________________________________________________________________
_______________________________________________________________________________
EXHIBIT E - Page 1
<PAGE>
5.2 Will any such wastewater or waste be treated before discharge?
Yes [_] No [_]
If yes, describe the type of treatment proposed to be conducted.
Existing tenants should describe the actual treatment conducted.
_______________________________________________________________________________
_______________________________________________________________________________
6. AIR DISCHARGES
6.1 Do you plan for any air filtration systems or stacks to be used in
your company's operations in, on or about the Premises or Equipment Space that
will discharge into the air; and will such air emissions be monitored? Existing
tenants should indicate whether or not there are any such air filtration systems
or stacks in use in, on or about the Premises or Equipment Space which discharge
into the air and whether such air emissions are being monitored.
Yes [_] No [_]
If yes, please describe: ____________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
6.2 Do you propose to operate any of the following types of equipment, or
any other equipment requiring an air emissions permit? Existing tenants should
specify any such equipment being operated in, on or about the Premises or
Equipment Space.
______ Spray booth(s) ______ Incinerator(s)
______ Dip tank(s) ______ Other (Please describe)
______ Drying oven(s) ______ No Equipment Requiring Air Permits
If yes, please describe: ____________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
7. HAZARDOUS MATERIALS DISCLOSURES
7.1 Has your company prepared or will it be required to prepare a
Hazardous Materials management plan ("Management Plan") pursuant to Fire
Department or other governmental or regulatory agencies' requirements? Existing
tenants should indicate whether or not a Management Plan is required and has
been prepared.
Yes [_] No [_]
If yes, attach a copy of the Management Plan. Existing tenants should
attach a copy of any required updates to the Management Plan.
EXHIBIT E - Page 2
<PAGE>
8. ENFORCEMENT ACTIONS AND COMPLAINTS
8.1 With respect to Hazardous Materials or Environmental Laws, has your
company ever been subject to any agency enforcement actions, administrative
orders, or consent decrees or has your company received requests for
information, notice or demand letters, or any other inquiries regarding its
operations? Existing tenants should indicate whether or not any such actions,
orders or decrees have been, or are in the process of being, undertaken or if
any such requests have been received.
Yes [_] No [_]
If yes, describe the actions, orders or decrees and any continuing
compliance obligations imposed as a result of these actions, orders or decrees
and also describe any requests, notices or demands, and attach a copy of all
such documents. Existing tenants should describe and attach a copy of any new
actions, orders, decrees, requests, notices or demands not already delivered to
Landlord pursuant to the provisions of Article 32 of the signed Lease.
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
8.2 Have there ever been, or are there now pending, any lawsuits against
your company regarding any environmental or health and safety concerns?
Yes [_] No [_]
If yes, describe any such lawsuits and attach copies of the
complaint(s), cross-complaint(s), pleadings and all other documents related
thereto as requested by Landlord. Existing tenants should describe and attach a
copy of any new complaint(s), cross-complaint(s), pleadings and other related
documents not already delivered to Landlord pursuant to the provisions of
Article 32 of the Lease.
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
9. PERMITS AND LICENSES
9.1 Attach copies of all Hazardous Materials permits and licenses
including a Transporter Permit number issued to your company with respect to its
proposed operations in, on or about the Premises or Equipment Space, including,
without limitation, any wastewater discharge permits, air emissions permits, and
use permits or approvals. Existing tenants should attach copies of any new
permits and licenses as well as any renewals of permits or licenses previously
issued.
The undersigned hereby acknowledges and agrees that this Hazardous Materials
Disclosure Certificate is being delivered in connection with, and as required
by, Landlord in connection with the evaluation and finalization of a Lease and
will be attached thereto as an exhibit; that this Hazardous Materials Disclosure
Certificate is being delivered in accordance with, and as required by, the
provisions of Article 32 of the Lease; and that Tenant shall have and retain
full and complete responsibility and liability with respect to any of the
Hazardous Materials disclosed in the HazMat Certificate notwithstanding
Landlord's receipt and/or approval of such certificate.
Tenant further agrees that none of the following described acts or events shall
be construed or otherwise interpreted as either (a) excusing, diminishing or
otherwise limiting Tenant from the requirement to fully and faithfully perform
its obligations under the Lease with respect to Hazardous Materials, including,
without limitation, Tenant's indemnification of the Landlord and all Landlord
Related Parties and compliance with all Environmental Laws, or (b) imposing upon
Landlord, directly or indirectly, any duty or liability with respect to any such
Hazardous Materials, including, without limitation, any duty on Landlord to
investigate or otherwise verify the accuracy of the representations and
statements made therein or to ensure that Tenant is in compliance with all
Environmental Laws: (i) the delivery of such certificate to Landlord and/or
Landlord's acceptance of such certificate, (ii) Landlord's review and approval
of such certificate, (iii) Landlord's failure to obtain such certificate from
Tenant at any time, or (iv) Landlord's actual or constructive knowledge of the
types and quantities of Hazardous Materials being used, stored, generated,
disposed of or transported on or about the Premises or Equipment Space by Tenant
or Tenant's employees, agents, contractors or representatives. Notwithstanding
the foregoing or anything to the contrary contained herein, the undersigned
acknowledges and agrees that Landlord and its partners, lenders and
representatives may, and will,
EXHIBIT E - Page 3
<PAGE>
rely upon the statements, representations, warranties, and certifications made
herein and the truthfulness thereof in entering into the Lease and the
continuance thereof throughout the term, and any renewals thereof, of the Lease.
I (print name)______________, acting with full authority to bind the (proposed)
Tenant and on behalf of the (proposed) Tenant, certify, represent and warrant
that the information contained in this certificate is true and correct.
TENANT:
By: ________________________
Title: ________________________
Date: ________________________
EXHIBIT E - Page 4
<PAGE>
EXHIBIT F
---------
TENANT OPTIONS
--------------
1. RENEWAL OPTION
--------------
A. Tenant shall have one right to extend the Term (the "Renewal Option")
for an additional period of five (5) years (the "Renewal Term")
commencing on the day following the Expiration Date of the Term, if:
1. Landlord receives notice of exercise of the Renewal Option
("Initial Renewal Notice") nine (9) full calendar months prior to
the expiration of the initial Term and not more than twelve (12)
full calendar months prior to the expiration of the initial Term;
and
2. Tenant is not in default under the Lease and no event which, with
notice, the passage of time, or both, would constitute a default
hereunder on the part of Tenant exists at the time that Tenant
delivers its Initial Renewal Notice or at the time Tenant
delivers its Binding Notice (as defined below); and
3. No portion of the Premises in excess of twenty percent (20%) of
the Rentable Area of the Premises is sublet at the time that
Tenant delivers its Initial Renewal Notice or at the time Tenant
delivers its Binding Notice, other than in connection with a
Permitted Transfer; and
4. The Lease has not been assigned prior to the date that Tenant
delivers its Initial Renewal Notice or prior to the date Tenant
delivers its Binding Notice other than in connection with a
Permitted Transfer; and
5. Tenant executes and returns the Renewal Amendment (hereinafter
defined) within thirty (30) days after submission to Tenant of an
accurate Renewal Amendment.
B. The initial Base Rent rate and Equipment Space Rent rate during the
Renewal Term shall equal the Prevailing Market (hereinafter defined)
rate per Rentable Square Foot, determined in the manner set forth
below.
C. Tenant shall pay Additional Rent (i.e. Operating Expenses and Property
Taxes) for the Premises during any Renewal Term in accordance with the
Lease.
D. Within thirty (30) days after receipt of Tenant's Initial Renewal
Notice, Landlord shall advise Tenant of the applicable Base Rent rate
for the Premises and Equipment Space Rent rate for the Renewal Term.
Tenant, within thirty (30) days after the date on which Landlord
advises Tenant of the Base Rent rate and Equipment Space Rent rate for
the Renewal Term, shall either (i) give Landlord final binding written
notice ("Binding Notice") of Tenant's exercise of its option, or (ii)
if Tenant disagrees with Landlord's determination, provide Landlord
with written notice of rejection (the "Rejection Notice"). If Tenant
fails to provide Landlord with either a Binding Notice or Rejection
Notice within such thirty (30) day period, Tenant's Renewal Option
shall be null and void and of no further force and effect. If Tenant
provides Landlord with a Binding Notice, Landlord and Tenant shall
enter into the Renewal Amendment (as defined below) upon the terms and
conditions set forth herein. If Tenant provides Landlord with a
Rejection Notice, Landlord and Tenant shall work together in good
faith to agree upon the Prevailing Market Base Rent rate and Equipment
Space Rent rate during the Renewal Term. Upon agreement, Landlord and
Tenant shall enter into the Renewal Amendment in accordance with the
terms and conditions hereof. Notwithstanding the foregoing, if
Landlord and Tenant are unable to agree upon the Prevailing Market
Base Rent rate and Equipment Space Rent rate for the Premises within
thirty (30) days after the date on which Tenant provides Landlord with
a Rejection Notice, then Tenant may, on or before the thirty-fifth
(35th) day following Tenant's delivery of the Rejection Notice, either
rescind Tenant's exercise of the Renewal Option or elect to submit the
matter to arbitration; if Tenant fails to timely make an election,
Tenant will be deemed to have submitted the matter to arbitration. If
the matter is submitted to arbitration, the Prevailing Market Base
Rent rate and Equipment Space Rent rate payable as of commencement of
the Renewal Term shall be determined as follows:
EXHIBIT F - Page 1
<PAGE>
1. Within ten (10) days after the thirty-fifth (35th) day described
above, Tenant, at its sole expense, shall obtain and deliver in
writing to Landlord a determination of the Prevailing Market Base
Rent rate and Equipment Space Rent rate for the Premises and
Equipment Space, for a term equal to the Renewal Term, from a
real estate broker ("Tenant's Broker") licensed in the State of
Illinois and engaged in the leasing of commercial real estate in
the Chicago, Illinois vicinity for at least the immediately
preceding five (5) years; such determination shall be stated in a
single "per square foot per annum (or month)" figure, for ease of
comparison. If Landlord accepts such determination, the
Prevailing Market Base Rent rate and Equipment Space Rent rate
payable by Tenant during the Renewal Term shall be equal to the
amount determined by Tenant's Broker. If Tenant fails to timely
deliver such determination, the Prevailing Market Base Rent rate
and Equipment Space Rent rate as quoted by Landlord shall
control.
2. If Landlord does not accept such determination, within fifteen
(15) days after receipt of the determination of Tenant's Broker,
Landlord shall designate a similarly qualified broker
("Landlord's Broker"). If the two Brokers are appointed by the
parties as set forth above, such Brokers shall promptly meet and
attempt to agree upon the applicable Prevailing Market Base Rent
rate and Equipment Space Rent rate. If such Brokers are unable
to agree within fifteen (15) days following the appointment of
Landlord's Broker, the Brokers shall select a third broker
meeting the qualifications set forth above within ten (10) days
after the last date the two Brokers are given to agree upon the
applicable Prevailing Market Base Rent rate and Equipment Space
Rent rate. The Third Broker shall be a person who has not
previously acted and is not currently acting in any capacity for
either party.
3. The Third Broker shall conduct its own independent investigation
of the applicable Prevailing Market Base Rent rate and Equipment
Space Rent rate, and shall be instructed not to advise either
party of its determination, except as follows: when the Third
Broker has made its determination (which shall be completed
within fifteen (15) days after the appointment of the Third
Broker), it shall advise Landlord and Tenant and establish a
date, at least five (5) days after the giving of notice by such
Third Broker to Landlord and Tenant, on which it will disclose
its determination. Such meeting shall take place in Landlord's
office unless otherwise mutually agreed by the parties. After
having initialed the paper on which its determination is set
forth, the Third Broker shall place its determination in a sealed
envelope. Landlord's Broker and Tenant's Broker shall each set
forth their determination (each stated in a single "per rentable
square foot per annum (or month)" figure) on a separate piece of
paper, initial the same, and place them in sealed envelopes.
Each of the three envelopes shall be marked with the name of the
party whose determination is inside the envelope. In the
presence of the Third Broker, the determination of the Prevailing
Market Base Rent rate and Equipment Space Rent rate by Landlord's
Broker and Tenant's Broker shall be opened and examined. If the
higher of the two determinations submitted by Landlord's Broker
and Tenant's Broker is one hundred and five percent (105%) or
less of the amount set forth in the lower determination, the
average of the two determinations shall be the Prevailing Market
Base Rent rate and Equipment Space Rent rate, the envelope
containing the determination by the Third Broker shall be
destroyed and the Third Broker shall be instructed not to
disclose its determination. If either party's envelope is blank,
or does not set forth a determination, the determination of the
other party shall prevail and be treated as the Prevailing Market
Base Rent rate and Equipment Space Rent rate. If the higher of
the two determinations is more than one hundred and five percent
(105%) of the amount of the other determination, the envelope
containing the Third Broker's determination shall be opened, the
Prevailing Market Base Rent rate and Equipment Space Rent rate
shall, in such event, be the rent proposed by either Landlord's
Broker or Tenant's Broker which is closest to the determination
of Prevailing Market Base Rent rate and Equipment Space Rent rate
by the Third Broker; if the two are equidistant, the Prevailing
Market Base Rent rate and Equipment Space Rent rate shall be
equal to the Third Broker's determination.
4. Landlord shall pay the costs and fees of Landlord's Broker in
connection with any determination hereunder, and Tenant shall pay
the costs and fees of Tenant's Broker in connection with such
determination. The costs and fees of any Third Broker shall be
paid one-half by Landlord and one-half by Tenant. Tenant
expressly acknowledges that any costs, fees and commissions
arising in
EXHIBIT F - Page 2
<PAGE>
favor of any broker or other party hired by Tenant to represent
Tenant in the negotiation of the extension of the term of the
Lease shall be borne solely by Tenant.
5. If the amount of the Prevailing Market Base Rent rate and
Equipment Space Rent rate is not known as of the commencement of
the Renewal Term, then Tenant shall continue to pay the
Prevailing Base Rent rate and Equipment Space Rent rate in effect
immediately prior to the expiration of the initial Term until the
amount of the Prevailing Market Base Rent rate and Equipment
Space Rent rate are determined. When such determination is made,
Tenant shall pay Landlord any deficiency to Landlord upon demand
or Landlord will credit any overpayment against rent next due and
payable under the Lease.
E. If Tenant is entitled to and properly exercises its Renewal Option,
Landlord shall prepare an amendment (the "Renewal Amendment") to
reflect changes in the Base Rent, Equipment Space Rent, Term,
Expiration Date and other appropriate terms. The Renewal Amendment
shall be:
1. sent to Tenant within a reasonable time after receipt of the
Binding Notice; and
2. executed by Tenant and returned to Landlord in accordance with
Section 1.A.5 above.
An otherwise valid exercise of the Renewal Option shall, at Landlord's
option, be fully effective whether or not the Renewal Amendment is
executed.
F. For purpose hereof, "Prevailing Market" shall mean the arms length
fair market annual rent rate per rentable square foot under renewal
leases and amendments in the Building entered into on or about the
date on which the Prevailing Market is being determined hereunder for
space comparable to the Premises and Equipment Space in the Building.
EXHIBIT F - Page 3
<PAGE>
EXHIBIT G
---------
SAMPLE LETTER OF CREDIT
________________________
[Name of Financial Institution]
Irrevocable Standby
Letter of Credit
No. ______________________
Issuance Date: ___________
Expiration Date: _________
Applicant: _______________
Beneficiary
- -----------
[Insert Owner Name]
_____________________________
_____________________________
_____________________________
Ladies/Gentlemen:
We hereby establish our Irrevocable Standby Letter of Credit in your favor
for the account of the above referenced Applicant in the amount of
____________________ U.S. Dollars ($____________________) available for payment
at sight by your draft drawn on us when accompanied by the following documents:
1. An original copy of this Irrevocable Standby Letter of Credit.
2. Beneficiary's dated statement purportedly signed by one of its officers
reading: "This draw in the amount of ______________________ U.S. Dollars
($____________) under your Irrevocable Standby Letter of Credit No.
____________________ represents funds due and owing to us as a result of
the Applicant's failure to comply with one or more of the terms of that
certain lease by and between ______________________, as landlord, and
_____________, as tenant."
It is a condition of this Irrevocable Standby Letter of Credit that it will
be considered automatically renewed for a one year period upon the expiration
date set forth above and upon each anniversary of such date, unless at least
thirty (30) days prior to such expiration date or applicable anniversary
thereof, we notify you in writing by certified mail, return receipt requested,
that we elect not to so renew this Irrevocable Standby Letter of Credit. A copy
of any such notice shall also be sent to: CARLYLE-CORE CHICAGO LLC, c/o Core
Location Realty Associates of Chicago LLC, 4520 East-West Highway, Suite 650,
Bethesda, Maryland 20814, Attention: Management Agent.
In addition to the foregoing, we understand and agree that you shall be entitled
to draw upon this Irrevocable Standby Letter of Credit in accordance with 1. and
2. above in the event that we elect not to renew this Irrevocable Standby Letter
of Credit and, in addition, you provide us with a dated statement purportedly
signed by one of Beneficiary's officers stating that the Applicant has failed to
provide you with an acceptable substitute irrevocable standby letter of credit
in accordance with the terms of the above referenced lease. We further
acknowledge and agree that: (a) upon receipt of the documentation required
herein, we will honor your draws against this Irrevocable Standby Letter of
Credit without inquiry into the accuracy of Beneficiary's signed statement and
regardless of whether Applicant disputes the content of such statement; (b) this
Irrevocable Standby Letter of Credit shall permit partial draws and, in the
event you elect to draw upon less than the full stated amount hereof, the stated
amount of this Irrevocable Standby Letter of Credit shall be automatically
reduced by the amount of such partial draw; and (c) you shall be entitled to
assign your interest in this Irrevocable Standby Letter of Credit from time to
time to an entity or individual who is succeeding to your position as the
landlord under the Lease without our approval and without charge. In the event
of an assignment, we reserve the right to require reasonable evidence of such
assignment as a condition to any draw hereunder.
EXHIBIT G - Page 1
<PAGE>
This Irrevocable Standby Letter of Credit is subject to the Uniform Customs
and Practice for Documentary Credits (1993 revision) ICC Publication No. 500.
We hereby engage with you to honor drafts and documents drawn under and in
compliance with the terms of this Irrevocable Standby Letter of Credit.
All communications to us with respect to this Irrevocable Standby Letter of
Credit must be addressed to our office located at ____________________________
to the attention of __________________________________.
Very truly yours,
-----------------------
[name]
-----------------------
[title]
-----------------------
EXHIBIT G - Page 2
<PAGE>
EXHIBIT H
---------
AGREEMENT REGARDING LENDER'S SECURITY INTEREST
IN TENANT'S PERSONAL PROPERTY
-----------------------------
THIS AGREEMENT is entered into as of the ____ day of _________, 19__, by
and between _______________________________________, a(n)
_________________________ ("Landlord"), _____________________________________,
(a)n ________________________ ("Tenant") and _____________________________, a(n)
_______________________ ("Lender"), with reference to the following facts:
A. Landlord and Tenant have heretofore entered into a written lease dated
____________, 19__, as same may be amended from time to time (the "Lease")
for certain premises (the "Premises") and equipment space (the "Equipment
Space") located in that certain office building known as the Lakeside
Technology Center (the "Building") located at [*], Chicago, Illinois.
B. Tenant desires to borrow money from Lender in the principal sum of
____________________________________ Dollars ($____________) (the "Loan").
C. Lender desires to obtain a security interest in the Tenant's personal
property located within the Premises and/or Equipment Space described in
Exhibit A attached hereto (the "Collateral") until such Loan is repaid.
D. Landlord is willing to subordinate its rights in the Collateral to the
rights of Lender's security interest upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. The only property affected by this Agreement is that Collateral
specifically listed on Exhibit A attached hereto. Any property not
described in Exhibit A shall not be subject to the terms of this
Agreement and Landlord shall be entitled, to the extent provided by
the Lease and by law, to exercise any lien, right or remedy against
such other property.
2. Lender acknowledges that it has no security interest in any property
located in, or about, the Premises or Equipment Space other than the
Collateral listed on Exhibit A.
3. Notwithstanding anything to the contrary contained in the Lease, until
such time as Tenant repays in full to Lender the Loan which is secured
by the Collateral, the Collateral shall remain the personal property
of Tenant subject to the security interest of Lender. Lender shall
notify Landlord when the obligations of Tenant to repay the Loan have
been satisfied and discharged.
4. Landlord does hereby subordinate any and all claims or rights in and
to the Collateral to the security interest of Lender in the
Collateral; provided, however, that this subordination nor shall not
prevent Landlord from exercising any lien on any property of Tenant,
including the Collateral, or enforcing any judgment by levying upon
any property of Tenant, including the Collateral, so long as Landlord
recognizes Lender's prior right to the Collateral. Except as
expressly provided herein, the provisions of any security and other
agreements between Tenant and Lender shall at all times be subject and
subordinate to all covenants, terms and conditions of the Lease and
all of Landlord's rights thereunder.
5. Lender can enter the Premises or Equipment Space for purpose of
removal of the Collateral only if:
(a) permitted by the Loan Agreement between Lender and Tenant;
(b) Lender gives Landlord ten (10) days prior written notice;
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT H - Page 1
<PAGE>
(c) Lender enters the Premises or Equipment Space for purpose of
removal of the Collateral at such time and in such manner as
Landlord reasonably may determine so as to minimize disruption to
the operation of the Building;
(d) Lender and Tenant agree, jointly and severally, promptly to
repair any damage to the Premises or to the Building caused by
the removal of the Collateral or, if Landlord shall, in its sole
discretion, elect to make such repairs, to pay to Landlord upon
demand the costs and expenses incurred in connection therewith;
(e) Tenant and Lender agree, jointly and severally, to restore the
Premises or Equipment Space to the condition the Premises were in
prior to the installation of the Collateral;
(f) there shall be no display nor public nor private sale of the
Collateral in or on the Building; and
(g) Lender hereby indemnifies Landlord for any claim, liability or
expense (including reasonable attorneys' fees) arising out of or
in connection with Lender's removal of the Collateral and
Lender's entry and activities upon the Premises or Equipment
Space and the Building.
6. If Landlord shall fail to demand strict compliance with any provision
hereof, such failure shall not constitute a waiver of any right or
remedy to which Landlord may be entitled.
7. If Tenant should be in default under the terms of the Lease, and such
default results in (a) the termination of the Lease or (b) claims by
Landlord for rent due, Lender shall submit to Landlord within ten (10)
days after Landlord's demand, a certified statement showing:
(i) the original amount of funds supplied by Lender to Tenant;
(ii) the amount paid by Tenant to date; and
(iii) the amount due from Tenant to Lender.
In the event Lender sells the Collateral to satisfy claims against
Tenant, all funds derived from the sale of the Collateral, to the
extent that such funds are in excess of the amount owed to the Lender,
shall belong to Landlord, subject to the terms of the Lease, to
satisfy any claim which Landlord may have.
8. Landlord shall have the right, but not the obligation, to cure any
default by Tenant under any agreement between Lender and Tenant
concerning the Collateral. Lender agrees to notify Landlord in
writing of any default on the part of Tenant under its agreement with
Tenant concerning the Collateral and further agrees that Lender shall
not exercise any of its rights with respect to the Collateral unless
Landlord has received the aforesaid notice and has not, within thirty
(30) days after the date thereof, cured such default or if the default
cannot be cured within thirty (30) days, has not commenced curing and
is not diligently prosecuting the cure of Tenant's default; provided,
however, that nothing contained in this Agreement shall require
Landlord to cure any such default or otherwise to perform the
obligations of Tenant to Lender.
9. A default by Tenant under its agreement with Lender concerning the
Collateral shall be deemed a default by Tenant under the Lease.
10. This Agreement contains the entire understanding between the parties
hereto. Any modification shall be effective only if in writing and
signed by the parties hereto.
EXHIBIT H - Page 1
<PAGE>
11. Landlord's address for notices is:
CARLYLE-CORE CHICAGO LLC
c/o Core Location Realty Associates of Chicago LLC
4520 East-West Highway, Suite 650
Bethesda, Maryland 20814
Attention: Mark Ezra
With a copy to:
Shartsis, Friese & Ginsburg LLP
One Maritime Plaza, 18th Floor
San Francisco, California 94111
Attention: Jonathan M. Kennedy, Esq.
and
The Carlyle Group
1001 Pennsylvania Avenue
Suite 220 South
Washington, DC 20004
Attention: Gary Block
Tenant's address for notices is:
Equinix, Inc.
901 Marshall Street, 2nd Floor
Redwood City, California 94063
Attention: Mr. Art Chinn
Lender's address for notices is:
______________________________
______________________________
______________________________
Attention: __________________
12. This Agreement shall be governed by and construed in accordance with
the laws of the state in which the Building is located.
13. This Agreement shall be binding upon and inure to the benefit of the
heirs, executors, administrators, successors and assigns of the
respective parties hereto.
EXHIBIT H - Page 2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as of
the date set forth above.
LANDLORD: CARLYLE-CORE CHICAGO LLC,
a Delaware limited liability company
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
TENANT: ______________________________________
a(n) _________________________________
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
LENDER: ______________________________________,
a(n) _________________________________
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
EXHIBIT H - Page 3
<PAGE>
EXHIBIT A
LIST OF COLLATERAL
------------------
EXHIBIT H - Page 4
<PAGE>
EXHIBIT 10.11
LEASE BETWEEN
LAING BEAUMEADE, INC.
---------------------
Landlord
AND
EQUINIX, INC.
-------------
Tenant
<PAGE>
TABLE OF CONTENTS
Page
----
1. GRANT/TERM/USE........................................................ 1
2. RENT.................................................................. 2
3. CONSTRUCTION AND ACCEPTANCE OF LEASED PREMISES........................ 2
4. OPERATING EXPENSES.................................................... 2
5. SECURITY DEPOSIT...................................................... 5
6. UTILITIES............................................................. 5
7. MAINTENANCE AND REPAIR BY LANDLORD.................................... 6
8. CONTROL............................................................... 6
9. OCCUPANCY BY TENANT................................................... 7
10. INSURANCE; INDEMNITY................................................. 7
11. REPAIRS.............................................................. 9
12. TENANT'S PROPERTY.................................................... 9
13. IMPROVEMENTS AND ALTERATIONS BY TENANT............................... 10
14. CASUALTY............................................................. 11
15. SUBLETTING AND ASSIGNMENT............................................ 12
16. LIENS................................................................ 12
17. CONDEMNATION......................................................... 13
18. PARKING.............................................................. 14
19. ACCESS............................................................... 15
20. SIGNS................................................................ 15
21. SUBORDINATION........................................................ 16
22. TENANT'S DEFAULT..................................................... 16
23. LANDLORD'S REMEDIES.................................................. 17
24. QUIET ENJOYMENT...................................................... 19
25. FINANCING............................................................ 19
26. HOLDOVER TENANCY..................................................... 20
27. ESTOPPEL CERTIFICATE/FINANCIAL STATEMENT............................. 20
28. MISCELLANEOUS........................................................ 21
EXHIBIT "A" - Leased Premises............................................. 27
EXHIBIT "B" - Land Description............................................ 28
EXHIBIT "C" - Annual Base Rent............................................ 29
EXHIBIT "D" - Work Agreement.............................................. 30
EXHIBIT "E" - Rules and Regulations....................................... 35
EXHIBIT "F" - Special Stipulations........................................ 39
EXHIBIT "G" - Roof License Agreement...................................... 45
EXHIBIT "H" - Construction Criteria....................................... 51
EXHIBIT "I" - Subordination, Non-Disturbance and Attornment Agreement..... 55
EXHIBIT "J" - Landlord's Approved General Contractor List................. 39
EXHIBIT "K" - Special Tenant Requirements................................. 40
<PAGE>
key terms
(a) "Additional Rent" is defined in Section 2.
(b) "Base Rent" is defined in Section 2.
(c) "Commencement Date" is defined in Section 1(b).
(d) "Common Areas" is defined in Section 1(a).
(e) "Declaration" is defined in Section 4(b).
(f) "Lease Year" is defined in Section 2(b).
(g) "Mortgagee" and "Mortgage" are defined in Section 21.
(h) "Prime Rate" is defined in Section 11.
(i) "Rent" is defined in Section 2.
(j) "Tenant's Prorata Share" is defined in Section 4(a).
(k) "Term" is defined in Section 1(b).
<PAGE>
LEASE
-----
THIS LEASE (the "Lease") is made as of the 18th day of November, 1998
---- -------- --
by and between Equinix, Inc. ("Tenant"), a Delaware corporation, and Laing
------------ -------------------- -----
Beaumeade, Inc. ("Landlord"), a Georgia corporation.
- --------------- ---------------------
WITNESSETH THAT, for and in consideration of the rentals herein
reserved, the mutual covenants an agreements herein set forth and other good and
valuable consideration, the receipt and adequacy of which we hereby
acknowledged, the parties hereto, intending to be legally bound, hereby covenant
and agree as follows:
1. GRANT/TERM/USE. (a) Subject to the terms, conditions and
--------------
provisions hereof, Landlord does hereby demise, lease and let unto Tenant, and
Tenant does hereby rent and take from Landlord, approximately [*] square feet
---
of space (the "Leased Premises") located at [*], Suite C, Ashburn, Virginia
20147 (as outlined on Exhibit "A" attached hereto and made a
-----------
part hereof), being a portion of that certain building (the "Building") located,
or to be constructed by Landlord, at Laing at Beaumeade, on the land (the
------------------
"Land") described on Exhibit "B" attached hereto and made a part hereof,
-----------
together with the nonexclusive revocable license to use, in common with all
others entitled to such use, the Common Areas. The Building, Common Areas and
Land are hereinafter sometimes collectively referred to as the "Project." The
term "Common Areas" is hereby defined as those areas forming a part of the Land
and/or Building designated by Landlord for the non-exclusive, general common use
of tenants and their employees, agent, licenses, invoices and the like,
including, without limitation, all parking areas, access roads, trash pickup
and/or dumpster areas, truckways, driveways, loading docks, delivery and pick-up
passages and areas, sidewalks, ramps, landscaped and planted areas, retaining
walls, roof, exterior walls (including window frames but excluding window
panes), downspouts, lighting facilities and the like.
(b) This Lease shall be in full force and effect from the date
first above written. The term of this Lease (the "Term") shall be for a period
of one hundred twenty months commencing on January 15, 1999. The term
------------------ ----------------
"Commencement Date" is hereby defined as January 15, 1999.
----------------
(c) Tenant shall use and occupy the entire Leased Premises
during the entire Term solely as a general office and telecommunications service
center with related legal uses, and may not use all or any portion of the Leased
Premises for any other purpose whatsoever. Tenant agrees not to use the Leased
Space for mobile indoor storage. For purposes of this paragraph, "mobile indoor
storage" shall be defined as the delivery, receipt and storage of specialty
crates containing personal property of the general public. The term "mobile
indoor storage" is defined to exclude (a) traditional moving and storage
operations, (b) freight forwarding, (c) with respect to a tenant located within
the buildings described on Exhibit B, the warehousing or storage of such
tenant's own property within the premises demised to such tenant or the
warehousing or storage within the premises demised to such tenant of property
sold by such tenants to their customers or (d) indoor self storage. The term
"mobile indoor storage" shall include indoor self storage or any other type of
self storage business. In addition, but not by way of limitation, Tenant shall
not lease any portion of said buildings to those entities known as
___________________
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
1
<PAGE>
(a) Shurgard or Shurgard to Go, (b) Public Storage or Public Storage PUD
Division, or (c) Door to Door.
2. RENT. Commencing on the Commencement Date, Tenant shall, and
----
hereby covenants and agrees to, pay to Landlord during each Lease Year of the
Term an annual base rental. ("Base Rent") as set forth on Exhibit "C" attached
-----------
hereto and made a party hereof. The term "Lease Year" is hereby defined as each
successive twelve consecutive month period beginning on the Commencement Date.
The annual Bases Rent shall be paid by Tenant in lawful money of the United
States in equal consecutive monthly installments on or before the first day of
each calendar month in advance. Base Rent for any partial month shall be
prorated at the rate of 1/30th of the monthly Base Rent per day. Tenant shall
pay to Landlord as additional rent ("Additional Rent") hereunder all charges and
other amounts required to be paid by Tenant to Landlord under this Lease,
whether or not designated herein as rent or additional rent. The term "Rent" is
hereby defined as Base Rent and Additional Rent. All Rent shall be paid by
Tenant to Landlord, without any deduction, setoff or counterclaim whatsoever, at
Landlord's address set forth at Section 28(b) hereof.
3. CONSTRUCTION AND ACCEPTANCE OF LEASED PREMISES. (a) Landlord
----------------------------------------------
shall have absolutely no obligation to provide any construction to the Leased
Premises. Tenant agrees to lease the Leased Premises in "as is", "where is"
condition. Landlord makes no warranty, either express or implied, as to the
nature of or suitability of any improvements located within the Leased Premises.
(b) Tenant agrees to furnish to Landlord all final and permanent certificates of
occupancy, permits and licenses from all applicable local authorities necessary
or required with respect to the occupation and use of the Leased Premises by
Tenant as herein contemplated;
4. OPERATING EXPENSES. (a) In addition to Base Rent, Tenant shall
------------------
pay as Additional Rent during each Lease Year of the Term, Tenant's Prorata
Share of (i) Common Area Maintenance Expenses, (ii) Real Estate Taxes and (iii)
Insurance Costs. "Tenant's Prorata Share" shall be the percentage determined by
dividing the total leasable area of the Leased Premises by the total leasable
area of the Building. On the date hereof, Tenant's Prorata share is projected to
be [*]% ([*]).
---- ---
(b) "Common Area Maintenance Expenses" shall mean any and all
costs and expenses whatsoever incurred or paid by Landlord relating to or in
connection with operating, maintaining, repairing, managing and replacing, and
providing services to, the Building, Common Areas and the Land (and all
easements, rights and appurtenances thereto), including but not limited to: (i)
costs and expenses of operating, maintaining, repairing, replacing, lighting,
painting, decorating and cleaning the Project, removing snow, ice and debris
therefrom, and policing and regulating traffic therein and thereon; (ii)
assessments or charges imposed pursuant to the Declaration of Covenants,
Conditions and Restrictions of [*], as amended, superseded or supplemented, from
---
time to time (as amended, superseded or supplemented, the "Declaration"); (iii)
costs and expenses of supplies and equipment and maintenance and service
contracts; (iv) costs and expenses of replacing, repairing, repaving and
striping pavements, curbs, walkways, parking areas, driveways and truckways,
drainage and lighting, facilities and other Common Areas amenities; (v) all
utility expenses, costs and charges including water and sewer charges; (vi)
contributions with respect
_____________________
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
2
<PAGE>
to, and costs and expenses of maintenance, repair and replacement of, on and
off-site utility systems serving the Project; (vii) all landscaping (including,
but not limited to, maintenance and new and replacement plantings); (viii)
consulting and management fees not to exceed four percent (4%) of actual
expenses and all other fees, charges and costs of or by contractors and agents
employed by Landlord; (xi) commissions, wages, salaries and other labor costs
and all persons engaged in such maintenance, operation, repair, management and
the like (including, but not limited to, taxes, insurance, medical and other
benefits); (xii) any capital expenditures incurred either to reduce Common Area
Maintenance Expenses, to comply with any governmental law, order, requirement or
regulation or to replace existing structures, equipment and machinery, such
capital costs to be amortized over such reasonable period as Landlord shall
determine, together with interest at the rate paid by Landlord on any funds
borrowed for such expenditures; (xiii) legal and accounting fees and charges
(except as otherwise provided hereinafter); and (xiv) any other expenses or
charges included in Common Area Maintenance Expenses with respect to comparable
office-warehouse buildings in the Ashburn, Virginia area. Common Area
-----------------
Maintenance Expenses shall not incur any of the following: ground rent; interest
and amortization of funds surrounded by Landlord (except as specifically
provided above); leasing commissions and advertising, legal, and space planning
expenses incurred in procuring tenants for the Building; and salaries, wages, or
other compensation paid to officers or executives of Landlord in their
capabilities as officers and executives. Landlord agrees that any and all cost
and expenses for such above-mentioned repairs, improvements, maintenance, and
service contracts, or any work commenced by any trade or contractor in excess of
$5,000.00 per event, must be competitively bid with award of such contract or
bid to the lowest qualified bidder.
Notwithstanding anything to the contrary contained in this Lease, it
is expressly understood that Common Area Expenses do not include (i) amounts due
under loans encumbering the Leased Premises, or payments of rent under ground
leases of the Leased Premises, (ii) depreciation of the Building or of any
building service equipment, (iii) brokerage commissions in connection with
leasing all or a portion of the Building or Land, (iv) attorneys' fees,
accounting costs and other costs directly related to leasing space in the
Building or Land, except in the context of reviewing, negotiating, and/or
drafting of any assignment or sublease proposed by any Tenant, (v) physical
damage to property caused by the active negligence or willful misconduct of
Landlord or its employees, agents or contractors, (vi) all cost incurred by
Landlord to investigate remedial Hazardous Waste or Hazardous Materials to the
extent Landlord is not otherwise indemnified against such costs by Tenant
pursuant to this Lease, (vii) costs incurred by Landlord for repairing damage
which costs are actually recovered for insurance proceeds (or if Landlord fails
to carry insurance which it is required to carry under this Lease, the costs
that would have been recovered from insurance proceeds had Landlord carried such
insurance) or condemnation awards and (viii) Landlord's overhead and
administrative costs to the extent exceeding management fee charges permitted
pursuant to the provisions of this Paragraph.
(c) "Real Estate Taxes" shall mean any and all real estate
taxes, assessments, water and sewer tests and charges, liens, charges, levies
and other governmental impositions and charges of every kind and nature
whatsoever, general or special, ordinary or extraordinary, foreseen or
unforeseen, assessed, levied or imposed upon, or arising in connection with, the
fixtures, machinery, equipment or systems, in, upon or used in connection with
the operation of the Building or the Land; including, but not limited to,
metropolitan district water
3
<PAGE>
and sewer charges, any assessments for public facilities or improvements for the
areas in which the Project is located and taxes, assessments, charges and the
like upon this Lease or any rents from the use, occupancy or possession of the
Project. If, because of any change in the method of taxation of real estate or
because of the enactment of any new tax by federal, state, county or local
government, any other tax or assessment is imposed upon Landlord, or the rents
or income derived from the Project, in substitution for, or in lieu of, or in
addition to, any tax or assessment which would otherwise be included within Real
Estate Taxes hereunder. Real Estate Taxes shall also include all expenses
incurred by Landlord in obtaining or attempting to obtain a reduction of Real
Estate Taxes, including, but not limited to legal fees. Tenant may in good faith
contest or appeal the amount of any personal taxes or Real Estate Tax or
assessment at Tenant's expense directly to the taxing authority, but in such
event, Tenant shall indemnify Landlord against liability therefor. Landlord will
reasonably cooperate at Tenant's expense in joining such appeal if required by
the taxing authority.
Notwithstanding the foregoing, the term "Real Estate Taxes" shall not include
estate, inheritance, transfer, gift or franchise taxes of Landlord or any tax or
governmental charge based upon the net or gross income or receipts of the
Landlord except for any tax on gross income or receipts of the Landlord except
for any tax or gross income or receipts applied solely to rents from real
property.
(d) "Insurance Costs" shall mean all insurance expenses incurred
by Landlord relating to all insurance of whatsoever nature kept or caused to be
kept by Landlord in connection with the ownership, operation, use or management
of the Project, including, but not limited to, any and all policies of fire and
extended coverage insurance (including, without limitation, extended and broad
form coverage risks, mud slide, land subsidence, flood and earthquake), rent and
business interruption insurance, boiler insurance, sprinkler insurance,
comprehensive general public liability insurance (including, without limitation,
an all-risk liability endorsement) and excess liability insurance.
(e) Tenant's Prorata Share of such Common Area Maintenance
Expenses, Real Estate Taxes and Insurance Costs for each calendar year shall be
paid in monthly installments in advance on the first day of each calendar month,
commencing with the Commencement Date, in amounts reasonably estimated by
Landlord to be "Tenant's Prorata Share thereof based upon, among other things,
actual expenses, if any, incurred with respect to the immediately preceding
calendar year. Such estimates may be revised, at any time and from time to time
during such calendar year (but in no event more often than 4 times during any
calendar year), in which event Tenant shall immediately commence making monthly
payments hereunder pursuant to such new statement and, in addition, with the
next monthly payment of Base Rent, pay to Landlord the difference between
monthly payments for the preceding months based on such revised statement and
the amount actually paid by Tenant with respect to such preceding months; it
being understood, acknowledged and agreed, however, that as to Common Area
Maintenance Expenses, Real Estate Taxes and Insurance Costs payable or paid in
advance by Landlord, Tenant covenants and agrees to pay Tenant's Prorata Share
thereof within 10 days after receipt of Landlord's written demand therefor.
Within 120 days following the expiration of such calendar year, Landlord shall
furnish to Tenant a written statement showing the actual amount of Tenant's
Prorata share of Common Area Maintenance Costs, Real Estate Taxes and Insurance
Costs for such calendar year and the payments thereto made by Tenant and known
as
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the "Year End Report." If the payments made by Tenant shall exceed Tenant's
actual share of such costs, Tenant shall, provided Tenant is not in default
hereunder, be entitled to a credit for such excess against payments next
thereafter due to Landlord pursuant to this Section 4; it being understood,
acknowledged and agreed, however, that if Tenant is indebted to Landlord
hereunder in any amount for any reason whatsoever, Landlord may deduct such
amount owned from such overpayment and if on or after termination of this Lease,
the overpayment will be returned to Tenant within thirty (30) days after the
Year end Report referenced in the proceeding sentence. If Tenant's share of such
costs shall exceed the payments made by Tenant, Tenant shall pay to Landlord the
deficiency within 30 days after Landlord shall submit the aforesaid statement to
Tenant. Tenant's obligations pursuant to this Section 5 shall survive the
expiration or sooner termination of this Lease. Landlord's failure to provide
the statement called for above in this Section 5(e) shall not release or relieve
Tenant of Tenant's obligations under this Section 5 or elsewhere in this Lease.
5. SECURITY DEPOSIT. Upon the execution of this Lease, Tenant shall
----------------
pay to Landlord $[*] ("the Deposit") as security for the faithful performance by
Tenant of all of the terms, covenants, and conditions of this Lease (including,
but not limited to, the payment of Rent). The Security Deposit shall be given in
cash in the minimum amount of $[*]. In the event Tenant pays to Landlord the
full amount of the Security Deposit in the form of cash, Tenant may elect to
convert $[*] of the Security Deposit into the form of an unconditional,
irrevocable letter of credit in the name of the Landlord and payable upon
presentation at a federally-insured national bank in the Commonwealth of
Virginia, in such form and content as landlord shall reasonably require, or in
such form as Landlord may approve, or in a combination of the foregoing. Upon
Landlord's receipt of an approved letter of credit, Landlord shall refund to
Tenant the full amount of the letter of credit up to a maximum amount of $[*]
within thirty (30) days. Landlord may, but is not obligated to, without waiving
or satisfying such Event of Default, or waiving or limiting any other rights or
remedies of Landlord or limiting Tenant's liability to Landlord, apply all or
any portion of the Deposit on account of any Event of Default hereunder, as well
as on account of any expense incurred or paid, or damages suffered, by Landlord
in connection with such failure, and Tenant, within ten (10) days following
receipt of written notice of demand, shall replenish the amount necessary to
restore the full Deposit. Landlord may commingle the Deposit with any other
accounts that Landlord holds, and Landlord shall not be obligated to pay any
interest accrued on the Deposit to Tenant. In the event of a sale or other
transfer of the Project (or Landlord's interest therein), Landlord shall have
the right to transfer to such purchaser or other party the Deposit and Landlord
thereupon shall be released by Tenant from all liability for the return thereof,
and Tenant agrees to look to the new landlord solely for the return thereof.
6. UTILITIES. Tenant shall be solely responsible for, and promptly
---------
pay as and when due, all changes and assessments for heat, gas, electricity,
telephone and other utilities used, consumed or provided to or on the Leased
Premises and shall, at Tenant's sole cost and expense, arrange with the
appropriate utility companies for the provision, augmentation or modification of
such utilities to the Leased Premises. Notwithstanding anything herein to the
contrary, Landlord shall not be liable in any respect for any damages
whatsoever, whether to or with respect to person, property, Tenant's business or
otherwise, for interruption in, or stoppage, suspension or curtailment of, any
utility service or system (whether caused by or arising out of Landlord's need
to make repairs or any other reason whatsoever), nor shall the same
_____________________
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
5
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(a) constitute a constructive eviction or interference or disturbance with
Tenant's use, possession or enjoyment of the Leased Premises, (b) constitute
grounds for abatement, reduction or rebate, in whole or in part, of Rent or any
other sum payable by Tenant hereunder, or (c) release or relieve Tenant of or
from any Tenant's obligations hereunder. In the event landlord shall elect, or
be required by governmental authorities, to install in the Leased Premises
individual meters or other devices to measure any or all of the utilities
consumed in the Leased Premises, Tenant shall pay to Landlord the charges
incurred for such meters and the installation thereof in the Leased Premises. If
any such utilities are not separately measured, Tenant shall pay to Landlord,
within thirty (30) days after Tenant's receipt of Landlord's written demand
therefor, Tenant's allocable share of such utilities as reasonably determined by
Landlord.
7. MAINTENANCE AND REPAIR BY LANDLORD. Landlord shall, subject to
----------------------------------
the provisions of Sections 14 and 17 hereof and so long as Tenant is not in
default hereunder, keep the foundation, the exterior walls (except plate glass
windows, doors, door closure devices, window and door frames, molding, locks and
hardware and painting or other treatment of interior walls, all of which shall
be Tenant's responsibility to maintain, replace and repair) and the roof of the
Leased Premises in good repair, ordinary wear and tear excepted. Any repairs
required to be made by Landlord under this Lease which are occasioned by the
act, omission or negligence of Tenant, or Tenant's agents, employees,
subtenants, licensees, invitees, visitors, contractors, servants, customers or
others acting, through or under Tenant or for or on behalf of Tenant
(collectively, "Tenant's Agents"), shall be paid for by Tenant, at any time and
from time to time, upon receipt of Landlord's demand to the extent not covered
by any net insurance proceeds paid or payable to Landlord therefor. In the event
that the Leased Premises should become in need of repairs required to be made by
Landlord hereunder, Tenant shall immediately give written notice thereof to
Landlord and Landlord shall not be obligated in any way to commence any such
repairs until a reasonable time shall have elapsed after Landlord's receipt of
such written notice. Notwithstanding the above, because of the sensitive nature
of Tenant's business and equipment, if Landlord does not repair roof leaks
within five (5) business days of written notice of such leaks from Tenant, then
Tenant may make the repairs and shall invoice Landlord for the reasonable cost
of such repairs, which Landlord will pay to Tenant within thirty (30) days of
receipt of the invoice and reasonably substantial evidence of completion of the
repairs. Notwithstanding anything contained herein, Tenant shall use the roof
manufacturers' approved roof installation and repairs contractors only to
perform any repairs.
8. CONTROL. The Common Areas shall be subject to Landlord's
-------
reasonable management and control and shall be operated and maintained in such
manner as Landlord, in its reasonable discretion, shall determine. Without
limiting the generality of the immediately preceding sentence, Landlord reserves
the exclusive right to install, construct, remove, maintain and operate lighting
systems, facilities, improvements, buildings, equipment and signs on, in or to
all parts of the Common Areas and the Building; increase, reduce or change the
number, size, height, layout, or locations of buildings, walks, driveways and
truckways, parking areas and/or Common Areas now or hereafter forming a part of
the Project; make alterations or additions to the Building; close temporarily
all or any portion of the Common Areas to make repairs, changes or to avoid
public dedication; grant easements, or replat or subdivide or make such other
changes to the Land, as Landlord shall deem necessary; place, relocate and
operate utility lines through, over or under the Leased Premises necessary to
serve
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<PAGE>
other portions of the Building; and use or permit the use of all or any portion
of the roof of the Building.
9. OCCUPANCY BY TENANT. (a) Tenant covenants and agrees to, at its
-------------------
sole cost and expense, observe and comply with the provisions of (i) all matters
of record (including, but not limited to, the Declaration and all Mortgages),
(ii) all building, zoning, fire and other governmental laws, ordinances,
regulations, requirements, codes, certificates of occupancy and rules, (iii) the
orders and directives (pursuant to law) of public officials applicable to the
Leased Premises and/or the balance of the Project or the conduct of the business
in the Leased Premises by Tenant, (iv) all rules, regulations, orders and
requirements of carriers of insurance insuring the Project; and (v) the Rules
and Regulations, attached hereto as Exhibit "F" and made a part hereof, and any
-----------
additions thereto and modifications thereof as adopted by Landlord from time to
time. Notwithstanding anything herein to the contrary, Tenant, at its sole cost
and expense, shall make any and all repairs, alterations, additions and
improvements of any nature whatsoever required by any governmental authority by
reason of Tenant's use or occupancy of the Leased Premises.
(b) Tenant shall not keep or allow to be kept anything within
the Leased Premises or use or permit the use of the Leased Premises for any
purpose or in any manner, which causes or might cause an increase in the
insurance premium cost of, or invalidate or breach or conflict with, any
insurance policy carried on all or any part of the Project, or cause any
existing or prospective insurer to refuse to issue any insurance policy with
respect to all or any portion of the Project or the Landlord's business, or
cerate any risk of fire or other hazard. Notwithstanding the above, Landlord
acknowledges Tenant's use of Equipment and Tenant's Generator which may cause an
increase in Landlord's insurance premium cost which increase related to Tenant's
use of Equipment and Tenant's Generator shall be paid as Additional Rent, upon
receipt of Landlord's demand therefor, any such increased premium cost due to or
associated with Tenant's unique use or occupation of the Leased Premises or
Tenant's storage of goods. Tenant, at its sole cost and expense, shall comply
with all rules, regulations, orders and requirements of the American Insurance
Association (formerly the National Board of Fire Underwriters) and of any other
similar body having jurisdiction over the Project).
10. INSURANCE; INDEMNITY. (a) Tenant shall, at Tenant's sole cost
--------------------
and expense, carry and keep in force at all times during the Term (i) a policy
of comprehensive general public liability insurance, together with a contractual
liability endorsement, with limits of not less than $1,000,000 in respect of
bodily injury to or death of any one person, an amount not less than $2,000,000
in respect to bodily injuries or death(s) occurring in any one occurrence and an
amount not less than $500,000 in respect of property damaged or destroyed; (ii)
fire and extended coverage insurance covering the full replacement cost of all
alterations, additions, partitions, improvements, equipment, furniture, fixtures
and inventory made or placed by Tenant in the Lease Premises against "all-risk"
of physical loss; (iii) worker's compensations insurance with limits not less
than that required by law; and (iv) such additional amounts of insurance and
additional types of coverage as Landlord may reasonably request from time to
time. Tenant's liability hereunder shall not be limited to the insurance
coverage maintained, or required to be maintained pursuant hereto by Tenant. All
such policies shall be with companies licensed to do business in the state in
which the Land is located, and from a responsible company satisfactory to
Landlord, and contain a waiver of subrogation as contemplates in Section 10(d)
below.
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<PAGE>
Landlord, and Landlord's Mortgagee if requested by Landlord, shall be named as
additional insurers under such insurance policies. All such insurance policies
shall be primary and non-contributing with any insurance carried by the
Landlord, shall be written on an "occurrence" basis and not on a "claims-made"
basis, and shall contain endorsements requiring 45 days' notice to Landlord
prior to any cancellation or any reduction in amount of coverage. Tenant shall
deliver to Landlord as a condition precedent to Tenant's taking occupancy of the
Leased Premises (but not to Tenant's obligation to pay Rent), A complete
duplicate copy of all such policies maintained by Tenant, and shall also deliver
copies thereof to Landlord not less than 30 days prior to the expiration date of
each such policy. Tenant's failure to comply with any of the requirements of
this Section 10(a) shall be an Event of Default.
(b) Neither Landlord, nor any of the Landlord's partners,
officers, members, directors, agents or employees, shall, to the extent
permitted by law, have any liability to Tenant, or to Tenant's Agents, for any
damage, injury, loss or claim based on or arising out of any cause whatsoever,
including, without limitation, the following; repair to any portion of the
Leased Premises, Building or Common Areas; interruption in the use of the Leased
Premises or any equipment therein; any accident or damage resulting from any use
or operation by Landlord, Tenant or any person or entity of heating, cooling,
electrical, sewerage or plumbing equipment or apparatuses; termination of this
Lease by Landlord for damage to the Lease Premises or the Building; fire,
robbery, theft, vandalism, mysterious disappearance or any other casualty;
actions of any other tenant of the Building or of any other person or entity;
failure or inability to furnish any service specified in this Lease; and leakage
in any part of the Leased Premises or the Building from water, rain, ice or snow
that may leak into, or flow from, any part of the Leased Premises or the
Building, or from drains, pipes or plumbing fixtures in the Leased Premises or
the Building. Notwithstanding the foregoing, Landlord shall not except as set
forth in Section 10(d) below or elsewhere herein, be released from liability to
Tenant for any injury caused by Landlord's willful misconduct or gross
negligence. In no event, however, shall Landlord have any liability to Tenant on
account of any claims for the interruption of or loss to Tenant's business or
for any indirect damages or consequential losses.
(c) Tenant shall, to the extent permitted by law, reimburse
Landlord for, and shall defend (upon Landlord's request), indemnify and hold
Landlord, its partners, officers, members, directors, employees and agents
harmless from and against, any and all costs, damages, claims, liabilities,
expenses (including, but not limited to, attorneys' fees and court and
litigation costs), losses, demands, actions, causes of action, judgements,
proceedings and obligations of any nature whatsoever suffered by or claimed
against Landlord, directly or indirectly, resulting from, based on or arising
out of, in whole or in part, (i) the possession, use and/or occupancy of the
Leased Premises or the business conducted therein or therefrom (whether or not
damage or loss occurs in or on the Leased Premises, the Common Areas or
elsewhere); (ii) any act or omission of Tenant, or any of Tenant's Agents;
and/or (iii) any breach of the provisions of Section 28(u) hereof). The
provisions of Section 10(b) above and this Section 10(e) shall survive the
expiration or sooner termination of this Lease with respect to any claims,
liabilities and the like attributable to acts, omissions, occurrences and/or
conditions existing or occurring prior to such expiration or termination.
(d) Without limiting the provisions of Section 10(b) above or
any other provisions hereof as to Landlord, Landlord and Tenant each hereby
release the other from
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<PAGE>
any and all liability or responsibility to the other or any one claiming through
or under them, by way of subrogation or otherwise, from or with respect to any
loss or damage to property caused by fire or any other perils insured under
policies of insurance covering such property (but only to the extent of the
insurance proceeds payable under such policies), even if such loss or damage is
attributable to the fault or negligence of the other party, or anyone for whom
such party may be responsible, including any other tenants or occupants of the
Building. The foregoing notwithstanding, this mutual release shall be applicable
and in force and effect only to the extent lawful at the time any claim is made,
and in any event only with respect to loss or damage occurring during such times
as the releasor's policies shall contain a clause or endorsement providing that
any such release shall not adversely affect or impair said policies or prejudice
the right of the releasor to recover thereunder. Landlord and Tenant shall
request their respective insurance carriers to include in its policies such a
clause or endorsement. If additional cost shall be charged therefor, the party
responsible for procuring such insurance shall pay such additional costs. If
Tenant fails to obtain or maintain any such property insurance policies as
required hereunder, Tenant's release of Landlord shall remain and be deemed in
full force and effect as to the coverage thereof as if such policies, and an
insurer's waiver of subrogation endorsement, were obtained and in full force and
effect; provided, however, that nothing herein shall excuse Tenant's failure to
maintain any insurance required hereunder or constitute a waiver or limitation
of any other rights and remedies of Landlord in the event Tenant fails to
maintain any insurance.
11. REPAIRS. Except as to Landlord's obligations pursuant to
-------
Sections 7, 14 and 17 hereof, and in addition to all other repair, maintenance
and replacement obligations of Tenant act forth herein, Tenant agrees to
maintain the Leased Premises at all times during the Term in a neat, clean and
sanitary condition and in good order and repair and shall make all needed
repairs and replacements thereto. Such maintenance, replacement and repair shall
be at the sole cost of Tenant and shall include, but not be limited to, the
maintenance, replacement and repair of floor coverings, ceilings and walls,
front and rear doors, all glass on the Leased Premises, all plumbing units,
pipes and connections, and all heating, ventilating and air conditioning
equipment and systems.
12. TENANT'S PROPERTY. Furnishings, equipment, machinery and trade
-----------------
fixtures that can be installed by Tenant with or without drilling, cutting or
otherwise defacing the Leased Premises (collectively, "Tenant's Personal
Property") may be installed by Tenant on the Leased Premises and shall be the
property of Tenant. On the expiration of this Lease, if Tenant is not in default
hereunder, Tenant may remove any such property (and shall remove any such
property if directed by Landlord) and shall repair any damage caused by such
removal and reimburse Landlord for Landlord's cost of so repairing the Lease
Premises. If Tenant fails to remove the Tenant's Personal Property as required
under this Lease, Landlord may do so and Landlord shall not be liable for any
loss or damage to such property of Tenant which may occur during Landlord's
removal thereof, or Landlord may treat such property as abandoned and remove and
keep the same, and Tenant shall pay the entire cost of such removal to
Landlord's written demand therefor. Tenant agrees to pay all taxes on Tenant's
Personal Property and if such taxes are levied against Landlord, or the assessed
valued of the Project is increased by inclusion of a value placed on such
property, Tenant shall pay such taxes to Landlord on demand if Landlord is
required to pay such taxes (or reimburse Landlord on demand if Landlord pays
such taxes). Notwithstanding anything herein to the contrary, any property
placed by Tenant in or about the Leased Premises or the Building shall be at the
sole risk of Tenant, and Landlord
9
<PAGE>
shall not in any manner be responsible therefor. The provisions of this Section
12 shall survive the expiration or sooner termination of this Lease.
Notwithstanding the above, Tenant shall have the right to install equipment and
trade fixtures in the manner and extent set forth in Exhibit "K" hereto.
13. IMPROVEMENTS AND ALTERATIONS BY TENANT: (a) Without Landlord's
--------------------------------------
prior written approval (which may be withheld in Landlord's reasonable
discretion), Tenant may not make or permit any additions, improvements,
alterations, substitutions, replacements or modifications, structural or
otherwise, to the Leased Premises (including, but not limited to, all
electrical, heating, ventilating, air conditioning, plumbing or mechanical
systems within the Leased Premises) (collectively, the "Alterations"), or attach
any machines, equipment and fixtures (other than the Tenant's Personal Property
provided the same are installed at no cost or expense to Landlord), which may be
made or installed by either party upon the Leased Premises shall be and remain
the property of Landlord and shall remain upon and be surrendered with the
Leased Premises, unless Landlord requests their removal at such time that the
Landlord approves and gives consent, in which event Tenant shall remove the same
and restore the Leased Premises to its original condition at Tenant's sole cost
and expense and Tenant shall pay the entire cost of such removal to Landlord
upon Tenant's receipt of Landlord's written demand therefor. If Tenant fails to
remove such Alterations and property and restore the Leased Premises as
aforesaid, Landlord may do so and Tenant shall pay the entire cost thereof to
Landlord as Additional Rent within 10 days after Tenant's receipt of Landlord's
written demand therefor. Any such Alterations performed by Tenant shall be done,
at Tenant's sole cost and expense, in strict conformity with any plans and
specifications approved by Landlord prior to Tenant commencing such work and in
such a manner to minimize interference with other construction in the Building
or on the Land in progress and with the use or enjoyment of all or any portion
of the balance of the Project by any other tenants. All work performed shall be
done in a good and workmanlike manner by contractors approved by Landlord and
with materials of comparable quality, value, utility and appearance as
originally installed in the Leased Premises. Landlord's consent to or approval
of and Alterations (or the plans and specifications therefor) shall not
constitute a representation or warrant by Landlord, nor Landlord's acceptance,
that the same comply with (a) sound architectural and/or engineering practices,
or (b) applicable laws, regulations, rules, codes, ordinances and other
governmental requirements, and Tenant shall be solely responsible for enduring
all compliance with the matters referred to in (a) and (b) above in this
sentence. In each instance in which Landlord's approval is requested or required
hereunder, Tenant shall reimburse Landlord as Additional Rent, upon receipt of
written demand therefor, for all out-of-pocket cost and expenses incurred or
paid by Landlord during such review process.
(b) Nothing contained in this Lease shall be deemed or construed
in any way as constituting the consent or request of, or order or authorization
by, Landlord, express or implied, by inference or otherwise, to any contractor,
subcontractor, laborer or materialman for the performance of any labor, or the
furnishing of any materials, that would give rise to the filing of any lien
against the Leased Premises, or the Project, or any part thereof. Landlord shall
have the right to post and keep posted on the Leased Premises any notices that
may be provided by law or which Landlord may deem to be proper for the
protection of Landlord, the Leased Premises and the Project from such lien(s).
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14. CASUALTY. (a) If the Leased Premises is destroyed or damaged by
--------
fire, earthquake or other casualty (collectively, a "Casualty") and Landlord
does not elect to terminate this Lease as herein provided, Landlord shall,
subject to the terms hereof and obtaining all necessary public approvals and
solely to the extent of net insurance proceeds actually received by Landlord
(and free of all claims by Mortgagees and others and all expenses), and provided
such Casualty is not due to the negligence or wrongful acts of Tenant, or any of
Tenant's Agents (subject, however, to subrogation rights as set forth in
Paragraph 10(d)), proceed in a reasonable manner to rebuild and restore the
Leased Premises or such part thereof as may be destroyed or damaged to as near
its former conditions as circumstances will reasonably permit. During the period
of such rebuilding and restoration, Base Rent shall, provided such Casualty is
not due to the negligence or other wrongful acts of Tenant, or any of Tenant's
Agents, be abated in the same ratio as the square footage of the portion of the
Leased Premises rendered untenantable, to the extent, and so long as, however,
the Leased Premises remains untenantable. If, however, Landlord shall reasonably
determine that such destruction or damage cannot be repaired within one hundred
eighty (180) days after the date of such Casualty, either Landlord or Tenant may
elect to terminate this Lease by giving written notice of such election to
Tenant within 90 days after the date of such Casualty, in which event this Lease
and the tenancy created hereunder shall terminate as of the date of such notice
and Rent shall (except to the extent Tenant has continued to make use of all or
any of the Leased Premises) be abated as of such date of such Casualty. Tenant
agrees to give notice to Landlord of any Casualty occurring in, on, or about the
Leased Premises within 24 hours from the occurrence thereof.
(b) If Landlord is required to repair the Leased Premises under
the provisions of this Section 14, Landlord's obligation shall be limited to the
Landlord's Work, excluding, in any event, all alterations, fixtures or signs
installed by Tenant and all floor coverings, furniture, equipment and
decorations or other Tenant's Personal Property. Tenant, at Tenant's expense,
shall promptly perform all repairs and restoration not required to be done by
Landlord and shall promptly re-enter the Leased Premises to perform such work.
(c) Anything contained herein to the contrary notwithstanding,
if (i) the proceeds of Landlord's insurance (recovered or recoverable) as a
result of any damage to the Leased Premises by any Casualty (exclusive of rent
insurance) shall be insufficient to pay fully for the cost of repair of the
Leased Premises, (ii) the Leased Premised shall be damaged by a Casualty which
is not covered by Landlord's insurance, or (iii) the Building is more than fifty
percent (50%) damaged by fire or other casualty (although the Leased Premises
may not be affected) that Landlord decides in Landlord's sole and absolute
discretion not to rebuild or construct the Building, Landlord shall have the
right to terminate this Lease by giving written notice of such termination to
Tenant within 90 days after the date of such Casualty in which event this Lease
and the tenancy created hereunder shall terminate as of the date of such notice
and Rent shall (except to the extent Tenant has continued to make use of all or
any of the Leased Premises) be abated as of the date of such Casualty.
Notwithstanding the above, as to the event of (i) or (ii) above, if Landlord
elects to terminate this Lease, the Tenant may prevent this termination if,
within fifteen (15) days of the receipt of Landlord's notice of its election to
terminate, that Tenant agrees at its sole expense to make the repairs and
restoration work not covered by insurance and to continue its occupancy and
tenancy under the Lease. In the event the Rent shall only abate to the date
Tenant elects to restore the Leased Premises at its expense.
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15. SUBLETTING AND ASSIGNMENT. Without the prior written consent of
-------------------------
Landlord in each instance, which consent may not be unreasonably withheld in
Landlord's reasonable discretion. Tenant shall not directly or indirectly (in
one or more transaction), voluntarily, involuntarily or by operation of law,
assign transfer, pledge, mortgage or otherwise hypothecate or encumber all or
any portion of Tenant's legal or equitable interest in this Lease or in the
Leased Premises, nor sublet all or any portion of the Leased Premises, nor enter
into any management, license, concession or other contract or agreement which
provides for a direct or indirect transfer of operating control over the
business operated in, or the use of occupancy of, the Leased Premises. Any
direct or indirect transfer, sale, pledge or other disposition, in a single
transaction or cumulatively during the Term, of at least 25% of the ownership
interests in Tenant (or any lesser percentage if sufficient to transfer voting
control (if Tenant is a corporation) or management control (if Tenant is a
partnerships)), as well as of any general partnership interest in Tenant if
Tenant is a limited partnership, shall each be deemed an assignment of this
Lease; provided, however, that this limitation shall not apply with respect to
the transfer of voting stock in a corporation, all the outstanding voting stock
of which is listed on a national securities exchange as defined in the
Securities Exchange Act of 1934. Any assignment, sublease or other such transfer
without Landlord's prior written consent shall be voidable by Landlord and
Landlord's election, shall constitute an Event of Default hereunder. Consent of
Landlord to one or more assignments, subletting or encumbering of this Lease or
the Leased Premises shall not operate as a waiver of Landlord's rights (and the
requirement of Landlord's consent), or be deemed Landlord's consent, with
respect to any subsequent assignment, subletting or encumbering. Notwithstanding
any assignment or subletting, Tenant, and each and every guarantor of this Lease
and Tenant's obligations hereunder, shall at all times remain fully and
primarily responsible and liable for the payment of all Rent and other monetary
obligations herein specified and for the compliance with and performance of all
of the Tenant's other obligations under this Lease. Landlord's consent, if any,
to any assignment or sublease will not be effective unless and until (a)
Landlord receives a fully executed copy of the assignment or sublease agreement,
(b) in the case of an assignment, Tenant delivers to Landlord an assumption of
liability agreement in form satisfactory to Landlord including as assumption of
the assignee of all of the obligations of Tenant and the assignee's ratification
of, and agreement to be bound by, all of the terms, conditions and provisions of
this Lease, and (c) Landlord is fully reimbursed by Tenant of Landlord's costs
and fees, including, but not limited to, attorney's fees, incurred in processing
and evaluating any requests for assignment or subletting by Tenant.
Notwithstanding anything to the contrary in this paragraph 15, Tenant may,
without Landlord's prior consent and without Landlord's participation in any
proceeds, sublet the Premises or assign the lease to: (i) a subsidiary,
affiliate, division or corporation controlling, controlled by or under common
control with Tenant; (ii) a successor corporation related to Tenant, by merger,
consolidation, non bankruptcy reorganization, or governmental action; or (iii) a
purchaser of substantially all of Tenant's assets located in the Leased
Premises. For the purpose of this Lease, sale of Tenant's capital stock through
any public exchange shall not be deemed an assignment, subletting or any other
transfer of the Lease or the Leased Premises.
16. LIENS. Tenant shall keep the Project free and clear of and from
-----
any and all liens or encumbrances arising out of any work performed, materials
furnished or obligations incurred by Tenant or otherwise arising out of Tenant's
use or occupancy of the Leased Premises. An Event of Default shall exist of at
any time any such lien or encumbrance is filed, claimed or recorded against, or
otherwise exists with respect to, the Leased Premises or the
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Building and Tenant shall fail to have said lien or encumbrance discharged of
record, or bonded over so as to forever remove such lien or encumbrance as an
encumbrance upon the Project, within 15 days (or if American Institute of
Architects contract form, thirty (30) days) from the date such lien or
encumbrance is filed, claimed or recorded against, or otherwise exists with
respect to, the Project. Tenant shall promptly notify Landlord if Tenant learns
that a lien has been, is about to or might be filed against the Premises.
17. CONDEMNATION. (a) In the event of a taking by any public or
------------
quasi-public authority under the power of eminent domain, condemnation or
expropriation, or in the event of a conveyance in lieu thereof, (all of which
events are herein collectively referred to as a "Taking"), of the whole of the
Leased Premises, then this Lease shall terminate effective upon the date title
to the Leased Premises vests in the condemning authority and Base Rent and
Additional Rent shall be adjusted as of such date.
(b) In the event of a Taking of less than 25% of the Leased
Premises, then this Lease shall terminate only as to the part taken as of the
date title vests in the condemning authority. In the event of a Taking of more
than 25% (but less than all) of the Leased Premises, then Landlord shall have
the right to terminate this Lease by written notice given to Tenant effective
within 60 days after the date title vests in the condemning authority.
(c) If the nature, location or extent of any Taking affecting
the Building (whether or not including the Leased Premises) or the Land is such
that Landlord elects in Landlord's sole and absolute discretion to demolish all
or a portion of the Building, then Landlord may terminate the Lease by giving at
least 60 days' written notice of termination to Tenant at any time after such
Taking. This Lease shall terminate on the date specified in such notice, and
monthly Base Rent and Additional Rent shall be adjusted to such date.
(d) If there shall be a Taking, and this Lease is not terminated
as set forth above in this Section 17, then this Lease shall continue in full
force and proportion to the Base Rent shall be reduced to be that sum which
bears the same proportion to the Base Rent in effect immediately prior to such
Taking as the leasable area of the Leased Premises remaining after such Taking
bears to the leasable area of the Leased Premises immediately preceding such
Taking. Following receipt of the compensation awarded or payment made for such
Taking, Landlord shall commence to make all necessary repairs or alterations to
restore that portion of the Leased Premises remaining to as near its former
condition as the circumstances will reasonably permit; provided, however, that
Landlord shall in no event be required to spend for such repairs and alterations
any sums in excess of the amount of the compensation or payment for such Taking
actually received by Landlord (and free of all claims by Mortgagees and others)
which is attributable to the part of Leased Premises taken (excluding the
proportionate part thereof attributable to the then current market value of the
Project taken) less the cost of collecting such compensation or payment and
provided further that Landlord's obligation shall be limited to the Landlord's
Work and Landlord shall have no obligation to repair, restore or replace any
alterations, fixtures or signs made or installed by Tenant or any floor
coverings, furniture, equipment or decorations or other Tenant's Personal
Property (the repair, restoration and replacement of which shall be the sole
obligation of, and be promptly performed by, Tenant).
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(e) Tenant shall have no claim against Landlord or the
condemning authority for any portion of the amount of the condemnation award or
settlement that may be claimed as damages by Tenant as a result of such Taking
or for the value of any unexpired Term, and all condemnation awards and similar
payments shall be paid and belong to Landlord. Notwithstanding the foregoing,
Tenant may make a separate claim against the condemning authority for a separate
award or payment for the value of Tenant's trade fixtures and for relocation
costs, provided such awards do not reduce Landlord's award.
18. PARKING. Tenant agrees not to overburden the parking areas and
-------
facilities and agrees to cooperate with Landlord and other tenants in the use of
parking areas and facilities, and, in any event, shall use such parking areas
and facilities in accordance with the terms and conditions of the Declaration
and such rules and regulations promulgated by Landlord. Tenant acknowledges and
agree that, except as set forth in the immediately following sentence, all
parking areas and facilities shall be for the non-exclusive use of all tenants
in the Building, their employees, invitees and others; provided, however, that
Tenant, its employees, invitees and customers, shall not have the right to use
any parking spaces or facilities which are reserved for handicapped parking
(unless handicapped, but subject to the rights of other handicapped persons) or
other tenants or which are otherwise set aside or reserved by Landlord. Landlord
hereby agrees to designate 54 parking spaces in the immediate vicinity of the
Leased Premises for the exclusive use of Tenant, its employers and invitees; it
being understood, acknowledged and agreed, however, that Landlord shall have no
obligation whatsoever to monitor or police the use of such parking spaces and
shall have no liability of any nature whatsoever if all or any of such spaces
are used by any other parties, including, but not limited to, other tenants in
the Building.
19. ACCESS.
------
(a) Leased Premises. Landlord acknowledges and agrees that the
Equipment at the Leased Premises is highly sensitive, requiring specialized
maintenance and care. It is essential to the successful operation of Tenant's
business that access to the Leased Promises be restricted to Tenant's employees
and agents. Landlord shall only have access to the Leased Premises for the
purposes for the purpose of making such alterations, repairs, improvements or
additions to the Leased Premises as required pursuant to this Lease. Landlord or
Landlord Parties shall give no less than two (2) days' prior written notice to
Tenant to each entry onto the Leased Premises and upon each entry, Landlord or
Landlord Parties shall be accompanied by a representative of Tenant. Landlord
acknowledges that due to the foregoing reasons, Landlord shall not have a key to
the Leased Premises during the Lease Term.
(b) Emergency Access - Leased Premises. In the event of an
Emergency, Landlord, or emergency personnel including fire or police department
personnel, may use force to enter the Leased Premises in order to remedy such
Emergency; provided, however that Landlord and such emergency personnel shall
use reasonable efforts to avoid causing damage to interfering with the
Equipment. Tenant shall, upon receipt of notice from Landlord, pay for all
damage to the Leased Premises or Building resulting from such forced entry by
Landlord or such emergency personnel into the Leased Premises, including without
limitation, damage to the door leading into the Leased Premises due to an
Emergency, as Additional Rent. For purposes of this Section, an "Emergency"
shall mean a condition in the
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Leased Premises reasonably likely to cause imminent bodily harm to persons at
the Building or imminent and substantial damage to the Building.
(d) Building. Landlord acknowledges and agrees that in order to
accommodate Tenant's specialized utility needs, Tenant shall have a key to each
and every mechanical room located at the Building which contains equipment or
cabling of any kind relating to the Leased Premises of the Equipment, including
without limitation, boiler rooms and electrical rooms (the "Tenant Access
Mechanical Rooms"). Landlord further acknowledges and agrees that it is
essential to the successful operation of Tenant's business that access to each
and every Tenant Access Mechanical Room be restricted to only those of
Landlord's employees and agents who are trained as to the special requirements
of the Equipment and Tenant's specialized utility needs.
20. SIGNS. All signs and symbols placed in the doors or windows or
-----
elsewhere about the Leased Premises, or upon any other part of the Building,
including building directories, shall comply with and satisfy all conditions of
the Declaration and all laws, ordinances, regulations, requirements and the like
and shall, in any event, not be placed or installed without the prior written
approval of the Landlord. Any signs or symbols which have been placed without
approval may be maintained by Tenant at its sole cost and expense during the
Term and upon the expiration or sooner termination of this Lease all signs
installed by Tenant shall be removed and any damage resulting therefrom shall be
promptly repaired at Tenant's sole cost and expense. The provisions of this
Section 20 shall survive the expiration or sooner termination of this Lease.
21. SUBORDINATION. This Lease, and the rights of Tenant hereunder,
-------------
are and shall be, without further action by any party, subject and subordinate
to the lien, terms, conditions, operation and effect of any and all Mortgage(s)
now or hereafter encumbering or otherwise affecting the Land or Building and all
advances made or hereafter to be made upon the security hereof, and the rights
of any Mortgagee thereunder or with respect to each such Mortgage. The term
"Mortgage" means any mortgage, deed of trust, ground lease or other security or
financing instrument encumbering or otherwise affecting the Land or Building and
all renewals, replacements, modifications, consolidations, recasting,
refinancing or extensions thereof. At the election of any holder or beneficiary
of any Mortgage (collectively, a "Mortgagee"), this Lease shall be superior to
the lien of the applicable Mortgage. Upon request by Landlord, Tenant agrees to
execute whatever documentation may be required to further affect the provisions
of this Section 21 wherein such documentation shall include Landlord's standard
Non-Disturbance and Attornment clause. Tenant agrees that if any proceedings are
brought pursuant to a Mortgage (whether or not for foreclosure of the Mortgage)
or termination of any ground lease, Tenant, if requested to do so by the
purchaser or other successor to Landlord pursuant to foreclosure or other
proceedings under the Mortgage (including, but not limited to, any Mortgagee or
ground lessor), or pursuant to any conveyance in lieu of foreclosure, shall
recognize and attorn to such party as Landlord under this Lease, and shall make
all payments required hereunder to such new landlord without deduction or set-
off and, upon the request of such purchaser or other successor, execute, deliver
and acknowledge documents confirming such attornment. Tenant waives the
provisions of any law or regulation, now or hereafter in effect, which may give
or purport to give Tenant any right to terminate or otherwise adversely affect
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this Lease and the obligations of Tenant hereunder in the event that any such
foreclosure or termination or other proceeding is prosecuted or completed.
22. TENANT'S DEFAULT. Each of the following shall be an "Event of
----------------
Default" by Tenant hereunder:
(a) Tenant shall fail to pay when due any installment of Base
Rent and Additional Rent or any other charge or payment required of Tenant
hereunder;
(b) Subject to the provisions of Section 22(g) below, Tenant
shall violate or fail to perform any of the other terms, conditions, covenants
or agreements of this Lease, and such violation or failure shall continue for a
period of 30 days after Tenant's receipt of written notice thereof to Tenant
from Landlord;
(c) Tenant or any guarantor of this Lease shall (i) make a
general assignment for the benefit of its creditors, (ii) make a transfer in
fraud of creditors, (iii) admit in writing its general inability to pay its debt
when due, (iv) file any petition for, or answer seeking or concerning or
acquiescing to, bankruptcy, reorganization, moratorium, liquidation,
composition, extension, readjustment, arrangement, insolvency, dissolution or
similar relief under any federal, state or other statute, law or regulation or
otherwise, or (v) have filed against it any petition seeking any relief
mentioned in (iv) above in this sentence that is not stayed or dismissed within
30 days;
(d) Any execution, levy, attachment or other process of law
shall occur upon Tenant's Personal Property (or other property) or Tenant's
interest in the Leased Premises;
(e) (i) A trustee, receiver, liquidator or similar officer shall
be appointed for Tenant or any guarantor of this Lease for a substantial part of
Tenant's or any such guarantor's property and such appointment is consented or
acquiesced to by Tenant or any such guarantor, (ii) if not consented or
acquiesced to, such appointment shall not be stayed or dismissed within 30 days
after such appointment, or (iii) Tenant or any such guarantor shall seek the
appointment of any such trustee, receiver, liquidator or similar officer;
(f) Tenant shall vacate or abandon all or any of the Leased
Premises or shall remove or manifest an attempt to remove, not in the ordinary
cause of business, Tenant's goods and property from all or any of the Licensed
Premises such action will not constitute default under this lease if Tenant
continues to pay rent without default and the Leased Premises are kept secure;
and
(g) Any other act, failure or omission specifically referred to
herein as an Event of Default.
23. LANDLORD'S REMEDIES.
-------------------
(a) If an Event of Default shall have occurred and be concurring
with regard to the making of any payment or the doing of any act herein required
to be made or done by Tenant, then Landlord may, but shall not be required to,
make such payment to do such act, and the making of such payment or the doing of
such act by Landlord shall not operate to cure
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<PAGE>
such Event of Default or to stop Landlord from the pursuit of any right or
remedy to which Landlord would otherwise be entitled. Any instrument(s) of Base
Rent and Additional Rent unpaid for 5 days after the date when due shall be
subject to a late charge equal to 5% of such installment payable as Additional
Rent to Landlord upon Tenant's receipt of Landlord's demand therefor. In
addition, any installments of Base Rent and Additional Rent not paid when due,
and any payments by Landlord hereunder on Tenant's behalf or for Tenant's
behalf, shall bear interest until paid at the rate that is 2 percentage points
above the Prime Rate (but in no event greater than the maximum rate permitted
under the laws of the state in which the land is located) and such interest, and
all amounts paid by Landlord on Tenant's behalf, shall constitute Additional
Rent hereunder due and payable upon Tenant's receipt of Landlord's demand
therefor. In addition to the foregoing, and without regard to whether this Lease
has been terminated, Tenant shall pay to landlord all costs incurred by
Landlord, including attorney's fees, with respect to any lawsuit or action
instituted or taken by Landlord to enforce the provisions of this Lease.
(b) If an Event of Default shall have occurred, Landlord, at
Landlord's option, may terminate this Lease by written notice to Tenant,
whereupon, on the date of such notice or any later termination date set forth
therein, all rights of Tenant hereunder shall expire and terminate, everything
herein required on the part of Landlord to be done and performed shall cease,
and this Lease shall end and terminate, except, and provided in all events,
however, that Tenant shall forever remain liable for all of Tenant's obligations
hereunder (including, but not limited to, the payment of Rent), no matter when
first accruing, occurring or arising, as herein provided over the entire Term as
if this Lease had not been terminated.
(c) If an Event of Default shall have occurred, with or without
terminating this Lease, Landlord may enter upon and take possession of the
Leased Premises and expel or remove Tenant and any other person who may be
occupying the Leased Premises or any part thereof, without being liable for
trespass, prosecution or any claim for any damages or liability therefor.
Landlord may thereupon make such alterations and repairs as, in Landlord's
absolute discretion, may be necessary to relet the Leased Premises or any part
thereof, alone or together with other portions of the Building, in Landlord's
name, Tenant's name or otherwise, without notice to Tenant, for such rent and
such use, and for such period of time and subject to such terms and conditions
as Landlord, in its absolute discretion, may deem advisable and receive the rent
therefor. Tenant shall be liable for any and all expenses (including, but not
limited to, attorneys' fees, disbursements and brokerage fees) incurred by
landlord in reentering and repossessing the Leased Premises, in correcting (but
not waiving or curing, or estopping Landlord from asserting any rights or
remedies with respect to) any default of Tenant, in painting, altering,
repairing or dividing the Leased Premises, in protecting and preserving the
Leased Premises by use of security guard and caretakers, and in reletting the
Leased Premises. Tenant shall, over the entire Term as if such repossession, and
any such termination had not occurred, remain liable for and pay to Landlord, on
demand, any deficiency between (i) the amount of Rent payable by the Tenant
hereunder, and (ii) any amount received by Landlord pursuant to any reletting
after deducting all of Landlord's expenses as described in the immediately
preceding sentence (all amounts so received by Landlord to be applied on account
of Tenant's obligations hereunder in any order that Landlord deems fit in
Landlord's sole discretion). Suit may be brought by Landlord at any time and
from time to time to enforce collection of such difference(s), and any suit
brought by Landlord to enforce collection of such
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difference(s) for any one month shall not prejudice Landlord's right to enforce
the collection of any difference for any subsequent month(s) in subsequent
separate actions at any time and from time to time, as said damages shall have
been made more easily ascertainable by successive reletting. Landlord shall not
have any obligation to relet or attempt to relet all or any of the Leased
Premises and Landlord shall not be liable for any failure to relet the Leased
Premises or any part thereof or for any failure to collect any rent due upon any
such reletting. Notwithstanding any such reletting without termination, Landlord
may at any time thereafter elect to terminate this Lease for such prior Event of
Default. Tenant's liability shall survive the institution of summary proceedings
and the issuance of any warrant hereunder. No entry or taking possession of the
Leased Premises by Landlord will be construed as an election on Landlord's part
to terminate this Lease unless a written notice expressly stating such intention
is sent to Tenant.
(d) Landlord shall, to the extent permitted by law, have (in
addition to all other rights and remedies whatsoever) a right of distress for
rent and a lien on all of Tenant's personal property, except telecommunications
related equipment, and other property on the Leased Premises, as security of all
Rent and any other sums payable under this Lease.
(e) If Landlord terminates this Lease pursuant hereto, Landlord
shall be entitled to recover from Tenant at any time thereafter, and Tenant
shall pay to Landlord on demand, as and for liquidated and agreed final damages
for such Event of Default, an amount equal to the difference between (i) all
Base Rent and Additional Rent and other sums which would be payable under this
Lease from the date of such demand through the end of the Term (as if this Lease
had not been terminated), and (ii) the fair market rental value of the Leased
Premises over the same period (net of all expenses and all vacancy periods
reasonably projected by Landlord to be incurred in connection with the reletting
of the Leased Premises), discounted at the rate of five percent (5%) per annum.
Nothing herein shall be construed to affect or prejudice Landlord's right to
prove, and claim in full, unpaid Rent accrued prior to termination of this Lease
or Landlord's right to assert any indemnity claims pursuant hereto.
(f) Tenant, on its own behalf of all persons claiming by,
through or under Tenant, including all creditors, does hereby specifically waive
and surrender any and all rights and privileges, so far as if permitted by law,
which Tenant, and all such persons might otherwise have under any present or
future law (i) to redeem the Leased Premises or the Lease, (ii) to reenter or
repossess the Leased Premises, (iii) to restore the operation of this Lease,
with respect to any dispossession of Tenant by judgment or warrant of any court
or judge, or any re-entry by Landlord, or any expiration or termination, whether
such dispossession, re-entry, expiration or termination shall be by operation of
law or pursuant to the provisions of this Lease or (iv) to the benefit of any
law which excepts property from liability for debt or for distress for rent. The
words "dispossession," "re-enter," "entry," "re-entry," "re-entered," "possess,"
"repossession," "repossess," and "redeem" and the like as used in this Lease
shall not be deemed to be restricted to their technical legal meanings.
(g) Tenant hereby consents to the exercise of personal
jurisdiction over Tenant by the state court, and, if federal jurisdiction shall
be applicable, the United States District Court, with respect to the county in
which the Land is located.
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(h) All and each of Landlord's rights and remedies set forth
herein shall be in addition to all rights and remedies at law or in equity or by
statute or otherwise, all of which are separate, distinct and cumulative and no
one of them, whether or not exercised by Landlord, shall be deemed in exclusion
of any of the others. Without limiting the generality of the foregoing, in the
event Tenant fails to take possession of the Leased Premises as herein required,
Tenant shall, among other things, be obligated to pay Landlord in full for all
Tenant improvements constructed or installed within the Leased Premises and for
all materials ordered at Tenant's request for the Leased Premises. The exercise
or beginning of the exercise by Landlord of any right or remedy shall not
prejudice the simultaneous or later exercise of any other rights or remedies.
24. QUIET ENJOYMENT. If, and so long as, Tenant pays the Rent and
---------------
fully performs and observes each and every term, covenant, obligation and
condition herein contained to be performed or observed by Tenant, Tenant shall
enjoy the Leased Premises during the Term without hindrance or molestation by
Landlord, subject to the terms, covenants and conditions of this Lease and the
lien, terms, conditions, operation and effect of any and all Mortgage(s) and the
rights of any Mortgage thereunder or with respect thereto.
25. FINANCING.
---------
(a) If, in connection with obtaining, or pursuant to, any
temporary, construction, permanent or other financing for the Building and/or
the Land, any lender shall request reasonable modifications of this Lease as a
condition to such financing. Tenant shall execute, acknowledge and deliver any
such modification to Landlord within ten (10) days after Tenant's receipt
thereof, provided such modifications do not increase the financial obligations
of Tenant hereunder or materially and adversely affect Tenant's use and
enjoyment of the Leased Premises as herein provided. Tenant agrees to give every
Mortgagee by certified mail, return receipt requested, a copy of any notice of
default served upon Landlord, provided that prior to such notice Tenant has been
notified in writing of the address of such Mortgagee.
(b) Tenant agrees that no Mortgagee shall be (i) bound by any
payment of Base Rent and Additional Rent for more than 1 month in advance, (ii)
bound by any amendment or modification of this Lease made without the consent of
such Mortgagee, (iii) liable for damages for any breach, act or omission of any
prior Landlord, (iv) bound to effect or pay for any construction for Tenant's
occupancy, (v) subject to any off-sets or defenses that Tenant may have against
any prior Landlord or (vi) have any obligation with respect to the Deposit of
Tenant's Prepaid Rent unless, and to the extent, the same has been physically
delivered to such Mortgagee.
26. HOLDOVER TENANCY. If (without execution of a new lease or written
----------------
extension) Tenant shall holdover after the expiration of the Term, then Tenant
shall, subject to Landlord's written consent but without execution of a new
lease, become a tenant at sufferance at a monthly rental equal to twice the Rent
due under the terms of this Lease, commencing said tenancy with the first day
next after the end of the Term. Tenant, as a tenant at sufferance, shall be
subject to all of the conditions and covenants of this Lease as though the
tenancy had originally been a monthly tenancy. During the holdover period, each
party hereto shall give to the other at least 30 days' written notice to quit
the Leased Premises, except in the event of
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nonpayment of Rent when due, or the breach of any other covenant or default
hereunder by Tenant (without giving effect to any notice or right to cure
period), in which event Tenant shall not be entitled to any notice to quit, the
usual 30 days' notice to quit being expressly waived. The foregoing shall not
constitute Landlord's consent to any holdover by Tenant. Notwithstanding the
foregoing, if Landlord shall desire to regain possession of the Leased Premises
by any legal action or process in force in the jurisdiction in which the Land is
located, and Landlord shall have the right to recover all direct or indirect
costs, expenses, legal expenses, attorneys' fees, damages, loss of profits or
any other costs incurred by Landlord as a result of Tenant's failure or
inability to deliver possession of the Leased Premises to Landlord when required
under this Lease.
27. ESTOPPEL CERTIFICATE/FINANCIAL STATEMENT. Within 10 days after
----------------------------------------
request therefor from Landlord, Tenant shall deliver, in recordable form, a
certificate to any proposed Mortgage or purchaser, or to Landlord, together with
a true and correct copy of this Lease, certifying (i) whether this Lease is in
full force and effect and without modification, (ii) the amount of any prepaid
rent and/or security deposit paid by Tenant to Landlord, (iii) whether Landlord
has performed all of Landlord's obligations due to be performed under this Lease
and/or whether there are any defenses, counterclaims, deductions, or offsets
outstanding or other excuses for Tenant's performance under this Lease, (iv)
whether or not the Term has commenced and Tenant has accepted possession of the
Leased Premises, (v) the Commencement Date, (vi) the amount of Rent currently
due and payable, and (vii) any other information reasonable requested by
Landlord or such proposed Mortgage or purchaser. Tenant covenants and agrees
that, at any time, within 30 days after notice and demand by Landlord, Tenant
will furnish to Landlord Tenant's most recent financial statements as of the end
of Tenant's last fiscal year certified by an independent certified public
accountant or Tenant's chief financial officer, and Tenant consents to the
delivery of same by Landlord to lenders or prospective lenders or purchasers of
all or part of the Project or of any interest in a Mortgage.
28. MISCELLANEOUS.
-------------
(a) Amendment. This Lease may not be amended or modified except
---------
in writing and signed by Landlord and Tenant.
(b) Notices. All notices required by this lease shall be in
-------
writing and shall be effective, if mailed, when mailed by certified mail, return
receipt requested, or, if sent by messenger, when personally delivered, as
follows (or to such other address designated by written notice thereof to the
other given in accordance with the terms of this Section 28(b)):
Notice to Landlord: Notice to Tenant:
Laing Beaumeade, Inc. Equinix, Inc.
c/o Laing Properties, Inc. [*]
2401 Pennsylvania Avenue, N.W. Suite C
Washington, D.C. 20037-1730 Ashburn Virginia 20147
Attention: General Manager
_____________________
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
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With a copy to: With a copy to:
Laing Beaumeade, Inc. Equinix, Inc.
c/o Laing Properties, Inc. 901 Marshall Street
5901-B Peachtree-Dunwoody Road Redwood City, CA 94063
Atlanta, Georgia 30328
Attention: General Counsel
(c) Binding Effect. Subject to the provision of Section 15
--------------
hereof and all other restrictions set forth herein, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their successors
and assigns.
(d) Limitation Of Landlord's Liability. Notwithstanding any
----------------------------------
provision to the contrary contained herein, Tenant shall look solely to the
estate and interest of Landlord in and to the land and the Building, and
Landlord shall have no personal liability, in the event of any claim against
Landlord arising out of or in connection with this Lease, the relationship of
Landlord and Tenant, or Tenant's use of the Leased Premises, and Tenant agrees
that the liability of Landlord arising out of or in connection with this Lease,
the relationship of Landlord and Tenant, or Tenant's use of the Leased Premises,
shall be limited solely to such estate and interest of Landlord in as to the
Land and the Building and that Landlord shall have no personal liability as
provided above in this sentence. No properties or assets of Landlord other than
the estate and interest of Landlord in and to the land and the Building, and no
property owned by any partner of Landlord, shall be subject to levy, execution
or other enforcement procedures for the satisfaction of any judgment (or other
judicial process) or for the satisfaction of any other remedy of Tenant arising
out of or in connection with this Lease, the relationship of Landlord and Tenant
or Tenant's use of the Leased Premises. Further, in no event whatsoever shall
any partner in Landlord have any liability or responsibility whatsoever arising
out of or in connection with this Lease, the relationship of Landlord and
Tenant, or Tenant's use of the Leased Premises.
(e) Accord And Satisfaction. No receipt and retention by
-----------------------
Landlord of any payment tendered by Tenant in connection with this Lease, or
application of the Deposit, will give rise to, or support or constitute, and
accord and satisfaction, notwithstanding any accompanying statement, instrument
or other assertion to the contrary (whether by notation on a check or in a
transmittal letter or otherwise), unless Landlord expressly agrees in a separate
writing to an accord and satisfaction.
(f) Severability. If any term or provision, or any portion
------------
thereof, of this Lease, or the application thereof to any person or
circumstances shall, to any extent, be illegal, invalid or unenforceable, the
remainder of this Lease or the application of such term or provision to persons
or circumstances other than those as to which it is held illegal, invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Lease shall be valid and be enforced to the fullest extent permitted by
law. It is the intention of the parties hereto that if any such provision is
held to be illegal, invalid or unenforceable, there will be added in lieu
thereof a provision as similar in terms to such provision as is legal, valid and
enforceable.
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(g) Waiver/Consent. No term, condition or provision of this
--------------
Lease shall be deemed waived, unless waived in writing by the party against whom
such waiver is to be enforced. One or more waivers of any covenant, term or
condition of this Lease by either party shall not be construed as a waiver of a
subsequent breach of the same covenant, term or condition. The consent or
approval by either party to or of any act by the other party requiring such
consent or approval hereunder shall not be deemed to waive or render unnecessary
consent to or approval of any subsequent similar act.
(h) Time. Time is of the essence hereof.
----
(i) Applicable Law. This License shall be construed according
--------------
to the laws of the Commonwealth of Virginia in which the Land is located.
(j) Anticipatory Repudiation. If, prior to the commencement of
------------------------
the Term, Tenant notifies Landlord of or otherwise unequivocally demonstrates an
intention to repudiate this Lease, Landlord may, at its option, consider such
anticipatory repudiation a breach of this Lease and an Event of Default
hereunder. In addition to any other remedies available to Landlord hereunder or
at law or in equity or by statute or otherwise, Tenant shall pay in full for all
tenant improvements constructed or installed within the Leased Premises as of
the date of such breach and for materials ordered at Tenant's request for the
Licensed Premises, attorneys' fees, brokerage fees, costs of reletting and loss
of Rent.
(k) Entire Agreement. This Lease sets forth all the covenants,
----------------
promises, agreements, conditions and understandings between Landlord and Tenant
concerning the Leased Premises, Building, and Project, and there are no
covenants, promises, agreements, conditions or understandings, either oral or
written, between them other than as set forth herein.
(l) Waiver of Jury Trial. Landlord and Tenant each hereby waive
--------------------
trial by jury in any action, proceeding or counterclaim brought by either of
them against the other, on any claim or matter whatsoever arising out of or in
any way connected with this Lease, the relationship of Landlord and Tenant,
Tenant's use and occupancy of the Leased Premises and/or any claim of injury or
damage.
(m) Captions. Any headings preceding the text of the several
--------
Sections or Subsections hereof are inserted solely for convenience of reference
and shall not constitute a part of this Lease, nor shall they affect the
meaning, construction or effect of this Lease.
(n) Force Majeure. In the event that Landlord shall be delayed,
-------------
hindered in or prevented from the performance of any act or obligation required
hereunder by reason of acts of God, strikes, lockouts, labor troubles or
disputes, inability to procure or shortage of materials or labor, failure of
power or any utilities whatsoever, delay in transportation, fire, vandalism,
accident, flood, severe weather, other casualty, restrictive governmental laws,
regulation, or orders (including, but not limited to, mandated changes in plans
and specifications or the Landlord's Work resulting from changes in pertinent
codes and regulations or interpretations thereof), riot, insurrection, civil
commotion, sabotage, explosion, war, natural or local emergency, acts or
omissions of others, including, but not limited to, Tenant, or other reasons of
a similar or dissimilar nature not solely the fault of, or under the
22
<PAGE>
exclusive control of, Landlord, then performance of such act shall be excused
for the period of the delay and the period for the performance of any such act
shall be extended for the period equivalent to the period of such delay.
(o) Surrender. Tenant agrees to yield up and surrender the
---------
Leased Premises, at the expiration or earlier termination of this Lease, clean
and neat, and in the same condition and repair in which they are required to be
kept by Tenant throughout the Term, reasonable wear and tear excepted.
(p) Effect of Submission. The submission by Landlord to Tenant
--------------------
of this Lease shall not constitute a reservation of, or an option for, the
leasing of the Leased Premises and this Lease shall have no binding force and
effect unless and until executed by Landlord and Tenant and, if required
pursuant to applicable loan documents, approved by any current Mortgagee.
(q) Recording. Tenant shall not record this Lease or a
---------
memorandum or other notice thereof without the written consent of Landlord
(which consent may be withheld in Landlord's sole and absolute discretion), and
Tenant's recording of this Lease or a memorandum or other notice hereof will be
void and an Event of Default hereunder.
(r) Independent Covenants. Tenant's covenants to pay Rent, and
---------------------
any other payments required of Tenant hereunder, are independent of all other
covenants and agreements herein contained. All obligations of Landlord hereunder
shall be construed as covenants, not as conditions.
(s) Brokers. Landlord and Tenant represent and warrant to each
-------
other that, except as set forth below in this Section 28(s), neither has had any
dealings, negotiations or consultations with respect to the Leased Premises or
this transaction with any broker or other intermediary. In the event that any
broker or other intermediary claims a commission or other compensation with
respect to this transaction, the party alleged to have created the right to such
commission or compensation shall be responsible for and will indemnify and save
harmless the other party from and against any and all costs, fees, expenses
(including, without limitation, reasonable attorneys' fees), liabilities and
claims incurred or suffered by the other party as a result thereof. Landlord
--------
hereby represents that in the event GSHH/LBG, LLC representing Landlord is
-----------------------------------
entitled to a commission with respect to the transaction herein contemplated,
Landlord shall be responsible for a reasonable commission pursuant to terms and
- --------
conditions contained in separate agreements.
(t) Counterparts. This Lease may be executed in counterparts,
------------
each of which shall constitute one and the same agreement.
(u) Hazardous Waste. The term "Hazardous Substance," as used in
---------------
this Lease, shall mean pollutants, petroleum, contaminants, infections, toxic or
hazardous waste, asbestos, radioactive materials, polychlorinated biphenyls or
any other substances, materials or debris, the removal of which is required or
the use, handling, deposit, or storage of which is restricted, prohibited,
regulated or penalized by any "Environmental Law", which term shall mean any
federal, state or local law, statute, ordinance, rule, code, regulation or
requirement
23
<PAGE>
directly or indirectly relating to pollution or protection of the environment.
Except as consented to by Landlord pursuant to this Lease, Tenant hereby
covenants and agrees, for itself, its agents, contractors, subtenants and
employees, that (i) no activity will be conducted on all or any part of the
Leased Premises or balance of the project that will produce or cause the release
of any Hazardous Substances or otherwise violate or fail to comply with any
Environmental Law; (ii) the Leased Premises and the balance of the Project will
not be used in any manner for the storage (for any period of time whatsoever) of
any Hazardous Substances; (iii) no portion of the Leased Premises or balance of
the Project will be used as a landfill or a dump; (iv) no underground tanks of
any type will be installed on the Lease Premises or the balance or the Project;
(v) no surface or subsurface conditions shall exist or come into existence that
constitute, or with the passage of time may constitute, a public or private
nuisance on the Leased Premises or the balance of the Project; and (vi) no
Hazardous Substances shall be brought onto or into the Leased Premises or
balance of the Project. If any such Hazardous Substance is brought or found
located in or on the Leased Premises, the same shall be immediately removed by
Tenant, with proper disposal, and all required cleanup procedures shall be
diligently undertaken pursuant to all Environmental Laws, by Tenant, at Tenant's
sole cost and expense. If, at any time during or after the Term, the Leased
Premises are found to be so contaminated or subject to said conditions, or if
Tenant shall, by act or omission, breach any of its obligations under this
Section 28(u), an Event of Default shall exist. The provisions of this Section
28(u) shall survive the expiration or earlier termination of this Lease.
(v) Authority. Tenant represents and warrants that the
---------
individual executing this Lease on behalf of Tenant is authorized to execute and
deliver this Lease; that Tenant is validly formed or organized and in good
standing in the state of its incorporation or formation and authorized to
transact business in the jurisdiction in which the Land is located; that Tenant
has the power and authority to enter into this Lease; and that all action
required to authorize Tenant to enter into this Lease has been taken. Upon
receipt of Landlord's request, Tenant will provide Landlord with evidence
satisfactory to Landlord confirming all of the above representations and
warranties.
(w) Joint and Several. In the event this Lease is executed by
-----------------
more than one party as Tenant, the liability of all such parties shall be deemed
to be joint and several for all purposes hereunder.
(x) Transfer by Landlord. In the event of any sale, transfer or
--------------------
other disposition of Landlord's interest in the Project, Landlord shall
automatically and without any further act or instrument be released and relieved
of and from any and all obligations and liabilities of Landlord occurring from
and after the day of any such transfer and in such event Landlord's successor or
transferee by accepting such sale, transfer or assignment shall thereby
automatically assume and be liable for all obligations and liabilities of
Landlord which accrue from and after such sale or transfer and Tenant agrees to
look solely to such successor or transferee for the performance of any such
duties and obligations and in satisfaction of all such obligations and
liabilities under this Lease Agreement, notwithstanding that all pre-paid rent,
pre-paid Common Area Maintenance fees and all Security Deposits are transferred
to Landlord's successor or transferee.
(SIGNATURES TO FOLLOW)
24
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
duly executed as of the date first above written.
LANDLORD:
WITNESS: Laing Beaumeade, Inc.,
a Georgia corporation
[signature illegible] By: [signature illegible] (SEAL)
- ----------------------------- -----------------------------
Its: E.V.P.
TENANT:
WITNESS: Equinix, Inc.
a Delaware corporation
[signature illegible] By: /s/ Jay S. Adelson (SEAL)
- ----------------------------- -----------------------------
Its: CTO
WITNESS:
[signature illegible] By: /s/ Albert M. Avery (SEAL)
- ----------------------------- -----------------------------
Its: CEO
25
<PAGE>
EXHIBIT "A"
DESCRIPTION OF LEASED PREMISES
------------------------------
[Graphic of Floor Plan]
26
<PAGE>
EXHIBIT "B"
LAND DESCRIPTION
----------------
[Graphic of Land]
27
<PAGE>
EXHIBIT "C"
ANNUAL BASE RENT
----------------
<TABLE>
<CAPTION>
FROM TO RENTAL RATE MONTHLY ANNUALLY
<S> <C> <C> <C> <C>
Jan. 15, 1999 Jan. 31, 1999 $[*] $[*] $[*]
Feb. 1, 1999 Jan. 31, 2000 $[*] $[*] $[*]
Feb, 1, 2000 Jan. 31, 2001 $[*] $[*] $[*]
Feb, 1, 2001 Jan. 31, 2002 $[*] $[*] $[*]
Feb, 1, 2002 Jan. 31, 2003 $[*] $[*] $[*]
Feb, 1, 2003 Jan. 31, 2004 $[*] $[*] $[*]
Feb, 1, 2004 Jan. 31, 2005 $[*] $[*] $[*]
Feb, 1, 2005 Jan. 31, 2006 $[*] $[*] $[*]
Feb, 1, 2006 Jan. 31, 2007 $[*] $[*] $[*]
Feb, 1, 2007 Jan. 31, 2008 $[*] $[*] $[*]
Feb, 1, 2008 Jan. 31, 2009 $[*] $[*] $[*]
</TABLE>
_____________________
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
28
<PAGE>
EXHIBIT "D"
WORK AGREEMENT
--------------
THIS WORK AGREEMENT is entered into the 18th day of November 1998 by
and between Laing Beaumeade, Inc. ("Landlord") and Equinix, Inc. ("Tenant"), and
attached as Exhibit "D" to that certain Lease (the "Lease") of even date
herewith, by and between Landlord and Tenant. All terms used in this Exhibit
"D" shall have the same meanings set forth in the Lease except as otherwise
defined herein.
1. Landlord's Work. It is hereby understood and acknowledged by the
---------------
parties hereto that Landlord is leasing the Leased Premises to Tenant in "as is"
condition with all faults, and that Landlord has made no representations
respecting the condition of the Leased Premises or the Project not expressly
contained herein. Landlord shall have no obligation to perform any work in, or
for the benefit of the Leased Premises except as follows:
(a) At no cost to Tenant, Landlord shall supply building standard
warehouse lighting and natural gas powered, ceiling mounted building standard
warehouse heaters, (the "Landlord's Work").
2. Tenant's Work. Tenant hereby agrees to provide all work and materials
-------------
for the construction and/or installations of all alterations and improvements in
the Leased Premises (including interior construction, interior design,
telecommunications cabling and installation, and other associated finishes and
fixtures) required by Tenant for the operation of Tenant's business therein (the
"Tenant's Work") in accordance with (a) the final plans and working drawings
approved by Landlord, (b) all of the terms and conditions for making
improvements and alterations as set forth in Paragraph 13 of the Lease, (c) the
terms and conditions set forth in this Exhibit "D", and (d) all applicable
codes, laws and regulations. As part of the Tenant's Work, Tenant, at Tenant's
sole expense, shall install and maintain such fire extinguishers and other fire
protection devices as may be required from time to time by any agency having
jurisdiction thereof and/or the underwriters of the insurance company(ies)
insuring the Project. Tenant shall timely pay all expenses incurred by Tenant in
connection with the Tenant's Work, whether such payments are due contractors,
subcontractors or others.
3. Permits and Licenses. Tenant shall not commence the Tenant's Work
--------------------
until Tenant has delivered to Landlord a building permit approved by the
applicable governmental authorities. Tenant shall be responsible for obtaining
all other necessary permits and licenses for the Tenant's Work and shall be
responsible for the payment of all fees associated therewith. Tenant shall also
be responsible for the performance of the Tenant's Work in accordance with all
applicable Federal, state and county laws, ordinances, regulations, restrictions
and codes (including, but not limited to, the Americans With Disabilities Act),
and in accordance with the provisions of Paragraph 13 of the Lease.
4. Insurance.
---------
(a) During the period commencing on the date Landlord tenders
possession of the Leased Premises for construction of the Tenant's Work and
continuing until the
29
<PAGE>
construction of the Tenant's Work is complete. Tenant shall carry and maintain
at no expense to Landlord builder's completed value "all-risk" insurance,
including collapse and transit coverage.
(b) During the period commencing on the date Landlord tenders
possession of the Leased Premises or construction of the Tenant's Work and
continuing until the construction of the Tenant's Work is complete, Tenant shall
require each contractor and subcontractor performing all or any portion of the
Tenant's Work to carry and maintain or no expense to Landlord;
(i) comprehensive general liability insurance, including
contractor's liability coverage, contractual liability coverage, completed
operations coverage, Leased Premises-operations coverage, broad form property
damage endorsement and independent contractor's protective liability coverage in
an amount not less than Two Million Dollars ($2,000,000.00) combined single
limit per occurrence provided that such coverage may be provided through an
umbrella insurance policy affording comparable coverage, naming Landlord as an
additional insured and other meeting the criteria set forth in Paragraph 10 of
the Lease.
(ii) worker's compensation or other similar insurance in the
form and amounts required by law.
(c) Certified copies of insurance policies or certificates of
insurance for the foregoing coverage shall be delivered to Landlord prior to
commencement of the Tenant's Work and, on renewal of such policies, not less
than twenty (20) days before expiration of the term of the policy.
5. Temporary Utilities.
-------------------
(a) Tenant shall pay the costs of all utilities furnished to the
Leased Premises during the period Tenant is performing the Tenant's Work.
(b) Tenant, at its expense, may provide temporary telephone service
to the Leased Premises during the period Tenant is performing the Tenant's Work.
6. Plans Approval; Schedule.
------------------------
(a) It is agreed that Tenant will develop construction drawings and
specifications for completion of the Tenant's Work to be performed in the Leased
Premises. All such construction drawings and specifications are expressly
subject to Landlord's written approval; however, notwithstanding any such
approval by Landlord, Tenant shall be solely responsible for the content of the
construction drawings and specifications (including compliance with all
applicable laws, including, but not limited to, compliance with the Americans
With Disabilities Act), and coordination of the construction drawings and
specifications with base Project design. Tenant shall reimburse Landlord upon
demand for the Landlord's reasonable out-of-pocket costs for review of Tenant's
plans, drawings and specifications (including, but not limited to, the cost of
review of mechanical, electrical and plumbing plans and review (if any) for
compliance with applicable laws). Tenant, upon written notice from Landlord,
shall immediately pay said costs to Landlord as Additional Rent under the Lease.
30
<PAGE>
(i) Tenant will deliver to Landlord, for Landlord's approval,
Tenant's proposed construction schedule and a complete set of Tenant's
preliminary construction drawings and specifications for the entire Leased
Premises prepared by Tenant's architect. Such construction drawings and
specifications shall set forth, among other things:
(A) the location of equipment;
(B) the location and specification of telephone and other
communication outlets;
(C) the location and specification of electrical outlets,
especially those required to accommodate items such as computers and 220 volt
equipment;
(D) the location of heat-producing machines, and
specification of heat output (BTU/hour) and required operating conditions
(maximum/minimum temperature, hours of operation);
(E) the location, manufacture, specifications and plans
for any heating, air conditioning or ventilation units to be installed in the
Leased Premises.
(ii) Within seven (7) days after such delivery, Landlord shall
deliver to Tenant in writing its approval of such construction drawings and
specifications or changes to such construction drawings and specifications that
will be required to obtain Landlord's approval.
(iii) Within seven (7) days after delivery of Landlord's report
containing required and/or suggested revisions to Tenant's preliminary
construction drawings and specifications, Tenant shall deliver to Landlord
Tenant's revised preliminary construction drawings and specifications containing
the required revisions and such suggested revisions as Tenant chooses to
incorporate, together with electrical and mechanical drawings prepared by a
professional engineer.
(iv) Within five (5) days after such delivery, Landlord shall
deliver its confirmation that all required revisions have been made (if such is
the fact) and its approval of the revised preliminary plans (or if all such
revisions have not been made, Landlord shall, within said 5 day period, not if
Tenant of any additional revisions which are required to obtain Landlord's
approval, and Tenant shall then cause such additional revisions to be made
within the time period specified in (iii) above). If within said 5 day period,
the Landlord's required revisions are fully incorporated into the preliminary
drawings, Landlord's approval of said revised preliminary drawings shall be
considered as Landlord's final approval.
(b) All construction drawings and specifications to be prepared by
Tenant or on Tenant's behalf pursuant to this Exhibit "D" shall be prepared at
Tenant's sole cost and expense.
(c) Landlord reserves the right from time to time to require, without
the consent or approval of Tenant, that Tenant modify, amend or change the
Tenant's final
31
<PAGE>
construction drawings and specifications as may be necessary to comply with any
applicable law or regulation of any governmental authority or insurance board.
(d) Upon completion of the Tenant's Work, Tenant shall deliver to
Landlord one (1) complete Mylar film or "blue-line" set of "as-built" plans for
the Tenant's Work, and a copy of the Tenant's permanent certificate of occupancy
for the Leased Premises.
7. Coordination of Tenant's Work. Tenant shall, upon the execution of the
-----------------------------
Lease, designate in writing to Landlord the individual ("Tenant's Agent") having
authority to approve plans and specifications on Tenant's behalf and to
authorize changes or additions to work during construction. Authorization by
Tenant's Agent shall be deemed to be authorization by Tenant.
8. Performance of Tenant's Work.
----------------------------
(a) Tenant agrees to complete at Tenant's sole cost and expense all
work to the Leased Premises as shown on the Tenant's final construction plans
and specifications and all other work necessary to complete the Leased Premises
for Tenant's occupancy.
(b) All materials used in the performance of the Tenant's Work shall
be of top quality and in new condition. All systems shall be in good working
order when completed. All equipment installed shall be Underwriter's Laboratory
approved and be covered by a standard manufacturers and installation warranties,
and Tenant shall perform, or cause its contractor to perform, all of the
Tenant's Work in a good and workmanlike manner and in compliance with all
applicable codes, laws and regulations.
(c) Subject to the provisions of paragraph 4(c) herein, Tenant shall
have the right to select its own contractors and subcontractors (subject to
Landlord's consent over such contractors and subcontractors, which consent shall
not be unreasonably withheld, conditioned or delayed) to perform any work in the
Leased Premises, provided that:
(i) the contractors employed in connection with the Tenant's
Work shall be licensed, bonded and reputable contractors, and shall comply with
any applicable law and reasonable work rules and regulations established by
Landlord from time to time for all work in the Leased Premises (including, but
not limited to those set forth herein in paragraph 10 of this Exhibit "D");
(ii) in Landlord's reasonable judgement, such work or the
identities or presence of such contractors or their subcontractors will not
result in delays, stoppages or other action or the threat thereof which may
interfere with construction progress of or delay in completion of other work in
the Building or in any other project then under construction by Landlord, or in
any manner impair any guarantee or warranty from Landlord's contractor or its
subcontractors, or conflict with any labor agreements applicable to the
construction of the Project by Landlord; and
(iii) each such contractor and subcontractor, and the nature and
extent of the work to be performed by it, shall be approved by Landlord (but
such approval shall not relieve Tenant of its responsibility to comply with the
applicable provisions of this Exhibit
32
<PAGE>
nor constitute a waiver by Landlord of any of its rights under the Lease).
Tenant shall be responsible for negotiating all fees with Tenant's permitted
contractors and subcontractors, irrespective of whether Tenant employs
Landlord's contractor another contractor or subcontractor.
(d) Tenant shall defend, indemnify and hold harmless Landlord
and its property and asset managers and their respective agents, employees,
officers and partners, harmless from and against any claim, demand, loss,
damage, cost, liability, suit, or expense, whether occurring incurred or arising
before or after the Lease Commencement Date, arising from or out of or in
connection with, the performance of the Tenant's Work, and, without limiting the
foregoing. Landlord shall have the right to offset against the Tenant Allowance
(as defined below) any monies incurred, payable or paid by or on behalf of
Landlord with respect to which Landlord is entitled to be indemnified, or may
invoice the same as Additional Rent pursuant to the Lease and payable upon
demand from Landlord.
9. Construction Rules. Tenant hereby agrees that, with respect to any all
------------------
Tenant's Work, Tenant and each of Tenant's contractors, subcontractors,
suppliers, laborers and others performing all or any portion of the Tenant's
Work shall comply with the rules and regulations listed in Exhibit "H" attached
hereto.
33
<PAGE>
EXHIBIT "E"
----------
RULES AND REGULATIONS
---------------------
The following rules and regulations have been formulated for the
safety and well-being of all tenants of the Building.
Landlord may waive the compliance by a tenant to any of these rules
and regulations, provided that (i) no waiver shall be effective unless signed
by Landlord or Landlord's authorized agent, (ii) any such waiver shall not
relieve such tenant from the obligation to comply with such rules or regulations
in the future unless expressly consented to by Landlord and (iii) no waiver
granted to any tenant shall relieve any other tenant from the obligation of
complying with the rules and regulations unless such other tenant has received a
similar waiver in writing from the Landlord.
Landlord shall not be responsible to any tenant for the non-observance
or violation of or by any other tenant of any of these rules and regulations at
any time.
1. The Common Areas shall not be obstructed or encumbered by Tenant
or used for any purpose other than ingress and egress to and from the Leased
Premises except as provided herein. Landlord shall have the right to control and
operate the Common Areas, except those areas as defined in Exhibit A of the
Lease, in such manner as Landlord, in Landlord's sole discretion, deems best for
the benefit of the tenants generally. No tenant shall permit the visit to the
Leased Premises of persons in such numbers or under such conditions as to
interfere with the use and enjoyment by other tenants of Common Areas.
2. No awning, antennas, or other projections shall be attached to
the outside walls of the Building, except as provided herein.
3. No showcases or other articles shall be put in front of or
affixed to any part of the exterior of the Building, nor placed in the halls,
corridors or vestibules or other Common Areas of the Building without the prior
written consent of Landlord.
4. The water and wash closets and other plumbing fixtures shall not
be used for any purposes other than those for which they were constructed, and
no sweepings, rubbish, rags, chemicals, paints cleaning fluids or other
substances shall be thrown or placed therein. Without limiting any of the
provisions of the Lease which this Exhibit C forms a part of and the rights and
remedies of Landlord thereunder, all damages resulting from any misuse of the
plumbing fixtures shall be borne by the tenant who, or whose servants,
employees, agents, visitors, or licensees, shall have caused the same.
5. There shall be no marking, painting, drilling into or other
forms(s) of defacing of any part of the Project (exclusive of the Leased
Premises) or of any part of the Leased Premises visible from the Common Areas.
Tenant shall not construct, maintain, use or operate within the Leased Premises
any electrical devices, wiring, or apparatus in connection with a loud speaker
system or other sound systems, except as
34
<PAGE>
reasonably required for its communication system and approved prior to the
installation thereof by Landlord. No such loud speaker or sound system shall be
constructed, maintained, used or operated outside of the Leased Premises.
6. No bicycles, vehicles, animals, birds, or pets of any kind shall
be brought into or kept in or about the Leased Premises. No cooking (except for
hot-plate cooking by Tenant's employees for their own consumption, the equipment
for and location of which are first approved by Landlord) shall be done or
permitted by Tenant on the Leased Premised. Tenant shall not cause or permit any
unusual or objectionable odors to be produced upon or permeate of originate from
the Leased Premises. Tenant shall be obligated to maintain sanitary conditions
in any area approved by Landlord for food preparation and consumption.
7. Other than expressly permitted under the Lease, no spaced in the
Building shall be used for the manufacturing of goods, merchandise, or other
property, or for the sale or auction of merchandise, goods, or property of any
king. The office area of the Leased Premises may be used only for office use.
8. No tenant shall make, or permit to be made, any unseemly or
disturbing noises or disturb or interfere with occupants of the Building for
neighboring buildings or premises or those having business with them whether by
the use of any mechanical instrument, radio, talking machines, tape machine,
unmusical noise, other sound or sound system or in any other way. No tenant
shall throw anything out of the doors or windows or down the corridors or
stairs. In addition, Tenant shall not permit any vibrations from the operation
of Tenant's machines, fixtures, mechanical equipment or otherwise to exist to
any degree or extent as to be objectionable to Landlord or any other tenant(s)
in the Building.
9. No flammable, combustible, explosive, hazardous or toxic fluid,
chemical or substance shall be brought into, or kept or generated upon, the
Leased Premises or balance of the Project, except for materials defined by the
Federal Code of Regulations for consumer products with packaging as defined
under Department of Transportation Packaging Regulations CFR - 49, paragraph
171-100, except as provided herein.
10. No additional locks or bolts of any kind shall be placed upon any
of the doors or windows by any tenant, nor shall and changes be made in the
existing locks or mechanisms thereof, except as provided herein. The doors
leading to the Common Areas shall be kept closed during business hours except as
they may be used for ingress or egress. Each tenant shall, upon the termination
or expiration of its tenancy, restore to the Landlord all keys of or to offices,
storage, toilet rooms, or with respects to any and all other portions of the
Leased Premises or Building, either furnished to, or otherwise procured by, such
tenant, and in the event of the loss of any keys so furnished, such tenant shall
pay to Landlord the cost thereof.
11. Tenant shall not pay any employees on the Leased Premises, except
those actually working for Tenant on the Leased Premises.
35
<PAGE>
12. Landlord reserves the right to exclude from the Building at all
times any person who is not known or does not properly identify himself to any
Building management, security guard on duty, or security system monitor. Each
tenant shall be responsible for all persons for whom he authorizes entry into or
exit out of the Building, and shall be liable to Landlord for all acts or
omissions of such persons.
13. The Leased Premises shall not, at any time, be used for lodging
or sleeping or any immoral or illegal purpose.
14. Tenant, before closing and leaving the Leased Premises at any
time, shall see that all windows are closed and all lights are turned off.
15. Landlord's employees shall not perform any work or do anything
outside of their regular duties, unless under special instruction from the
management of the Building. The requirements of tenants will be attended to only
upon application to Landlord and any such special requirements shall be billed
to the applicable tenant (and paid with the next installation of Base Rent) at
the schedule of charges maintained by Landlord from time to time or at such
charge as is agreed upon in advance by Landlord and such tenant.
16. Canvassing, soliciting, and peddling in the Building are
prohibited and each tenant shall cooperate to prevent the same.
17. There shall not be used in any space or in the public halls of
the Building, either by any tenant or by jobbers or others, in the delivery or
receipt of merchandise, any hand trucks except those equipped with rubber tires
and side guards, and each tenant shall be responsible to Landlord for any loss
or damage result from any deliveries of such tenant to the Building. All
material handling equipment used on the concrete warehouse floor shall have
rubber tires.
18. Mats, trash, or other objects shall not be placed in the Common
Areas. All trash shall be disposed of in a manner acceptable to Landlord.
19. No sign, advertisement, notice, or other lettering shall be
exhibited, inscribed, painted or affixed by any tenant on any part of the
outside or inside of the Building, or on any other portion of the Project,
without the prior written consent of the Landlord and the Beaumeade Owners
----------------
Association Architectural Review Committee. In the event of the violation of the
- -----------
foregoing by any tenant, Landlord may charge the expense incurred by such
removal to the tenant responsible for such violation.
20. INTENTIONALLY DELETED.
21. Tenant acknowledges and agrees that all company, non-company,
customer, contractor, and vendor trucks including but not limited to tractors
trailers, wheeled containers of any type, tractor cabs, cube and straight bed
trucks shall park only at the rear of, immediately adjacent to and in alignment
with the Tenant's Leased Premises. Such parking shall not infringe upon
neighboring tenant's dock and loading areas. All parked vehicles shall be
removed from the truck court no less than every ten
36
<PAGE>
(10) days. In no event and at no time whatsoever shall Tenant's un-used vehicles
remain parked in the truck court, parking lots, or adjacent to the Building in
excess of ten (10) days. All non-wheeled containers, regardless of size, shall
be stored inside the Leased Premises. Tenant acknowledges and agrees that
parking in the front of Building shall be in common with other tenants and shall
be used only for employee, visitor and customer automobiles, pick-up trucks,
passenger vans, and motorcycles. In no event and at no time whatsoever shall
Tenant's parking of vehicles encroach upon the Project's Fire Lane(s). In no
event and at no time whatsoever shall Tenant's parking of vehicles include
boats, recreational vehicles, aircraft, trailers, cranes, campers, tents, or any
other vehicle or storage device which is not approved in writing, in advance by
Landlord.
<PAGE>
EXHIBIT "F"
SPECIAL STIPULATIONS
1. RENEWAL OPTION
A. Tenant shall have the right to renew this Lease for three (3)
additional terms of five (5) years each commencing on February 1,
2010, February 1, 2015 and February 1, 2020 (hereinafter referred to
as the "Renewal Lease Term"). Said right to renewal shall be subject,
however, to the following conditions precedent:
1. Tenant shall give Landlord written notice of its exercise of each
such renewal option at least one hundred eighty (180) days prior
to the expiration of the Term and each Renewal Lease Term: and
2. Tenant shall not be in material default in performance of or with
respect to any of the terms, covenants, and conditions of the
Lease.
B. All of the terms, covenants and conditions of this Lease shall
continue in full force and effect during each Renewal Lease Term,
except that Annual Base Rent shall be adjusted at the commencement of
each Renewal Lease Term to the greater of the then prevailing market
rate for renewing tenants in similar buildings in Ashburn, Virginia as
defined by independent, third party industrial/warehouse real estate
broker licensed and in good standing in the Commonwealth of Virginia
or 103% of the base rental for the month prior to the expiration of
the term or the expiration of the Renewal Lease Term.
2. ENVIRONMENTAL MATTERS
A. Tenant covenants that it will not cause or permit, knowingly, and
Hazardous Wastes to be brought upon, disposed on or stored in or on
the Premises or any Hazardous Material to be released in, on or about
the Premises and that it will comply with any and all applicable laws,
ordinance, rules regulations and requirements respecting the presence,
use or release of Hazardous Materials in, on or about the Premises,
unless otherwise set forth herein.
B. Tenant covenants that it will immediately notify Landlord, in writing,
of any existing, pending or threatened (a) investigation, inquiry,
claim or action by any governmental authority in connection with any
Environmental Laws; (b) third party claims; (c) regulatory actions:
and/or (d) contamination of the Premises.
C. Tenant shall, at Tenant's expense, investigate, monitor, re-mediate,
and/or clean up any Hazardous Material, Hazardous Waste, or other
environmental condition on, about, or under the Premises required as a
<PAGE>
result of Tenant's use of Hazardous Material or occupancy of the
Premises.
D. Tenant covenants that it shall keep the Premises free of any lien
imposed pursuant to any Environmental Laws.
E. Tenant shall indemnify, defend and hold Landlord harmless from and
against any and all claims, judgements, damages, penalties, fines,
costs (including without limitation, actual and reasonable attorney's
fees and court costs), liabilities or losses (collectively, the
"Tenant Indemnified Claims") resulting from (i) the presence of
Hazardous Wastes in or about the Premises (other than Hazardous Wastes
present as of the date of this Lease which are covered by Landlord's
indemnity in subparagraph (F) below) or the release of Hazardous
Materials in, on or about the Premises on or after the date of this
Lease, except to the extent that the Tenant Indemnified Claims are
caused by Landlord, its agents, employees or contractors, and (ii) any
Hazardous Waste placed or any Hazardous Substances released elsewhere
in Laing at Beaumeade by Tenant, its agents, invitees, employees and
contractors.
F. Landlord shall indemnify, defined and hold Tenant harmless from and
against any and all claims, judgments, damages, penalties, fines,
costs (including without limitation, actual and reasonable attorney's
fees and court costs), liabilities or losses (collectively, the
"Landlord Indemnified Claims") resulting from the presence of
Hazardous Wastes in or on the Premises as of the date of this Lease or
the release of Hazardous Materials in or on the Premises as of the
date of this Lease or the release of Hazardous Materials in or on the
Premises prior to the date of this Lease, except to the extent that
the Landlord Indemnified Claims are caused by Tenant, its agents,
employees, invitees or contractors.
G. The provisions of this Special Stipulation "3" shall survive the
expiration or termination of this Lease.
H. Landlord represents that, to the knowledge of this individual(s)
executing this Lease on behalf of Landlord, no "Hazardous Waste", as
said term defined in the Resource Conversation and Response Act, as
amended 42 U.S.C. (S)6901 et. seq. ("RCRA"), has been brought upon,
disposed or stored in or on the premises, and no hazardous material as
hereinafter defined has been released in or on the Premises.
I. For the purpose of this Lease, the term "Hazardous Material", is
defined to include those matters described in the Environmental
Response Compensation and Liability Act, as amended, 42 U.S.C. (S)6901
et. seq. (CERCLA"). As used herein the term "Hazardous Materials"
shall also mean (1) asbestos, or any substance containing asbestos;
(2)
<PAGE>
polychlorinated biphenyls; (3) lead; (4) radon; (5) pesticides; (6)
petroleum or any other substances containing hydrocarbons; (7) any
substance which, when on the Premises, is prohibited by any
Environmental Laws; and (8) any other substance, material or waste
which, (i) by any Environmental Laws requires special handling or
notification of any governmental authority in its collection, storage,
treatment, or disposal or (ii) is defined or classified as hazardous,
dangerous or toxic pursuant to any legal requirement.
J. For purposes of this Lease, Environmental Laws shall mean; any and all
federal, state and local laws, statues, codes, ordinances,
regulations, rules or other requirements to human health or safety or
the environment, including, but not limited to, those applicable to
the storage, treatment, disposal, handling and release of any
Hazardous Waste or Hazardous Materials, all as amended or modified
from time to time.
3. LANDLORD'S CONSTRUCTION CRITERIA. Tenant is granted the right to select and
authorize a general contractor, (hereinafter referred to as "Tenant's
Contractor") to construct any improvements to the Premises, subject to the
provisions contained in Exhibit "H" (hereinafter referred to as
"Construction Criteria"), attached hereto and hereby incorporated herein.
All costs associated with any contemplated improvements to Premises by
Tenant shall be the sole responsibility of Tenant.
4. RIGHT OF FIRST OFFER. During the Term of the Lease and each Renewal Lease
Term, the Tenant shall have a one time right of first offer to lease
contiguous space (hereinafter referred to as the "Expansion Premises",
illustrated in Attachment "A", attached hereto and hereby incorporated
herein) prior to the Expansion Premises being leased to a third party, on
the same terms and conditions then in effect under the Lease, expect as
follows:
(d) the term of the Expansion Premises shall be for a minimum of thirty
six (36) months. In the event Tenant elects to exercise the right of
first offer, the lease term for the Leased Premises shall be extended
so as to expire co-terminus with the Expansion Premises space.
(e) the rent for the Expansion Premises shall be equal to the annual cost
per square foot currently in effect for the Leased Premises at the
date of occupancy and shall adjust annually as stated in Exhibit "C"
of the Lease and Paragraph One above.
(f) the Expansion Premises shall be leased in "as is" condition.
(g) Tenant shall pay One Hundred Percent (100%) of all costs incurred with
preparing the Expansion Premises for Tenant's occupancy.
<PAGE>
Landlord shall notify Tenant when the Expansion Premises are available to be
leased. Tenant shall then have ten (10) days in which to notify Landlord in
writing exercising Tenant's right to lease the Expansion Premises on the terms
described above. If Tenant exercises the right to lease the Expansion Premises,
said lease shall commence the earlier of ninety (90) days after Tenant's notice
exercising the right, or the date the Expansion Premises is available for lease.
After Tenant validly exercises the right of first offer provided herein, the
parties shall execute a lease expansion agreement for the Expansion Premises
using the Landlord's standard document.
The foregoing right of first offer shall apply only with respect to the
Expansion Premises and may not be exercised with respect to any other space. If
Tenant shall fall to exercise such right of first offer after notice by Landlord
as provided herein, Landlord may freely lease the Expansion Premises and the
foregoing right of first offer shall be of no further force or effect. In the
event Landlord falls to lease the Expansion Premises to a third party within one
hundred eighty (180) days from receipt of Tenant's notice to not exercise its
right of first offer, Tenant's right of first offer shall be re-instated based
on the same terms and conditions as previously agreed to. The foregoing right
of first offer shall be subject and subordinate to any other rights of tenants
to lease the Expansion Premises, if such rights have already been granted prior
to the date of this Lease.
If Tenant shall exercise the right of first offer granted herein, Landlord does
not guarantee that the Expansion Premises will be available on the commencement
date for the lease thereof for any reason beyond Landlord's reasonable control.
In such event, Rent with respect to the Expansion Premises shall be abated until
Landlord legally delivers the same to Tenant, as Tenant's sole recourse.
Tenant's exercise of such right of first offer shall not operate to cure any
default by Tenant of any of the terms or provisions in the Lease, nor to
extinguish or impair any rights or remedies of Landlord arising by virtue of
such default. The right of first offer shall, at Landlord's election, be null
and void, if Tenant is in default under the lease on the date the Tenant
exercises its rights hereunder or at anytime thereafter, and prior to the
commencement of the Lease for the Expansion Premises. If the Lease or Tenant's
right to possession of the Premises shall terminate in any manner whatsoever
before Tenant shall exercise the right herein provided, or if Tenant shall have
subleased the Premises, then immediately upon such termination or sublease, the
right of first offer herein granted shall simultaneously terminate and become
null and void. Such right is personal to Tenant. Under no circumstances
whatsoever shall the subtenant under a sublease of the Premises have any right
to exercise the right of first offer granted herein unless such subtenant is a
wholly owned subsidiary of Tenant. Tenant agrees that time in giving notices
hereunder is of the essence of this provision.
5. RIGHT OF FIRST OFFER TO LEASE SPACE IN FUTURE BUILDING. Provided the Lease
is not in default and Landlord elects to develop, construct and lease to
the general public a fifth building immediately adjacent to [*], Ashburn,
Virginia, Tenant shall have a one time right of first offer to lease 10,000
or more square feet in the proposed building (hereinafter referred to as
the
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
"Future Premises", illustrated in Attachment "B", attached hereto and
hereby incorporated herein) prior to the building being offered to lease to
the general public on the same terms and conditions then in effect under
the Lease, except as follows:
(a) the term of the Lease for the Future Premises shall be for a minimum
of sixty (60) months. In the event Tenant elects to exercise the right
of first offer, the lease term for the Leased Premises shall be
extended so as to expire co-terminus with the Expansion Premises
space. In the event the Tenant elects to exercise the right of first
offer to lease the entire Future Premises, the lease term for the
Leased premises shall be terminated so as to expire with Tenant's
occupancy of the Future Premises.
(b) the rent for the Future Premises shall be equal to the annual cost per
square foot currently in effect for like warehouse buildings in the
Ashburn, Virginia sub-market at the date of occupancy and shall adjust
annually.
(c) the Future Premises shall be leased in "as is" condition.
(d) Tenant shall pay One Hundred Percent (100%) of all costs incurred with
preparing the Future Premises for Tenant's occupancy.
Landlord shall notify Tenant seven (7) months in advance of when the Future
Premises are available to be leased. Tenant shall then have thirty (30) days in
which to notify Landlord in writing exercising Tenant's right to lease the
Future Premises on the terms described above. If Tenant exercises the right to
lease the Future Premises, said lease shall commence on the date the Future
Premises is available for lease. After Tenant validly exercises the right of
first offer provided herein, the parties shall execute a lease agreement for the
Future Premises. After Tenant validly exercised the right of first offer
provided herein, Tenant shall have the option to participate in the design,
planning, and construction of the portion of the Future Premises which Tenant
leases in order to prepare the leased premises for installation of Tenant's
equipment. Under no circumstances whatsoever shall Tenant's participation
interfere with Landlord's ability to design, plan and construct the Future
Premises for lease to the general public.
The foregoing right of first offer shall apply only with respect to the Future
Premises and may not be exercised with respect to any other space. If Tenant
shall fail to exercise such right of first offer after notice by Landlord as
provided herein, Landlord may freely lease the Future Premises and the foregoing
right of first offer shall be of no further force or affect. The foregoing
right of first offer shall be subject and subordinate to any other rights of
tenants to lease the Future Premises, if such rights have already been granted
prior to the date of this Lease.
If Tenant shall exercise the right of first offer granted herein, Landlord does
not guarantee that the Future Premises will be available on the commencement
date for the lease thereof for any reason beyond Landlord's reasonable control.
In such event, Rent
<PAGE>
with respect to the Future Premises shall be abated until Landlord legally
delivers the same to Tenant, as Tenant's sole recourse.
Tenant's exercise of such right of first offer shall not operate to cure any
default by Tenant of any of the terms or provisions in the Lease, nor to
extinguish or impair any rights or remedies of Landlord arising by virtue of
such default. The right of first offer shall, at Landlord's election, be null
and void, if Tenant is in default under the lease on the date the Tenant
exercises its rights hereunder or at any time thereafter, and prior to the
commencement of the Lease for the Future Premises. If the Lease or Tenant's
right to possession of the Leased Premises shall terminate in any manner
whatsoever before Tenant shall exercised the right herein provided, or if Tenant
shall have subleased the Leased Premises, then immediately upon such termination
or sublease, the right of first offer herein granted shall simultaneously
terminate and become null and void. Such right is personal to Tenant. Under no
circumstances whatsoever shall the subtenant under a sublease of the Leased
Premises have any right to exercise the right of first offer granted herein.
Tenant agrees that time in giving notices hereunder is of the essence of this
provision.
<PAGE>
EXHIBIT "G"
ROOF LICENSE AGREEMENT
THIS AGREEMENT made as of this 18/th/ day of November, 1998 between
----- --------------
Laing Beaumeade, Inc. ("Licensor") and Equinix, Inc. ("Licensee"), having an
- --------------------- -------------
address at [*], Suite C, Ashburn, Virginia 20147.
--------------------------------------
1. Premises and Duration. Licensor hereby grants to Licensee a
license, subject to the terms and conditions herein set forth, to
use certain premises shown on the drawing attached hereto as
Exhibit A ("Roof Premises") located on the roof ("Roof") of the
building known as Laing at Beaumeade ("Building") located at
------------------
[*], Ashburn, Virginia 20147 for the purposes described in
----------------------------
paragraph 4. below. The term of the license (the "Term") shall
commence on [*] ("Commencement Date") and terminate on
---
January 31, 2009 ("Termination Date") unless terminated prior
----------------
thereto as hereinafter provided.
2. Rent. On or before the first day of each month of the Term,
Licensee shall pay Licensor Base Rent in the amount of [*]
---
Dollars ($[*]). Base Rent shall be prorated for any partial
---
month at the rate of 1/30/th/ of the monthly amount. Base Rent
shall be subject to Base Rent Escalations, as described in
Paragraph 5. In addition to Base Rent, Licensee shall pay for
electricity consumed in the Roof Premises, as described in
Paragraph 22.
3. Security Deposit. Upon its execution of this Agreement, Licensee
shall pay the amount of [*] Dollars $[*] ("Security Deposit")
to Licensor.
4. Use. Licensee shall use the Roof Premises for the installation,
maintenance, use and removal of the following items (the
"Items"): any and all antenna, transmit and/or receiving
----------------------------------------------
equipment, cabling and appurtenances as necessary to utilize roof
-----------------------------------------------------------------
space for Licensee's intended use, and for no other purpose.
---------------------------------
Licensee shall not use the Roof Premises or the Items so as to
interfere in any way with the ability of other occupants of the
Building or occupants of other buildings to receive radio,
television, telephone, short-wave, long-wave or other signals of
any sort, nor so as to interfere with the use by Licensor or such
occupants of electric, electronic or other facilities, equipment,
appliances, personal property and fixtures, nor so as to
interfere in any way with the use of any antennae, satellite
dishes or other electronic or electric equipment or facilities
_____________________
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
currently or hereafter located on the Roof or any other floor or
area of the Building or other buildings. Licensee shall not use
the Premises in any way so as to increase Licensor's insurance
payments, and at Licensor's option shall pay such increases. The
location of the Items within the Premises shall be subject to
Landlord's advance written approval.
5. Indemnity and Insurance. Licensee shall indemnify, defend and
save harmless Licensor and its partners, trustees, beneficiaries,
directors, officers, employees, affiliates and agents
("Indemnitees") from and against any and all claims and/or
liability resulting from any act or omission of Licensee and/or
Licensee's installation (including without limitation, damage
cause by over stress), use, maintenance or removal of the items
or use of the Roof Premises or Building. It is understood and
agreed that all items kept, stored or maintained on the Roof
Premises shall be so kept, stored or maintained at the sole risk
of Licensee. Licensee shall notify its insurance carriers of this
License Agreement and shall obtain any additional coverage or
increase its policy limits as necessary to fully cover any loss
relating to the Items, or Licensee's installation, use,
maintenance or removal of the Items, or use of the Roof Premises.
Licensee hereby waives all rights of subrogation of its insurers
with respect to claims against the Indemnitees. Tenant shall
maintain comprehensive general liability insurance with at least
$2,000,000 combined single limit per occurrence, with the
Indemnitees as additional insureds, workers compensation coverage
in statutory amounts, and employer's liability insurance of at
least $500,000 per occurrence.
6. Access to Premises. Licensor shall permit Licensee reasonable
access to the Roof Premises for the purposes permitted hereunder,
during normal business hours at the Building upon reasonable
advance notice and scheduling through Licensor's management and
security personnel. Access after normal business hours may be
granted by Licensor in its sole discretion and for such
reasonable charges as Licensor shall impose. Licensor reserves
the right to enter the Roof Premises, without notice, at any time
for the purpose of inspecting the same, or of making repairs,
additions, or alterations to the Building, and to exhibit the
Roof Premises to prospective tenants, purchasers, or others, or
for any other reason not inconsistent with Licensee's right
hereunder. In connection with exercising such rights, Licensor
may, if reasonably necessary temporarily disconnect and/or move
the Items without liability to Licensee. The exercise by Licensor
of any of its rights under this Paragraph shall not be deemed an
eviction or disturbance of Licensee's use of the Roof Premises.
<PAGE>
7. Installation, Use, Alterations and Removal. Licensee shall not
install the Items, or thereafter make any alterations, additions
or improvements to the Roof Premises or the Items without
Licensor's prior written consent. Licensee acknowledges that it
has inspected the Roof Premises and agrees to accept the same "as
is". Licensor shall approve or reject the proposed installation
of the Items within a reasonable time after Licensee submits (1)
plans and specifications for the installation of the Items, (2)
copies of all required governmental and quasi-governmental
permits, licenses, and authorizations which Licensee will obtain
at its own expense, and (3) a certificate of insurance evidencing
the coverage required herein. Licensor may withhold approval if
the installation or operation of the Items may damage the
structural integrity of the Building, interfere with any service
provided by Licensor or any occupant, reduce the amount of
leasable space in the Building, detract from the appearance of
the Building, or for any other reasonable ground. Licensor may
require that any installation or other work be done under the
supervision of Licensor'' employees or agents, and in a manner so
as to avoid damage to the Building. Upon termination of this
Agreement, by expiration or otherwise, Licensee shall disconnect
and remove the Items and fully repair and restore the Roof
Premises to the same or a better condition that prior to this
Agreement, ordinary wear and tear, and damage from fire or other
casualty not the fault of Licensee excepted. Licensee shall
promptly and properly repair during the Term and upon termination
of this Agreement any roof leaks or other damage or injury to the
Roof, the Building or the Roof Premises caused by Licensee's use
of the Roof Premises or its installation, use, maintenance or
removal of the Items. If Licensee does not immediately repair any
such leaks, damage or injury or does not remove the Items when so
required, Licensee hereby authorizes Licensor to make such
repairs or remove and dispose of the Items and charge Licensee
for all costs and expenses incurred in doing so. Licensor shall
not be liable for any property so disposed of or removed by
Licensor.
8. Assignment and Sublicensing. Licensee shall not, by operation of
law or otherwise, assign or otherwise transfer or encumber this
License or the rights granted hereunder, or sublicense the whole
or any part of the Roof Premises. Licensee may not let any other
party tie into or use the Items or the Roof Premises, and
Licensee may not transmit or distribute signals through the Items
to any parties not affiliated with Licensee. Any such transfer
without Licensor's consent shall at Licensor's option be null,
void and of no effect. If Licensee desires to assign or
sublicense, Licensor may consent to the same in its absolute
discretion and upon such terms and conditions as Licensor may
impose. In the alternative,
<PAGE>
Licensor may elect to terminate this Agreement, by written notice
to Licensee within thirty (30) days after receiving Licensee's
request for approval. Notwithstanding anything to the contrary in
this Paragraph 8, Licensee may, without Landlord's prior consent
and without Landlord's participation in any proceeds, sublet the
Roof Premises or assign the license agreement to: (i) a
subsidiary, affiliate, division or corporation controlling,
controlled by or under common control with Licensee; (ii) a
successor corporation related to Licensee, by merger,
consolidation, non bankruptcy reorganization, or governmental
action; or (iii) a purchaser of substantially all of Licensee's
assets located in the Roof Premises. For the purpose of this
License Agreement, sale of Licensee's capital stock through any
public exchange shall not be deemed an assignment, subletting or
any other transfer of the License Agreement or the Roof Premises.
9. License. The interest herein created is a license and no
leasehold or tenancy is intended to be or shall be created
hereby. Licensor, at its sole option may require Licensee to
terminate operation of the Items, if Licensee or the Items is
causing physical damage to the Building, if Licensee or the Items
is disturbing or annoying any other occupant of the Building, or
if Licensee defaults in any other way under this Agreement.
10. Entire and Binding Agreement. This Agreement contains all of the
agreements between the parties relating to the Roof Premises and
Items, and may not be modified in any manner other than by
agreement, in writing, signed by both parties. The terms,
covenants and conditions contained herein shall inure to the
benefit of and be binding upon Licensor, Licensee and their
successors and assigns, except as provided herein.
11. Heavy Objects. Licensee shall not bring into or install in the
Roof Premises any objects, including the Items contemplated
hereunder, the weight of which, singularly or in the aggregate,
would exceed the maximum safe load per square foot of the Roof
Premises. Licensee shall engage and cause a licensed and
qualified engineer to certify the same to Licensor before
Licensee shall install, affix or place the Items upon the Roof
Premises.
12. Applicable Law. This Agreement shall be construed in accordance
with the laws of the Commonwealth of Virginia.
13. Execution and Delivery. The submission of this Agreement for
examination or execution does not constitute an offer or
reservation of any option for the Roof Premises, and this
<PAGE>
Agreement shall become effective only upon execution and
delivery thereof by both parties.
14. Defaults. In addition to any other specified herein, it shall be
a default hereunder if Licensee vacates or abandons the Items or
the Roof Premises for more than ten (10) consecutive days. In the
event of any default which is not cured within five (5) days
after written notice by Licensor, Licensor shall have the right
to terminate this Agreement and recover the possession of the
Roof Premises through peaceful self-help, forcible detainer
proceedings or any other lawful means, and to recover all damages
and losses sustained as a result of such default and termination
of this Agreement, including without limitation loss of Rent that
would otherwise be received hereunder. In the event of default,
Licensor shall also have the right to discontinue providing
electricity to the Roof Premises. In the event of any litigation
between the parties, the prevailing party shall be entitled to
receive its reasonable attorney's fees and costs as part of the
judgment.
15. Recording. Licensee shall not record this Agreement.
16. Lease. Any default under this Agreement shall be a default under
the Lease, and any default under the Lease shall be a default
under this Agreement.
<PAGE>
EXHIBIT A TO EXHIBIT G, ROOF LICENSE AGREEMENT OF LEASE DATED
NOVEMBER 18, 1998 BETWEEN LAING BEAUMEADE, INC. AND EQUINIX,
INC. SHOWING ROOF AREA CROSS HATCHED
[Graphic of Roof Area]
<PAGE>
EXHIBIT "H"
CONSTRUCTION CRITERIA
I. REQUIREMENTS FOR TENANT PERFORMANCE OF TENANT CONSTRUCTION
1. Proposed plans/scope of work shall be submitted to Landlord for review
and approval prior to commencement of work.
2. Tenant's selection of Contractors shall meet Landlord's approval
criteria.
3. Tenant's Contractors shall comply with Landlord's rules for working on
the property.
4. At completion of work, Tenant shall furnish Landlord with the
following:
a) lien waivers, in a form satisfactory to Landlord, certifying that
Contractors have been paid in full for work completed.
b) a copy of the "Occupancy Permit" from Loudoun County, Virginia.
II. APPROVAL CRITERIA FOR TENANT CONTRACTORS
1. Must have been in business a minimum of three (3) years operating
under the same name.
2. Must have a substantial history of successful Tenant work.
3. Must have a history of performance of Tenant work quality equal to
that proposed for the building.
4. Must have a good credit history and be financially sound.
5. Must meet Landlord's insurance requirements and supply Landlord with
appropriate Certificates of Insurance.
6. Tenant's Contractor must comply with the rules for operating on the
property.
III. CONTRACTOR'S INSURANCE REQUIREMENTS
1. Prior to execution of contract agreements and commencing of work, all
Tenant Contractors shall provide to Landlord a Certificate of Insurance
indicating the following coverage and limits, and providing for a Thirty
(30) Day Notice of Cancellation to Landlord of the stated policies or
changes to coverage or limits.
2. Minimum Required Coverage and Limits:
<PAGE>
A. Comprehensive General Liability
Minimum $500,000 combined single limit. (B.1. and P.D. combined).
B. Comprehensive Automobile Liability
Minimum $500,000 combined single limit.
C. Umbrella Liability
Minimum $1,000,000 combined single limit.
D. Worker's Compensation
Statutory for the Commonwealth of Virginia and domicile of the
Subcontractor.
E. Employer's Liability
$100,000
III. Public Liability Insurance shall be provided on the basis described
below:
A. Comprehensive Automobile Liability Insurance
--------------------------------------------
1. All owned or licensed vehicles.
2. All hired vehicles.
B. Comprehensive General Automobile Liability Insurance
----------------------------------------------------
1. Premises - Operations Liability
2. Independent Contractor's Protective Liability
3. Products and Completed Operations Liability
4. Personal Injury Coverage (employee exclusion eliminated)
5. "X, C, and U" Hazards
6. Broad Form Property Damage
7. Contractual Insurance
IV. SPECIAL CONDITIONS - LOW-RISE BUILDINGS
<PAGE>
1. Clean-up of construction areas is to be performed on a daily
basis. Public areas are to be kept clean at all times. Outside
areas are to be kept clean at all times including the sweeping
and hosing down of asphalt and walkways after deliveries.
2. Construction work of a loud nature, such as concrete coring or
hammer drilling, is strictly prohibited during the weekday hours
of 8:00 a.m. to 6:00 p.m. Screw guns are not to be used on
demising walls during these hours as well.
3. Any welding and/or use of cutting torches shall be performed in
strict adherence of OSHA Standards. This work shall only be
performed in the presence of a Tenant Construction Management
representative or Tenant's General Contractor Site Supervisor. A
fire extinguisher shall be readily accessible in case of fire.
Fireproof blankets are to be placed over combustibles in the
area.
4. All construction employees are to park away from buildings so as
not to interfere with tenant parking. No parking in visitors,
maintenance, or handicapped spaces will be permitted.
5. If construction workers use utility sinks for clean-up, they are
to clean the sink after usage. Use of toilet vanities for
cleaning tools is prohibited. Do not use the utility sinks for
the disposal of paint or sheet rock mud. Parking lot catch basins
are not to be used for disposal of any cementatious waste, paint,
sheet rock mud, etc.
6. No dumping of any kind is permitted on the development grounds.
7. Do not leave drink cans, bottles, etc sitting in the window
sills. Put them in trash containers.
8. Raise blinds in the construction areas prior to commencement of
work. Return to down position and clean upon completion.
9. Construction workers are to be fully clothed at all times.
10. No blaring radios are allowed. Definition of blaring shall be
determined by the Tenant Coordinator and/or the Property Manager.
11. Contractor shall furnish his own cleaning equipment and supplies.
12. No equipment or materials shall be left sitting in public areas.
13. Tenant Coordinating Contractor shall furnish a portable toilet
for the use of tenant construction personnel. Personnel are not
to use the toilets of existing tenants.
<PAGE>
14. Tenant construction personnel are prohibited from using the
phones of existing tenants.
15. Tenant construction personnel are to use rear doors of suite
being constructed and under no circumstances is the front door to
be used. Front door is to be kept locked at all times.
16. When demolition of an existing space occurs, the electrical
contractor is responsible for removing all old phone lines and
equipment. Care is to be taken to avoid removing lines for other
tenants that may be in use. This cost is to be included in the
contractor's bids.
17. Utility Interruption Procedures
-------------------------------
Contractor or Subcontractor, its employees, and assigns shall NOT
---
disrupt any building or tenant utility, including but not limited
to electrical, water, gas, telephone, sewer and elevator service,
during the hours of 7:30 a.m. and 5:30 p.m. without the prior
written approval of Laing Properties, Inc. Additionally,
Contractor or Subcontractor must give Laing Properties, Inc.
twenty-four (24) hours verbal notice of any building or tenant
utility disruption to occur between the hour of 5:30 p.m. and
7:30 a.m.
18. Site Excavation Procedures
--------------------------
Any Contractor or Subcontractor planning to perform excavation
work on a Laing Properties project MUST arrange to have all
utilities located by the appropriate agency as well as arranging
with Laing Properties to locate Laing's underground structures,
including but not limited to irrigation, communication and power
lines, prior to starting excavation. Written authorization just
be obtained from Laing Properties after all subsurface structures
are located and prior to starting excavation.
19. Liquidated Damage Clause - Utilities and Site Excavation
--------------------------------------------------------
In consideration of the fact that actual damage for utility
interruptions is difficult to estimate or compute, Contractor and
Subcontractor agrees that a $500,000 per occurrence liquidated
damage will be assessed against Contractor or Subcontractor for
failure to give proper notice or obtain authorization and/or an
$1,000.00 per occurrence liquidated damage will be assessed
against Contractor or Subcontractor for an unauthorized
interruption of utility service.
<PAGE>
EXHIBIT "I"
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
-------------------------------------------------------
THIS AGREEMENT made as of the _______ day of __________________,
________ among ______________________ a national banking association chartered
pursuant to the laws of the United States of America (hereinafter referred to as
"Lender"), EQUINIX, INC., a California corporation (hereinafter referred to as
"Tenant"), and LAING BEAUMEADE, INC., a Georgia corporation, (hereinafter
referred to as the "Landlord").
WITNESSETH
WHEREAS, Landlord and Tenant have entered into a certain lease
(hereinafter referred to as the "Lease") executed as of November 18, 1998
-----------------
relating to a portion of the premises (the "Demised Premises") described in
Exhibit A attached hereto and by this reference made a part hereof (hereinafter
- ---------
referred to as the "Premises"); and
WHEREAS, Lender has made or has committed to make a loan to Landlord
in the principal amount of $______________ secured by a deed of trust
(hereinafter referred to as the "Mortgage"), including an assignment of leases
and rents from Landlord to Lender, covering the Premises; and
WHEREAS, Tenant has agreed that the Lease shall be subject and
subordinate to the Mortgage held by Lender, provided Tenant is assured of
continued occupancy of the Demised Premises under the terms of the Lease;
NOW, THEREFORE, for and in consideration of the mutual covenants
herein contained, the sums of Ten Dollars ($10.00) and other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
and notwithstanding anything in the Lease to the contrary it is hereby agreed as
follows.
1. Lender, Tenant and Landlord do hereby covenant and agree that the Lease
with all rights opinions, liens and charges created thereby, is and shall
continue to be subject and subordinate in all respects to the Mortgage and
to any renewals, modifications, consolidations, replacements and extensions
thereof and to all advancements made thereunder.
2. Lender does hereby agree with Tenant that, in the event Lender becomes the
owner of the Premises by foreclosure, conveyance in lieu foreclosure or
otherwise, so long as Tenant complies with and performs its obligations
under the Lease, (a) Lender will take no action which will interfere with
or disturb Tenant's possession or use of the Demise Premises or other
rights under the Lease, and (b) the Demised Premises shall be subject to
the Lease and Lender shall recognize Tenant as the tenant of the Demised
Premises for the remainder of the term of the Lease in accordance with the
provisions thereof, provided, however, that Lender shall not be subject to
any offsets or defenses which Tenant might have against
<PAGE>
any prior landlord except those which arose under the provisions of the
Lease out of such landlord's default and accrued after Tenant had notified
Lender and given Lender the opportunity to cure same as hereinbelow
provided, nor shall Lender be liable for any act or omission of any prior
landlord, nor shall Lender be bound by any rent or additional rent which
Tenant might have paid for more than the modification of the Lease made
without its consent.
3. Tenant does hereby agree with Lender that in the event Lender becomes the
owner of the premises by foreclosure, conveyance in lieu of foreclosure or
otherwise, then Tenant shall attorn to and recognize Lender as the landlord
under the Lease for the remainder of the term thereof; and Tenant shall
perform and observe its obligations thereunder, subject only to the terms
and conditions of the Lease. Tenant further covenants and agrees to execute
and deliver upon request of Lender or its assigns, an appropriate agreement
of attornment to Lender and any subsequent titleholder of the Premises.
4. So long as the Mortgage remains outstanding and unsatisfied, Tenant will
mail or deliver to Lender, at the address and in the manner hereinbelow
provided, a copy of all notices permitted or required to be given to the
landlord by Tenant under and pursuant to the terms and provisions of the
Lease. At any time before the rights of the landlord shall have been
forfeited or adversely affected because of any default of the landlord, or
within the time permitted the landlord for curing any default under the
Lease as therein provided (but not less than sixty (60) days from the
receipt of notice), Lender may, but shall have no obligation to, pay any
taxes and assessments, make any repairs and improvements, make any deposits
or do any other act or thing required of the landlord by the terms of the
Lease; and all payments so made and all things so done and performed by
Lender shall be as effective to prevent the rights of the landlord from
being forfeited or adversely affected because of any default under the
Lease as the same would have been if done and performed by the landlord.
5. Tenant acknowledges that Landlord will execute and deliver to Lender an
assignment of the Lease as security for said loan, and Tenant hereby
expressly consents to such assignment.
6. Landlord and Tenant hereby certify to Lender that the Lease has been duly
executed by Landlord and Tenant and is in full force and effect, that the
Lease and any modifications and amendments specified herein are a complete
statement of the agreement between Landlord and Tenant with respect to the
leasing of the Demised Premises, and the Lease has not been modified or
amended except as specified herein; that to the knowledge of Landlord and
Tenant, no party to the Lease is in default thereunder; that no rent wider
to the Lease has been paid more than thirty (30) days in advance of its due
date; and that Tenant, as of this date, has no charge, lien or claim of
offset under the Lease, or otherwise, against the rents or other charges
due or to become due thereunder.
<PAGE>
7. Unless and except as otherwise specifically provided herein, any and all
notices, elections, approvals, consents, demands, requests and responses
thereto ("Communications") permitted or required to be given under this
Agreement shall be in writing, signed by or on behalf of the party giving
the same, and shall be deemed to have been properly given and shall be
effective upon the earlier of receipt thereof or deposit thereof in the
United States mail, postage prepaid, certified with return receipt
requested, to the other party at the address of such other party set forth
hereinbelow or at such other address within the continental United States
as such other party may designate by notice specifically designated as a
notice of change of address and given in accordance herewith; provided,
however, that the time period in which a response to any Communication must
be given shall commence on the date of receipt thereof, and provided
further that no notice of change of address shall be effective with respect
to Communications sent prior to the time of receipt thereof. Receipt of
Communications hereunder shall occur upon actual delivery whether by mail,
telecopy transmission, messenger, courier service, or otherwise, to an
individual party or to an officer or general or limited partner of a party
or to any agent or employee of such party at the address of such party set
forth hereinbelow, subject to change as provided hereinabove. An attempt
delivery in accordance with the foregoing, acceptance of which is refused
or rejected, shall be deemed to be and shall constitute receipt; and an
attempted delivery in accordance with the foregoing by mail, messenger, or
courier service (whichever is chosen by the sender) which is not completed
because of changed address of which no notice was received by the Lender in
accordance with this provision prior to the sending of the Communication
shall also be deemed to be and constitute receipt. Any Communication, if
given to Lender, must be addressed as follows, subject to change as
provided hereinabove and, if given to Tenant, must be addressed as follows,
subject to change as provided hereinabove:
EQUINIX, INC.
[*], Suite C
Ashburn, Virginia 20147
Attention: Branch Manager
and, if given to landlord, shall be addressed as follows:
Laing Beaumeade, Inc.
5901 B Peachtree Dunwoody Road, Suite 555
Atlanta, Georgia 30328
Attention: Robert K. Stubbs, Esq.
8. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, legal representatives,
successors, successors-in-title and assigns. When used herein, the term
"landlord" refers to Landlord and to any successor to the interest of
Landlord under the Lease.
_____________________
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal
of the date first above written.
LENDER:
By: ___________________________________
Title: ________________________________
[BANK SEAL]
TENANT: EQUINIX, INC.,
a California corporation
By: ___________________________________
Title: ________________________________
Attest: _______________________________
Title: ________________________________
LANDLORD: LAING BEAUMEADE, INC.,
a Georgia corporation
By: ___________________________________
Title: ________________________________
Attest: _______________________________
Title: ________________________________
<PAGE>
EXHIBIT "J"
LANDLORD'S APPROVED GENERAL CONTRACTOR LIST
1. Fox Seko, 485 Spring Park Place, Herndon, Virginia 22071; telephone
703/904-2700; contract Jeff Roberts
2. Fisher and Stracban, 11820 Coakley Circle, Rockville, Maryland 20852;
telephone 301/881-6797; contact Richard Strachan
3. J. R. Austin Co., 4981 Montgomery Lane, Bethesda, Maryland 20814; telephone
301/657-7600; contact Scott Austin
4. Kfoury Construction Group, 11307 Sunset Hills Road, Reston, Virginia 22090;
telephone 703/736-100; contact Jeff Martello
5. The Leapley Company, 1724 Kalorama Road, N.W., Washington, D.C. 20009;
telephone 202/483-1800; contact Dennis Leapley
6. G & F Associates, 3920 University Drive, Fairfax, Virginia 22030; telephone
703/293-7000; contact Mark Geminyani
7. R. W. Murray Co., 4511-A Daly Drive, Chantilly, Virginia 20151; telephone
703/818-0980; contact Chuck Loving
8. K. F. Brumback Construction Corporation, 323 Seneca Road, Great Falls,
Virginia 22066; telephone 703/450-2725; contact Ken Brumback
9. Minkoff Company, Inc., 5223 River Road, Bethesda, Maryland 20816; telephone
301/652-8711; contact Jim Lippert
10. Tucon Construction, 105 Executive Drive, Suite 200, Dulles, Virginia 20166;
telephone 703/478-3500; contact Scott Houston
11. Willett Custom Printing and Construction, Inc., P.O. Box 244, Port Tobacco,
Maryland 20677; telephone 301/645-9638; contact Chris Willett
39
<PAGE>
EXHIBIT "K"
Special Tenant Requirements
---------------------------
Landlord and Tenant hereby agree that, notwithstanding anything contained
in the Lease to the contrary, the provisions set forth below shall be included
as part of the Lease and shall supersede any inconsistent provisions of the
Lease. All references in the Lease and in this Exhibit to the Lease shall be
construed to mean the Lease (and all exhibits thereto), as amended and
supplemented by the Exhibit. All terms not otherwise defined in the Exhibit
shall have the same meanings as set forth in the Lease.
1. Use.
1.1 Tenant's Use of Premises and Buildings and Land. Tenant is
-----------------------------------------------
permitted (a) to construct, maintain, operate and repair electronic,
transmitting and receiving equipment and supporting structures on the Premises,
including the roof of the Building, (b) to construct, maintain, operate and
repair an equipment room on the Premises, including the construction of an
upgraded fire suppression system which shall be a dry pipe, pre-action water
based system and Tenant reserves the right to install an environmentally
approved, gas, fire suppression system, (c) to install, upgrade, maintain,
operate, and repair utility lines, transmission lines, and telecommunications
conduit and cabling (collectively, the "Conduits") in such locations on the
Building and Land as set forth in plans and specifications, which shall be
subject to Landlord's approval which shall not be unreasonably withheld,
conditioned or delayed, (d) reasonable ingress and ogress over existing roadways
on the Land for Tenant's truck and other vehicles, to maintain Tenant's
equipment, and the Conduits (collectively, "Equipment"). The Equipment shall
include, without limitation, the antenna, batteries, uninterruptible power
supply and such other equipment necessary thereto. Tenant shall have access to
and use of Premises, the Building and Land and the Conduits, 24 hours per day,
365 days per year.
1.2 Tenant's Use of Conduit Ducts. Tenant shall have the right to
-----------------------------
install, maintain, operate and repair the Conduits in any of Landlord's conduit
ducts located on the Building and Land, so long as Tenant's use of the Conduits
does not Interfere with Landlord's use of Landlord's conduit ducts located on
the Building and Land, if required for provisioning of any utility service
provider to the building. Tenant will install separate conduit where applicable.
2. Compliance With Law. Nothing contained in this Exhibit shall in any
-------------------
way limit or negate Tenant's obligation to comply with laws in accordance with
the terms of the Lease.
3. Initial Installation and Testing. Tenant shall have the right, at
--------------------------------
Tenant's sole cost and expense, at any time following the execution of this
Lease by Tenant in a form mutually acceptable to Landlord and Tenant, to enter
upon the Building and Land and to carry out any tests, inspections, pre-
installation activities on the Building and Land as necessary for the
construction and installation of the Equipment, including without limitation,
engineering and environment surveys, physical inspections, soil test borings,
and underground trenching. Immediately following the completion of such tests,
inspections, or pre-installation activities, Tenant shall, at Tenant's sole cost
and expense, repair any damage to the Building ad Land
40
<PAGE>
caused by such inspections or pre-installation activities, including re-paying
and re-landscaping any affected areas of the Building and Land. Any such entry
onto the Building and Land prior to the Commencement Date of the Lease shall be
on all of the terms and provisions of the Lease, expected for Tenant's
obligation to pay rent.
4. Equipment Ownership Surrender. The Equipment shall be the property
-----------------------------
of and owned by Tenant throughout the Lease Term, and shall in all event be
deemed trade fixtures, even if affixed to the Premises or Building or Land. On
or before the Expiration Date or earlier termination of this Lease. Tenant shall
remove its Equipment from the Premises and Building and Land and restore the
Leased Premises as outlined in Paragraph 13 (n) of this Lease. Landlord hereby
expressly waives and releases any and all contractual liens and security
interests or constitutional and/or statutory liens and security interests
arising by operation of law or under the Lease to which Landlord might now or
hereafter be entitled on any of the Equipment, Tenant's HVAC Unit or Tenant's
Generator. Landlord further agrees that the Equipment, Tenant's HVAC Unit, and
Tenant's Generator shall be exempt from execution, foreclosure, sale, levy,
attachment, for any Tenant default hereunder, and that the Equipment, Tenant's
HVAC Unit, and Tenant's Generator may be removed at any time from the Premises
or the Building and Land by Tenant.
5. Emergency Power Generator. Tenant shall have the right, at any time
during the Lease Term, at Tenant's option and at Tenant's sole cost and expense:
(a) install and emergency power generators ("Tenant's Generator") on the Leased
Premises as noted on Exhibit A, in such location as reasonably approved by
Landlord, to provide back-up emergency power for the Equipment and for Tenant's
HVAC Unit, and (b) store fuel, above ground, on the Premises or elsewhere as
noted in Exhibit A, in such locations as reasonably approved by Landlord, in
such amounts as Tenant reasonably determines necessary for Tenant's Generator.
6. No Interference: Relocation.
----------------------------
6.1 No Interference. Neither Landlord nor any of Landlord's agents,
---------------
employees, or contractors (collectively, the "Landlord Parties") shall interfere
in any way with the Equipment or with Tenant's access to the Equipment and
Antennas, the Conduits, Tenant's HVAC Unit, or Tenant's Generator (the
"Interference"). Landlord agrees that prior to Landlord's carrying out any
construction, maintenance or repair activities on the Land in the vicinity of,
the Antennas, the Conduits, Tenant's HVAC Unit, or Tenant's Generator (if such
are not located within the Premises), Landlord shall provide three (3) days'
prior written notice of Landlord's or Landlord Parties' intent to carry out such
construction, maintenance or repair work including the date, time and location
in which such work will take place. Tenant shall have the right to monitor and
inspect such work will take place. Tenant shall have the right to monitor and
inspect such work at Tenant's own risk, and at Tenant's sole cost and expense.
Landlord and Landlord's Parties shall exercise all due care in carrying out such
work. Landlord shall use reasonable efforts to immediately notify the Tenant's
designated contact person by telephone or facsimile in the event of Landlord's
actual knowledge of fire, power failure, bomb threats, or other unplanned events
which could adversely impact Tenant's operations.
41
<PAGE>
6.2 Remedies. Upon written notice from Tenant, stating with
--------
specificity that Landlord or one or more of the Landlord Parties is creating an
Interference in violation of Section 6.1 above, Landlord shall take immediately
all necessary measures at Landlord's sole cost and expense to eliminate the
Interference, including, hiring agents to work extended hours, until the
Interference is eliminated.
6.3 Relocation. In no event shall Landlord relocate Tenant or the
Equipment to other premises, or require Tenant to relocate its Equipment for any
length of time to any other location, either in or on the Building or Land or
elsewhere.
7. Co-Location. Landlord acknowledges that Tenant's business to
-----------
be conducted on the Premises requires the installation on the Premises of
certain communications equipment by certain licenses and customers of Tenant
(collectively, "Customers") in order for such Customers to interconnect with
Tenant's terminal facilities or to permit Tenant to manage or operate such
Customer's equipment, or otherwise as may be required pursuant to applicable
statutes and regulations. Notwithstanding anything to the contrary contained in
the Lease, Landlord hereby consents in advance to any sublease, license
agreements, "co-location agreement" or similar agreement (collectively,
"Customer License") between Tenant and such a Customer of the limited purpose of
permitting such arrangements as described above. The effectiveness of such
advance consent to a particular Customer License is conditioned upon such
Customer License being in writing and consistent with the provisions of this
Lease (although Tenant will only be required to provide Landlord a copy of the
executed Customer License if the Landlord requests it in writing).
8. Sound Control. Tenant is responsible for taking the necessary
-------------
measures to reduce the sound transmissions caused by the Equipment. In addition,
Tenant's Generator shall be installed in a weatherproof, walk-around type, sound
attenuating enclosure which shall limit the sound to no more that 85 dBA as
measured at three (3) feet from any side, top or bottom, under all operating
conditions.
9. Confidentiality. Landlord shall keep all Confidential
---------------
Information of Tenant confidential. For the purposes of this Lease,
"Confidential Information" includes any data or information pertaining to Tenant
or Tenant's business, regardless of medium, that is provided by Tenant to
Landlord, including Tenant's plans and specifications or electrical power
requirements, site plans, or copies of any such information, but excludes any
information (a) approved in writing by Tenant for releases to third parties, (b)
that Landlord possesses independently of Tenant, or (o) that Tenant places in
the public domain.
10. Indemnity. Tenant agrees that Paragraph 10 (c) of the Lease
---------
pertains to this Exhibit.
42
<PAGE>
LANDLORD:
WITNESS: Laing Beaumeade, Inc.
a Georgia corporation
______________________________ By: [signature illegible] (SEAL)
-------------------------
Its: ______________________________
TENANT:
WITNESS Equinix, Inc.
a Delaware corporation
______________________________ By: /s/ Jay S. Adelson (SEAL)
----------------------
Its: CTO
-----------------------------
WITNESS:
______________________________ By: /s/ Albert M. Avery (SEAL)
----------------------
Its: CEO
-----------------------------
43
<PAGE>
EXHIBIT 10.12
CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE--NET
(Do not use this form for Multi-Tenant Buildings)
1. Basic Provisions ("Basic Provisions")
1.1 Parties: This Lease ("Lease"), dated for reference purposes only June
10, 1999, is made by and between ROSS VENTURES II, INC,. a California
corporation ("Lessor") and EQUINIX, INC., a California corporation ("Lessee"),
(collectively the "Parties," or individually a "Party").
1.2 Premises: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known as [*], San Jose, located in the County of Santa Clara, State of
California and generally described as (describe briefly the nature of the
property and, if applicable, the "Project", if the property is located within a
Project) an industrial/office building of approximately [*] square feet of
rentable floor space and land on which same is located, more particularly
described in Exhibit "A" hereto, ("Premises"). (See also Paragraph 2 for further
provisions.)
1.3 Term: eleven (11) years and six (6) months ("Original Term") commencing
September 1, 1999 ("Commencement Date"), and ending February 28, 2000
("Expiration Date"). (See also Paragraph 3.)
1.4 Early Possession: Upon execution hereof ("Early Possession Date")
(See also Paragraphs 3.2 and 3.3.)
1.5 Base Rent: $[*] per month ("Base Rent"), payable on the first (1st) day
of each month commencing on the Commencement Date continuing for 6 months. (See
also Paragraph 4.)
[X] If this box is checked, there are provisions in this Lease for the Base
Rent to be adjusted. See also Paragraph 1 of Addendum.
1.6 Base Rent Paid Upon Execution: $______________________________________
as Base Rent for the period ___________________________________________________.
1.7 Security Deposit: See Paragraph 2 of Addendum ("Security Deposit").
(See Paragraph 5.)
1.8 Agreed Use: See Paragraph 5 of Addendum. (See also Paragraph 6.)
1.9 Insuring Party: Lessor is the "Insuring Party" unless otherwise
stated herein. (See also Paragraph 8.)
1.10 Real Estate Brokers: (See also Paragraph 15).
(a) Representation: The following real estate brokers (collectively,
the "Brokers") and brokerage relationships exist in this transaction (check
appropriate boxes):
[_] __________________________________________________ represents Lessor
exclusively ("Lessor's Broker");
[X] Commercial Properties Services Company (CPS) represents Lessee exclusively
("Lessor's Broker"); or
[X] __________________________________________________ represents both Lessor
and Lessee ("Dual Agency").
(b) Payment to Brokers: Upon execution and delivery of this Lease by
both Parties, Lessor shall pay to the Broker the fee agreed to in their separate
written agreement.
1.11 Guarantor. The obligations of the Lessee under this Lease are to be
guaranteed by N/A ("Guarantor"). (See also Paragraph 37)
1.12 Addenda and Exhibits. Attached hereto is an Addendum or Addenda
consisting of Paragraphs ___ through ___ and Exhibit _________________________
_______________, all of which constitute a part of this Lease.
2. Premises.
2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, the Premises, for the term, at the rental, and upon all of the terms,
covenants and conditions set forth in this Lease. Unless otherwise provided
herein, any statement of size set forth in this Lease, or that may have been
used in calculating rental, is an approximation which the Parties agree is
reasonable and the rental based thereon is not subject to revision whether or
not the actual size is more or less.
2.2 Condition. Lessor shall deliver the Premises to Lessee broom clean and
free of debris on the Commencement Date or the Early Possession Date, whichever
first occurs first ("Start Date"). Landlord warrants that the structural
elements of the roof, bearing walls and foundation of any buildings on the
Premises (the "Building") shall be free of material defects. If a non-compliance
with said warranty exists as of the Start Date, Lessor shall, as Lessor's sole
obligation with respect to such matter, except as otherwise provided in this
Lease, promptly after receipt of written notice from Lessee setting forth with
specificity the nature and extent of such non-compliance, rectify same at
Lessor's expense. If, after the Start Date, Lessee does not give Lessor written
notice of any non-compliance with this warranty within: (i) one year as to the
surface of the roof and the structural portions of the roof, foundations and
bearing walls, correction of that non-compliance shall be the obligation of
Lessee at Lessee's sole cost and expense. See "AS IS" Provision in Paragraph 3
of Addendum.
2.3 Compliance. As used in this Lease, "Applicable Requirements" means all
applicable laws, covenants, or restrictions of record, building codes,
regulations and ordinances in effect on the Start Date.
2.4 Acknowledgements. Lessee acknowledges that: (a) it has been advised
by Lessor and/or Brokers to satisfy itself with respect to the condition of the
Premises (including but not limited to the electrical, HVAC and fire sprinkler
systems, security, environmental aspects, and compliance with Applicable
Requirements), and their suitability for Lessee's intended use, (b) Lessee has
made such investigation as it deems necessary with reference to such matters and
assumes all responsibility therefor as the same relate to its occupancy of the
Premises, and (c) neither Lessor, Lessor's agents, nor any Broker has made any
oral or written representations or warrants with respect to said matters other
than as set forth in this Lease. In addition, Lessor acknowledges that: (a)
Broker has made no representations, promises or warranties concerning Lessee's
ability to honor the Lease or suitability to occupy the Premises, and (b) it is
Lessor's sole responsibility to investigate the financial capability and/or
suitability of all proposed tenants.
3. Term.
3.1 Term. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
3.2 Early Possession. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent shall
be abated for the period of such early possession. All other terms of this
Lease, however, (including but not limited to the obligations to pay Real
Property Taxes and insurance premiums and to maintain the Premises) shall be in
effect during such period. Any such early possession shall not affect the
Expiration Date.
_________________
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
3.3 Delay in Possession. Lessor agrees to use its best commercially
reasonable efforts to deliver possession of the Premises to Lessee by the
Execution Date. If, despite said efforts, Lessor is unable to deliver possession
as agreed, Lessee shall not be subject to any liability therefor, nor shall such
failure affect the validity of this Lease. Lessee shall not, however, be
obligated to pay Rent or perform its other obligations until it receives
possession of the Premises. If possession is not delivered within sixty (60)
days after the Execution Date, Lessee may, at its option, by notice in writing
to Lessor within ten (10) days after the end of such sixty (60) day period,
cancel this Lease, in which event the Parties shall be discharged from all
obligations hereunder. If such written notice is not received by Lessor within
said ten (10) day period, Lessee's right to cancel shall terminate. Except as
otherwise provided, if possession is not tendered to Lessee by the Start Date
and Lessee does not terminate this Lease, as aforesaid, any period of rent
abatement that Lessee would otherwise have enjoyed shall run from the date of
delivery of possession and continue for a period equal to what Lessee would
otherwise have enjoyed under the terms hereof, but minus any days of delay
caused by the acts or omissions of Lessee. If possession of the Premises is not
delivered within four (4) months after the Execution Date, this Lease shall
terminate unless other agreements are reached between Lessor and Lessee, in
writing.
3.4 Lessee Compliance. Lessor shall not be required to tender possession
of the Premises to Lessee until Lessee complies with its obligation to provide
evidence of insurance (Paragraph 8.5). Pending delivery of such evidence, Lessee
shall be required to perform all of its obligations under this Lease from and
after the Commencement Date, including the payment of Rent, notwithstanding
Lessor's election to withhold possession pending receipt of such receipt of such
evidence of insurance. Further, if Lessee is required to perform any other
conditions prior to or concurrent with the Start Date, the Start Date shall
occur but Lessor may elect to withhold possession until such conditions are
satisfied.
4. Rent.
4.1 Rent Defined. All monetary obligations of Lessee to Lessor under the
terms of this Lease (except for the Security Deposit) are deemed to be rent
("Rent").
4.2 Payment. Lessee shall cause payment of Rent to be received by Lessor
in lawful money of the United States, without offset or deduction (except as
specifically permitted in this Lease), on or before the day on which it is due.
Rent for any period during the term hereof which is for less than one (1) full
calendar month shall be prorated based upon the actual number of days of said
month. Payment of Rent shall be made to Lessor at its address stated herein or
to such other persons or place as Lessor may from time to time designate in
writing. Acceptance of payment which is less than the amount then due shall not
be a waiver of Lessor's rights to the balance of such Rent, regardless of
Lessor's endorsement of any check so stating.
5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof
the Security Deposit as security for Lessee's faithful performance of Lessee's
obligations under this Lease. If Lessee fails to pay Rent after any applicable
cure period, or otherwise Breaches under this Lease, Lessor may use, apply or
retain all or any portion of said Security Deposit for the payment of any amount
due Lessor or to reimburse or compensate Lessor for any liability, expense, loss
or damage which Lessor may suffer or incur by reason thereof. If Lessor uses or
applies all or any portion of said Security Deposit, Lessee shall within ten
(10) days after written request therefor deposit monies with Lessor sufficient
to restore said Security Deposit to the full amount required by this Lease.
Should the Agreed Use be amended to accommodate a material change in the
business of Lessee or to accommodate a sublessee or assignee, Lessor shall have
the right to increase the Security Deposit to the extent necessary, in Lessor's
reasonable judgment, to account for any increased wear and tear that the
Premises may suffer as a result thereof. Lessor shall not be required to keep
the Security Deposit separate from its general accounts. Within fourteen (14)
days after the expiration or termination of this Lease, if Lessor elects to
apply the Security Deposit only to unpaid Rent, and otherwise within thirty (30)
days after the Premises have been vacated pursuant to Paragraph 7.4(c) below,
Lessor shall return to that portion of the Security Deposit not used or applied
by Lessor. No part of the Security Deposit shall be considered to be held in
trust, to bear interest or to be prepayment for any monies to be paid by Lessee
under this Lease.
6. Use.
6.1 Use. Lessee shall use and occupy the Premises only for the Agreed
Use, or any other legal use which is reasonably comparable thereto, and for no
other purpose. Lessee shall not use or permit the use of the Premises in a
manner that is unlawful, creates damage, waste or a nuisance, or that disturbs
owners and/or occupants of, or causes damage to neighboring properties. Lessor
shall not unreasonably withhold or delay its consent to any written request for
a modification of the Agreed Use, so long as the same will not impair the
structural integrity of the improvements on the Premises or the mechanical or
electrical systems therein, is not significantly more burdensome to the
Premises. If Lessor elects to withhold consent, Lessor shall within five (5)
business days after such request give written notification of same, which notice
shall include an explanation of Lessor's objections to the change in use. See
Paragraph 5, Addendum)
6.2 Hazardous Substances.
(a) Reportable Uses Require Consent. The term "Hazardous Substance"
as used in this Lease shall mean any product, substance, or waste whose
presence, use, manufacture, disposal, transportation, or release, either by
itself or in combination with other materials expected to be on the Premises, is
either: (i) potentially injurious to the public health, safety or welfare, the
environment or the Premises, (ii) regulated or monitored by any governmental
authority, or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substance shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, and/or crude oil or any products, by-products or fractions
thereof. Lessee shall not engage in any activity in or on the Premises which
constitutes a Reportable Use of Hazardous Substances without the express prior
written consent of Lessor and timely compliance (at Lessee's expense) with all
Applicable Requirements. "Reportable Use" shall mean (i) the installation or use
of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration or
business plan is required to be filed with, any governmental authority, and/or
(iii) the presence at the Premises of a Hazardous Substance with respect to
which any Applicable Requirements requires that a notice be given to persons
entering or occupying the Premises or neighboring properties. Notwithstanding
the foregoing, Lessee may use any ordinary and customary materials reasonably
required to be used by Lessee in the normal course of the Agreed Use, so long as
such use is in compliance with all Applicable Requirements, is not a Reportable
Use, and does not expose the Premises or neighboring properties to any
meaningful risk of contamination or damage or expose Lessor to any liability
therefor. In addition, Lessor may condition its consent to any Reportable Use
upon receiving such additional assurances as Lessor reasonably deems necessary
to protect itself, the public, the Premises and/or the environment against
damage, contamination or injury and/or liability, including, but not limited to,
the installation (and removal on or before Lease expiration or earlier
termination) of protective modifications and/or increasing the Security Deposit.
(b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause
to believe, that a Hazardous Substance has come to be located in, on, under or
about the Premises, other than as previously consented to by Lessor, Lessee
shall immediately give written notice of such fact to Lessor, and provide Lessor
with a copy of any report, notice, claim or other documentation which is has
concerning the presence of such Hazardous Substance.
(c) Lessee Remediation. Lessee shall not cause or permit any
Hazardous Substance to be spilled or released in, on, under, or about the
Premises (including through the plumbing or sanitary sewer system) and shall
promptly, at Lessee's expense, take all investigatory and/or remedial action
reasonably recommended, whether or not formally ordered or required, for the
cleanup of any contamination of, and for the maintenance, security and/or
monitoring of the Premises or neighboring properties, that was caused or
materially contributed to by Lessee, or pertaining to or involving any Hazardous
Substance brought onto the Premises during the term of this Lease, by or for
Lessee, or any third party.
(d) Lessee Indemnification. Lessee shall indemnify, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, harmless from
and against any and all loss of rents and/or damages, liabilities, judgments,
claims, expenses, penalties, permits and attorney's and consultant's fees
arising out of or involving any Hazardous Substance brought onto the Premises by
or for Lessee, or any third party (provided however, that Lessee shall have no
liability under this Lease with respect to underground migration of any
Hazardous Substance under the Premises from adjacent properties). Lessee's
obligations shall include, but not be limited to, the effects of any
contamination or injury to person, property or the environment created or
suffered by Lessee, and the cost of investigation, removal, remediation,
restoration and/or abatement, and shall survive the expiration or earlier
termination of this Lease. No termination, cancellation or release agreement
entered into by Lessor and Lessee shall release Lessee from its obligations
under this Lease with respect to Hazardous Substances, unless specifically so
agreed by Lessor in writing at the time of such_agreement.
(e) Lessor Indemnification. Lessor and its successors and assigns
shall indemnify, defend, reimburse and hold Lessee, its employees and lenders,
harmless from and against any and all environmental damages, including the cost
of remediation, which existed as a result of Hazardous Substances on the
Premises prior to the Start Date or which are caused by the negligence or
willful misconduct of Lessor, its agents or employees. Lessor's obligations, as
and when required by the Applicable Requirements, shall include, but not be
limited to, the cost of investigation, removal, remediation, restoration and/or
abatement, and shall survive the expiration or termination of this Lease.
(f) Investigations and Remediations. Lessor shall retain the
responsibility and pay for any investigations or remediation measures required
by governmental entitles having jurisdictions with respect to the existence of
Hazardous Substances on the Premises prior to the Start Date, unless such
remediation measure is required as a result of Lessee's use (including
"Alterations", as defined in paragraph 7.3(a) below) of the Premises,
<PAGE>
in which event Lessee shall be responsible for such payment. Lessee shall
cooperate fully in any such activities at the request of Lessor, including
allowing Lessor and Lessor's agents to have reasonable access to the Premises at
reasonable times in order to carry out Lessor's Investigative and remedial
responsibilities.
(g) Lessor Termination Option. If a Hazardous Substance Condition
occurs during the term of this Lease, unless Lessee is legally responsible
therefor (in which case Lessee shall make the investigation and remediation
thereof required by the Applicable Requirements and this Lease shall continue in
full force and effect, but subject to Lessor's rights under Paragraph 6.2(d) and
Paragraph 13). Lessor may, at Lessor's option, either (i) investigate and
remediate such Hazardous Substance Condition, if required, as soon as reasonably
possible at Lessor's expense in which event this Lease shall continue in full
force and effect, or (ii) if the estimated cost to remediate such condition
exceeds $2,000,000.00 given written notice to Lessee, within thirty (30) days
after receipt by Lessor of knowledge of the occurrence of such Hazardous
Substance Condition, of Lessor's desire to terminate this Lease as of the date
sixty (60) days following the date of such notice. In the event Lessor elects to
give a termination notice, Lessee may, within ten (10) days thereafter, give
written notice to Lessor of Lessee's commitment to pay the amount by which the
cost of the remediation of such Hazardous Substance Condition $2,000,000.00.
Lessee shall provide Lessor with said funds or satisfactory assurance thereof
within thirty (30) days following such commitment. In such event, this Lease
shall continue in full force and effect, and Lessor shall proceed to make such
remediation as soon as reasonably possible after the required funds are
available. If Lessee does not give such notice and provide the required funds or
assurance thereof within the time provided, this Lease shall terminate as of the
date specified in Lessor's notice of termination.
6.3 Lessee's Compliance with Applicable Requirements. Except as otherwise
provided in this Lease, Lessee, shall, at Lessee's sole expense, fully,
diligently and in a timely manner, materially comply with all Applicable
Requirements, the requirements of any applicable fire insurance underwriter or
rating bureau, and the reasonable recommendations of Lessor's engineers and/or
consultants which relate in any manner to the Premises, without regard to
whether said requirements are now in effect or become effective after the Start
Date. Lessee shall, within ten (10) days after receipt of Lessor's written
request, provide Lessor with copies of all permits and other documents, and
other information evidencing Lessee's compliance with any Applicable
Requirements specified by Lessor, and shall immediately upon receipt, notify
Lessor in writing (with copies of any documents involved) of any threatened or
actual claim, notice, citation, warning, complaint or report pertaining to or
involving failure of Lessee or the Premises to comply with any Applicable Law.
6.4 Inspection; Compliance. Lessor and Lessor's "Lender" (as defined in
Paragraph 30 below) and consultants shall have the right to enter into Premises
at any time, in the case of an emergency, and otherwise at reasonable times, for
the purpose of inspecting the condition of the Premises and for verifying
compliance by Lessee with this Lease. The cost of any inspections shall be paid
by Lessor, unless a violation of Applicable Requirements, or a contamination is
found to exist or be imminent, or the inspection is requested or ordered by a
governmental authority. In such case, Lessee shall upon request reimburse
Lessor for the cost of such inspections, so long as such inspection is
reasonably related to the violation or contamination. Notwithstanding the
foregoing, Lessor shall not be allowed to enter the Premises without providing
Lessee with at least twenty-four (24) hours prior notice and being escorted by
one or Lessee's representatives, except in case of an emergency.
7. Maintenance; Repairs; Utility Installations; Trade Fixtures and
Alterations.
7.1 Lessee's Obligations.
(a) In General. Subject to the provisions of Paragraph 2.2
(Condition), 6.3 (Lessor's Compliance with Applicable Requirements), 7.2
(Lessor's Obligations), 9 (Damage and Destruction), and 14 (Condemnation),
Lessee shall, at Lessee's sole cost and expense, keep the Premises, Utility
Installations, and Alterations in good order, condition and repair (whether or
not such portion of the Premises requiring repairs, or the means of repairing
the same, are reasonably or readily accessible to Lessee, and whether or not the
need for such repairs occurs as a result of Lessee's use, any prior use, the
elements or the age of such portion of the Premises), including, but not limited
to, all equipment or facilities, such as plumbing, heating, air conditioning,
electrical, lighting facilities, boilers, pressure vessels, fire protection
system, fixtures, walls (interior and exterior), foundations, ceilings, roofs,
floors, windows, doors, plate glass, skylights, landscaping, driveways, parking
lots, fences, retaining walls, signs, sidewalks and parkways located in, on,
about, or adjacent to the Premises. Lessee, in keeping the Premises in good
order, condition and repair, shall exercise and perform good maintenance
practices, specifically including the procurement and maintenance of the service
contracts required by Paragraph 7.1(b) below. Lessee's obligations shall include
restorations, replacements or renewals when necessary to keep the Premises and
all improvements thereon or a part thereof in good order, condition and state of
repair. Lessee shall, during the term of this Lease, keep the exterior
appearance of the Building in a first-class condition consistent with the
exterior appearance of other similar facilities of comparable age and size in
the vicinity, including, when necessary, the exterior repainting of the
Building.
(b) Service Contracts. Lessee shall, at Lessee's sole cost and
expense, procure and maintain contracts, with copies to Lessor, in customary
form and substance for, and with contractors specializing and experienced in the
maintenance of the following equipment and improvements, if any, if and when
installed on the Premises: (i) HVAC equipment, (ii) fire sprinkler systems,
including fire alarm and/or smoke detection, (iii) landscaping and irrigation
systems, (iv) roof covering and drains, (v) driveways and parking lots, (vi)
basic utility feed to the perimeter of the Building, if reasonably required by
Lessor.
7.2 Lessor's Obligations. Subject to the provisions of Paragraphs 2.2
(Condition), 9 (Damage or Destruction) and 14 (Condemnation), it is intended by
the Parties hereto that Lessor have no obligation, in any manner whatsoever, to
repair and maintain the Premises, or the equipment therein, all of which
obligations are intended to be that of the Lessee. It is the intention of the
Parties that the terms of this Lease govern the respective obligations of the
Parties as to maintenance and repair of the Premises and they expressly waive
the benefit of any statute now or hereafter in effect to the extent it is
inconsistent with the terms of this Lease.
7.3 Utility Installations; Trade Fixtures; Alterations.
(a) Definitions; Consent Required. The term "Utility Installations"
refers to all floor and window coverings, air lines, power panels, electrical
distribution, security, fire protection systems, communication systems, lighting
fixtures, HVAC equipment, plumbing, and fencing in or on the Premises. The term
"Trade Fixtures" shall mean Lessee's machinery and equipment that can be removed
without doing material damage to the Premises. The term "Alterations" shall mean
any modification of the improvements, other than Utility Installations or Trade
Fixtures, whether by addition or deletion. "Lessee Owned Alterations and/or
Utility Installations" are defined as Alterations and/or Utility Installations
made by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a).
Lessee shall not make any Alterations or Utility Installations to the Premises
without Lessor's prior written consent. Lessee may, however, make non-structural
Utility Installations to the interior of the Premises (excluding the roof),
without such consent but not upon notice to Lessor, as long as they are not
visible from the outside, do not involve puncturing, relocating or removing the
roof or any existing walls, and the cumulative cost thereof during the term of
this Lease as extended does not exceed $50,000 in the aggregate or $10,000 in
any one year. See Paragraph 4 Addendum.
(b) Consent. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. Consents shall be
deemed conditioned upon Lessee's: (i) acquiring all applicable governmental
permits, (ii) furnishing Lessor with copies of both the permits and the plans
and specifications prior to commencement of the work, and (iii) compliance with
all conditions of said permits and other Applicable Requirements in a prompt and
expeditious manner. Any Alterations or Utility Installations shall be performed
in a workmanlike manner with good and sufficient materials. Lessee shall
promptly upon completion furnish Lessor with as-built plans and specifications.
For work which costs an amount equal to the quarter of one month's Base Rent, or
$10,000, Lessor may condition its consent upon Lessee providing a lien and
completion bond in an amount equal to one and one-half times the estimated cost
of such Alteration or Utility Installation and/or upon Lessee's posting an
additional Security Deposit with Lessor. See Paragraph 4 Addendum.
(c) Indemnification. Lessee shall pay, when due, all claims for
labor or materials furnished or alleged to have been furnished to or for Lessee
at or for use on the Premises, which claims are or may be secured by any
mechanics' or materialmen's lien against the Premises or any interest therein.
Lessee shall give Lessor not less than ten (10) days' notice prior to the
commencement of any work in, on or about the Premises, and Lessor shall have the
right to post notices of non-responsibility. If Lessee shall contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend and protect itself, Lessor and the Premises against the same and
shall pay and satisfy any such adverse judgment that may be rendered thereon
before the enforcement thereof. If Lessor shall require, Lessee shall furnish a
surety bond in an amount equal to one and one-half times the amount of such
contested lien, claim or demand, indemnifying Lessor against liability for the
same. In Lessor elects to participate in any such action, Lessee shall pay
Lessor's attorneys' fees and costs.
7.4 Ownership; Removal; Surrender; and Restoration.
(a) Ownership. Subject to Lessor's right to require removal or elect
ownership as hereinafter provided, all Alterations and Utility Installations
made by Lessee shall be the property of Lessee, but considered a part of the
Premises. Lessor may, at any time, elect in writing to be owner of all or any
specified part of the Lessee Owned Alterations, and Utility Installations.
Unless otherwise instructed per Paragraph 7.4(b) hereof, all Lessee Owned
Alterations and Utility Installations shall, at the expiration or earlier
termination of this Lease, become the property of Lessor and be surrendered by
Lessee with the Premises. See Paragraph 4 of Addendum.
(b) Removal. By delivery to Lessee of written notice from Lessor not
earlier than ninety (90) and not later than thirty (30) days prior to the end of
the term of this Lease. Lessor may require that any or all Lessee Owned
Alterations or Utility Installations be removed by the expiration or
PAGE 3
<PAGE>
termination of this Lease. Lessor may require the removal at any time of all or
any part of any Lessee Owned Alterations or Utility Installations made without
the required consent. See Paragraph 4 of Addendum.
(c) Surrender/Restoration. Lessee shall surrender the Premises by
the Expiration Date or any earlier termination date, with all of the
improvements, parts and surfaces thereof broom clean and free of debris, and in
good operating order, condition and state of repair, ordinary wear and tear,
casualty, condemnation, and damage attributable to the willful misconduct or
negligence of Lessor, its agents, employees and contractors, and damage
attributable to Lessor's default hereunder excepted. "Ordinary wear and tear"
shall not include any damage or deterioration that would have been prevented by
good maintenance practice. Lessee shall repair any damage occasioned by the
installation, maintenance or removal of Trade Fixtures, Lessee Owned Alterations
and/or Utility Installations, furnishings, and equipment as well as the removal
of any storage tank installed by or for Lessee, and the removal, replacement, or
remediation of any soil, material or groundwater contaminated by Lessee. Trade
Fixtures shall remain the property of Lessee and shall be removed by Lessee. The
failure by Lessee to timely vacate the Premises pursuant to this Paragraph
7.4(c) without the express written consent of Lessor shall constitute a holdover
under the provisions of Paragraph 26 below.
8. Insurance; Indemnity.
8.1 Payment For Insurance. Lessee shall pay for all insurance required
under Paragraph 8. Premiums for policy periods commencing prior to or extending
beyond the Lease term shall be prorated to correspond to the Lease term. Payment
shall be made by Lessee to Lessor within ten (10) days following receipt of an
invoice.
8.2 Liability Insurance.
(a) Carried by Lessee. Lessee shall obtain and keep in force a
Commercial General Liability policy of insurance protecting Lessee and Lessor
against claims for bodily injury, personal injury and property damage based upon
or arising out of the ownership, use, occupancy or maintenance of the Premises
and all areas appurtenant thereto. Such insurance shall be on an occurrence
basis providing single limit coverage in an amount not less than $2,000,000 per
occurrence with an "Additional Insured-Managers or Lessors of Premises
Endorsement" and contain the "Amendment of the Pollution Exclusion Endorsement"
for damage caused by heat, smoke or fumes from a hostile fire. The policy shall
not contain any intra-insured exclusions as between insured persons or
organizations, but shall include coverage for liability assumed under this Lease
as an "insured contract" for the performance of Lessee's indemnity obligations
under this Lease. The limits of said insurance shall not, however, limit the
liability of Lessee nor relieve Lessee of any obligation hereunder. All
insurance to be carried by Lessee shall be primary to and not contributory with
any similar insurance carried by Lessor, whose insurance shall be considered
excess insurance only.
8.3 Property Insurance-Building, Improvements and Rental Value.
(a) Building and Improvements. The Insuring Party shall obtain and
keep in force a policy or policies in the name of Lessor, with loss payable to
Lessor, any groundlessor, and to any Lender(s) insuring loss or damage to the
Premises. The amount of such insurance shall be equal to the full replacement
cost of the Premises, as the same shall exist from time to time, but not less
than the amount required by Lenders, but in no event more than the commercially
reasonable and available insurable value thereof. If Lessor is the Insuring
Party, however, Lessee Owned Alterations and Utility Installations, Trade
Fixtures, and Lessee's personal property shall be insured by Lessee under
Paragraph 8.4 rather than by Lessor. If the coverage is available and
commercially appropriate, such policy or policies shall insure against all risks
of direct physical loss or damage the perils of flood and/or earthquake, if
desired by Lessor, including coverage for debris removal and the enforcement of
any Applicable Requirements requiring the upgrading, demolition, reconstruction
or replacement of any portion of the Premises as the result of a covered of
loss. Said policy or policies shall also contain an agreed valuation provision
in lieu of any coinsurance clause, waiver of subrogation, and inflation guard
protection causing an increase in the annual property insurance coverage amount
by a factor of not less than the adjusted U.S. Department of Labor Consumer
Price Index for All Urban Consumers for the city nearest to where the Premises
are located. If such insurance coverage has a deductible clause, the deductible
amount shall not exceed $1,000 per occurrence, and Lessee shall be liable for
such deductible amount in the event of an Insured Loss. Lessor shall use
insurance proceeds as necessary, to rebuild the Premises, unless this Lease is
terminated pursuant to Paragraph 9 hereof.
(b) Rental Value. The Insuring Party shall obtain and keep in force
a policy or policies in the name of Lessor, with loss payable to Lessor and
Lender, insuring the loss of the full Rent for one (1) year. Said insurance
shall provide that in the event the Lease is terminated by reason of an insured
loss, the period of indemnity for such coverage shall be extended beyond the
date of the completion of repairs or replacement of the Premises, to provide for
one full year's loss of Rent from the date of any such loss. Said insurance
shall contain an agreed valuation provision in lieu of any coinsurance clause,
and the amount of coverage shall be adjusted annually to reflect the projected
Rent otherwise payable by Lessee, for the next twelve (12) month period. Lessee
shall be liable for any deductible amount in the event of such loss.
8.4 Lessee's Property/Business Interruption Insurance. ** subject to its
Lender's rights therein and as Lessee otherwise elects.
(a) Property Damage. Lessee shall obtain and maintain insurance
coverage on all of Lessee's personal property, Trade Fixtures, and Lessee Owned
Alterations and Utility Installations. Such insurance shall be full replacement
cost coverage with a deductible of not to exceed $25,000 per occurrence. The
proceeds from any such insurance shall be used by Lessee** for the replacement
of personal property, Trade Fixtures and Lessee Owned Alterations and Utility
Installations. Lessee shall provide Lessor with written evidence that such
insurance is in force.
(b) Business Interruption. Lessee shall obtain and maintain loss of
income and extra expense insurance in amounts as will reimburse Lessee for
direct or indirect loss of earnings attributable to all perils commonly insured
against by prudent lessees in the business of Lessee or attributable to
prevention of access to the Premises as a result of such perils.
(c) No Representation of Adequate Coverage. Lessor makes no
representation that the limits or forms of coverage of insurance specified
therein are adequate to cover Lessee's property, business operations or
obligations under this Lease.
8.5 Insurance Policies. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholders Rating"
of at least B+, V, as set forth in the most current issue of "Best's Insurance
Guide", or such other rating as may be required by a Lender. Lessee shall not do
or permit to be done anything which invalidates the required insurance policies.
Lessee shall, prior to the Start Date, deliver to Lessor certified copies of
policies of such insurance or certificates evidencing the existence and amounts
of the required insurance. No such policy shall be cancelable or subject to
modification except after thirty (30) days prior written notice to Lessor.
Lessee shall, at least thirty (30) days prior to the expiration of such
policies, furnish Lessor with evidence of renewals or "insurance binders"
evidencing renewal thereof, or Lessor may order such insurance and charge the
cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon
demand. Such policies shall be for a term of at least one year, or the length of
the remaining term of this Lease, whichever is less. If either Party shall fail
to procure and maintain the insurance required to be carried by it, the other
Party may, but shall not be required to, procure and maintain the same.
8.6 Waiver of Subrogation. Without affecting any other rights or remedies,
Lessee and Lessor each hereby release and relieve the other, and waive their
entire right to recover damages against the other, for loss of or damage to its
property arising out of or incident to the perils required to be insured against
herein. The effect of such releases and waivers is not be limited by the amount
of insurance carried or required, or by any deductibles applicable thereto. The
Parties agree to have their respective property damage insurance carriers waive
any right to subrogation that such companies may have against Lessor or Lessee,
as the case may be, so long as the insurance is not invalidated thereby.
8.7 Indemnity. Except for Lessor's gross negligence or willful
misconduct, Lessee shall indemnity, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
liens, judgments, penalties, permits, attorney's and consultant's fees, expenses
and/or liabilities arising out of, involving, or in connection with, the use
and/or occupancy of the Premises by Lessee. If any action or proceeding is
brought against Lessor by reason of any of the foregoing matters, Lessee shall
upon notice defend the same at Lessee's expense by counsel reasonably
satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense.
Lessor need not have first paid any such claim in order to be defended or
indemnified.
8.8 Exemption of Lessor from Liability. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, tire sprinklers, wires,
appliances, plumbing, HVAC or lighting fixtures, or from any other cause,
weather the said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, or from other sources or places. Lessor shall not be liable for any
damages arising from any act or neglect of any other tenant of Lessor.
Notwithstanding Lessor's negligence or breach of this Lease, Lessor shall under
no circumstances be liable for injury of Lessee's business or for any loss of
income or profit therefrom.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall mean damage or destruction to the
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations, which can reasonably be repaired in six (6) months or less from
the date of the of the damage or destruction. Lessor shall notify Lessee in
writing within thirty (30) days from the date of the damage or destruction as to
whether or not the damage is Partial or Total.
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(b) "Premises Total Destruction" shall mean damage or destruction to
the Premises, other than Lessee Owned Alterations and Utility Installations and
Trade Fixtures, which cannot reasonably be repaired in six (6) months or less
from the date of the damage or destruction. Lessor shall notify Lessee in
writing within thirty (30) days from the date of the damage or destruction as to
whether or not the damage is Partial or Total.
(c) "Insured Loss" shall mean damage or destruction to improvements
on the Premises, other than Lessee Owned Alterations and Utility Installations
and Trade Fixtures, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a), irrespective of any deductible amounts
or coverage limits Involved.
(d) "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of Applicable building codes, ordinances or
laws, and without deduction for depreciation.
(e) "Hazardous Substance Condition" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 Partial Damage-Insured Loss. If a Premises Partial Damage that is an
Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage
(but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect; provided, however, that Lessee shall, at Lessor's
election, make the repair of any damage or destruction the total cost to repair
of which is $10,000 or less, and, in such event, Lessor shall make any
applicable insurance proceeds available to Lessee on a reasonable basis for that
purpose. Notwithstanding the foregoing, if the required insurance was not in
force or the insurance proceeds are not sufficient to effect such repair, the
Insuring Party shall promptly contribute the shortage in proceeds (except as to
the deductible which is Lessee's responsibility) as and when required to
complete said repairs. In the event, however, the shortage was due to the fact
that, by reason of the unique nature of the improvements, full replacement cost
insurance coverage was not commercially reasonable and available, Lessor shall
have no obligation to pay for the shortage in insurance proceeds or to fully
restore the unique aspects of the Premises unless Lessee provides Lessor with
the funds to cover same, or adequate assurance thereof, within ten (10) days
following receipt of written notice of such shortage and request therefore. If
Lessor receives said funds or adequate assurance thereof within said ten (10)
day period, the party responsible for making the repairs shall complete them as
soon as reasonably possible and this Lease shall remain in full force and
effect. If such funds or assurance are not received, Lessor may nevertheless
elect by written notice to Lessee within ten (10) days thereafter to: (i) make
such restoration and repair as is commercially reasonable with Lessor paying any
shortage in proceeds, in which case this Lease shall remain in full force and
effect, or have this Lease terminate thirty (30) days thereafter. Lessee shall
not be entitled to reimbursement of any funds contributed by Lessee to repair
any such damage or destruction. Premises Partial Damage due to flood or
earthquake shall be subject to Paragraph 9.3, notwithstanding that there may be
some insurance coverage, but the net proceeds of any such insurance shall be
made available for the repairs if made by either Party.
9.3 Partial Damage-Uninsured Loss. If a Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense),
Lessor may either: (i) repair such damage as soon as reasonably possible at
Lessor's expense, in which event this Lease shall continue in full force and
effect, or (ii) terminate this Lease by giving written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
damage. Such termination shall be effective sixty (60) days following the date
of such notice. In the event Lessor elects to terminate this Lease, Lessee shall
have the right within ten (10) days after the receipt of the termination notice
to give written notice to Lessor of Lessee's commitment to pay for the repair of
such damage without reimbursement from Lessor. Lessee shall provide Lessor with
said funds or satisfactory assurance thereof within thirty (30) days after
making such commitment. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such repairs as soon as reasonably
possible and the required funds are available. If Lessee does not make the
required commitment, this Lease shall terminate as of the date specified in the
termination notice.
9.4 Total Destruction. Notwithstanding any other provision hereof, if a
Premises Total Destruction occurs, this Lease shall terminate sixty (60) days
following the date of such Destruction. If the damage or destruction was caused
by the gross negligent or willful misconduct of Lessee, Lessor shall have the
right to recover Lessor's damages from Lessee, except as released and waived in
Paragraph 8.6.
9.5 Damage Near End of Term. If at any time during the last six (6)
months of this Lease there is damage for which the cost to repair exceeds one
(1) month's Base Rent, whether or not an Insured Loss, Lessor may terminate this
Lease effective sixty (60) days following the date of occurrence of such damage
by giving a written termination notice to Lessee within thirty (30) days after
the date of occurrence of such damage. Notwithstanding the foregoing, if Lessee
at that time has an exercisable option to extend this Lease or to purchase the
Premises, then Lessee may preserve this Lease by, (a) exercising such option and
(b) providing Lessor with any shortage in insurance proceeds (or adequate
assurance thereof) needed to make the repairs on or before the earlier of (i)
the date which is ten days after Lessee's receipt of Lessor's written notice
purporting to terminate this Lease, or (ii) the day prior to the date upon which
such option expires. If Lessee duly exercises such option during such period and
provides Lessor with funds (or adequate assurance thereof) to cover any shortage
in insurance proceeds, Lessor shall, at Lessor's commercially reasonable
expense, repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option and
provide such funds or assurance during the period, then this Lease shall
terminate on the date specified in the termination notice and Lessee's option
shall be extinguished.
9.6 Abatement of Rent; Lessee's Remedies.
(a) Abatement. In the event of Premises Partial Damage or Premised Total
Destruction or a Hazardous Substance Condition for which Lessee is not
responsible under this Lease, the Rent payable by Lessee for the period required
for the repair, remediation or restoration of such damage shall be abated in
proportion to the degree to which Lessee's use of the Premises is impaired. All
other obligations of Lessee hereunder shall be performed by Lessee, and Lessor
shall have no liability for any such damage, destruction, remediation, repair or
restoration except as provided herein.
(b) Remedies. If Lessor shall be obligated to repair or restore the
Premises and does not commence, in a substantial and meaningful way, such repair
or restoration within ninety (90) days after such obligation shall accrue,
Lessee may, at any time prior to the commencement of such repair or restoration,
give written notice to Lessor and to any Lenders of which Lessee has actual
notice, of Lessee's election to terminate this Lease on a date not less than
sixty (60) days following the giving of such notice. If Lessee gives such notice
and such repair or restoration is not commenced within thirty (30) days
thereafter, this Lease shall continue in full force and effect. "Commence" shall
mean either the unconditional authorization of the preparation of the required
plans, or the beginning of the actual work on the Premises, whichever first
occurs.
9.7 Termination--Advance Payments. Upon termination of this Lease pursuant
to this Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be made
concerning advance Base Rent and any other advance payments made by Lessee to
Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's Security
Deposit as has not been, or is not then required to be, used by Lessor.
9.8 Waive Statutes. Lessor and Lessee agree that the terms of this Lease
shall govern the effect of any damage to or destruction of the Premises with
respect to the termination of this Lease and hereby waive the provisions of any
present or future statute to the extent inconsistent herewith.
10. Real Property Taxes.
10.1 Definition of "Real Property Taxes." As used herein, the term "Real
Property Taxes" shall include any form of assessment; real estate, general,
special, ordinary or extraordinary, or rental levy or tax (other than
inheritance, personal income or estate taxes); improvement bond; and/or license
fee imposed upon or level against any legal or equitable interest of Lessor in
the Premises, Lessor's right to other income therefrom, and/or Lessor's business
of leasing, by any authority having the direct or indirect power to tax and
where the funds are generated with reference to the Building address and where
the proceeds so generated are to be applied by the city, county or other local
taxing authority of a jurisdiction within which the Premises are located. The
term "Real Property Taxes" shall also include tax, fee, levy, assessment or
charge, or any license therein, imposed by reason of events occurring during the
term of this Lease, including but not limited to, a change in the ownership of
the Premises.
10.2 (a) Payment of Taxes. Lessee shall pay the Real Property Taxes
applicable to the Premises during the term of this Lease. Subject to Paragraph
10.2(b), all such payments shall be made at least ten (10) days prior to the
delinquency date. Lessee shall promptly furnish Lessor with satisfactory
evidence that such taxes have been paid. If any such taxes shall cover any
period of time prior to or after the expiration or termination of this Lease,
Lessee's share of such taxes shall be prorated to cover only the portion of the
tax bill applicable to the period that this Lease is in effect, and Lessor shall
reimburse Lessee for any overpayment. If Lessee shall fail to pay any required
Real Property Taxes, Lessor shall have the right to pay the same, and Lessee
shall reimburse Lessor therefor upon demand.
(b) Advance Payment. In the event Lessee incurs a late charge on any
Rent payment, Lessor may, at Lessor's option, estimate the current Real Property
Taxes, and require that such taxes be paid in advance to Lessor by Lessee,
either: (i) in a lump such amount equal to the installment due, at least twenty
(20) days prior to the applicable delinquency date, or (ii) monthly in advance
with the payment of the Base Rent. If Lessor elects to require payment monthly
in advance, the monthly payment shall be an amount equal to the amount of the
estimated installment of taxes divided by the number of months remaining before
the month in which said installment becomes delinquent. When the actual amount
of the applicable tax bill is known, the amount of such equal monthly advance
payments shall be adjusted as required to provide the funds needed to pay the
applicable taxes. If the amount of collected by Lessor is insufficient to pay
such Real Property Taxes when due, Lessee shall pay Lessor, upon demand, such
additional sums as are necessary to pay such obligations. All moneys paid to
Lessor under this Paragraph may be intermingled with other moneys of
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Lessor and shall not bear interest. In the event of a Breach by Lessee in the
performance of its obligations under this Lease, then any balance of funds paid
to Lessor under the provisions of this Paragraph may at the option of Lessor, be
treated as an additional Security Deposit.
10.3 Joint Assessment. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be conclusively determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available.
10.4 Personal Property Taxes. Lessee shall pay, prior to delinquency, all
taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee. When possible, Lessee shall such property to be assessed and billed
separately from the real property of Lessor. If any of Lessee's said personal
property shall be assessed with Lessor's real property, Lessee shall pay Lessor
the taxes attributable to Lessee's property within ten (10) days after receipt
of a written statement.
11. Utilities. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered. (All subject to
Paragraphs 6 through 6.3 of Exhibit "A" to Addendum hereto.
12. Assignment and Subletting. (All subject to Paragraph 10 of Exhibit "A" to
Addendum hereto)
12.1 Lessor's Consent Required.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively, "assign or
assignment") or sublet all or any part of Lessee's interest in this Lease or in
the Premises without Lessor's prior written consent.
(b) A change in the control of Lessee shall constitute an assignment
requiring consent. The transfer, on a cumulative basis, of twenty-five percent
(25%) or more of the voting control of Lessee shall constitute a change in
control for this purpose.
(c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
transfer, leveraged buy-out or otherwise), whether or not a formal assignment or
hypothecation of this Lease or Lessee's assets occurs, which results or will
result in a reduction of the Net Worth of Lessee by an amount greater than
twenty-five percent (25%) of such Net Worth as it was represented at the time of
the execution of this Lease or at the time of the most recent assignment to
which Lessor has consented, or as it exists immediately prior to said
transaction or transactions constituting such reduction, whichever was or is
greater, shall be considered an assignment of this Lease to which Lessor may
withhold its consent. "Net Worth of Lessee" shall mean the net worth of Lessee
(excluding any guarantors) established under generally accepted accounting
principles.
(d) An assignment or subletting without consent shall, at Lessor's
option, be a Default curable after notice per Paragraph 13.1(c), or a noncurable
Breach without the necessity of any notice and grace period. If Lessor elects to
treat such unapproved assignment or subletting as a noncurable Breach, Lessor
may either: (i) terminate this Lease, or (ii) upon thirty (30) days written
notice, increase the monthly Base Rent to one hundred ten percent (110%) of the
Base Rent then in effect. Further, in the event of such Breach and rental
adjustment, (i) the purchase price of any option to purchase the Premises held
by Lessee shall be subject to similar adjustment to one hundred ten percent
(110%) of the price previously in effect, and (ii) all fixed and non-fixed
rental adjustments scheduled during the remainder of the Lease term shall be
increased to One Hundred Ten Percent (110%) of the scheduled adjusted rent.
(e) Lessee's remedy for any breach of Paragraph 12.1 by Lessor shall
be limited to compensatory damages and/or injunctive relief.
12.2 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not: (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, or (iii) alter the primary
liability of Lessee for the payment of Rent or for the performance of any other
obligations to be performed by Lessee.
(b) Lessor may accept any Rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of Rent or performance shall constitute a waiver or estoppel
of Lessor's right to exercise its remedies for the Default or Breach.
(c) Lessor's consent to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting.
(d) In the event of any Default or Breach of Lessee, Lessor may
proceed directly against Lessee, any Guarantors or any one else responsible for
the performance of the Lessee's obligations under this Lease, including the
sublessee, without first exhausting Lessor's remedies against any other person
or entity responsible therefor to Lessor, or any security held by Lessor.
(e) Each request for consent to an assignment or subletting shall be
in writing, accompanied by information relevant to Lessor's determination as to
the financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises. If any, together with a fee of $1,000, as
consideration for Lessor's consideration for Lessor's considering and processing
said request. Lessee agrees to provide Lessor with such other or additional
information and/or documentation as may be reasonably requested.
(f) Any assignee of, or sublessee under, this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed to have
assumed and agreed to conform and comply with each and every term, covenant,
condition and obligation herein to be observed or performed by Lessee during the
term of said assignment or sublease, other than such obligations as are contrary
to or inconsistent with provisions of an assignment or sublease to which Lessor
has specifically consented in writing.
12.3 Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all Rent payable on any sublease, and Lessor may collect such Rent
and apply same toward Lessee's obligations under this Lease; provided, however,
that until a Breach shall occur in the performance of Lessee's obligations,
Lessee may collect said Rent. Lessor shall not, by reason of the foregoing or
any other assignment of such sublease, nor by reason of the collection of the
Rent, be deemed liable to the sublessee for any failure of Lessee to perform and
comply with any of Lessee's obligations to such sublessee.. Lessee hereby
irrevocably authorizes and directs any such sublessee, upon receipt of a written
notice from Lessor stating that a Breach exists in the performance of Lessee's
obligations under this Lease, to pay to Lessor the Rent due and to become due
under the sublease. Sublessee shall rely upon any such notice from Lessor and
shall pay all Rents to Lessor without any obligation or right to inquire as to
whether such Breach exists, notwithstanding any claim from Lessee to the
contrary.
(b) In the event of a Breach by Lessee, Lessor may, at its option,
require sublessee to attorn to Lessor, in which event Lessor shall undertake the
obligations of the sublessor under such sublease from the time of the exercise
of said option to the expiration of such sublease; provided, however, Lessor
shall not be liable for any prepaid rents or security deposit paid by such
sublessee to such sublessor or for any prior Defaults or Breaches of such
sublessor.
(c) Any matter requiring the consent of the sublessor under the
sublease shall also require the consent of Lessor.
(d) No sublessee shall further assign or sublet all or any part of
the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by
Lessee to the sublessee, who shall have the right to cure the Default of Lessee
within the grace period, if any, specified in such notice. The sublessee shall
have a right of reimbursement and offset from and against Lessee for any such
Defaults cured by the sublessee.
13. Default; Breach; Remedies.
13.1 Default; Breach. A "Default" is defined as a failure by the Lessee
to comply with or perform any of the terms, covenants, conditions or rules under
this Lease. A "Breach" is defined as the occurrence of any one or more of the
following Defaults, and the failure of Lessee to cure such Default within any
applicable grace period:
(a) The abandonment of the Premises; or the vacating of the Premises
without providing a commercially reasonably level of security, or where the
coverage of the property insurance described in Paragraph 8.3 is jeopardized as
a result thereof, or without providing reasonable assurances to minimize
potential vandalism.
(b) The failure of Lessee to make any payment of Rent or any Security
Deposit required to be made by Lessee hereunder, whether to Lessor or to a third
party, when due, to provide reasonable evidence of insurance or surety bond, or
to fulfill any obligation under this Lease which endangers or threatens life or
property, where such failure continues for a period of five (5) business days
following written notice to Lessee.
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(c) The failure by Lessee to provide (i) reasonable written evidence
of compliance with Applicable Requirements, (ii) the service contracts, (iii)
the rescission of an unauthorized or subletting, (iv) a Tenancy Statement, (v) a
requested subordination, (vi) evidence concerning any guaranty and/or Guarantor,
(vii) any document requested under Paragraph 42 (easements), or (viii) any other
documentation or information which Lessor may reasonably require of Lessee under
the terms of this Lease, where any such failure continues for a period of ten
(10) days following written notice to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof,
other than those described in subparagraphs 13.1(a), (b) or (c), above, where
such Default continues for a period of thirty (30) days after written notice;
provided, however, that if the nature of Lessee's Default is such that more than
thirty (30) days are reasonably required for its cure, then it shall not be
deemed to be a Breach if Lessee commences such cure within said thirty (30) day
period and thereafter diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making of
any general arrangement or assignment for the benefit of creditors; (ii)
becoming a "debtor" as defined in 11 U.S.C. (S) 101 or any successor statute
thereto (unless, in the case of a petition filed against Lessee, the same is
dismissed within sixty (60) days); (iii) the appointment of a trustee or
receiver to take possession of substantially all of Lessee's assets located at
the Premises or of Lessee's interest in this Lease, where possession is not
restored to Lessee within sixty (60) days; or (iv) the attachment, execution or
other judicial seizure of substantially all of Lessee's assets located at the
Premises or of Lessee's interest in this Lease, where such seizure is not within
thirty (30) days; provided; however, in the event that any provision of this
subparagraph (e) is contrary to any applicable law, such provision shall be of
no force or effect, and not affect the validity of the remaining provisions.
(f) The discovery that any financial statement of Lessee or of any
Guarantor given to Lessor was materially false.
13.2 Remedies. If Lessee fails to perform any affirmative duties or
obligations, within ten (10) days after written notice (or in case of an
emergency, without notice), Lessor may, at its option, perform such duty or
obligation on Lessee's behalf, including but not limited to the obtaining of a
reasonably required bonds, insurance policies, or governmental licenses, permits
or approvals. The costs and expenses of any such performance by Lessor shall be
due and payable by Lessee upon receipt of invoice therefor. If any check given
to Lessor by Lessee shall not be honored by the bank upon which it is drawn,
Lessor, at its option, may require all future payments to be made by Lessee to
be made only by cashier's check. In the event of a Breach, Lessor may, with or
without further notice or demand, and without limiting Lessor in the exercise of
any right or remedy which Lessor may have by reason of such Breach:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession to Lessor. In such event Lessor shall be
entitled to recover from Lessee: (i) the unpaid Rent which had been earned at
the time of termination: (ii) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that the Lessee proves
could have been reasonably avoided; (iii) the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of the District within which the Premises are located
at the time of award plus one percent (1%). Efforts by Lessor to mitigate
damages caused by Lessee's Default or Breach of this Lease shall not waive
Lessor's right to recover damages under this Paragraph 12. If termination of
this Lease is obtained through the provisional remedy of unlawful detainer,
Lessor shall have the right to recover in such proceeding the unpaid Rent and
damages as are recoverable therein, or Lessor may reserve the right to recover
all or any part thereof in a separate suit. If a notice and grace period
required under Paragraphs 13.1 was not previously given, a notice to pay rent or
quit, or to perform or quit given to Lessee under the unlawful detainer statute
shall also constitute the required by Paragraphs 13.1 and the unlawful detainer
statute shall run concurrently, and the failure of Lessee to cure the Default
within the greater of the two such grace periods shall constitute both an
unlawful detainer and a Breach of this Lease entitling Lessor to the remedies
provided for in this Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession and recover
the Rent as It becomes due, in which event Lessee may sublet or assign, subject
only to reasonable limitations. Acts of maintenance, efforts to relet, and/or
the appointment of a receiver to protect the Lessor's interests, shall not
constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available under the laws
or judicial decisions of the state wherein the Premises are located. The
expiration or termination of this Lease and/or the termination of Lessee's
rights to possession shall not relieve Lessee from liability under any indemnity
provisions of this Lease as to matters occurring or accruing during the term
hereof or by reason of Lessee's occupancy of the Premises.
13.3 Inducement Recapture. Any agreement for free or abated rent or other
charges, or for the giving or paying by Lessor to or for Lessee of any cash or
other bonus, inducement or consideration for Lessee's entering into this Lease,
all of which concessions are hereinafter referred to as "Inducement Provisions"
shall be deemed conditioned upon Lessee's full and faithful performance of all
of the terms, covenants and conditions of this Lease. Upon Breach of this Lease
by Lessee, any such Inducement Provision shall automatically be deemed deleted
from this Lease and of no further force or effect, and any rent, other charge,
bonus, inducement or consideration theretofore abated, given or paid by Lessor
under such an Inducement Provision shall be immediately due and payable by
Lessee to Lessor, notwithstanding any subsequent cure of said Breach by Lessee.
The acceptance by Lessor of rent or the cure of the Breach which initiated the
operation of this paragraph shall not be deemed a waiver by Lessor of the
provisions of this paragraph unless specifically so stated in writing by Lessor
at the time of such acceptance.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of Rent will cause Lessor to incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult to ascertain. Such
costs include, but are not limited to, processing and accounting charges, and
late charges which may be imposed upon Lessor by any Lender. Accordingly, if any
Rent shall not be received by Lessor within ten (10) days after such amount
shall be due, then, without any requirement for notice to Lessee, Lessee shall
pay to Lessor a one-time late charge equal to five percent (5%) of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment.
Acceptance of such late charge by Lessor shall in no event constitute a waiver
of Lessee's Default or Breach with respect to such overdue amount, nor prevent
the exercise of any of the other rights and remedies granted hereunder. In the
event that a late charge is payable hereunder, whether or not collected, for
three (3) consecutive installments of Base Rent, then notwithstanding any
provision of this Lease to the contrary, Base Rent shall, at Lessor's option,
become due and payable quarterly in advance.
13.5 Interest. Any monetary payment due Lessor hereunder, not received by
Lessor, when due as to scheduled payments (such as Base Rent) or within thirty
(30) days following the date on which it was due for non-scheduled payment,
shall bear interest from the date when due, as to scheduled payments, or the
thirty-first (31st) day after it was due as to non-scheduled payments. The
interest ("Interest") charged shall be equal to the prime rate reported in the
Wall Street Journal as published closest prior to the date when due is plus four
percent (4%), but shall not exceed the maximum rate allowed by law. Interest is
payable in addition to the potential late charge provided for in Paragraph 13.4.
13.6 Breach by Lessor.
(a) Notice of Breach. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and any lender whose name and address shall have been furnished Lessee in
writing for such purpose, of written notice specifying wherein such obligation
of Lessor has not been performed; provided, however, that if the nature of
Lessor's obligation is such that more than thirty (30) days are reasonably
required for its performance, then Lessor shall not be in breach if performance
is commenced within such thirty (30) day period and thereafter diligently
pursued to completion.
(b) Performance by Lessee on Behalf of Lessor. In the event that
neither Lessor nor Lender cures said breach within thirty (30) days after
receipt of said notice, or if having commenced said cure they do not diligently
pursue it to completion, then Lessee may elect to cure said breach at Lessee's
expense and offset from Rent and amount equal to the greater of one month's Base
Rent or the Security Deposit, and to pay an excess of such expense under
protest, reserving Lessee's right to reimbursement from Lessor. Lessee shall
document the cost of said cure and supply said documentation to Lessor.
14. Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(collectively "Condemnation"), this Lease shall terminate as to the part so
taken as of the date the condemning authority takes title or possession,
whichever first occurs. If more than ten percent (10%) of any building portion
of the premises, or more than twenty-five percent (25%) of the land area portion
of the premises not occupied by any building, is taken by Condemnation, Lessee
may, at Lessee's option, to be exercised in writing within ten (10) days after
Lessor shall have given Lessee written notice of such taking (or in the absence
of such notice, within ten (10) days after the condemning authority shall have
taken possession) terminate this Lease as of the date the condemning authority
takes such possession. If Lessee does not terminate this Lease in accordance
with the foregoing, this Lease shall remain in full force and effect as to the
portion of the Premises remaining, except that the Base Rent shall be reduced in
proportion to the reduction in utility of the Premises caused by such
Condemnation. Condemnation awards and/or payments shall be the property of
Lessor, whether such award shall be made as compensation for diminution in value
of the leasehold,
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the value of the part taken, or for severance damages; provided, however, that
Lessee shall be entitled to any compensation for Lessee's relocation expenses,
loss of business goodwill and/or Trade Fixtures, without regard to whether or
not this Lease is terminated pursuant to the provisions of this Paragraph. All
Alterations and Utility Installations made to the Premises by Lessee, for
purposes of Condemnation only, shall be considered the property of the Lessee
and Lessee shall be entitled to any and all compensation which is payable
therefor. In the event that this Lease is not terminated by reason of the
Condemnation, Lessor shall repair any damage to the Premises caused by such
Condemnation.
15. Brokers Fee.
15.1 Deleted
15.2 Deleted
15.3 Representations and Indemnities of Broker Relationships. Lessee and
Lessor each represent and warrant to the other that it has had no dealings with
any person, firm, broker or finder (other than the Brokers, if any) in
connection with the Lease, and that no one other than said named Brokers is
entitled to any commission or finder's fee in connection herewith. Lessee and
Lessor do each hereby agree to indemnify, protect, defend, and hold the other
harmless from and against liability for compensation or charges which may be
claimed by any such unnamed broker, finder or other similar party by reason of
any dealings or actions of the indemnifying Party, including any costs,
expenses, attorneys' fees reasonably incurred with respect thereto.
16. Estoppel Certificates.
(a) Each Party (as "Responding Party") shall within ten (10) business
days after written notice from the other Party (the "Requesting Party") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "Tenancy Statement" form published by the
American Industrial Real Estate Association plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.
(b) If the Responding Party shall fail to execute or deliver the
Estoppel Certificate within such ten day period, the Requesting Party may
execute an Estoppel Certificate stating that: (i) the Lease is in full force and
effect without modification except as may be represented by the Requesting
Party, (ii) there are no uncured defaults in the Requesting Party's performance,
and (iii) if Lessor is the Requesting Party, not more than one month's rent has
been paid in advance. Prospective purchasers and encumbrances may rely upon the
Requesting Party's Estoppel Certificate, and the Responding Party shall be
estopped from denying the truth of the facts contained in said Certificate.
(c) If Lessor desires to finance, refinance up to four (4) times in
any given twelve (12) month period or sell the Premises, or any part thereof,
Lessee and all Guarantors shall deliver to any potential lender or purchaser
designated by Lessor such financial statements as may be reasonably required by
such lender or purchaser, including but not limited to Lessee's financial
statements for the past three (3) years. All such financial statements shall be
received by Lessor and such lender or purchaser in confidence and shall be used
only for the purposes herein set forth.
17. Definition of Lessor. The term "Lessor" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises, or, if
this is a sublease, of the Lessee's interest in the prior lease. In the event of
a transfer of Lessor's title or interest in the Premises or this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor. Except as provided in Paragraph 15, upon such
transfer or assignment and delivery of the Security Deposit, as aforesaid, the
prior Lessor shall be relieved of all liability with respect to the obligations
and/or covenants under this Lease thereafter to be performed by the Lessor.
Subject to the foregoing, the obligations and/or covenants in this Lease to be
performed by the Lessor shall be binding only upon the Lessor as hereinabove
defined. Notwithstanding the above, the subject to the provisions of Paragraph
20 below, the original Lessor under this Lease, and all subsequent holders of
the Lessor's interest in this Lease shall remain liable and responsible with
regard to the potential duties and liabilities of Lessor pertaining to Hazardous
Substances as outlined in Paragraph 6 above.
18. Severability. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of an
other provision hereof.
19. Days. Unless otherwise specifically indicated to the contrary, the word
"days" as used in this Lease shall mean and refer to calendar days.
20. Limitation on Liability. Subject to the provisions of Paragraph 17 above,
the obligations of Lessor under this Lease shall not constitute personal
obligations of Lessor, the individual partners of Lessor or its or their
individual partners, directors, officers or shareholders, and Lessee shall look
to the Premises, and to no other assets of Lessor, for the satisfaction of any
liability of Lessor with respect to this Lease, and shall not seek recourse
against the individual partners of Lessor, or its or their individual partners,
directors, officers or shareholders, or any of their personal assets for such
satisfaction.
21. Time of Essence. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.
22. No Prior or Other Agreements; Broker Disclaimer. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Broker that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to the Lease and as to
the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. The liability (including court costs and Attorneys'
fees), of any Broker with respect to negotiation, execution, delivery or
performance by either Lessor or Lessee under this Lease or any amendment or
modification hereto shall be limited to an amount up to the fee received by such
Broker pursuant to this Lease; provided, however, that the foregoing limitation
on each Broker's liability shall not be applicable to any gross negligence or
willful misconduct of such Broker.
23. Notices.
23.1 Notice Requirements. All notices required or permitted by this Lease
shall be in writing and may be delivered in person (by hand or by courier) or
may be sent by, certified or registered mail or U.S. Postal Service Express
Mail, with postage prepaid, or by facsimile transmission, and shall be deemed
sufficiently given if served in a manner specified in this Paragraph 23. The
addresses noted adjacent to a Party's signature on this Lease shall be that
Party's address for delivery or mailing of notices. Either Party may by written
notice to the other specify a different address for notice. A copy of all
notices to Lessor shall be concurrently transmitted to such party or parties at
such addresses as Lessor may from time to time hereafter designate in writing.
23.2 Date of Notice. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. Notices
delivered by United States Express Mail or overnight courier that guarantee next
day delivery shall be deemed given twenty-four (24) hours after delivery of the
same to the Postal Service or courier. Notices transmitted by facsimile
transmission or similar means shall be deemed delivered upon telephone
confirmation of receipt, provided a copy is also delivered via delivery or mail.
If notice is received on a Saturday, Sunday or legal holiday, it shall be deemed
received on the next business day.
24. Waivers. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or of any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any act shall not be deemed to render unnecessary
the obtaining of Lessor's consent to, or approval of, any subsequent or similar
act by Lessee, or be construed as the basis of an estoppel to enforce the
provision or provisions of this Lease requiring such consent. The acceptance of
Rent by Lessor shall not be a waiver of any Default or Breach by Lessee. Any
payment by Lessee may be accepted by Lessor on account of moneys or damages due
Lessor, notwithstanding any qualifying statements or conditions made by Lessee
in connection therewith, which such statements and/or conditions shall be of no
force or effect whatsoever unless specifically agreed to in writing by Lessor at
or before the time of deposit of such payment.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees applicable thereto.
26. No Right To Holdover. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. In the event that Lessee holds over, then the Base Rent shall be
increased to one hundred twenty-five percent (25%) of the Base Rent applicable
during the month immediately preceding the expiration or termination. Nothing
contained herein shall be construed as consent by Lessor to any holding over by
Lessee.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. Covenants and Conditions; Construction of Agreement. All provisions of
this Lease to be observed or performed by Lessee are both covenants and
conditions. In consulting this Lease, all headings and titles are for the
convenience of the parties only and shall not be considered a part of this
Lease. Whenever required by the context, the singular shall include the plural
and vice versa. This Lease shall not be construed as if prepared by one of the
parties, but rather according to its fair meaning as a whole, as if both parties
had prepared it.
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<PAGE>
29. Binding Effects; Choice of Law. This Lease shall be binding upon the
parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. Subordination; Attornment; Non-Disturbance.
30.1 Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed by upon the Premises, to any and all advances made on the
security thereof, and to all renewals, modifications, and extensions thereof.
Lessee agrees that the holders of any such Security Devices (in this Lease
together referred to as "Lessor's Lender") shall have no liability or obligation
to perform any of the obligations of Lessee under this Lease. Any Lender may
elect to have this Lease and/or any Option granted hereby superior to the lien
of its Security Device by giving written notice thereof to Lessee, whereupon
this Lease and such Options shall be deemed prior to such Security Device,
notwithstanding the relative dates of the documentation or recordation thereof.
30.2 Attornment. Subject to the non-disturbance provision of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one month's rent.
30.3 Non-Disturbance. With respect to Security Devices now existing or
hereafter entered into by Lessor after the execution of this Lease, Lessee's
subordination of this Lease shall be subject to receiving a commercially
reasonable agreement (a "Non-Disturbance Agreement") from the Lender which Non-
Disturbance Agreement provides that Lessee's possession of the Premises, and
this Lease, including any options to extend the term hereof, will not be
disturbed so long as Lessee is not in Breach hereof and attorns to the record
owner of the Premises. Further, within sixty (60) days after the execution of
this Lease, Lessor shall use its commercially reasonable efforts to obtain a
Non-Disturbance Agreement from the holder of any pre-existing Security Device
which is secured by the Premises. In the event that Lessor is unable to provide
the Non-Disturbance Agreement within said sixty (60) days, then Lessee may, at
Lessee's option, directly contact Lessor's lender and attempt to negotiate for
the execution and delivery of a Non-Disturbance Agreement.
30.4 Self-Executing. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided however,
that, upon written request from Lessor or a Lender or Lessee in connection with
a sale, financing or refinancing of the Premises, Lessee and Lessor shall
execute such further writings as may be reasonably required to separately
document any such subordination, attornment and/or Non-Disturbance Agreement
provided for herein.
31. Attorney's Fees. If any Party brings an action or proceeding involving the
Premises to enforce the terms hereof or declare rights hereunder, the Prevailing
Party (as hereafter defined) in any such proceeding, action, or appeal thereon,
shall be entitled to reasonable attorney's fees. Such fees may be awarded in
the same suit or recovered in a separate suit, whether or not such action or
proceeding is pursued to decision or judgment. The term, "Prevailing Party"
shall include, without limitation, a Party who substantially obtains or defeats
the relief sought, as the case may be, whether by compromise, settlement,
judgment, or the abandonment by the other Party of its claim or defense. The
attorney's fee award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorney's fees reasonably
incurred. In addition, Lessor shall be entitled to attorney's fees, costs and
expenses incurred in the preparation and service of notices of Default and
consultations in connection therewith, whether or not a legal action is
subsequently commenced in connection with such Default or resulting Breach.
32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times (subject to last sentence of
Section 6.4 above) for the purpose of showing the same to prospective
purchasers, lenders, or lessees, and making such alterations, repairs,
improvements or additions to the Premises as Lessor may reasonably deem
necessary. All such activities shall be without abatement of rent or liability
to Lessee may at any time place on the Premises any ordinary "For Sale" signs
and Lessor may during the last six (6) months of the term hereof place on the
Premises any ordinary "For Lease" signs. Lessee may at any time place on or
about the Premises any ordinary "For Sublease" sign.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, any
auction upon the Premises without Lessor's prior written consent. Lessor shall
not be obligated to exercise any standard reasonableness in determining whether
to permit an auction.
34. Signs. Except or ordinary "For Sublease" signs, Lessee shall not place any
sign upon the Premises without Lessor's prior written consent. All signs must
comply with all Applicable Requirements.
35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, that Lessor may elect to continue any one or all of
any existing subtenancies. Lessor's failure within ten (10) days following any
such event to elect to the contrary by written notice to the holder of any
lesser interest, shall constitute Lessor's election to have such event
constitute the termination of such interest.
36. Consents. Except as otherwise provided herein, wherever in this Lease the
consent of a Party is required to an act by or for the other Party, such consent
shall not be unreasonably withheld or delayed. Lessor's actual reasonable costs
and expenses (including but not limited to architects', attorneys', engineers'
or other consultants' fees) incurred in the consideration of, or response to, a
request by Lessee for any Lessor consent, including but not limited to consents
to an assignment, a subletting or the presence or use of a Hazardous Substance,
shall be paid by Lessee upon receipt of an invoice and supporting documentation
therefor. Lessor's consent to any act, assignment or subletting shall not
constitute an acknowledgement that no Default or Breach by Lessee of this Lease
exists, nor shall such consent be deemed a waiver of any then existing Default
or Breach, except as may be otherwise specifically stated in writing by Lessor
at the time of such consent. The failure to specify herein any particular
condition to Lessor's consent shall not preclude the imposition by Lessor at the
time of consent of such further or other conditions as are then reasonable with
reference to the particular matter for which consent is being given. In the
event that either Party disagrees with any determination made by the other
hereunder and reasonably requests for reasons for such determination, the
determining party shall furnish its reasons in writing and in reasonable detail
within ten (10) business days following such request.
37. Guarantor. deleted
37.1 deleted.
37.2 deleted.
38. Quiet Possession. Subject to payment by Lessee of the Rent and performance
of all of the covenants, conditions and provisions on Lessee's part to be
observed and performed under this Lease, Lessee shall have quiet possession and
quiet enjoyment of the Premises during the term hereof.
39. Options.
39.1 Definition. "Option" shall mean: (a) the right to extend the term
of or renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (b) the right of first refusal or first offer to lease
either the Premises or other property of Lessor; (c) the right to purchase or
the right of first refusal to purchase the Premises or other property of Lessor.
See Option to Extend Addendum - Attached.
39.2 Options Personal To Original Lease. Each Option granted to Lessee in
this Lease is personal to the original Lessee, and cannot be assigned or
exercised by anyone other than said original Lessee and only while the original
Lessee is in full possession of the Premises and, if requested by Lessor, with
Lessee certifying that Lessee has no intention of thereafter assigning or
subletting.
39.3 Multiple Options. In the event that Lessee has any multiple Options
to extend or renew this Lease, a later Option cannot be exercised unless the
prior Options have been validly exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option: (i) during the
period commencing with the giving of any notice of Default and continuing until
said Default is cured, (ii) during the period of time any Rent is unpaid
monetary (without regard to whether notice thereof is given Lessee), (iii)
during the time Lessee is in Breach of this Lease, or (iv) in the event that
Lessee has been given three (3) or more notices of monetary Default, whether or
not the Defaults are cured, during the twelve (12) month period immediately
preceding the exercise of the Option.
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) An Option shall terminate and be of no further force or effect,
notwithstanding Lessee's due and timely exercise of the Option, if, after such
exercise and prior to the commencement of the extended term, (i) Lessee fails to
pay Rent for a period of thirty (30) days after such Rent becomes due (without
any necessity of Lessor to give notice thereof), (ii) Lessor gives to Lessee
three (3) or more notices of monetary Default during any twelve month period,
whether or not the Defaults are cured, or (iii) if Lessee commits a Breach of
this Lease.
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40. Multiple Buildings. deleted.
41. Security Measures. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees, and their property from the acts of third parties.
42. Reservations. Lessor reserves to itself the right, from time to time, to
grant, without the consent or joinder of Lessee, such easements, rights, and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps, and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions.
43. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay.
44. Authority. If either Party hereto is a corporation, trust, limited
partnership company, partnership, or similar entity, each individual executing
this Lease on behalf of such entity represents and warrants that he or she is
duly authorized to execute and deliver this Lease on its behalf. Each party,
within thirty (30) days after request, deliver to the other party satisfactory
evidence of such authority.
45. Conflict. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
46. Offer. Preparation of this Lease by either Party or their agent and
submission of same to the other Party shall not be deemed an offer to lease to
the other Party. This Lease is not intended to be binding until executed by all
Parties hereto.
47. Amendments. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification.
48. Multiple Parties. If more than one person or entity is named herein as
either Lessor or Lessee, such multiple Parties shall be the joint and several
responsibility to comply with the terms of this Lease.
49. Mediation and Arbitration of Disputes. An Addendum requiring the Mediation
and/or the Arbitration of all disputes between the Parties and/or Brokers
arising out of this Lease [_] is [X] is not attached to this Lease.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE, SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
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ATTENTION: NO REPRESENTATIVE OR RECOMMENDATIONS IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR B ANY BROKER AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES. THE PARTIES ARE URGED TO:
1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL TAX CONSEQUENCES OF THIS LEASE.
2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF
THE PREMISES, SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE
POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE
STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE
SUITABILITY OF THE PREMISES FOR LESSEE'S INTENDED USE.
WARNING: IF THE PREMISES IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN
-------
PROVISIONS OF THE LEASE MAY NEED TO REVISED TO COMPLY WITH THE STATE IN WHICH
THE PREMISES IS LOCATED.
- --------------------------------------------------------------------------------
The parties hereto have executed this Lease at the place on the dates specified
above to their respective signatures.
Executed at Cupertino, California Executed at ______________________________
on ________________________________ on _______________________________________
by LESSOR: by LESSEE:
ROSE VENTURES II, INC., EQUINIX, INC.
- ----------------------------------- ------------------------------------------
a California corporation a California corporation
- ----------------------------------- ------------------------------------------
By: /s/ Stephen P. Diamond By:_______________________________________
--------------------------------
Name Printed: Stephen P. Diamond Name Printed:
Title: President Title:
---------------------------
By:________________________________ By: /s/ [signature illegible
---------------------------------------
Name Printed: _____________________ Name Printed: ____________________________
Title:_____________________________ Title:____________________________________
Address:___________________________ Address:__________________________________
Telephone: (408) 247-1111 Telephone: (___)__________________________
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Facsimile: (408) 247-8811 Facsimile: (___)__________________________
------------------
Federal ID No. ____________________ Federal ID No.____________________________
NOTE: These forms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the
most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 So.
Flower Street, Suite 600, Los Angeles, California 90017. (213) 687-8777.
Fax No. (213) 687-8616
PAGE 10
<PAGE>
OPTION(S) TO EXTEND
STANDARD LEASE ADDENDUM
Dated June 20, 1999
By and Between (Lessor) Rose Ventures II, Inc.
(Lessee) EQUINIX, Inc.
Address of Premises: [*], San Jose, CA
Paragraph 39.1.1
A. OPTION(S) TO EXTEND:
Lessor hereby grants to Lessee the option to extend the term of this Lease for
three (3) additional sixty (60) month period(s) commencing when the prior term
expires upon each and all of the following terms and conditions:
(i) In order to exercise an option to extend, Lessee must give
written notice of such election to Lessor and Lessor must receive the same at
least six months prior to the date that the option period would commence, time
being of the essence. If proper notification of the exercise of an option is not
given and/or received, such option shall automatically expire. Options (if there
are more than one) may only be exercised consecutively.
(ii) The provisions of paragraph 39, including those relating to
Lessee's Default set forth in paragraph 39.4 of this Lease, are conditions of
this Option.
(iii) Except for the provisions of this Lease granting an option or
options to extend the term, all of the terms and conditions of this Lease except
where specifically modified by this option shall apply.
(iv) This Option is personal to the original Lessee, and cannot be
assigned or exercised by anyone other than said original Lessee and only while
the original Lessee is in full possession of the Premises and without the
intention of thereafter assigning or subletting.
(v) The monthly rent for each month of the option period shall be
calculated as follows, using the method(s) indicated below:
(Check Method(s) to be Used and Fill In Appropriately)
[_] I. Cost of Living Adjustment(s) (COLA)
a. On (Fill in COLA Dates):
____________________________________________
__________________________________________________________________________
____________
the Base Rent shall be adjusted by the change, if any, from the Base Month
specified below, in the Consumer Price Index of the Bureau of Labor
Statistics of the U.S. Department of Labor for (select one): [_] CPI W
(Urban Wage Earners and Clerical Workers) or [_] CPI U
(All Urban Consumers), for (Fill in Urban Area):
___________________________________________________________________________
All Items (1982-1984 = 100), herein referred to as "CPI"
b. The monthly rent payable in accordance with paragraph A.I.a. of this
Addendum shall be calculated as follows: the Base Rent set forth in
paragraph 1.5 of the attached Lease, shall be multiplied by a fraction the
numerator of which shall be the CPI of the calendar month two months prior
to the month(s) specified in paragraph A.I.a. above during which the
adjustment is to take effect, and the denominator of which shall be the CPI
of the calendar month which is two months prior to (select one): the
first month of the term of this Lease as set forth in paragraph 1.3 ("Base
Month") or (Fill in Other "Base Month"): ________________________. The
sum so calculated shall constitute the new monthly rent hereunder, but in
no event, shall any such new monthly rent be less than the rent payable for
the month immediately preceding the rent adjustment.
c. In the event the compilation and/or publication of the CPI shall be
transferred to any other governmental department or bureau or agency or
shall be discontinued, then the index most nearly the same as the CPI shall
be used to make such calculation. In the event that the Parties cannot
agree on such alternative index, then the matter shall be submitted for
decision to the American Arbitration Association in accordance with the
then rules of said Association and the decision of the arbitrators shall be
binding upon the parties. The cost of said Arbitration shall be paid
equally by the Parties.
[X] II. Market Rental Value Adjustment(s) (MRV)
a. On (Fill in MRV Adjustment Date(s)) proposed commencement dates of
each Option Term following due notice of Lessee's exercise of said Option,
the Base Rent shall be adjusted to the "Market Rental Value" of the
properly as follows:
1) Four months prior to each Market Rental Value Adjustment Date
described above, the Parties shall attempt to agree upon what the new MRV will
be on the adjustment date. If agreement cannot be reached, within thirty days,
then:
(a) Lessor and Lessee shall immediately appoint a mutually
acceptable appraiser or broker to establish the new MRV within the next thirty
days. Any associated costs will be split equally between the Parties, or
(b) Both Lessor and Lessee shall each immediately make a
reasonable determination of the MRV and submit such determination, in writing,
to arbitration in accordance with the following provisions:
(i) Within fifteen days thereafter, Lessor and Lessee shall
each select an appraiser or broker ("Consultant" - check one) of their choice to
act as an arbitrator. The two arbitrators so appointed shall immediately select
a third mutually acceptable Consultant to act as a third arbitrator.
<PAGE>
(ii) The three arbitrators shall within thirty days of the
appointment of the third arbitrator reach a decision as to what the actual MRV
for the Premises is, and whether Lessor's or Lessee's submitted MRV is the
closest thereto. The decision of a majority of the arbitrators shall be binding
on the Parties. The submitted MRV which is determined to be the closest to the
actual MRV shall thereafter be used by the Parties.
(iii) If either of the Parties fails to appoint an
arbitrator within the specified fifteen days, the arbitrator timely appointed by
one of them shall reach a decision on his or her own, and said decision shall be
binding on the Parties.
(iv) The entire cost of such arbitration shall be paid by
the party whose submitted MRV is not selected, i.e., the one that is NOT the
closet to the actual MRV.
2) Notwithstanding the foregoing, the new MRV shall not be less than
the rent payable for the month immediately preceding the rent adjustment.
b. Upon the establishment of each New Market Rental Value:
1) The new MRV will become the new "Base Rent" for the purpose of
calculating any further Adjustments, and
2) the first month of each Market Rental Value term shall become the
new "Base Month" for the purpose of calculating any further Adjustments.
3) Annual upward adjustments of rent during Option Terms shall be
determined when Market Rent Value Adjustments are determined hereunder.
[_] III. Fixed Rental Adjustment(s) (FRA)
The Base Rent shall be increased to the following amounts on the dates set forth
below:
On (Fill in FRA Adjustment Date(s)): The New Base Rent shall be:
----------------------------------- $ ----------------------------------
----------------------------------- $ ----------------------------------
----------------------------------- $ ----------------------------------
----------------------------------- $ ----------------------------------
B. NOTICE:
Unless specified otherwise herein, notice of any rental adjustments,
other than Fixed Rental Adjustments, shall be made as specified in paragraph 23
of the Lease.
<PAGE>
EXHIBIT "A"
-----------
All that certain real property situate in the City of San Jose, County of Santa
Clara, State of California, described as follows:
Parcel 2, as shown on that certain Parcel Map filed for record on November 16,
1982 in the office of the Recorder of the County of Santa Clara, State of
California in Book [*] of Maps at Pages [*] and [*].
Together with the following described "Transfer Area"
Beginning at the most Westerly corner of Parcel 1, as shown on that certain
Parcel Map filed for record on November 16, 1982 in Book [*] of Maps at Pages
[*] & [*], Santa Clara County Records;
Thence from said Point of Beginning, North 37(degrees) 00' 37" East 150.00 feet
along the Northwesterly line of said Parcel 1;
Thence South 52(degrees) 59' 50" East 412.39 feet along a line parallel and
105.00 feet Northeasterly, measured at right angles, to the Southwesterly line
of said Parcel 1;
Thence North 37(degrees) 99' 10" East 13.40 feet;
Thence South 52(degrees) 59' 50" East 399.20 feet along a line parallel and
163.40 feet Northeasterly, measured at right angles, to the Southwesterly line
of said Parcel 1, to a point in a non-tangent curve in the Southeasterly common
boundary between said Parcel 1 and said Parcel 2;
Thence Southwesterly along said non-tangent curve to the right, the center of
which bears North 26(degrees) 32' 24" West, having a radius of 3485.00 feet,
through a central angle of 3(degrees) 02' 33" for an arc length of 185.05 feet
to the most Southerly corner of said Parcel 1;
Thence along said Southwesterly line of said Parcel 1 North 52(degrees) 59' 50"
West 724.80 feet to the point of beginning.
Excepting therefrom all that portion thereof as conveyed to the State of
California by instrument recorded December 31, 1986 in book [*] at Page [*] of
Official Records, being more particularly described as follows:
A portion of Parcel 2 as shown on that certain Parcel Map filed for record in
the office of the Recorder of Santa Clara County on November 16, 1982 in Book
[*] of Maps, at pages [*] and [*], more particularly described as follows:
Commencing at the Southerly corner of said Parcel 2; thence along the
Southwesterly line of said Parcel 2 N. 52(degrees) 59' 50" W., 512.23 feet;
thence leaving said line, from a tangent that bears N. 74(degrees) 14' 29" E.,
along a curve to the left with a radius of 3520.00 feet, through an angle of
8(degrees) 03' 39", an arc length of 495.22 feet to the Northeasterly line of
said Parcel 2; thence along last said line S. 52(degrees) 59' 50" E., 240.02
feet to the Southeasterly line of said Parcel 2; thence along last said line S.
36(degrees) 50' 07" W., 414.00 feet to the point of commencement.
And Excerpting therefrom that portion of land as granted to the State of
California by Deed filed for record in the office of the Recorder for the County
of Santa Clara on December 10, 1992 in Book M [*] at Page [*] Official Records,
and being more particularly described as follows:
Being a portion of Parcel 2, as shown on that certain Parcel Map filed for
record on November 16, 1982 in Book [*] of Maps at Pages [*] and [*], Santa
Clara County Records, described as follows:
Beginning at the most Westerly corner of that certain 64.00 foot wide Parcel of
land shown as "[*] to be dedicated" on said Parcel Map; thence from said Point
of Beginning along the Southwesterly line of said 64.00 foot wide Parcel S.
52(degrees) 23' 23" E. 55.12 feet to the most Northerly corner of Parcel 3, as
shown on said Parcel Map; thence leaving said Southwesterly line along the
Northwesterly line of said Parcel 3 from a tangent bearing of S. 60(degrees) 26'
43" W. along a curve to the right with a radius of 3519.83 feet through a
central angle of 0(degrees) 25' 29" for an arc length of 26.09 feet to a point
in a line parallel with and distant Southwesterly 24.00 feet, measured at right
angles, from said Southwesterly line; thence along said parallel line N.
52(degrees) 23' 23" W. 44.91 feet to a point on the general Southwesterly line
of Parcel 1 as shown on said Parcel Map; thence leaving said parallel line along
said Southwesterly line N. 37(degrees) 36' 37" E. 24.00 feet to the point of
beginning.
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
Addendum to Lease
-----------------
This is an Addendum to the foregoing Lease dated June 10, 1999,
between ROSE VENTURES II, INC., a California Corporation, as Lessor, and
EQUINIX, INC., a California Corporation, as Lessee. The provisions of this
Addendum shall be in addition to and shall supersede and control any contrary
provisions of the foregoing Lease.
1. Rental Adjustments. The initial Base Rent of $[*] per month
------------------
shall commence on the Commencement Date and apply during Months 1 through 6.
Thereafter, said base rent shall be adjusted as follows:
a. $[*] per month for Months 7-12;
b. $[*] per month for Months 13-18;
c. $[*] per month for Months 19-24; and
d. For each 12-month period thereafter, monthly Base Rent shall
be adjusted upward by [*] percent ([*]%) of the monthly Base
Rent payable in the last month preceding each such 12-month
perio d.
2. Security Deposit. Upon execution hereof, Lessee shall deliver to
----------------
Lessor a $[*] irrevocable standby letter of credit to be held by Lessor as and
for a security deposit pursuant to paragraph 5 of the foregoing Lease. Said
letter of credit shall be in a standard form reasonably acceptable to Lessor.
Lessor may only draw upon said letter of credit to cure a monetary Breach by
Lessee which has not been timely cured by Lessee under this Lease. In the event
of any draw upon said letter of credit, Lessor shall provide to Lessee a written
accounting of the amount of such draw, the Breach to which it has been applied
and such Breach shall be deemed cured as of the date of such application,
provided that the full amount available originally under said Letter of Credit
is restored by Lessee within ten (10) business days after the date of such
accounting notice. Upon delivery of proof satisfactory to Lessor that Lessee has
constructed, or caused to be constructed, and has paid for, tenant improvements
for the building on the leased premises, as previously approved by Lessor,
costing at least $10,000,000.00 in the aggregate, then Lessee may pay Lessor
cash in the sum of $[*] to be held as the Security Deposit under paragraph 5 of
the foregoing Lease, and Lessor shall thereupon surrender the letter of credit
for cancellation.
3. Lessee Accepts Premises AS IS. Except as otherwise provided in
-----------------------------
paragraph 2.2 of the foregoing Lease, Lessee agrees to accept the leased
premises and all of the improvements thereon IN THEIR PRESENT "AS IS" CONDITION
ON THE DATE OF EXECUTION OF THIS LEASE, AND WITHOUT WARRANTY, EXPRESS OR
IMPLIED, FROM THE LESSOR. Lessee acknowledges the importance of, and takes
responsibility for, obtaining full and comprehensive inspections of the leased
premises and improvements thereon by competent, professional contractors,
inspectors and other experts, and affirms Lessee's decision to lease the same is
being made in reliance thereon, and not on any representations made by Lessor or
Lessor's agent.
4. Lessee-Owned Alterations and/or Utility Installations.
-----------------------------------------------------
Notwithstanding anything to the contrary contained in paragraphs 7.3 and 7.4 of
the foregoing Lease, all Lessee-installed equipment shall remain the property of
Lessee and owned by Lessee throughout the Lease term, and any option terms
thereafter exercised, and shall be deemed trade fixtures, even if affixed to the
leased premises, the building thereon, or the land surrounding said building. In
addition, all of the terms and conditions contained in Exhibit "A" hereto,
entitled "Special Tenant Requirements," hereby are consented to by Lessor and
made a part hereof by reference.
5. Use. In addition to the uses allowed under paragraph 6.1 of the
---
foregoing Lease, Lessee may use the leased premises for executive and general
office use, the installation, operation, modification and maintenance of
equipment and facilities in connection with the Lessee's telecommunications
businesses and any other legally permitted uses. Other uses allowable include
those further described in paragraph sections one (1) through one-point-ten
(1.10) on the attached Exhibit "A" entitled "Special Tenant Requirements,"
including but not limited to use of conduits, fiber entrances and risers, copper
entrances and risers, roof space for ancillary equipment, antenna pad and riser,
overhead space use, exterior lighting, floor loading capacity and other
associated rights, fire protection and drainage, non-exclusive use of wet,
waste, vent and drainage piping, and use of batteries.
6. Parking/Truck Access. Lessee shall be allowed one (1) on-site
--------------------
parking space for each 1,000 square feet of rentable space provided the same are
available on the site of the leased premises. Lessee shall also be provided
vehicular access for trucks delivering or removing equipment to and from the
building on the leased premises.
7. Compliance With Applicable Laws. Nothing contained in this
-------------------------------
Addendum or in Exhibit "A" hereto shall in any way limit or negate Lessee's
obligation to comply with laws in accordance with the terms of this Lease.
8. Expansion of Building. In the event Lessee needs additional
---------------------
space on the site, Lessor, at its expense, shall construct a building in the
existing parking area for Lessee. The building shall be in shell condition in
accordance with the appropriate building/zoning codes. The rent shall be the
rent Lessee is paying per square foot under the Lease in the year the building
is completed and during each lease year thereafter through the Lease Term under
the terms and conditions of the Lease.
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
9. Additional Revisions to Lease:
-----------------------------
Section Number Revisions to Section
- -------------- --------------------
Par. 6.2(a) At the end of the fifth sentence (which begins
with "Notwithstanding the foregoing ..." the
following phrase is hereby inserted: "provided
that Lessee also may, without Lessor's prior
consent, but in compliance with all Applicable
Requirements, use any ordinary and customary
materials reasonably required to be used by Lessee
in the normal course of Lessee's business
permitted on the Premises even if such use
constitutes a Reportable Use."
Par. 6.2(b) In the first sentence, after the words "previously
consented to by Lessor," the following phrase is
hereby inserted: "(or other than as permitted by
the fifth sentence of Paragraph 6.2(a) above)."
Par. 6.2(d) Add to the end of this paragraph the following
sentences: "Lessor may not enter into any
settlement or other compromise with respect to any
claim covered by the indemnity set forth in this
section in which Lessee has expressly agreed to
indemnify and defend Lessor and is actively doing
so, without Lessee's prior written consent, which
shall not be unreasonably withheld, conditioned or
delayed, and if a claim is settled or compromised
without such consent, Lessee shall not be
obligated to provide indemnification under this
section. If Lessor or any other indemnified party
obtains recovery of any of the amounts that Lessee
has paid to them pursuant to the indemnity set
forth in this section, then Lessor or such other
indemnified party, as applicable, shall promptly
pay to Lessee the amount of such recovery."
Par. 7.3(b) Lessor shall not require a bond for alterations
unless such alterations exceed $250,000 and no
bonds will be required for Lessee's initial tenant
improvements.
Par. 8.3(a) Notwithstanding anything to the contrary in this
Lease, Lessee shall not be obligated to pay the
premium for any earthquake insurance carried by
Lessor on the Premises unless Lessor's lender
requires Lessor to maintain such earthquake
insurance. Lessor represents and warrants that its
current lender does not require such insurance
under its loan documents and Lessor agrees to use
its best faith efforts to not have any
modifications to the existing loan documents or
any future lender on the Premises require
earthquake insurance to be obtained by Lessor. If
Lessor's lender does require earthquake insurance
to be obtained on the Premises, Lessee agrees to
reimburse Lessor for the cost of the premium for
such earthquake insurance up to a maximum of
Twenty-Five Thousand Dollars ($25,000) per
calendar year in which such earthquake insurance
is required. Lessee shall reimburse Lessor for
Lessee's portion of any such earthquake insurance
premium within ten (10) business days of Lessor
providing Lessee with a written receipt of
Lessor's payment of such premium.
Par. 8.6 At the beginning of the first sentence, the phrase
"Notwithstanding any other provision of this Lease
and" is hereby inserted. At the end of the first
sentence the phrase "or actually insured by the
parties" is hereby inserted.
Par. 8.7 The opening clause of this paragraph is revised to
read as follows: "Except for the negligence and/or
willful misconduct of Lessor, its agents,
employees, contractors, and invitees, or Lessor's
breach of this Lease." Also, in the first
sentence, the phrase "involving, or in connection
with," is hereby deleted. Insert at the end of
this paragraph the following: "Lessor may not
enter into any settlement or other compromise with
respect to any claim covered by the indemnity set
forth in this section in which Lessee has
expressly agreed to indemnify and defend Lessor
and is actively doing so, without Lessee's prior
written consent, which shall not be unreasonably
withheld, conditioned or delayed, and if a claim
is settled or compromised without such consent,
Lessee shall not be obligated to provide
indemnification under this section. If Lessor or
any other indemnified party obtains recovery of
any of the amounts that Lessee has paid to them
pursuant to the indemnity set forth in this
section, then Lessor or such other indemnified
party, as applicable, shall promptly pay to Lessee
the amount of such recovery."
Par. 8.8 At the beginning of this paragraph, the phrase
"Except for the negligence and/or willful
misconduct of Lessor, its agents, employees,
employees, contractors, and invitees occurring
before the Start Date, or Lessor's breach of this
Lease," is hereby inserted.
Par. 9 Add the following to Paragraph 9: "In the event
Lessor elects to terminate this Lease pursuant to
this Paragraph 9, Lessee shall have the right,
within ten (10) days after receipt of such notice,
to agree in writing on a basis satisfactory to
Lessor to pay for the entire cost of repairing
such damage less only the amount of insurance
proceeds, if any, received by Lessor, in which
event the notice of termination shall be
ineffective and this Lease shall continue in full
force and effect, and Lessor shall proceed to make
such repairs as soon as reasonably possible. If
Lessee does not give such notice within such ten
(10) day period this Lease shall be terminated
pursuant to such notice of termination by Lessor."
Par. 10.l(b) In the first line, after the words "payment",
insert the words "more than 2 times during any
calendar year." Delete item (ii) and all
references to that option in the rest of this
paragraph.
Par. 12 The following provision is hereby added to this
paragraph: "Notwithstanding any other provision of
this Lease to the contrary, Lessee may grant a
security interest in its rights under this Lease
to the entity that provides the equipment
financing to Lessee. The entity holding the
security interest in this Lease as authorized
under this section may foreclose on such security
interest and transfer this Lease to the party
purchasing at the foreclosure, provided that
Lessor consents to such party as the new tenant
hereunder, which consent shall not be unreasonably
withheld or delayed. In addition, the entity that
provides the equipment financing to Lessee shall
have the right to enter the Premises for purposes
of inspecting its collateral and conducting a
foreclosure sale if Lessee defaults on such
financing. Lessor disclaims any right or title in
the equipment financed by Lessee, and such
equipment can be removed from the Premises at any
time, provided that Lessee repairs any damage
caused by such removal."
<PAGE>
Par. 12.1(a) In the second line, Lessor shall not
unreasonably withhold or condition its
consent, and if Lessor does not respond to
Lessee's request for consent within fifteen
(15) days, Lessee shall give Lessor another
such request, and if Lessor does not respond
to Lessee's second request for consent within
ten (10) days following Lessee's request,
then Lessor shall be deemed to have consented
to the assignment.
Par. 12.3 This paragraph is hereby revised to provide
for a 50/50 split of any excess rent. In the
third line of this paragraph, after the word
"herein", insert the following: ", except
such terms and conditions shall not apply to
the transactions with Tenant's Customers as
set forth in Paragraph 8 of the Special
Tenant Requirements attached hereto as
Exhibit A to the Addendum."
Par. 17 In the event of a transfer by Lessor, Lessor
shall nevertheless be liable for its
indemnification obligations under the Lease
and any breach of the Lease existing as of
the date of the transfer, provided that
written notice of such indemnification
obligations for such breach has been given to
such Lessor before such transfer of title
occurs.
Par. 24 The provisions of the first sentence hereby
are made mutual to both Lessor and Lessee.
Par. 30 For the sole benefit of Lessee and as a
condition to the effectiveness of this Lease
(which may be waived solely by Lessee),
Lessor shall deliver to Lessee a draft non-
disturbance agreement on or before execution
of this Lease by Lessor and Lessee.
Par. 30.1 Add the following sentence to Paragraph 30.1:
"Any subordination agreement entered into by
Tenant pursuant to this Paragraph 30 must
provide that absent a Breach by Tenant under
this Lease or termination of this Lease, any
insurance proceeds associated with any damage
and destruction of the Premises shall be made
available for restoration of the Premises in
accordance with the provisions of Paragraph 9
of this Lease."
Par. 39.2 In recognition of the fact that Lessee
remains obligated for the performance of this
Lease following any "assignment," Lessee
shall have the right to transfer each Option
to any transferee under Paragraph 10 of the
Special Tenant Requirements attached to the
Addendum as Exhibit A.
Option(s) to Extend Paragraph A(iv) is hereby revised to make it
inapplicable to Extend any transfer pursuant
to Paragraph 10 of Exhibit A to the Addendum,
any agreements with the Customers as more
particularly provided in paragraph 12.3, and
the requirement that the Lessee be in full
possession at the time the Option is
exercised is hereby changed to a minimum of
50% possession.
Par. 7.1 of Exhibit A to Addendum Add the word "Equipment" after the word
"Antenna" in this paragraph.
This Addendum is executed concurrently with, and as a part of, the
foregoing Lease.
Lessor: Lessee:
- ------ ------
ROSE VENTURES II, INC. EQUINIX, INC.
a California Corporation a Delaware Corporation
By:_______________________ By:__________________________
Stephen P. Diamond
Its President Its:_________________________
By:__________________________
Its:_________________________
PAGE 16
<PAGE>
Exhibit "A"
to ADDENDUM
Special Tenant Requirements
---------------------------
Landlord and Tenant hereby agree that, notwithstanding anything
contained in the Lease to the contrary, the provisions set forth below shall be
included as part of the Lease and shall supersede any inconsistent provisions of
the Lease. All references in this Exhibit to the Lease shall be construed to
mean the Lease and all exhibits thereto, as amended and supplemented by the
Exhibit. All terms not otherwise defined in the Exhibit shall have the same
meanings as set forth in the Lease.
1. Use.
---
1.1 Tenant's Use of Premises and Building and Land. Tenant is
----------------------------------------------
permitted (a) to construct, maintain, operate and repair electronic,
transmitting and receiving equipment and supporting structures on the Premises,
including the roof of the Building, (b) to construct, maintain, operate and
repair an equipment room on the Premises, including the construction of an
upgraded fire suppression system, (c) to install, upgrade, maintain, operate,
and repair utility lines, transmission lines, and telecommunications conduit and
cabling (collectively, the "Conduits") in such locations on the Building and
Land as set forth in plans and specifications, which shall be subject to
Landlord's approval which shall not be unreasonably withheld, conditioned or
delayed, (d) reasonable ingress and egress over existing roadways on the Land
for Tenant's trucks and other vehicles, to maintain Tenant's equipment and the
Conduits (collectively, "Equipment"). The Equipment shall include, without
limitation, the antenna, batteries, uninterruptable power supply and such other
equipment, necessary thereto and more particularly as set forth hereafter.
Tenant shall have access to and use of the Premises, the Building and Land and
the Conduits, 24 hours per day, 365 days per year.
1.2 Tenant's Use of Conduit Ducts. Tenant shall have the
-----------------------------
right to install, maintain, operate and repair the Conduits in any of Landlord's
conduit ducts located on the Building and Land, so long as Tenant's use of the
Conduits does not interfere with Landlord's use of Landlord's conduit ducts
located on the Building and Land. If required by any service provider to the
Building or by Landlord, Tenant shall install separate conduits where
applicable.
1.2.1 Fiber Entrances and Risers. Tenant shall have the
--------------------------
right to install, maintain, operate, augment and repair the Conduits in any of
Landlord's conduit ducts located on the Property, so long as Tenant's use of the
Conduits does not interfere with Landlord's use of Landlord's conduit ducts
located on the Property. At a minimum Tenant shall have the right to utilize two
utility entrances within the Building and the right to install from these dual,
diverse entrances eight (8), exclusive, four (4") inch conduits for a total of
sixteen conduit ducts to the Leased Premises.
1.2.2 Copper Entrances and Risers. Tenant shall have the
---------------------------
right to install, maintain, operate, augment and repair the conduit ducts and
risers from the existing copper telephone point of entry to Tenant's Leased
Premises.
1.3 Roof Space for Ancillary Equipment. Tenant shall have the
----------------------------------
right as part of their Lease interest in the Building or Land to utilize space
on the Roof or other space as required and approved in advance by Landlord, for
the purpose of installing and maintaining equipment used in conjunction with
Tenant's use of the Premises. Tenant's use of such space shall be exclusive in
nature and Tenant shall have the right to accrue such space and equipment from
others. Tenant's use of this space shall be in conjunction with the Leased
Premises.
1.4 Antenna Pad and Riser. Tenant shall have the right as
---------------------
part of their Lease interest in the Building or Land to utilize space on the
Roof or other space as required and approved in advance by Landlord, for the
purpose of installing and maintaining equipment used in conjunction with
Tenant's use of the Premises. Tenant's use of such space shall be exclusive in
nature and Tenant shall have the right to accrue such space and equipment from
others. Tenant's use of this space shall be in conjunction with the Leased
Premises.
1.5 Overhead Space Use. Tenant shall have the right to
------------------
utilize all space from above seven (7") feet to the bottom of any beam
("Overhead Space") for any of Tenant's equipment. Utilization of this space is
at Tenant's sole discretion. Tenant may also elect, to relocate any existing
piping, ventilation, sprinkler, waste, drainage or any and all other piping,
collectively ("Piping") from this Overhead Space. Relocation of such Piping will
be at Tenant's sole cost and expense and approved in advance by Landlord.
Landlord approval of such relocation may not be unreasonably withheld.
PAGE 17
<PAGE>
1.6 Exterior Lighting. Tenant shall have the right to install,
-----------------
maintain, operate, augment and repair exterior lighting at the Building. Tenant
will do so at Tenant's sole cost and expense and within governmental boundaries.
1.7 Floor Loading Capacity and Augmentation, Ceiling and Access
-----------------------------------------------------------
to Space Above and Below - Tenant shall have the right to install and augment
- ------------------------
existing floor and ceiling loading capacity of the Tenant's Premises, including
but not limited to work necessary to complete this task within Tenant's
Premises. Such augmentation of floor and ceiling loading shall be at Tenant's
sole cost and expense and subject to Landlord's reasonable approval of plans for
such installation or augmentation.
1.8 Fire Protection and Drainage - Tenant shall have the right
----------------------------
to install, maintain, augment and operate a separate Gas Fire Protection System
("Gas Fire Protection System") on the Premises. Such Gas Fire Protection System
shall be in addition to any existing system on the Premises, shall be installed
at Tenant's sole cost and expense, and shall meet all Local, State and Federal
Governmental regulation. Further, if a Water-based Fire Protection System
("Water-based Fire Protection System") exists on the Property, Tenant shall have
the right to augment the current system, at Tenant's sole costs and expense, to
operate as a Pro-action, Dry Pipe, Water-based Fire Protection System. Tenant
shall have the to install, operate, maintain, a new Water-based Fire Protection
System, at Tenant's sole cost and expense, in any space adjacent, below or above
Tenant's Premises or any where on the (Property, Building or Land), and Tenant
shall have the right to augment or repair the existing Water-based Fire
Protection System any where on the (Property, Building or Land). Additionally,
Tenant reserves the right to install, operate, maintain, repair and augment, at
Tenant's sole cost and expense, drainage, existing or new, within Tenant's
Premises or any where on the (Property, Building or Land) that would be
necessary to divert water from the Water-based Fire Protection System from
Tenant's Premises.
1.9 Non-exclusive Use of Wet, Waste Vent and Drainage piping -
--------------------------------------------------------
Tenant shall have the right to install, maintain, augment and operate on the
Premises any and all piping necessary and customary for utilizing water, waste,
vent and drainage. Further, Landlord agrees that Tenant shall have the right to
a non-exclusive easement for the installation of such piping in common areas or
through others space as deemed necessary and appropriate for Tenant use of
water, waste, vent and drainage.
1.10 Battery - Tenant shall have the right to install, maintain,
-------
and operate on the Premises a battery power plant ("Battery Power Plant"). Such
battery power plant shall be for the sole use of Tenant and for the operations
of the Premises for Tenant's intended use. The installation and operation of the
Battery Power Plant shall be a Tenant's sole cost and expense and shall meet all
Local, State and Federal Governmental requirements.
2. HVAC, Special Requirement and Rights. Landlord understands that
------------------------------------
Tenant's intended use of the HVAC property involve special requirements for the
heating, cooling and ventilation ("HVAC") of the Premises. Therefore, in
addition to the existing heating, cooling and ventilation located at the
Building, at Tenant's option, instead of, the HVAC utilities supplied to the
Premises by Landlord. Tenant shall have the right at Tenant's option, to install
in the Premises or elsewhere on the Property, in such location as reasonably
approved by Landlord, a separate self-contained twenty-four (24) hour a day
heating, ventilation and air-conditioning HVAC unit ("Tenant's HVAC Unit")
subject to Landlord's prior approval of the plans and specifications for the
work and electrical requirements of Tenant's HVAC Unit, which approval shall not
be unreasonably withheld, conditioned, or delayed. Tenant shall pay all costs of
electrical power for such unit in the manner set forth in above.
3. Compliance With Law. Nothing contained in this Exhibit shall
-------------------
in any way limit or negate Tenant's obligation to comply with laws in accordance
with the terms of the Lease.
4. Initial Installation and Testing. Tenant shall have the right,
--------------------------------
at Tenant's sole cost and expense, at any time following the execution of this
Lease by Tenant in a form mutually acceptable to Landlord and Tenant, to enter
upon the Building and Land and to carry out any tests, inspections, pre-
installation and installation activities on the Building and Land as necessary
for the construction and installation of the Equipment, including without
limitation, engineering and environmental surveys, physical inspections, soil
test borings, and underground trenching. Immediately following the completion of
such tests, inspections or pre-installation activities, Tenant shall, at
Tenant's sole coat and expense, repair any damage to the Building and Land
caused by such inspections or pre-installation activities, including repaving
and re-landscaping any affected areas of the Building and Land. Any such entry
onto the Building and Land prior to the Commencement Date of the Lease shall be
on all of the terms and provisions of the Lease, except for Tenant's obligation
to pay rent.
PAGE 18
<PAGE>
5. Equipment Ownership; Surrender. The Equipment shall be the
------------------------------
property of and owned by Tenant throughout the Lease Term, and shall in all
event be deemed trade fixtures, even if affixed to the Premises or Building or
Land. On or before the Expiration Date or earlier termination of this Lease.
Tenant shall remove its Equipment from the Premises and Building and Land.
Landlord hereby expressly waives and releases any and all contractual liens and
security interest or constitutional and/or statutory liens and security
interests arising by operation of law or under the Lease to which Landlord might
now or hereafter be entitled on any of the Equipment, Tenant's HVAC Unit or
Tenant's Generator. Landlord further agrees that the Equipment, Tenant's HVAC
Unit, and Tenant's Generator shall be exempt from execution, foreclosure, sale,
levy, attachment, for any Tenant default hereunder, and that the Equipment,
Tenant's HVAC Unit, and Tenant's Generator may be removed at any time from the
Premises or the Building and Land by Tenant.
6. Utilities; Emergency Power Generator. Tenant shall have the
------------------------------------
right, at any time during the Lease Term, at Tenant's option and at Tenant's
sole cost and expense: (a) install an emergency power generator(s) ("Tenant's
Generator") on the Premises or elsewhere on the Land, as noted in Exhibit A, in
such location as reasonably approved by Landlord, to provide back-up emergency
power for the Equipment and for Tenant's HVAC Unit, and (b) store fuel above
ground, on the Premises or elsewhere on the Land, as noted in Exhibit A, in such
locations as reasonably approved by Landlord, in such amounts as Tenant
reasonably determines necessary for Tenant's Generator.
7. No Interference; Relocation.
---------------------------
7.1 No Interference. Neither Landlord nor any of Landlord's
---------------
agents, employees, or contractors (collectively, the "Landlord Parties") shall
interfere in any way with the Equipment or with Tenant's access to the Equipment
and Antennas, the Conduits, Tenant's HVAC Unit, or Tenant's Generator (the
"Interference"). Landlord agrees that prior to carrying out any construction,
maintenance or repair activities which are in the vicinity of the Premises, the
Antennas, the Conduits, Tenant's HVAC Unit, or Tenant's Generator (if such are
not located within the Premises), Landlord shall provide three (3) days' prior
written notice of Landlord's or Landlord Parties' intent to carry out such
construction, maintenance or repair work including the date, time and location
in which such work will take place. Tenant shall have the right to monitor and
inspect such work at Tenant's own risk, and at Tenant`s sole cost and expense.
Landlord and Landlord Parties shall exercise all due care in carrying out such
work. Landlord shall use reasonable efforts to immediately notify the Tenant's
designated contact person by telephone or facsimile in the event of fire, power
failure, bomb threats, or other unplanned events which could adversely impact
Tenant's operations.
7.2 Remedies. Upon written notice from Tenant, stating with
--------
specificity that Landlord or one or more of the Landlord Parties is creating an
Interference in violation of Section 7.1 above, Landlord shall take immediately
all necessary measures at Landlord's sole cost and expense to eliminate the
Interference, including hiring agents to work extended hours, until the
Interference is eliminated. If Landlord does not eliminate the Interference,
Tenant shall have the right, at Tenant's option, in addition to any other remedy
at law or in equity, to (a) eliminate the Interference, and deduct the cost of
eliminating the Interference from the Base Rent next due, (b) obtain injunctive
relief enjoining or restraining whatever Interference may have occurred or be
occurring, without posting a bond or other security and without proving damages,
it being expressly recognized by Landlord that any Interference will cause
irreparable harm to Tenant which cannot be fully compensable by damages, or (c)
immediately terminate this Lease, in which event, this Lease shall be of no
further force and effect and Tenant shall have no further obligations hereunder.
7.3 Relocation. In no event shall Landlord relocate Tenant or
----------
the Equipment to other premises, or require Tenant to relocate its Equipment for
any length of time to any other location, either in or on the Building or Land
or elsewhere.
8. Customer Equipment. Landlord acknowledges that Tenant's
------------------
business to be conducted on the Premises requires the installation of certain
communications equipment by certain licensees and customers of Tenant
(collectively, "Customers") in order for such Customers to interconnect with
Tenant's terminal facilities or to permit Tenant to manage or operate such
Customers' equipment, or otherwise as may be required pursuant to applicable
statutes and regulations. These contracts or licenses with the Customers shall
not be deemed subject to the Assignment and Sublease section of the Lease and
these Customer contracts or licenses do hereby have the Landlord's consent at no
consideration to Landlord for the limited purpose of permitting the services and
uses described above.
9. Sound Control. Tenant is responsible for taking the necessary
-------------
measures to reduce the sound transmissions caused by the Equipment. In addition,
Tenant's Generator shall be installed in a weatherproof, walk-around type, sound
attenuating enclosure which shall limit the sound
PAGE 19
<PAGE>
to no more than 85 dBA as measured at three (3) feet from any side, top to
bottom, under all operating conditions.
10. Transferability. Without Landlord's prior consent to
---------------
consideration to Landlord but with notice to Landlord, Tenant shall have the
right to assign the Lease to any affiliate, division or corporation,
controlling, controlled by or under common control with Tenant or a successor
entity related to Tenant by merger, consolidation, nonbankruptcy reorganization
or governmental action, or a purchaser of substantially all of Tenant's assets
located at the premises. For purposes of the Lease, the sale of the Tenant's
capital stock through any public exchange or any issuance for purposes of
raising financing shall not be deemed an assignment or any other transfer of the
Lease or the Premises.
11. Confidentiality. Landlord shall keep all Confidential
---------------
Information of Tenant confidential. For the purposes of this Lease,
"Confidential Information" includes any data or information pertaining to Tenant
or Tenant's business, regardless of medium, that is provided by Tenant to
Landlord, including Tenant's plans and specifications or electrical power
requirements, site plans, or copies of any such information, but excludes any
information (a) approved in writing by Tenant for release to third parties, (b)
that Landlord possesses independently of Tenant, or (c) that Tenant places in
the public domain.
12. Condition at Surrender. On or before Lease termination and
----------------------
Tenant's surrender of the Premises to Landlord, Tenant shall remove all of its
equipment, personal property and any of the special tenant improvement
installations set forth in this Exhibit, for which Landlord notifies Tenant in
writing that they are to be removed at Lease termination when Landlord approves
the plans for the improvements. Tenant shall repair and restore the Premises
from any damages caused by the removal of any equipment, personal property or
tenant improvements.
PAGE 20
<PAGE>
EXHIBIT 10.14
*CONFIDENTIAL TREATMENT REQUESTED.
CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
FIRST AMENDMENT TO LEASE
------------------------
THIS FIRST AMENDMENT TO LEASE ("First Amendment") is made this 9th day
of September, 1999, by and between TRIZECHAHN CENTERS, INC., a California
corporation d/b/a TrizecHahn Beaumeade Corporate Management ("Landlord"), as
successor in interest to Laing Beaumeade, Inc. ("Original Landlord"), and
EQUINIX, INC., a Delaware corporation ("Tenant").
W I T N E S S E T H:
WHEREAS, by that certain Lease dated as of November 18, 1998 (the
"Lease"), Original Landlord leased to Tenant, and Tenant leased from Original
Landlord, approximately [*] square feet of rentable area (the "Original
Premises"), known as Suite C, located on the first (1st) floor of the building
located at [*], Ashburn, Virginia (the "Building"), upon the terms and
conditions set forth in the Lease;
WHEREAS, all of the right, title and interest of Original Landlord in
the Building was transferred to Landlord and all of the right, title and
interest of Original Landlord in the Lease was assigned to Landlord;
WHEREAS, Tenant desires to lease from Landlord, and Landlord desires
to lease to Tenant, an additional [*] rentable square feet of space located on
the first (1st) floor of the Building (hereinafter referred to as the "Expansion
Space"), upon the terms and conditions hereinafter set forth;
___________________
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
1
<PAGE>
WHEREAS, the Original Premises and the Expansion Space are hereinafter
collectively referred to as the "Leased Premises"; and
WHEREAS, Landlord and Tenant desire to amend the Lease to reflect
their understanding and agreement with regard to the lease of such additional
space, and to otherwise amend the Lease, as more particularly set forth herein.
NOW, THEREFORE, for and in consideration of the mutual promises herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto mutually agree
as follows:
1. Any capitalized terms used in this First Amendment and not
otherwise defined herein shall have the meanings ascribed to them in the Lease.
2. The Lease is hereby further amended by adding thereto a new
Section 29, to read as follows:
"29. EXPANSION SPACE
A. Term. Landlord hereby leases unto Tenant, and Tenant hereby
----
leases from Landlord, approximately [*] square feet of rentable floor
area (hereinafter referred to as the `Expansion Space') located on the
first (1st) floor of the Building, which Expansion Space is hereby
agreed to be that certain space which is shown on Exhibit H attached
hereto and made a part hereof, for a term (the `Expansion Space Term')
commencing on June 1, 1999 (the `Expansion Space Commencement Date'),
and continuing through and including the last day of the Term of the
Original Premises, unless earlier terminated pursuant to the
provisions of this Lease.
B. "As-is" Condition. Tenant accepts the Expansion Space in
----------------
its "as-is" condition.
___________________
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
2
<PAGE>
C. Expansion Space Base Rent. In addition to the Base Rent
-------------------------
for the Premises as set forth in Exhibit C hereof, commencing on the
Expansion Space Commencement Date and continuing thereafter throughout
the Expansion Space Term, Tenant covenants and agrees to pay to
Landlord Base Rent for the Expansion Space in the following amounts
(the `Expansion Space Base Rent'):
<TABLE>
<CAPTION>
Expansion Space
Base Rent Per
Expansion Space Square Foot Expansion Space Expansion Space
Period Per Annum Base Rent Monthly Base Rent
- ----------------------- --------------------- -------------------- ---------------------
<S> <C> <C> <C>
6/1/99 - 1/31/00 $[*] $[*] $[*]
2/1/00 - 1/31/01 $[*] $[*] $[*]
2/1/01 - 1/31/02 $[*] $[*] $[*]
2/1/02 - 1/31/03 $[*] $[*] $[*]
2/1/03 - 1/31/04 $[*] $[*] $[*]
2/1/04 - 1/31/05 $[*] $[*] $[*]
2/1/05 - 1/31/06 $[*] $[*] $[*]
2/1/06 - 1/31/07 $[*] $[*] $[*]
2/1/07 - 1/31/08 $[*] $[*] $[*]
2/1/08 - 1/31/09 $[*] $[*] $[*]
</TABLE>
D. Except as otherwise herein expressly provided, Expansion
Space shall be deemed a part of the Premises for all purposes of this
Lease, such that both Landlord and Tenant shall have such respective
rights and obligations with respect to Expansion Space as apply to the
remainder of the Leased Premises."
3. Section 4.(a) of the Lease (captioned "Operating Expenses") is
hereby amended by deleting from the end thereof the language "[*]% ([*])" and
inserting the following language in lieu thereof: "[*]% ([*])."
4. Section 2 of the Lease (captioned "Payment") is hereby amended by
deleting therefrom the language: "at Landlord's address set forth at Section
28.(b) hereof" and
___________________
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
3
<PAGE>
inserting the following language in lieu thereof: "and
delivered to TrizecHahn Beaumeade Corporate Management at NationsBank, P.O. Box
#631557, Baltimore, Maryland 21263-1557."
5. Section 28.(b) of the Lease (captioned "Notices") is hereby
amended by deleting therefrom all of the language in the column headed "Notice
to Landlord" and inserting the following language in lieu thereof: "TrizecHahn
Mid-Atlantic Management Services LLC, 1250 Connecticut Avenue, N.W., Suite 500,
Washington D.C. 20036 Attention: Portfolio Manager-[*]".
6. Section 28.(s) of the Lease (captioned "Brokers") and Exhibit D
to the Lease (captioned "Work Agreement") shall not be applicable to the
Expansion Space.
7. Landlord and Tenant represent and warrant to each other that the
person signing this First Amendment on its behalf has the requisite authority
and power to execute this First Amendment and to thereby bind the party on whose
behalf it is being signed .
8. Landlord and Tenant represent and warrant to each other that
neither of them has employed any broker in procuring or carrying on any
negotiations relating to this First Amendment. Landlord and Tenant shall
indemnify and hold each other harmless from any loss, claim or damage relating
to the breach of the foregoing representation and warranty by the indemnifying
party.
9. Except as expressly amended and modified herein, all terms,
conditions and provisions of the Lease shall remain unmodified and in full force
and effect. In the event of any conflict between the terms and conditions of the
Lease and the terms and conditions of this First Amendment, the terms and
conditions of this First Amendment shall govern and control.
__________________
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PROTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
4
<PAGE>
EXHIBIT 10.15
[***]=Certain information in this Exhibit has been omitted and filed separately
with the Securities and Exchange Commission.
LEASE AGREEMENT
between
NEXCOMM ASSET ACQUISITION I, LP,
as Landlord,
and
EQUINIX, INC.,
as Tenant
Infomart
The Technology Community
[*]
Dallas, Texas 75207
214-800-8000
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
1
<PAGE>
INFOMART The Technology Community
is a registered servicemark of
IFM Services, LLC, [*],
Suite 6038, Dallas, Texas 75207
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
2
<PAGE>
LEASE AGREEMENT
INFOMART
THE TECHNOLOGY COMMUNITY
THIS LEASE AGREEMENT ("Lease") is made and entered into as of the 21st day of
January, 2000, by and between NEXCOMM ASSET ACQUISITION I, LP, a Texas limited
partnership ("Landlord"), whose address is 1950 Stemmons Freeway, Dallas, Texas
75207 and EQUINIX, INC., a Delaware corporation ("Tenant"), whose address is 901
Marshall Street, Redwood City, California 94063, Attention: Keith Taylor.
ARTICLE 1
BASIC LEASE INFORMATION AND DEFINED TERMS
Section 1.1. Basic Lease Information.
(a) Base Rent shall mean the following:
---------
From the Commencement Date until the Rental
Commencement Date, Base Rent shall be [*] Dollars
($[*]),
From the Rental Commencement Date through May 31, 2002,
Base Rent shall be [*] Dollars ($[*]) per month,
From the June 1, 2002 through May 31, 2004, Base Rent
shall be [*] Dollars ($[*]) per month,
From the June 1, 2004 through May 31, 2006, Base Rent
shall be [*] Dollars ($[*]) per month,
From the June 1, 2006 through May 31, 2008, Base Rent
shall be [*] Dollars ($[*]) per month,
From the June 1, 2008 through May 31, 2010, Base Rent
shall be [*] Dollars ($[*]) per month.
(b) Base Year shall mean 2000.
---------
(c) Building shall mean the office building and information
--------
processing center located on the Land.
(d) Building Rules shall mean all rules and regulations
--------------
adopted or modified by Landlord from time to time for the safety, care,
cleanliness, and reputation of the Building and for the preservation of good
order in the Building. The current Building Rules are attached at Exhibit "C."
----------
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
3
<PAGE>
(e) Commencement Date shall mean the Effective Date. Tenant
-----------------
shall be deemed to commence occupancy of the Premises on the date Tenant takes
possession of the Premises for the purpose of equipping, furnishing, and
improving the Premises. "Rental Commencement Date" shall mean the earlier of [*]
months after the Effective Date or June 1, 2000. Base Rent shall be adjusted
accordingly if the Rental Commencement Date is other than June 1, 2000.
(f) Common Areas shall mean those areas within the Project
------------
devoted to corridors, elevator foyers, restrooms, lobby areas, meeting rooms,
and other similar facilities provided for the common use or benefit of tenants
generally.
(g) INFOMART shall mean "INFOMART - The Technology
--------
Community" and shall include the Project as it currently exists or as it may
from time to time hereafter be expanded or modified.
(h) Insurance Costs shall mean all costs incurred by
---------------
Landlord in obtaining insurance on the Project, including property, liability,
and casualty insurance on the Building, but excluding all insurance costs which
Tenant is required to provide under Section 7.3 below.
(i) Land shall mean the tract of real property which is
----
described in Exhibit "A" to this Lease.
(j) Lease Term shall mean a term commencing on the Rental
----------
Commencement Date and continuing for one hundred twenty (120) full calendar
months.
(k) Permitted Use shall mean use for the installation,
-------------
maintenance and operation of information processing and telecommunications
products and services, for offices, and for storage and service areas incidental
and related to such uses, and to include collocation and other
telecommunications related operations.
(l) Premises shall mean Suite No. 1034 in the Building, as
--------
outlined on the floor plan of the Building which is attached as Exhibit "B" to
----------
this Lease.
(m) Project shall mean, collectively, the Building, the
-------
Land, and all other improvements located on the Land (including parking areas,
parking garages, plaza areas, and other similar areas relating to the Building).
(n) Rent shall mean, collectively, the Base Rent; Tenant's
----
Proportionate Share of Insurance Costs, Utility Costs and Taxes; and any other
amounts payable to Landlord by Tenant.
(o) Rentable Square Feet shall mean the Usable Square Feet
--------------------
within the Premises, together with an additional amount representing a portion
of the Common Areas, Service Areas and other non-tenant space on floors one (1)
through six (6) in the Building. For purposes of this Lease, the parties have
agreed that the Premises shall be deemed to consist of [*] Rentable Square Feet
and floors one (1) through six (6) of the Building shall be deemed to consist of
[*] Rentable Square Feet. However, both Landlord and Tenant acknowledge that
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
4
<PAGE>
neither of these figures was calculated by measuring the Common Areas, Service
Areas and other non-tenant spaces in the Building and that neither Landlord nor
Tenant shall have a right to demand remeasurement or recalculation of the
Rentable Square Feet applicable to the Premises or the Building.
(p) Security Deposit shall mean [*] Dollars ($[*]).
----------------
(q) Service Areas shall mean those areas within the outside
-------------
walls of the Building which are used for mechanical rooms, stairs, elevator
shafts, flues, vents, stacks, pipe shafts, risers, raceways, and vertical
penetrations (but shall not include any such areas for the exclusive use of a
particular tenant).
(r) Taxes shall mean all taxes and assessments and
-----
governmental charges, whether federal, state, county or municipal, and whether
levied or assessed by taxing districts or authorities presently taxing the
Premises or the Project or any part of either, or by others, subsequently
created or otherwise, and any other taxes and assessments attributable to the
Project or its operation together with any costs incurred by Landlord (including
attorneys' fees and costs of investigation) relative to any negotiation,
contest, or appeal pursued by Landlord to reduce or prevent an increase in any
portion of the Taxes, regardless of whether any reduction or limitation is
obtained, provided that such costs are allocated only to the periods for which
Landlord is trying to have the Taxes revised.
(s) Tenant's Proportionate Share shall mean a fraction, the
----------------------------
numerator of which is the number of Rentable Square Feet within the Premises,
and the denominator of which is the number of Rentable Square Feet on floors two
(2) through six (6) of the Building. Accordingly, the parties acknowledge and
agree that Tenant's Proportionate Share under this Lease is [*] percent.
(t) Trade Fixtures shall mean any and all signs and other
--------------
equipment, including without limitation, the switch and related equipment to be
installed by Tenant or placed by Tenant within the Premises pursuant to the
provisions of this Lease and any and all items of property used by Tenant in the
Premises, including furniture and equipment and "Tenant Equipment" as defined in
Exhibit "D" attached hereto. However, the term Trade Fixtures shall not include
any permanent leasehold improvements (including any floor, wall, or ceiling
coverings, any interior walls or partitions, , or any property which is a part
of or associated with any electrical, plumbing, or mechanical system other than
the generator and cooling equipment to be installed by Tenant in accordance with
the provisions of Exhibit D attached hereto and those items which are designated
as being "Trade Fixtures" on the Plans and Specifications approved by both
parties pursuant to the attached Work Letter), notwithstanding that the same may
have been installed within the Premises by Tenant.
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
5
<PAGE>
(u) Usable Square Feet shall mean the gross number of
------------------
square feet enclosed by the surface of the exterior glass walls, the midpoint of
any walls separating portions of the Premises from those of adjacent tenants,
the slab penetration line of all walls separating the Premises from Service
Areas, and the corridor side of walls separating the Premises from Common Areas.
(v) Utility Costs shall mean all costs incurred by Landlord
-------------
in providing electricity, gas, water, and sewage disposal facilities to the
Building, (including electricity used for heating, air conditioning, operation
of office machines), and other equipment used on or about the Building, and
elevator and escalator service and lighting, but excluding all such costs which
Tenant may, from time to time, be obligated to pay on a separately metered basis
under the provisions of Section 4.3.
Section 1.2. Defined Terms. Each of the terms defined in Section 1.1
-------------
will be used as defined terms in this Lease (including the Exhibits to this
Lease). In addition, other terms are defined in various sections of this Lease.
All words which are used as defined terms in this Lease are delineated with
initial capital letters and, when delineated with initial capital letters, shall
have the meaning specified in the applicable provision of this Lease in which
such term is defined.
ARTICLE 2
OCCUPANCY AND USE
Section 2.1. Premises and Term. In consideration for the obligation
-----------------
of Tenant to pay Rent and subject to and upon the terms and conditions stated in
this Lease, Landlord leases to Tenant, and Tenant leases from Landlord, the
Premises for the Lease Term. Landlord will deliver possession of the Premises to
Tenant on the Commencement Date. If Landlord requests, Tenant shall execute a
memorandum (in a form approved by Landlord) specifying the date upon which the
Commencement Date actually occurred.
Section 2.2. Leasehold Improvements. The Premises shall be delivered
----------------------
to Tenant in an "as is" condition, and Tenant shall install the initial
leasehold improvements in the Premises in accordance with Section 5.1 below.
Tenant has made a complete examination and inspection of the Premises and
accepts the same in its current condition, "as is" and without recourse to
Landlord. Landlord shall have no obligation to provide any leasehold
improvements to the Premises or to repair, decorate, or paint the Premises,
unless otherwise expressly set forth in this Lease. Landlord has made no
representations or warranties to Tenant with respect to the condition of the
Premises, the Building, or the Project. Tenant's occupancy of the Premises shall
be deemed an acknowledgment by Tenant that the Premises are suitable for
Tenant's intended use, and Landlord expressly disclaims any warranty that the
Premises are suitable for Tenant's intended use. Landlord does not make any
warranties, express or implied, with respect to the Premises, the Building, or
the Project. All implied warranties (including those of habitability,
merchantability, or fitness for a particular purpose) are expressly negated and
waived.
Section 2.3. Use. The Premises may be used only for the Permitted
---
Use specified in Section 1.1(k) and for no other purposes without the prior
written consent of
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Landlord. Tenant's use of the Premises shall be in compliance with the Building
Rules and with all applicable Legal Requirements and Insurance Requirements.
Tenant shall not, even if technically within the Permitted Use, use the Premises
for any purpose which is dangerous to person or property, which creates a
nuisance, which would violate the Building Rules, or which would violate any
applicable Legal Requirement or Insurance Requirement. Tenant shall comply with,
and shall cause any Tenant Related Parties to comply with, all Building Rules
and all Legal Requirements and Insurance Requirements relating to the use,
condition, or occupancy of the Premises. "Insurance Requirements" shall mean all
terms of any insurance policy obtained by Landlord or Tenant covering or
applicable to the Premises or the Project; all requirements for the issuing of
each such insurance policy; and all orders, rules, regulations, and other
requirements of the National Board of Fire Underwriters (or any other bodies
exercising any similar functions) which are applicable to or affect the
Premises, the Building, or the Project or any use or condition of the Premises,
the Building, or the Project. "Legal Requirements" shall mean all laws,
statutes, codes, acts, ordinances, orders, judgments, decrees, injunctions,
rules, regulations, permits, licenses, authorizations, and requirements of all
governmental authorities, foreseen or unforeseen, which now or at any time
hereafter may be applicable to the Premises, the Building, or the Project,
including (a) the Americans with Disabilities Act, (b) all federal, state, and
local laws, regulations, and ordinances pertaining to air and water quality,
hazardous materials, waste disposal, and other environmental matters; and (c)
all laws, codes, and regulations pertaining to zoning, land use, health, or
safety. "Tenant Related Parties" shall mean Tenant's officers, partners,
employees, agents, contractors, licensees, concessionaires, subtenants,
customers, and invitees. In addition, the number of persons in the Premises
shall not exceed a ratio of three (3) persons per one thousand (1,000) Rentable
Square Feet within Premises ("Density Limit"). Notwithstanding the foregoing to
the contrary, Tenant shall not be responsible for (a) making any alterations to
the Premises, except to the extent such alterations are required due to Tenant's
particular use of the Premises or alterations to the Premises made by Tenant, or
(b) any remediation of hazardous materials which exist in the Premises prior to
the execution date of this Lease. Notwithstanding anything in this Lease to the
contrary, Landlord shall have the right to inspect the Density Limit within the
Premises upon forty-eight (48) hour prior written notice to Tenant. Tenant shall
have the right to accompany Landlord during any such inspection. In the event
Tenant fails to comply with the Density Limit two (2) times within a twelve (12)
month period within the Lease Term, such second (2nd) failure may, at Landlord's
sole election, constitute an event of default under this Lease; and Landlord
shall then have the right to exercise any of the remedies set forth in Section
8.2 of this Lease as a result of that default.
Section 2.4. Atrium Space. Intentionally deleted.
------------
Section 2.5. Peaceful Enjoyment. Tenant may peacefully occupy the
------------------
Premises for the Permitted Use during the Lease Term subject to the terms and
provisions of this Lease and provided that Tenant pays the Rent and performs all
of Tenant's covenants and agreements contained in this Lease.
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ARTICLE 3
RENT
Section 3.1. Rental Payments. Tenant shall pay Rent to Landlord for
---------------
each month during the Lease Term as provided in this Lease. Rent shall be due
and payable in advance on the first (1st) day of each month during the Lease
Term. If the Commencement Date is a date other than the first (1st) day of a
calendar month, the Rent for the portion of the calendar month in which the
Commencement Date occurs shall be due and payable on the Commencement Date; and
the Rent for such partial month shall be prorated based upon the number of days
from the Commencement Date to the end of that calendar month. Rent for any
partial month at the end of the Lease Term shall be prorated based upon the
number of days from the beginning of that month to the end of the Lease Term.
Rent shall be payable at the address for Landlord designated in the first (1st)
paragraph of this Lease (or at such other address as may be designated by
Landlord from time to time). Tenant shall pay all Rent under this Lease at the
times and in the manner provided in this Lease, without abatement, notice,
demand, counterclaim, or set-off except as otherwise provided for in this
Lease.. Any charges or other sums payable by Tenant to Landlord under the terms
of this Lease shall be considered as additional Rent. No payment by Tenant or
receipt by Landlord of a lesser amount than the total amount of Rent then due
shall be deemed to be other than on account of the earliest past due installment
of Rent required to be paid under this Lease. No endorsement or statement on any
check or in any letter accompanying any check or payment of Rent shall ever be
deemed an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of the Rent then
due or to pursue any other remedy available under this Lease, at law, or in
equity.
Section 3.2. Interest/Late Charge. In the event that Tenant fails to
--------------------
pay any monthly Rent installment within five (5) days after the date on which
any such Rent installment becomes due and payable, then Tenant shall also be
obligated to pay interest on such past due amounts at a rate equal to the lesser
of eighteen percent (18%) per annum or the highest rate of interest permitted by
applicable law. Should Tenant make a partial payment of past due amounts, the
amount of such partial payment shall be applied first to reduce all accrued and
unpaid interest and late charges, in inverse order of their maturity, and then
to reduce all other past due amounts, in the inverse order of their maturity.
Tenant's failure to pay any installment of Rent when due may cause Landlord to
incur anticipated costs (including processing and accounting costs), and the
exact amount of these costs is extremely difficult to ascertain. Therefore, the
late charges permitted under this Section 3.2 shall be liquidated damages for
those costs and shall be in addition to and shall be cumulative of any other
rights and remedies which Landlord may have under this Lease with regard to the
failure of Tenant to make any payment of Rent or any other sum due under this
Lease.
Section 3.3. Consecutive Late Payments. If Tenant fails in two (2)
-------------------------
consecutive months to make Rent payments within five (5) days after the date
when due, Landlord may require that future Rent payments be paid quarterly in
advance instead of monthly and/or that all future Rent payments be made on or
before the due date by cash, cashier's check, or money order (in which event,
the delivery of Tenant's personal or corporate check will no longer constitute a
payment of Rent under this Lease). The election by Landlord to exercise either
or
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both of the foregoing remedies shall be made by written notice to Tenant and
shall be in addition to any interest and late charges accruing under Section
3.2, as well as any other rights and remedies accruing as a result of such
default. Any acceptance of a monthly Rent payment in the form of a personal or
corporate check by Landlord thereafter shall not be construed as a subsequent
waiver of these rights.
Section 3.4. Security Deposit. The parties have agreed that [*]
----------------
Security Deposit will be required of Tenant at the outset of this Lease.
However, if Tenant is late in paying monthly rentals in two (2) consecutive
months, or if Tenant is late paying monthly rentals three (3) or more times in a
twelve (12) month period, then Landlord reserves the right at such time to
demand (in writing) that a Security Deposit in the amount of [*] the average
monthly rental payments be deposited with Landlord and retained for the
remainder of the Lease Term. Tenant hereby grants to Landlord a security
interest in the Security Deposit. Landlord shall have, and Landlord expressly
retains and reserves, all rights of setoff, recoupment, and similar remedies
available to Landlord under applicable laws or in equity. Landlord may commingle
the Security Deposit with its other funds and shall receive and hold the
Security Deposit without liability for interest. Upon default by Tenant,
Landlord may from time to time, and without prejudice to any other remedy, use
the Security Deposit to the extent necessary to make good any arrears of Rent or
other sums then due from Tenant to Landlord or to pay the cost of any damage,
injury, expense, or liability caused by any default by Tenant under this Lease.
After any such application of any portion of the Security Deposit, Tenant shall
pay to Landlord, immediately upon demand, the amount so applied so as to restore
the Security Deposit to its original amount; and such amount shall then be
deemed to be part of the Security Deposit. Tenant's failure to restore the
Security Deposit may, at Landlord's sole option, constitute a default under this
Lease. If Tenant is not in default under this Lease and after application of the
Security Deposit to the repair of any damage or injury to the Project caused by
Tenant or by any Tenant Related Party, any remaining balance of the Security
Deposit held by Landlord shall be returned by Landlord to Tenant within a
reasonable period of time after the expiration or termination of this Lease. The
Security Deposit shall not be considered an advance payment of rental or a
measure of Landlord's damages resulting from a default by Tenant.
Section 3.5. Tenant's Proportionate Share of Taxes, Insurance Costs
------------------------------------------------------
and Utility Costs. In addition to the payment of the Base Rent, Tenant shall pay
- -----------------
to Landlord Tenant's Proportionate Share of Utility Costs, Insurance Costs, and
Taxes in accordance with the following provisions:
(a) Tenant shall pay to Landlord, either in the form of a
lump sum payment due and payable within twenty (20) days of receipt of invoice
by Landlord or on a monthly basis contemporaneously with the payment of Rent, as
Landlord may elect, (i) an amount reasonably estimated by Landlord to be
Tenant's Proportionate Share of all Utility Costs for each calendar year or
portion thereof during the Lease Term, (ii) an amount reasonably estimated by
Landlord to be Tenant's Proportionate Share of all Insurance Costs for each
calendar year or portion thereof during the Lease Term, and (iii) an amount
reasonably estimated by Landlord to be Tenant's Proportionate Share of the
amount, if any, by which Taxes for each calendar year or portion thereof during
the Lease Term exceeds Taxes for the Base Year.
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
9
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(b) If at any time Landlord shall have reasonable grounds to
believe that actual Utility Costs, Insurance Costs, or Taxes will vary from such
estimates, then Landlord reserves the right to revise such estimates
accordingly. Upon any such revision, Landlord may, at Landlord's election,
either (i) require Tenant to make a lump sum payment to Landlord reflecting such
revised estimate or (ii) require Tenant to make the monthly payments due and
payable to Landlord by Tenant under this Section be revised to an amount which
will amortize such revised estimate over the remainder of the calendar year in
which any such revision is made by Landlord.
(c) Within sixty (60) days after the end of any calendar year
during which such payments were made by Tenant, a lump sum payment (or credit
against the next succeeding installments of Base Rent, if any, in case of
amounts owed by Landlord to Tenant) shall be made by Tenant to Landlord or by
Landlord to Tenant, as the case may be, so that Tenant shall have paid to
Landlord only Tenant's Proportionate Share of (i) Utility Costs for the previous
calendar year, (ii) Insurance Costs for the previous calendar year, and (iii)
the amount, if any, by which Taxes for the previous calendar year exceed Taxes
for the Base Year, which obligation to make such reconciliation payment to
Landlord or Tenant shall survive the termination of the Lease.
(d) Tenant is aware that the provisions of (S) 41.413 the Texas
Property Tax Code (that statute or any successor thereto, being the "Protest
Provision") provides tenants with the right to protest ad valorem real estate
taxes under certain circumstances. Because Tenant recognizes that (a) due to the
size of the Project and the number of tenants who are or will be occupying space
in the Project during the Lease Term, Tenant's share of any Taxes will be
relatively small and (b) the confusion which could result if several tenants
file a real estate tax protest with respect to the Project, Tenant waives its
rights under the Protest Provision to the fullest extent allowed by law. In the
event that Tenant's rights under the Protest Provision cannot be waived, Tenant
will not protest any valuation of the Project unless Tenant notifies Landlord of
Tenant's intent to do so and Landlord then fails to protest that valuation
within thirty (30) days after Landlord receives Tenant's written notice. If
Tenant files a protest under the Protest Provision without giving the required
notice to Landlord, such filing shall, at Landlord's sole election, constitute a
default under this Lease; and no cure period shall be applicable to such
default. In addition, if Tenant exercises the right to protest under this
Protest Provision, Tenant shall pay all costs of such protest and, if the Taxes
are increased following that tax protest, Tenant shall pay such excess Taxes
until the determination of the appraised value of the Project is changed by the
appraisal review board, regardless of whether the increased Taxes are incurred
during the Lease Term or thereafter.
ARTICLE 4
BUILDING SERVICES AND UTILITIES
Section 4.1. Services to be Furnished by Landlord to Tenant. Landlord
----------------------------------------------
shall furnish Tenant (subject to the terms and conditions of this Article 4)
with the following services ("Building Standard Services") during the Lease
Term:
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<PAGE>
(a) Central Heating and air conditioning in season to the
enclosed public areas of the Building;
(b) Non-exclusive passenger escalator and/or elevator services
and non-exclusive freight elevator service;
(c) Maintenance and repair of the roof, exterior walls, and
public areas of the Building and electric lighting for all public areas of the
Building;
(d) Janitorial service for the corridors and other public areas
of the Building; and;
(e) Common use rest rooms and drinking fountains at locations
provided for general use of the tenants in the Building and their guests and
invitees.
The Building Standard Services shall be provided (i) during the hours and days
which Landlord establishes from time to time as the normal business hours of the
Building; (ii) at such locations, in such manner, and to the extent deemed by
Landlord to be reasonably adequate for the use and occupancy of the Building,
and with due regard for the prudent control of energy; (iii) subject to
temporary cessation for ordinary repair, maintenance, and cleaning and during
times when life safety systems override normal Building operating systems; and
(iv) subject to the other limitations described in this Article 4.
Landlord recognizes that Tenant has the right to operate in the Premises twenty-
four (24) hours a day, seven (7) days a week.
Section 4.2. Utilities. Landlord has caused the necessary mains,
---------
conduits, and other facilities necessary to supply normal water, electricity,
telephone service, and sewage service to the Building. Landlord shall maintain
those facilities within the Building but shall have no responsibility with
respect to any of those facilities located outside the boundaries of the
Project. To the extent the Building Standard Services require electricity,
water, or other specified utilities supplied by public utilities, Landlord's
obligations under this Lease shall only require Landlord to use reasonable
efforts to cause the applicable public utilities to furnish those utilities; and
Landlord shall not be responsible for, and shall have no liability with respect
to, the quality, quantity, or condition of any services provided by such public
utilities.
Section 4.3. Electrical Services. The facilities furnishing electrical
-------------------
service to the Building have the capacity for furnishing electricity in the
amount of seven (7) watts per Usable Square Foot within the Premises ("Building
Standard Capacity") and Tenant's Proportionate Share of Utility costs will be
calculated on the basis that Tenant's electrical usage in the Premises is equal
to the Building Standard Capacity. Landlord shall allow electrical services to
the Premises to be provided from a mutually agreed upon transformer pad which is
to be installed by Tenant as a part of the Initial Improvements. Such
transformer pad and installed transformers shall serve the Premises with a
dedicated access of not less than 56 watts per the Usable Square Feet within the
Premises ("Approved Electrical Capacity"); and Tenant's lighting and
receptacle/equipment loads in the Premises shall not have an electrical design
load greater than the Approved Electrical Capacity. In the event Tenant's actual
electrical usage within the Premises exceeds the Approved Electrical Capacity,
such excess electrical usage may
11
<PAGE>
affect the capability of such electrical systems to furnish electricity to other
tenants of the Building at the Building Standard Capacity. For this reason,
Landlord shall have the right to determine the amount of any electrical usage by
Tenant from time to time and, if such electrical usage by Tenant exceeds the
Building Standard Capacity, may either separately meter Tenant's electrical
usage within the Premises or require Tenant to reduce its electrical usage to
the Building Standard Capacity. The cost of purchasing, installing, maintaining,
and reading a separate meter shall be at Tenant's expense, and Tenant shall pay
to Landlord, on demand, the cost of the consumption of electrical services
within the Premises in excess of the Building Standard Capacity at rates
determined by Landlord in accordance with applicable laws. In addition, Tenant
shall pay for all costs of any wiring, risers, raceways, transformers,
electrical panels, and other items required by Landlord, in Landlord's
discretion, to accommodate Tenant's design loads and capacities that exceed the
Standard Building Capacity, including, without limitation, all installation and
maintenance costs relative to that equipment. Notwithstanding the foregoing,
Landlord may refuse to install, and may withhold consent for Tenant's
installation of, any wiring, transformers, electrical panels, or other equipment
required to accommodate Tenant's excess electrical usage if, in Landlord's sole
judgment, the same are not necessary or would cause damage or injury to the
Project or cause or create a dangerous or hazardous condition or entail
excessive or unreasonable alterations or repairs to the Project, or would
interfere with or create or constitute a disturbance to other tenants or
occupants of the Project. In no event shall Landlord incur any liability for
Landlord's refusal to install, or the withholding of consent for Tenant's
installation of, any such facilities or equipment; and Landlord shall have no
obligation to install any electrical facility or equipment to accommodate
Tenant's electrical usage in excess of the Approved Electrical Capacity.
Section 4.4. Adverse HVAC Effect. Intentionally deleted."
-------------------
Section 4.5. Interruption of Utilities or Services. In the event that any
-------------------------------------
utility services to the Building or the Premises are interrupted, malfunction,
or are subject to partial curtailment; any equipment, machinery, or facility
within the Building furnished by Landlord breaks down or, for any cause, ceases
to function; or an interruption or malfunction occurs with respect to any
Building Standard Service, Landlord shall use reasonable efforts to repair (if
related to facilities or equipment within the Project) or obtain the restoration
of such services as soon as reasonably practicable. No such occurrence, nor
Landlord's compliance with any Legal Requirement or with any voluntary
governmental or business guidelines related to the conservation of energy, shall
ever (a) cause Landlord to be liable or responsible to Tenant for any loss or
damage which Tenant may sustain or incur as a result of any such occurrence, (b)
be construed as an eviction of Tenant or as a disturbance of Tenant's use or
possession of the Premises, (c) constitute a breach by Landlord of any of
Landlord's obligations under this Lease, (d) work an abatement or reduction of
Rent, (e) entitle Tenant to any right of setoff or recoupment, or (f) relieve
Tenant of any of Tenant's obligations under this Lease. Landlord shall, as soon
as reasonably practicable, notify Tenant of any interruption anticipated by
Landlord in any utility services to the Building or the Premises.
Section 4.6. Telecommunications. In the event that Tenant desires to
------------------
utilize the services of a telephone or telecommunications provider who is not
then servicing the Project, such provider shall not be permitted to install its
lines or other equipment within the Project without first obtaining the prior
approval of Landlord (including Landlord's approval of any
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<PAGE>
plans or specifications for the installation of lines and/or other
telecommunications equipment within the Project). Neither Landlord's approval of
any provider nor Landlord's approval of any plans and specifications relative to
the installation of any telecommunications equipment will ever constitute an
indication, representation, or certification by Landlord as to the suitability,
competence, or financial strength of that provider or as to the suitability of
any telecommunications equipment provided. The failure of any provider to
satisfy the standards and conditions set forth in Landlord's "Telecommunications
Provider Requirements" shall constitute reasonable grounds for Landlord's
refusal to approve that provider. Landlord reserves the right to (a) impose
restrictions on any telecommunications provider that are reasonably necessary to
protect the safety, security, appearance, and condition of the Building, and the
safety and convenience of Landlord, tenants of the Building, and other persons;
(b) impose a reasonable limitation on the time during which any
telecommunication provider may have access to the Building to install any of its
telecommunications facilities; (c) impose reasonable limitations on the number
of telecommunications providers that have access to the Building; (d) require
that each telecommunications provider agree to indemnify Landlord for damage
caused in connection with the installation, operation, maintenance, repair, or
removal of any of its telecommunications facilities; (e) require Tenant or the
telecommunications providers selected by Tenant to bear the entire cost of
installing, operating, or removing all of its telecommunications facilities
(including wiring and cabling); and (f) require any telecommunications provider
to pay reasonable compensation to Landlord relevant to its installation.
Landlord shall have no obligation to repair, maintain or replace any
telecommunications facilities or equipment provided by a telephone or
telecommunications provider selected by Tenant, notwithstanding any provision of
this Lease to the contrary.
ARTICLE 5
ALTERATIONS, REPAIRS AND TRADE FIXTURES
Section 5.1. Alterations, Improvements and Additions.
---------------------------------------
(a) Tenant shall, at Tenant's expense, furnish, equip, and
improve the Premises, to the extent necessary or appropriate for the proper
operation of the Premises for the Permitted Use. Tenant's obligations to provide
leasehold improvements within the Premises shall include partitions, lighting
fixtures, floor and wall coverings, and other interior decoration and shall be
of a design and quality consistent with the standards generally observed by
Landlord and other tenants of the Building.
(b) All work to be done to improve, equip, or alter the
Premises and any work in any other areas of the Project for which Tenant is
responsible shall be subject to the following conditions:
(i) all such work shall be done at Tenant's sole
cost, risk, and expense and in accordance with all Legal Requirements, Insurance
Requirements, Building Rules, and construction guidelines and standards of
Landlord;
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(ii) all such work shall be performed in a good
and workmanlike manner with labor and materials of such quality as Landlord may
reasonably approve;
(iii) no such work shall be commenced until
approved in writing by Landlord. Notwithstanding the foregoing, Landlord shall
not unreasonably withhold its consent with respect to any alteration of the
Premises which (A) does not involve work above the ceiling of the Premises, or
(B) does not affect, in any way, the mechanical, electrical, plumbing and/or
structural components of the Building and Landlord's consent shall not be
required for work occurring entirely within the Premises which is necessary with
respect to electrical, mechanical, or security services provided by Tenant to
its Customers and provided that the requirements of clauses (A) and (B) in this
sentence are satisfied;
(iv) all such work shall be performed in strict
accordance with the plans and/or specifications previously approved by Landlord;
(v) all such work shall be prosecuted diligently
and continuously to completion;
(vi) all such work shall be performed in a manner
so as to minimize interference with the normal business operations of other
tenants in the Building; the performance of Landlord's obligations under this
Lease, any other lease for space in the Building, or any Financing Lien or
Ground Lease covering or affecting all or any part of the Project; and any work
being done in any other portion of the Project;
(vii) Landlord may impose such conditions with
respect to such work as Landlord deems reasonably appropriate, including,
without limitation, (A) requiring Tenant to furnish Landlord with security for
the payment of all costs to be incurred in connection with such work and (B)
requiring Tenant or Tenant's contractor to maintain insurance against
liabilities which may arise out of such work;
(viii) such work shall be performed by contractors
approved in writing by Landlord and, if requested by Landlord, any such
contractor and all work to be performed by such contractor shall be fully bonded
(with Landlord named as co-obligee) with companies and in amounts acceptable to
Landlord in its reasonable discretion; and
(ix) upon completion of any such work and upon
Landlord's request, Tenant shall deliver to Landlord evidence of payment,
contractors' affidavits, and full and final waivers of all liens for labor,
services, or material.
(c) No alterations, improvements, or additions made to the
Premises by or on behalf of either Landlord or Tenant may be removed by Tenant
without Landlord's prior written consent. All such alterations, improvements, or
additions shall become the property of Landlord upon the termination or
expiration of this Lease. Tenant shall have no (and hereby waives all) rights to
payment or compensation for any such alteration, improvement, or addition to the
Premises. However, Tenant's Trade Fixtures shall remain the property of Tenant
as provided in Section 5.3 below.
14
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(d) Tenant shall not allow any liens to be filed against
the Premises or the Project in connection with the installation of any
alterations, improvements, or additions to the Premises. If any such liens shall
be filed, Tenant shall cause the same to be released immediately by payment,
bonding, or other method acceptable to Landlord. If Tenant shall fail to cancel
or remove any lien, then Landlord, at its sole option, may obtain the release of
that lien; and Tenant shall pay to Landlord, on demand, the amount incurred by
Landlord for the release of each lien, plus an additional charge (as determined
by Landlord) to cover Landlord's administrative overhead and expenses.
(e) Tenant hereby indemnifies and holds Landlord harmless
from all losses, costs, damages, claims, expenses (including attorneys' fees and
costs of suit), liabilities, or causes of action arising out of or relating to
any alterations, additions, or improvements that Tenant makes or causes to be
made to the Premises or to any repairs made to any portion of the Project,
including any occasioned by the filing of any mechanic's, materialman's,
construction, or other liens or claims (and all costs or expenses associated
with any such lien or claim) asserted, filed, or arising out of such work.
Nothing contained in this Lease shall be deemed or construed in any way as
constituting the consent of or request by Landlord, express or implied, to any
contractor, subcontractor, laborer, or materialman for the performance of any
labor or the furnishing of any materials for the improvement, alteration, or
repair of the Premises or the Project or as giving Tenant any right or authority
to contract for or permit the rendering of any labor or the furnishing of any
materials that would give rise to a lien against the Premises or the Project.
(f) Tenant shall have the sole responsibility for
compliance with all applicable Legal Requirements and Insurance Requirements
relative to any such alterations, improvements, or additions. Landlord's
approval of any plans or specifications shall never constitute an indication,
representation, or certification that such alterations, improvements, or
additions will be in compliance with any applicable Legal Requirement or
Insurance Requirement or as to the adequacy or sufficiency of the alterations,
improvements, or additions to which such consent relates. In instances in which
several sets of requirements must be met, the strictest applicable requirements
shall control.
(g) Tenant shall not permit any weight exceeding two
hundred fifty (250) pounds per square foot of floor area upon the floor of the
Premises.
Section 5.2. Maintenance and Repairs. Tenant shall take good care of
-----------------------
and maintain the Premises (including all plate glass, Trade Fixtures, and
improvements, additions, or alterations situated in the Premises) in a first
class, clean, and safe condition other than damage caused by the negligence of
Landlord. Tenant shall not commit or allow any waste or damage to be committed
on any portion of the Premises or the Project. Tenant shall repair or replace
any damage to any part of the Project, caused by Tenant or by a Tenant Related
Party. However, Landlord may, at its option, make such repairs, improvements, or
replacements; and Tenant shall repay Landlord on demand the actual costs
incurred by Landlord to make such repairs, improvements, or replacements plus an
additional charge (as determined by Landlord) to cover administrative overhead.
Landlord shall arrange for the repair and maintenance of the foundation,
exterior walls, and roof of the Building; the public areas within the Building;
the heating, air conditioning, and ventilation system within the Building; and
the facilities providing
15
<PAGE>
utility services (other than facilities installed by a telephone or
telecommunications provider selected by Tenant) which are located within the
Project (collectively, "Landlord's Repair Obligations"). Landlord, however,
shall not be required to make any repairs arising as a result of, in whole or in
part the act or negligence of Tenant or any Tenant Related Party; and the cost
of those repairs shall be the obligation of Tenant. In the event that the
Premises become in need of repairs which are within Landlord's Repair
Obligations, Tenant shall give immediate notice to Landlord of the nature of
such repair needs; and Landlord shall not be responsible in any way for failure
to make any repairs until a reasonable time shall have elapsed after receipt by
Landlord of such written notice.
Section 5.3. Trade Fixtures. All Trade Fixtures shall be and remain
--------------
the property of Tenant and may be removed by Tenant prior to or upon the
expiration or termination of this Lease. Tenant shall repair any damage caused
by such removal and restore the Premises to the condition existing prior to the
installation of those Trade Fixtures. Any Trade Fixtures which are not removed
from the Premises upon the expiration or termination of this Lease shall be
deemed to have been abandoned by Tenant and shall, at Landlord's option, become
the property of Landlord. In that event, Tenant shall have no (and hereby waives
all) rights to payment or compensation for any such item.
Section 5.4. Surrender of Premises. Upon the expiration or
---------------------
termination of this Lease, Tenant shall surrender the Premises to Landlord,
broom-clean and in a good state of repair and condition, excepting only ordinary
wear and tear. Upon request of Landlord, Tenant shall (a) demolish or remove all
or any portion of any Trade Fixtures and other property and all alterations,
improvements, or additions to the Premises made by or on behalf of Tenant and
(b) restore the Premises to the condition existing prior to the installation of
those Trade Fixtures or other property or the making of any such alterations,
improvements, or additions. Upon the expiration or termination of this Lease,
Tenant will deliver all keys to the Premises to Landlord and inform Landlord of
all combinations on locks, safes, and vaults, if any, which remain in the
Premises.
ARTICLE 6
RIGHTS RESERVED BY LANDLORD
Section 6.1. Landlord's Access. Landlord (and its agents,
-----------------
representatives, and contractors) shall have the right to enter upon the
Premises with forty-eight (48) hours prior written to Tenant (and, in the case
of an emergency, at any time) to (a) inspect the Premises; (b) make repairs,
alterations, or additions; and (c) within six (6) months prior to the expiration
of the Lease Term, show the Premises to prospective tenants, subtenants,
mortgagees, and purchasers as Landlord may deem necessary or desirable. Except
in case of emergency, Tenant shall have the right to have a representative
present during any such entry into the Premises by Landlord Tenant shall not be
entitled to any abatement or reduction of any Rent by reason of any such entry
by Landlord, and no such entry shall ever be construed to be an eviction of
Tenant, a default by Landlord, or a breach of the covenant of quiet enjoyment.
In exercising its rights under this Section 6.1, Landlord shall use reasonable
efforts to avoid (to the extent reasonable and practicable under the
circumstances) material interference with Tenant's Permitted Use of the
Premises.
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Section 6.2. Assignment, Subletting, or Other Transfers by Tenant.
----------------------------------------------------
Landlord reserves the right to approve any transfers of any interest of Tenant
under this Lease. Tenant shall not, without having obtained Landlord's prior
written consent, (a) assign, convey, or otherwise transfer (whether voluntarily,
by operation of law, or otherwise) this Lease, the Premises, or any interest of
Tenant under this Lease, (b) mortgage, pledge, or otherwise encumber any
interest of Tenant under this Lease, (c) grant any concession or license within
the Premises, (d) grant or transfer any management privileges or rights with
respect to the Premises, (e) allow any lien, security interest, or other
encumbrance to be placed upon any interest of Tenant under this Lease, (f)
sublet all or any part of the Premises, or (g) permit any other party to occupy
or use all or any part of the Premises. Any attempted transfer by Tenant without
Landlord's prior written consent shall be of no force or effect and may, at
Landlord's option, be a default by Tenant under this Lease. If Tenant is other
than a natural person and if Tenant's voting securities are not traded on a
national securities exchange, any conveyance, assignment, or transfer of more
than a fifty-five percent (55%) interest in Tenant in a single transaction or in
a series of transactions shall be deemed an assignment prohibited by this Lease.
In the event of a transfer of any interest of Tenant under this Lease (whether
with or without Landlord's consent), (h) each transferee shall fully observe all
covenants and obligations of Tenant under this Lease; (i) no transferee shall
use the Premises for any use except the Permitted Use; (j) such transfer shall
be subject to all of the terms, covenants, and conditions of this Lease; (k) any
transferee must assume in writing all of the applicable obligations of the
Tenant under this Lease; and (l) any expansion, renewal, or like options granted
to Tenant under this Lease shall automatically terminate as of the date of such
transfer. No such transfer shall ever be construed to constitute a waiver of any
of Tenant's covenants contained in this Lease, a release of Tenant from any
obligation or liability of Tenant under this Lease, or a waiver of any of
Landlord's rights under this Lease. The consent by Landlord to a particular
transfer shall not constitute Landlord's consent to any other or subsequent
transfer. No transferee of Tenant shall have any right to further sublease or
assign, or otherwise transfer, encumber, pledge, or mortgage its interest under
this Lease. Neither the voluntary or other surrender of this Lease by Tenant nor
a mutual cancellation of this Lease shall ever constitute a merger of estates.
Instead, any such early termination of this Lease shall, at the option of
Landlord, either terminate all or any existing subleases or subtenancies or
operate as an assignment to Landlord of Tenant's interest in any or all such
subleases or subtenancies.
Notwithstanding any provision of this Lease to the contrary, Tenant
shall have the right, without obtaining the prior written consent of Landlord,
to assign this Lease or sublet the Premises to (a any parent corporation of
Tenant, (b) any subsidiary corporation of Tenant or of Tenant's parent
corporation, (c) any entity in which Tenant, any parent corporation of Tenant or
any subsidiary corporation of Tenant or of Tenant's parent corporation holds a
majority of the outstanding shares or ownership interests, or (d) any
corporation resulting from the merger, consolidation or reorganization of Tenant
or Tenant's parent corporation with another corporation (collectively,
"Affiliates"), but only if such Affiliate is "Credit Worthy" as of the date of
such assignment or subleasing. As used herein, "Credit Worthy" shall mean that
such Affiliate's has a net worth equal to not less than $5,000,000.00. Landlord
agrees to release Tenant from all obligations under this Lease in the event the
obligations of Tenant under this Lease are assumed under the provisions of the
preceding sentence by a corporation whose Landlord acknowledges that Tenant's
business to be conducted on the Premises requires the installation on the
Premise of certain communications equipment by certain licensees and
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customers of Tenant (collectively, "Customers") in order for such Customers to
interconnect with Tenant's terminal facilities or to permit Tenant to manage or
operate such Customers' equipment, or otherwise as may be required pursuant to
applicable statures and regulations. Notwithstanding anything to the contrary in
this Lease, Landlord hereby consents in advance to any sublease, license
agreement, co-location agreement or similar agreement (collectively, "Customer
License") between Tenant and such a Customer for the limited purpose of
permitting such arrangements as described above. Any and all of the transactions
permitted under this Section 6.2 shall not constitute an assignment, subletting
or other transaction requiring the consent of Landlord under the provisions of
this Section 6.2 and shall not be subject to any of the other provisions of this
Section 6.2.
Notwithstanding the provisions of this Section 6.2, Landlord shall not
unreasonably withhold its consent in connection with an assignment of this Lease
or a subletting of all or any portion of the Premises to a qualified third party
if (i) rent is to be at not less than the then market rate for comparable space
within the Building, (ii) Landlord receives evidence satisfactory to Landlord
that such proposed third-party is "Creditworthy" (as defined above), (iii)
Landlord receives evidence satisfactory to Landlord that the proposed subtenant
or assignee will immediately occupy and thereafter use the Premises, or
applicable portion thereof, in accordance with the Permitted Use for the
remainder of the Lease Term, or for the entire term of any sublease, if such
expires prior to the expiration of the Lease Term, and (iv) the occupancy of the
Premises, or applicable portion thereof, by the proposed third-party would not
increase fire hazards, require substantial alterations to the Premises, or
applicable portions thereof, reduce the rental value of rentable space within
the Building, or adversely affect the reputation and image of the Building. In
no event shall Landlord be deemed to have unreasonably withheld consent to an
assignment or sublease to a third party who is owned or controlled by a foreign
government, involved in lobbying activities, or reputed to be involved in
illegal or illicit activities. Under no circumstances shall Tenant have the
right, without first obtaining Landlord's prior consent, to advertise or to
engage in any other promotional activities regarding an assignment or subletting
of all or any portion of the Premises.
Landlord and Tenant shall divide equally the excess rentals from any
approved assignee or sublessee (such excess to be the amount which equals the
difference between the rentals or other consideration actually paid by such
assignee or sublessee to Landlord less the [i] rentals required to be paid by
Tenant hereunder, [ii] the brokerage commissions paid by Tenant in connection
with such assignment or sublease, and [iii] attorneys' fees paid by Tenant in
connection with such sublease or assignment).
Section 6.3. Assignment by Landlord. Landlord shall have the right
----------------------
at any time to transfer and assign, in whole and by operation of law or
otherwise, Landlord's rights, benefits, privileges, duties, and obligations
under this Lease, in the Building, or in any portion of the Project. Landlord
shall be released from any further obligation under this Lease, and Tenant
agrees to look solely to Landlord's successor in interest for the performance
of, all obligations of Landlord accruing subsequent to the date of such
transfer. All covenants of Landlord under this Lease shall be binding upon
Landlord and its successors only with respect to breaches occurring during its
or their respective periods of ownership of Landlord's interest under this
Lease.
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Section 6.4. Alterations and Additions by Landlord. Landlord reserves
-------------------------------------
the right to make alterations or additions to the Project at any time and from
time to time. Landlord further reserves the right to construct (or permit others
to construct) other buildings or improvements within the Project at any time and
from time to time. Such rights set forth in the two preceding sentences include
the right to construct additional stories to any building within the Project,
the right to build adjoining buildings, the right to construct multi-level,
elevated, underground, and other parking facilities within the Project, and the
right to erect or build temporary scaffolds or other aids to such construction.
Neither the diminution nor the shutting off of any light, air, or view nor any
other effect on the Premises as a result of Landlord's exercise of the rights
reserved in this Section 6.4 shall affect this Lease, abate or reduce Rent, or
otherwise impose any liability on Landlord provided Landlord's exercise of such
rights does not materially interfere with Tenant's Permitted Use of or access to
the Premises.
Section 6.5. Subordination to Mortgages and Leases. This Lease shall
-------------------------------------
be subject and subordinate at all times to (a) all ground or underlying leases
now existing or which may be subsequently executed affecting the Project
("Ground Lease"), (b) the lien or liens of all mortgages and deeds of trust now
existing or subsequently placed on the Project or Landlord's interest or estate
in the Project ("Financing Lien"), and (c) all renewals, modifications,
consolidations, replacements, and extensions of any Ground Lease or Financing
Lien. The provisions of this Section shall be self-operative without the
necessity of the execution of any other document by any party. However, Tenant
shall execute and deliver any instruments, releases, or other documents
requested by Landlord for the purpose of confirming the provisions of this
Section or further subjecting and subordinating this Lease to any Ground Lease
or Financing Lien. In the event of the enforcement by the lessor under any
Ground Lease or by the holder of any Financing Lien of the remedies provided for
by law or by such Ground Lease or Financing Lien, or in the event of the
transfer of the Building or Landlord's interest or estate in any part of the
Building by deed in lieu of foreclosure, Tenant, upon request of any person or
party succeeding to the interest of Landlord as a result of such enforcement or
deed in lieu of foreclosure, automatically will become the tenant of such
successor in interest without change in the terms or provisions of this Lease.
However, such successor in interest shall not be bound by any payment of Rent
for more than one (1) month in advance, except prepayments in the nature of
security for the performance by Tenant of its obligations under this Lease which
have been actually delivered to such successor; liable for the return of any
security deposit or other deposit unless such security deposit or other deposit
has actually been delivered to such successor; or bound by any amendment or
modification of this Lease made after the applicable Ground Lease or Financing
Lien is placed against the Project without the written consent of any trustee,
mortgagee, beneficiary, or lessor. Contemporaneously with Tenant's execution of
this Lease, Tenant shall execute and deliver an instrument ("SNDA"), in the form
attached hereto as Exhibit "F", confirming the attornment and other agreements
contemplated by this Section. Notwithstanding anything to the contrary set forth
in this Lease, the lessor under any Ground Lease or the holder of any Financing
Lien may elect at any time to cause their interest in the Project to be
subordinate to Tenant's interest under this Lease by filing an instrument in the
real property records of Dallas County, Texas, affecting such election; and
Tenant shall execute and deliver to Landlord immediately any such instruments or
documents requested by the lessor under such Ground Lease or the holder of such
Financing Lien for the purpose of confirming that such Ground Lease or Financing
Lien is subordinated to Tenant's interest under this Lease. Provided that Tenant
executes and delivers the SNDA to Landlord, Landlord shall, upon
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execution of this Lease by Landlord, execute the SNDA and deliver the SNDA to
the current holder of the Financing Lien on the Project, with the request that
such current holder of the Financing Lien execute and return a fully executed
copy of the SNDA to Landlord. Within ninety (90) days of Landlord's submission
of the partially executed SNDA to the current holder of the Financing Lender,
Landlord shall obtain, and deliver to Tenant, a fully executed copy of the SNDA.
In addition, Landlord will use its reasonable efforts to obtain a non-
disturbance agreement from any future holder of a Financing Lien on the Project,
which shall be acceptable to Tenant if in form and content, except for the
completion of the applicable blanks therein and the identity of the holder of
the Financing Lien, reasonably comparable to the SNDA. Landlord's obligation to
use reasonable efforts to obtain a non-disturbance agreement from future holders
of a Financing Lien shall not, however, require Landlord to forego future
financing or refinancing relative to the Project or a prospective sale of the
Project; and Landlord shall have the sole and absolute discretion to determine
at what point in the negotiation process to withdraw or waive Landlord's request
that such lender execute a non-disturbance agreement.]
Section 6.6. Certificates. Within ten (10) days after Landlord's
------------
written request, Tenant will execute, acknowledge, and deliver to Landlord (and
any other persons specified by Landlord) a certificate certifying as to such
facts (to the extent true) as Landlord may reasonably request, including (a)
that this Lease is in full force and effect, (b) the date and nature of each
modification to this Lease, (c) the date to which Rent and other sums payable
under this Lease have been paid, and (d) that Tenant is not aware of any default
under this Lease which has not been cured, except such defaults as may be
specified in said certificate. Such request may be made by Landlord at any time,
and from time to time, during the Lease Term. Any such certificate may be relied
upon by Landlord and by such other persons specified by Landlord or to whom such
certificate may be delivered. Tenant's failure to deliver any such certificate
within the specified time period shall constitute a representation by Tenant
that all factual statements made by Landlord relative to those matters are true
and correct and may be relied upon by any person. Likewise, within ten (10) days
after Tenant's request, Landlord will execute, acknowledge, and deliver to
Tenant (and any other person specified by Tenant) a certificate certifying as to
(a) the date to which Rent has been paid and (b) that Landlord is not aware of
any default under the Lease that has not been cured, except such defaults as may
be specified in said certificate. This request may be made by Tenant at any
time, and from time to time, during the Lease Term. Any such certificate may be
relied upon by Tenant and by such other persons specified by Tenant or to whom
such certificate may be delivered.
Section 6.7. Building Rules. Landlord reserves the right to rescind
--------------
any of the Building Rules and to make any modifications or additions to the
Building Rules as shall be necessary or advisable for the safety, protection,
care, and cleanliness of the Building and the Project, the operation of the
Project, the preservation of good order in the Project, the protection and
comfort of the tenants in the Building (and their agents, employees, and
invitees), and the reputation of the Project. All amendments, modifications, and
additions to the Building Rules shall be binding upon Tenant from the date on
which notice of any such Building Rules is delivered to Tenant. While the
Building Rules are intended to be of general applicability to all tenants of the
Building, Landlord reserves the right to waive the applicability of any one or
more of the Building Rules to a particular situation, but such waiver by
Landlord shall not be construed as a waiver of such Building Rules with respect
to any other comparable situation and shall not prevent Landlord from thereafter
enforcing any of such Building Rules against or any
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or all of the tenants in the Building. If there is any conflict between any
subsequently enacted Building Rules and the terms and provisions of this Lease,
the terms and provisions of this Lease shall control.
Section 6.8. Use of the Term "INFOMART". Landlord reserves the right
--------------------------
to approve Tenant's usage of the term "INFOMART", and Tenant shall not use the
term "INFOMART" in any of its activities (including advertising and marketing
activities) without the prior written consent of Landlord. Copies of all
proposed written materials and advertising containing references to the term
"INFOMART" shall be furnished to Landlord in advance for its review and
approval. Any permitted use of the term "INFOMART" by Tenant shall additionally
include the phrase "The Technology Community" immediately after such use. Tenant
shall not permit any third party to use the term "INFOMART" in any of its
activities and shall report to Landlord any unauthorized uses of such term as it
comes to its attention. The breach by Tenant of any provision in this Section
6.8 shall constitute an event of default under this Lease and shall entitle
Landlord to exercise any right or remedy available to Landlord under this Lease,
at law, or in equity. Tenant shall indemnify and hold Landlord harmless from and
against any loss, cost, claim, liability, cause of action, or expense whatsoever
(including attorney's fees and other costs and expenses of defending any such
claim) arising or alleged to arise from any unauthorized use by Tenant, or any
Tenant Related Party, of the term "INFOMART".
ARTICLE 7
CONDEMNATION AND CASUALTY
Section 7.1. Condemnation. In the event of a Total Taking of the
------------
Premises or the Building, then this Lease shall terminate as of the date when
physical possession of the Premises or Building, as applicable, is taken by the
condemning authority. If a Partial Taking occurs which relates to a material
portion of the Building or if Landlord is required to pay any of the proceeds
from such Partial Taking to the lessor under a Ground Lease or to the holder of
a Financing Lien, then this Lease, at the option of Landlord, exercised by
written notice to Tenant within thirty (30) days after the date of such Partial
Taking, shall terminate regardless of whether the Premises are affected by such
Partial Taking. In this event, Rent shall be apportioned as of the date when
physical possession of the applicable portion of the Building is taken by the
condemning authority. In the event of a Partial Taking of the Premises which
results in the Premises being Untenantable, then Tenant may terminate this Lease
as of the date of such Taking by giving Landlord written notice of Tenant's
termination election within thirty (30) days after the date of such Taking; and
Rent shall be apportioned as of the date of such Taking. If a Taking of the
Premises occurs which entitles Tenant to terminate this Lease but Tenant does
not do so in the manner and within the time period specified in the immediately
preceding sentence, then Tenant shall be deemed to have irrevocably waived its
termination right. If Tenant is deemed to have waived its termination right or
if a Partial Taking of the Premises occurs which does not result in the Premises
becoming Untenantable, then Landlord shall allow Tenant a fair diminution of
Rent as to that portion of the Premises subject to such Taking; and this Lease
shall otherwise continue in full force and effect. All proceeds (whether in a
lump sum or in separate awards) of any Taking shall be paid to Landlord, and
Tenant shall not be entitled to (and expressly waives any claim to) any portion
of Landlord's award. However, Tenant shall have the right to assert a separate
claim for any loss resulting to Tenant from such Taking if, and only
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if, that claim does not in any way adversely affect the amount of Landlord's.
The term "Taking" means a transfer during the Lease Term of all or any part of
the Premises, the Building, or the Project, as applicable, as a result of, or in
lieu of or in anticipation of, the exercise of the right of condemnation or
eminent domain for any public or quasi-public use under any governmental law,
ordinance, or regulation. The term "Partial Taking" means a Taking of less than
the whole or substantially the whole of the Building and/or the Premises. The
term "Total Taking" means a Taking of the whole or substantially the whole of
the Building or the Premises or to a Taking which results in the termination of
an applicable Ground Lease. "Untenantable" shall mean that Tenant is unable to
conduct its business in the Premises in a manner reasonably comparable to that
conducted immediately before the applicable occurrence.
Section 7.2. Casualty Damage. If the Premises shall be destroyed or
---------------
damaged by fire or any other casualty, Tenant shall immediately give written
notice of that occurrence to Landlord. In the event that any portion of the
Project is damaged by fire or other casualty and if (a) such damage is such that
Landlord cannot reasonably be expected to substantially complete the repairs
which are within Landlord's Repair Obligations within two hundred forty (240)
days after the date of the casualty; (b) if, and only if, such casualty results
in material damage to the Project, Landlord, in Landlord's sole judgment, elects
not to repair or rebuild such damaged areas; or (c) less than one (1) year
remains in the Lease Term at the time of any damage to the Project, then
Landlord, at Landlord's sole option, shall have the right to terminate this
Lease, regardless of whether the Premises are affected by such casualty. In such
event, all Rent owed up to the date of that casualty shall be paid by Tenant to
Landlord; and this Lease shall cease and come to an end as of the date of
Landlord's written notice to Tenant regarding such termination. In the event
that (x) the Premises is rendered Untenantable by fire or any other casualty
which is not caused by the fault or neglect of Tenant or any Tenant Related
Parties; (y) such damage is such that Landlord cannot reasonably be expected to
substantially complete the repairs within the Premises which are within
Landlord's Repair Obligations within two hundred forty (240) days after the date
of that casualty, as reasonably estimated by Landlord; and (z) Landlord has not
terminated this Lease, then Tenant shall have the right to terminate this Lease
by delivering written notice to Landlord within thirty (30) days after receipt
of written notice of Landlord's estimate of the time to complete Landlord's
Repair Obligations relative to the Premises. If Tenant does not provide Landlord
with notice of Tenant's termination election in the manner and within the time
period specified in the preceding sentence, then Tenant shall be deemed to have
irrevocably waived its right to terminate the Lease as a result of such
casualty; and Landlord, in reliance upon Tenant's waiver of its termination
right, shall proceed to make the repairs which are within Landlord's Repair
Obligations. During any period of reconstruction or repair of the Premises,
Tenant shall continue the operation of Tenant's business within the Premises to
the extent practicable. During the period from the occurrence of a casualty
which was not caused, in whole or in part, by Tenant or any Tenant related
party, until the completion of the work within Landlord's Repair Obligations
which is necessary to render the Premises tenantable, Rent shall be reduced to
the extent that the Premises are unfit for the conduct of Tenant's Permitted Use
of the Premises. If, however, the Premises or any portion of the Project is
damaged by fire or other casualty resulting from the fault or negligence of
Tenant or any Tenant Related Party, the Rent shall not be reduced during the
repair of such damage. If neither Landlord nor Tenant elects, or has the right
to elect, to terminate this Lease as the result of such casualty, then Landlord
shall commence and proceed with reasonable diligence to restore the Premises to
the extent of Landlord's Repair Obligations. When the repairs described in the
preceding sentence have been
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completed by Landlord, Tenant shall then complete the restoration of all
leasehold improvements in excess of Landlord's Repair Obligations which are
necessary to permit Tenant to re-occupy the Premises for the Permitted Use.
Tenant's restoration work shall be conducted in accordance with the provisions
of Section 5.1 above. In no event shall Landlord have the obligation to expend
for the restoration or repair of the Project an amount in excess of the
insurance proceeds actually received by Landlord as a result of such casualty;
and except for those repairs which are within Landlord's Repair Obligations, all
costs and expenses of restoring the Premises shall be borne by Tenant. Landlord
shall not be liable for any inconvenience or annoyance to Tenant or injury to
the business of Tenant resulting in any way from any casualty or the repair or
restoration work made necessary by the occurrence of any casualty.
Section 7.3. Insurance.
---------
(a) Landlord shall not be obligated to insure any of Tenant's
goods, Trade Fixtures, leasehold improvements, or any other property placed in
or incorporated in the Premises by or on behalf of Tenant. Landlord shall
maintain fire and extended coverage insurance on the Building (excluding
leasehold improvements and tenants' personal property) in amounts desired by
Landlord and at the expense of Landlord. All payments for losses thereunder
shall be made solely to Landlord.
(b) Tenant shall procure and maintain, at its sole cost and
expense during and throughout the Lease Term, a policy or policies of (i)
commercial general liability insurance in an amount of not less than
$5,000,000.00 (which can be complied with by Commercial General Liability Limits
or by combination with additional Excess or Umbrella [commercial catastrophe]
Liability limits), (ii) fire and extended coverage insurance with respect to
Tenant's Trade Fixtures, inventory, and leasehold improvements located in the
Premises written on an "All Risk" basis for the full replacement cost, (iii)
worker's compensation and employer's liability insurance, and (iv) such other
insurance as Landlord may, from time to time, reasonably require with the
exception of business interruption insurance which Tenant chooses not to carry
coverage. In addition, Tenant shall obtain a fire legal liability endorsement or
other coverage satisfactory to Landlord which removes the "owned, rented, or
occupied" property exclusion from Tenant's liability policy. All such insurance
shall be maintained with companies authorized to transact business in the State
of Texas and of good financial standing on forms and in amounts acceptable to
Landlord. In addition, each such policy, other than the workers
compensation/employers liability policies and policies insuring only Tenant's
Trade Fixtures, shall name Landlord and the Landlord Related Parties as
"additional insureds" thereunder and shall contain a standard "other insurance"
clause, unmodified in any way that would make the coverage provided by the
policy excess over or contributory with any additional insured's own insurance
coverage.
(c) All policies of insurance required to be maintained by
Tenant shall provide that Landlord shall be given at least thirty (30) days'
prior written notice of any cancellation or non-renewal of any such policy. A
duly executed certificate of insurance with respect to each such policy shall be
deposited with Landlord by Tenant on or before the Commencement Date, and a duly
executed certificate of insurance with respect to each subsequent policy shall
be deposited with Landlord at least fifteen (15) days prior to the expiration of
the policy then in effect.
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(d) Tenant shall not do or permit anything to be done in or
about the Premises, nor bring nor keep nor permit anything to be brought to or
kept in the Premises, which will in any way increase the existing rate of or
affect any fire insurance or other insurance which Landlord carries on the
Project or any of its contents, cause a cancellation or invalidation of any such
insurance or otherwise violate any Insurance Requirement. If the annual premiums
to be paid by Landlord with respect to any insurance obtained by Landlord
covering the Project or any of its contents shall be increased because either
the nature of Tenant's operations or the nature of Tenant's Trade Fixtures,
inventory, or leasehold improvements in the Premises may result in a hazardous
exposure, Tenant shall pay such increase upon demand by Landlord.
(e) All fire and extended coverage insurance policies carried by
either Landlord or Tenant shall provide for a waiver of rights of subrogation
against Landlord and Tenant on the part of the applicable insurance carrier
unless either (i) such waiver is then prohibited by applicable Texas law or (ii)
such waiver would invalidate, nullify, or provide a defense to coverage under
any such insurance policy. As long as the waivers contemplated by this
Subsection are in effect, Landlord and Tenant each hereby waives any and all
rights of recovery, claims, actions, or causes of action against the other (and
their respective employees, agents, officers, or partners) for any loss or
damage which may occur to the Premises or the Project which is covered by valid
and collectible insurance policies and to the extent that such loss is actually
recovered under any such insurance policy. The failure of Tenant to take out or
maintain any insurance policy required under this Section 7.3 shall be a defense
to any claim asserted by Tenant against Landlord by reason of any loss sustained
by Tenant which would have been covered by any such required policy. The waivers
set forth in this Subsection shall be in addition to, but shall not be in
substitution for, any other waivers, indemnities, or limitation of liabilities
set forth in this Lease.
Section 7.4. Indemnity. Tenant shall not be liable to Landlord or to
---------
the Landlord Related Parties for any injury to person or damage to property
caused by the gross negligence or willful misconduct of Landlord or the Landlord
Related Parties. Subject to the provisions of Section 9.14 below, Landlord shall
indemnify and hold Tenant and the Tenant Related Parties harmless from any
liability, loss, cost, claim, or expense (including attorneys' fees and
expenses, court costs, and costs of investigation) arising out of, or alleged to
have arisen out of, the gross negligence or willful misconduct of Landlord or
the Landlord Related Parties. Landlord and the other Protected Parties shall not
be liable to Tenant or to the Tenant Related Parties for any injury to person or
damage to property caused by the negligence or misconduct of Tenant or the
Tenant Related Parties, or arising out of any use of, or the conduct of any
business in the Premises or other portions of the Project, by Tenant or the
Tenant Related Parties. Tenant shall indemnify and hold Landlord and the other
Protected Parties harmless from any liability, loss, cost, claim, or expense
(including attorneys' fees and expenses, court costs, and costs of
investigation) to the extent arising out of, or alleged to have arisen out of,
the negligence or misconduct of Tenant or the Tenant Related Parties or out of
any use of, or conduct of any business in, the Premises or any other portion of
the Project by Tenant or the Tenant Related Parties. The indemnifications
granted by both Landlord and Tenant in this Section 7.4 are subject to any
express limitations to the contrary in this Lease. "Landlord Related Parties"
means Landlord's officers, partners, employees, agents, and contractors.
"Protected Parties" means the Landlord Related Parties and, to the extent
applicable, the holder of any Financing
24
<PAGE>
Lien, the lessor under any Ground Lease, and the management company for the
Building (and their respective directors, partners, officers, employees, and
agents).
Section 7.5. Damages from Certain Causes. Except to the extent caused
---------------------------
by that Protected Party, none of the Protected Parties shall ever be liable or
responsible to Tenant, or any person claiming through Tenant, for any loss,
injury to person, or damage to property in, upon, or about the Premises or any
other portion of the Project resulting from (a) theft, fire, casualty,
vandalism, acts of God, public enemy, injunction, riot, strike, inability to
procure materials, insurrection, war, court order, requisition, or order of any
governmental body or authority; (b) the acts or omissions of other tenants of
the Project; (c) any other causes beyond Landlord's control; or (d) any damage
or inconvenience which may arise through repair or alteration of the Project.
All goods, property, or personal effects stored or placed by Tenant in or about
the Project shall be at the sole risk of Tenant.
ARTICLE 8
DEFAULT AND REMEDIES
Section 8.1. Default by Tenant. The occurrence of any of the
-----------------
following events and the expiration of any grace periods hereafter described
shall constitute a default by Tenant under this Lease:
(a) The failure of Tenant to pay any Rent within ten (10) days
after Tenant's receipt of Landlord's written notice of such failure to pay;
provided Landlord shall be required to give such notice only twice in any twelve
(12) month period and thereafter Tenant shall be in default if any such payment
is not received when due and without notice;
(b) Tenant assigns its interest in this Lease or sublets any
portion of the Premises except as permitted in this Lease or Tenant otherwise
breaches the provisions of Section 6.2 of this Lease;
(c) Tenant uses the Premises for any purpose other than the
Permitted Use or otherwise breaches Tenant's operational covenants under
Sections 2.3, or 6.8 of this Lease after five (5) days Landlord's written notice
of such breach;
(d) Tenant breaches or fails to comply with any term, provision,
covenant, or condition of this Lease (other than as described in Subsections
[a], [b], or [c] above), or with any of the Building Rules now or subsequently
established, and such breach or failure continues for thirty (30) calendar days
after written notice by Landlord to Tenant or, if such condition cannot
reasonably be cured within such thirty (30) day period, Tenant shall fail to
commence such cure within such thirty (30) day period, or having commenced such
cure within such period shall thereafter diligently and continuously fail to
prosecute such cure to completion within sixty (60) days from the date of
Landlord's notice of such default;
(e) If the interest of Tenant under this Lease is levied on
under execution or other legal process, or if any petition in bankruptcy or
other insolvency proceedings is filed by or against Tenant, or any petition is
filed or other action taken to declare Tenant as bankrupt or to delay, reduces
or modify Tenant's debts or obligations or to reorganize or modify
25
<PAGE>
Tenant's capital structure or indebtedness or to appoint a trustee, receiver or
liquidator of Tenant or of any property of Tenant, or any proceedings or other
action is commenced or taken by a governmental authority for the dissolution or
liquidation of Tenant (provided that no such levy, execution, legal process; or
petition filed against Tenant shall constitute a breach of this Lease if Tenant
shall vigorously contest the same by appropriate proceedings and shall remove or
vacate the same within thirty (30) calendar days from the date of its creation,
service, or filing);
(f) Tenant becomes insolvent, makes an assignment for the
benefit of creditors, or makes a transfer in fraud of creditors; or a receiver
or trustee is appointed for Tenant or any of its properties;
(g) Tenant abandons the Premises during the Lease Term; or
(h) If Tenant is an individual person, the death or legal
incapacity of Tenant; if Tenant is a corporation, Tenant ceases to exist as a
corporation in good standing in the state of its incorporation and/or ceases to
be duly authorized to transact business within the State of Texas; or if Tenant
is a partnership or other entity, Tenant is dissolved or otherwise liquidated.
Section 8.2. Landlord's Remedies. Upon the occurrence of any default
-------------------
by Tenant under this Lease, Landlord, at Landlord's sole option, may exercise
any one or more of the following described remedies, in addition to all other
rights and remedies provided at law or in equity:
(a) Landlord may at any time thereafter (without being under any
obligation to do so) re-enter the Premises and correct or repair any condition
which shall constitute a failure on the part of Tenant to observe, perform, or
satisfy any term, condition, covenant, agreement, or obligation of Tenant under
this Lease; and Tenant shall fully reimburse and compensate Landlord on demand
for the costs incurred by Landlord in doing so, plus profit and overhead in any
amount equal to fifteen percent (15%) of such cost. No action taken by Landlord
under this subsection shall relieve Tenant from any of Tenant's obligations
under this Lease or from any consequences or liabilities arising from the
failure of Tenant to perform such obligations.
(b) Landlord may terminate this Lease and repossess the
Premises. In the event that Landlord elects to terminate this Lease, Landlord
shall be entitled to recover damages equal to the total of (i) the cost of
recovering the Premises (including attorneys' fees and costs); (ii) the cost of
removing and storing Tenant's or any other occupant's property; (iii) the unpaid
Rent owed at the time of termination, plus interest thereon from the date when
due at the maximum rate of interest then allowed by law; (iv) the cost of
reletting the Premises (as reasonably estimated by Landlord and including
alterations or repairs to the Premises and brokerage commissions); (v) the costs
of collecting any sum due to Landlord (including without limitation, attorneys'
fees and costs); and (vi) any other sum of money or damages owed by Tenant to
Landlord as a result of the default by Tenant, whether under this Lease, at law,
or in equity.
(c) Landlord may terminate Tenant's right of possession of the
Premises without terminating this Lease and repossess the Premises. In the event
that Landlord
26
<PAGE>
elects to take possession of the Premises without terminating this Lease, Tenant
shall remain liable for, and shall pay to Landlord, from time to time on demand,
(i) all costs and damages described in Subsection (ii) of this Section 8.2 and
(b) any deficiency between the total Rent due under this Lease for the remainder
of the Lease Term and rents, if any, which Landlord is able to collect from
another tenant for the Premises during the remainder of the Lease Term ("Rental
Deficiency"). Landlord may file suit to recover any sums falling due under the
terms of this Lease from time to time, and no delivery to or recovery by
Landlord of any portion of the sums owed to Landlord by Tenant under this Lease
shall be a defense in any action to recover any amount not previously reduced to
judgment in favor of Landlord. Landlord may use reasonable efforts to relet the
Premises on such terms and conditions and to such parties as Landlord, in
Landlord's sole discretion, may determine (including a term different from the
Lease Term, rental concessions, and alterations and improvements to the
Premises); but Landlord shall never be obligated to relet the Premises before
leasing other rentable areas within the Project, it being the intent of the
parties that Tenant shall not be placed in a preferential position by reason of
Tenant's own default. Any sums received by Landlord through reletting shall
reduce the sums owing by Tenant to Landlord, but Tenant shall not be entitled to
any excess of any sums obtained by reletting over and above the Rent provided in
this Lease under any circumstances. For the purpose of such reletting, Landlord
is authorized to decorate or to make any repairs, changes, alterations, or
additions in and to the Premises that Landlord may deem necessary or advisable.
No reletting shall be construed as an election on the part of Landlord to
terminate this Lease unless a written notice of such intention is given to
Tenant by Landlord. Notwithstanding any such reletting without termination,
Landlord may, at any time thereafter, elect to terminate this Lease for such
previous default. In the alternative (but only in the event that Tenant's
default constitutes a material breach), Landlord may elect to terminate Tenant's
right to possession of the Premises and to immediately recover as damages, in
lieu of the Rental Deficiency, a sum equal to the difference between (a) the
total Rent due under this Lease for the remainder of the Lease Term and (b) the
then fair market rental value of the Premises during such period, discounted to
present value using a discount rate of eight percent (8%) per annum ("Discounted
Future Rent"). In such event, Landlord shall have no obligation to relet the
Premises or to apply any rentals received by Landlord as a result of any
reletting to Tenant's obligations under this Lease; and the aggregate amount of
all damages due to Landlord, including the Discounted Future Rent, shall be
immediately due and payable to Landlord upon demand.
(d) In the event that Landlord elects to re-enter or take
possession of the Premises after Tenant's default, Tenant hereby waives notice
of such re-entry or re-possession and of Landlord's intent to re-enter or retake
possession. Landlord may, without prejudice to any other remedy which Landlord
may have for possession or arrearages in or future Rent, expel or remove Tenant
or any other person who may be occupying the Premises. Landlord may also change
or alter the locks or other security devices on the doors to the Premises
and/or, if applicable, remove Tenant's access media from the security system;
and Tenant waives, to the fullest extent allowed by law, any requirement that
notice be posted on the Premises as to the location of a key to such new locks
and any rights to obtain such a key.
(e) If Tenant abandons the Premises, Landlord may remove and
store any property of Tenant that remains within the Project at Tenant's
expense. In addition to Landlord's other rights and remedies, Landlord may
dispose of the stored property if Tenant does not claim that property within ten
(10) days after the date on which that property is first
27
<PAGE>
stored by Landlord. Landlord shall deliver by certified mail to Tenant, at
Tenant's last known address, a notice stating that Landlord will dispose of
Tenant's property if Tenant does not claim such property within ten (10) days
after the date the property was first seized and stored by Landlord. In
addition, Tenant shall be liable to Landlord for all costs and expenses incurred
by Landlord in moving, storing, and disposing of the abandoned property and
shall indemnify and hold harmless Landlord from and against any and all loss,
damage, costs, expenses, and liability related to or in connection with such
removal, storage, and disposal of Tenant's property after abandonment.
(f) In the event that Rent is to be increased at various
intervals during the Lease Term, then Landlord may, at Landlord's sole election,
calculate the amount of unpaid Rents owed at the time of termination of this
Lease or calculate the amount of any Rental Deficiency or Discounted Future Rent
based upon the difference between the average rate of Rent payable by Tenant
over the entire Lease Term instead of on the amount of Rent payable by Tenant
during the applicable period. If Landlord agreed to allow Tenant to pay a lower
rate of rent during the earlier portions of the Lease Term and to then increase
the Rent at various stages during the Lease Term, Tenant acknowledges and agrees
that (i) such agreement was made as an accommodation to Tenant and in reliance
upon Tenant performing all of Tenant's obligations and paying Rent throughout
the entire Lease Term and (ii) such method of calculation is intended to provide
Landlord with the benefit of Landlord's bargain in this Lease.
(g) No termination of this Lease shall ever be deemed to have
occurred unless Landlord specifically notifies Tenant in writing that Landlord
has elected to terminate this Lease. No election of Landlord to re-enter the
Premises or to retake possession of the Premises shall ever be deemed or
construed to be a termination of this Lease.
(h) The provisions of this Section 8.2 shall override and
control over any conflicting provisions of Section 93.002 of the Texas Property
Code (as amended), and Tenant expressly waives any and all rights Tenant may
have under Section 93.002.
(i) Tenant hereby expressly waives notice of any default for
which notice is not specifically required under Section 8.1.
(j) All rights and remedies of Landlord under this Lease shall
be non-exclusive and shall be in addition to an cumulative of all other rights
or remedies available to Landlord under this Lease or by law or in equity.
Section 8.3. Landlord's Lien. Intentionally deleted.
---------------
Section 8.4. Attorney's Fees and Other Expenses of Enforcement. In
-------------------------------------------------
the event Tenant defaults in the performance or observance of any of the terms,
covenants, agreements, or conditions contained in this Lease, Tenant, to the
extent permitted by applicable law, shall pay to Landlord (a) all reasonable
expenses incurred by Landlord in collecting any sums due under, or enforcing any
of the terms of, this Lease; and (b) if Landlord places the enforcement of all
or any part of this Lease in the hands of an attorney, all attorneys' fees and
other costs of collection and enforcement incurred by Landlord.
28
<PAGE>
Section 8.5. Default by Landlord. Landlord shall be in default under
-------------------
this Lease in the event Landlord has not begun and pursued with reasonable
diligence the cure of any failure of Landlord to meet its obligations under this
Lease within thirty (30) days of the receipt by Landlord of written notice from
Tenant of Landlord's alleged failure to perform. In no event shall Tenant have
the right to terminate or rescind this Lease as a result of Landlord's default.
Tenant waives such remedies of termination and rescission and agrees that
Tenant's remedies for default under this Lease and for breach of any promise or
inducement are limited to a suit for damages and/or injunction. In addition,
Tenant shall, prior to the exercise of any such remedies, provide each holder of
a Financing Lien and each lessor under a Ground Lease with written notice and a
reasonable time to cure any default by Landlord.
ARTICLE 9
MISCELLANEOUS PROVISIONS
Section 9.1. Amendments. This Lease may not be altered, changed, or
----------
amended except by an instrument in writing signed by both Landlord and Tenant.
Section 9.2. Non-Waiver. No course of dealing between Landlord and
----------
Tenant or any other person, nor any delay on the part of Landlord in exercising
any rights under this Lease, nor any failure to enforce any provision of this
Lease, nor the acceptance of any Rent by Landlord shall operate as a waiver or a
modification of the terms of this Lease or of any right which Landlord has to
demand strict compliance by Tenant with the terms of this Lease. If Landlord or
Tenant waives any agreement, condition, or provision of this Lease, such waiver
must be expressly set forth in a writing signed by either party and shall not be
deemed a waiver of any subsequent breach of the same or any other agreement,
condition, or provision contained in this Lease.
Section 9.3. Holding Over. In the event Tenant remains in possession
------------
of the Premises after the expiration or termination of this Lease without the
consent of Landlord, Tenant shall be deemed to be occupying the Premises as a
tenant at will and shall pay Rent for each month (or partial month) during the
first thirty (30) days any such holdover period at a rate equal to 125% of the
Rent which Tenant was obligated to pay for the month immediately preceding the
end of the Lease Term and 200% of the amount of such Rent thereafter. No holding
over by Tenant after the expiration or termination of this Lease shall be
construed to extend the Lease Term or in any other manner be construed as
permission by Landlord to holdover. Additionally, in the event of any
unauthorized holding over by Tenant, Tenant shall indemnify Landlord against all
claims for any damages by any other person or entity to whom Landlord may have
leased all or any part of the Premises and for any other loss, cost, damage, or
expense (including attorneys' fees and costs of suit) incurred by Landlord as a
result of such holding over.
Section 9.4. Notices. Any notice, demand, consent, approval, request,
-------
or other communication required or permitted to be given pursuant to this Lease
(including any Exhibit to this Lease) or by applicable law shall be in writing
and shall be delivered by registered or certified mail, postage prepaid, return
receipt requested, telegram, facsimile, or expedited delivery service with proof
of delivery, addressed to Landlord or Tenant, as applicable, at the
<PAGE>
address for each specified in the first paragraph of this Lease. Any such
communication transmitted by telegram, facsimile, or personal delivery shall be
deemed to have been delivered as of the date actually received by the addressee.
Any such communication transmitted by registered or certified mail shall be
deemed to have been given or served on the third (3rd) business day following
the date on which such notice was deposited in a receptacle maintained by the
United States Postal Service for such purpose. Any notice of default from Tenant
to Landlord shall also be delivered to any holder of a Financing Lien or any
lessor under a Ground Lease who has notified Tenant of its interest and the
address to which notices are to be sent; and such notice shall not be effective
until delivered to such parties. Either Landlord or Tenant may, by ten (10)
days' prior notice to the other in accordance with this Section 9.4, designate a
different address or different addresses to which communications intended for
the party are to be sent.
Section 9.5. Independent Obligations. The obligations of Tenant under
-----------------------
this Lease are independent of Landlord's obligations, and Tenant shall not, for
any reason, withhold or reduce Tenant's required payments of Rent or fail to
fully perform Tenant's obligations under this Lease. In the event that Landlord
commences any proceedings against Tenant as a result of Tenant's default under
this Lease, Tenant will not interpose any counterclaim or other claim against
Landlord of whatever nature or description in any such proceedings. In the event
that Tenant attempts to interpose any such counterclaim or other claim against
Landlord in such proceedings, Landlord and Tenant stipulate and agree that such
counterclaim or other claim asserted by Tenant shall, upon motion by Landlord,
be severed out of the proceedings instituted by Landlord and that those
proceedings may proceed to final judgment separately and apart from, and without
consolidation with or reference to the status of, such counterclaim or other
claim asserted by Tenant.
Section 9.6. Survival. Neither the expiration or termination of the
--------
Lease Term pursuant to the provisions of this Lease, by operation of law, or
otherwise, nor any repossession of the Premises pursuant to any remedy granted
to Landlord under this Lease or otherwise shall ever relieve Tenant of Tenant's
liabilities and obligations under this Lease, all of which shall survive such
expiration, termination, or repossession.
Section 9.7. Other Tenants of Building. Neither this Lease nor
-------------------------
Tenant's continued occupancy of the Premises is conditioned upon either (a) the
opening of any showroom or business in the Building or in any portion of the
Project by any other person or entity or (b) the continued operations of any
such showroom or business.
Section 9.8. Name of Building and Project. Tenant shall not utilize
----------------------------
the name of the Building or the Project for any purpose whatsoever, except to
identify the location of the Premises in Tenant's address. Landlord shall have
the right to change the name of the Building and/or the Project whenever
Landlord, in its sole discretion, deems it appropriate without any liability to
Tenant and without any consent of Tenant being necessary.
Section 9.9. Consent by Landlord. In each circumstance under this
-------------------
Lease in which the prior consent or permission of Landlord is required before
Tenant is authorized to take any particular type of action, the decision of
whether to grant or deny such consent or permission shall be within the sole and
exclusive judgment and discretion of Landlord unless otherwise
<PAGE>
specifically provided in this Lease with respect to that specific matter. Unless
(a) Landlord has specifically agreed otherwise in this Lease that Landlord will
not unreasonably withhold its consent with respect to that specific matter and
(b) Landlord then unreasonably withholds its consent with respect to that
specific matter, Tenant shall not have any claim for breach by Landlord or any
defense to performance of any covenant, duty, or obligation of Tenant under this
Lease on the basis that Landlord delayed or withheld the granting of such
consent or permission. Landlord's consent or approval to any particular act by
Tenant which requires such consent or approval shall not be deemed to waive or
render unnecessary consent to or approval of any subsequent similar act.
Section 9.10. Legal Interpretation. This Lease, and the rights and
--------------------
obligations of Landlord and Tenant under this Lease, shall be interpreted,
construed, and enforced in accordance with the laws of the State of Texas. All
obligations of the parties shall be performable in, and all legal actions to
enforce or construe this Lease shall be instituted in, the courts of, Dallas
County, Texas. All defined terms and other words used in this Lease shall
include the singular and plural, as applicable. References to the Premises, the
Building, the Land, or the Project shall also include any portion of each.
References to the Project shall include the Building and the Premises, and
references to the Building shall include the Premises. Words which are not used
as defined terms in this Lease shall be construed in accordance with the
meanings commonly ascribed to those words, relative to the context in which each
is used. The word "including" shall be construed as if followed, in each
instance, by the phrase "but not limited to." All article, section, and
subsection headings used in this Lease are for reference and identification
purposes only and are not intended to, and shall not under any circumstances,
alter, amend, amplify, vary, or limit the express provisions in this Lease. All
rights, powers, and remedies provided in this Lease may be exercised only to the
extent that their exercise does not violate any applicable law and are intended
to be limited to the extent necessary so that such provision will not render
this Lease invalid or unenforceable under applicable law. In the event that any
provision in this Lease, or the application of such provision to any person or
circumstance, shall be invalid or unenforceable to any extent, the remainder of
this Lease, or the application of such term or provision to persons or
circumstances other than those to which it is held invalid or unenforceable,
shall not be affected thereby. Landlord and Tenant hereby respectively
acknowledge that each such party has substantial experience in negotiation
commercial real estate leases, that this Lease is the product of extensive
negotiations between the parties, and that, therefore, neither Landlord nor
Tenant shall be charged with having promulgated this Lease and that no rule of
strict construction with respect to the provisions of this Lease shall be
applicable.
Section 9.11. Entire Agreement. Tenant agrees that (a) this Lease
----------------
supersedes and cancels any and all previous statements, negotiations,
arrangements, brochures, agreements, and understandings, if any, between
Landlord and Tenant or displayed by Landlord to Tenant with respect of the
subject matter of this Lease, the Premises, the Building, or the Project and (b)
there are no representations, agreements or warranties (express or implied, oral
or written) between Landlord and Tenant with respect to the subject matter of
this Lease, the Premises, the Building, or the Project other than as set forth
in this Lease.
Section 9.12. Authority. Tenant represents and warrants that (a)
---------
Tenant has the full right, power, and authority to enter into, and to perform
its obligations under, this Lease, and
<PAGE>
(b) upon execution of this Lease by Tenant, this Lease shall constitute a valid
and legally binding obligation of Tenant. If Tenant signs as a corporation, each
of the persons executing this Lease on behalf of Tenant covenant and warrant
that Tenant is a duly and validly existing corporation, that the execution of
this Lease by such persons on behalf of Tenant has been duly authorized by all
necessary corporate action, and that Tenant is qualified to do business in the
State of Texas. Likewise, Landlord represents and warrants that Landlord has the
full right, power, and authority to enter into, and to perform its obligations
under, this Lease, and that, upon execution of this Lease by Landlord, this
Lease shall constitute a valid and legally binding obligation of Landlord.
Section 9.13. Taxes on Tenant's Property. Tenant shall be liable for
--------------------------
all taxes levied against Tenant's Trade Fixtures, inventory, leasehold
improvements, and any other property of Tenant in the Premises or the Project.
If any such taxes are ever assessed against Landlord or Landlord's property and
Landlord elects to pay the same or if the assessed value of Landlord's property
is increased by the inclusion of Tenant's property, Tenant shall pay to
Landlord, within fifteen (15) days of demand, that part of such taxes
attributable to Tenant's property as additional Rent. Landlord shall be
responsible for paying all real property taxes levied against the Project.
However, if any alteration, addition, or improvement shall be made by Tenant
which causes an increase in the real property taxes, assessments, or other
governmental charges levied against the Building, Tenant shall pay to Landlord,
within fifteen (15) days of demand, the amount of any such increase as
additional Rent.
Section 9.14. Landlord's Liability. Notwithstanding anything to the
--------------------
contrary set forth in this Lease, Tenant agrees that no personal, partnership,
or corporate liability of any kind or character whatsoever shall attach to
Landlord or its partners or venturers for payment of any amounts payable under
this Lease or for the performance of any obligation under this Lease. The
exclusive remedies of Tenant for the failure of Landlord to perform any of
Landlord's obligations under this Lease shall be to proceed against the interest
of Landlord in and to the Project. Landlord shall not be responsible in any way
to Tenant or any Tenant Related Party for any loss of property from the Premises
or public areas of the Building or for any damages to any property from any
cause whatever. Nor shall Landlord be responsible for lost or stolen personal
property, money, or jewelry from the Premises, regardless of whether such loss
occurs when the Premises are locked. Landlord shall never be liable for
consequential or special damages.
Section 9.15. Time of the Essence. In all instances in which Tenant
-------------------
or Landlord is required to pay any sum or do any act at a particular time or
within a particular period, it is understood that time is of the essence.
Section 9.16. Instruments and Evidence Required to be Submitted to
----------------------------------------------------
Landlord. Each written instrument and all evidence of the existence or non-
- --------
existence of any circumstances or conditions which is required by this Lease to
be furnished to Landlord shall in all respects be in form and substance
satisfactory to Landlord, and the duty to furnish such written instrument or
evidence shall not be considered satisfied until Landlord shall have
acknowledged that Landlord is satisfied with the form and content of each.
Section 9.17. Counterparts. This Lease may be executed in any number
------------
of counterparts, each of which, when executed and delivered, shall be an
original; but such counterparts shall together constitute one and the same
instrument.
<PAGE>
Section 9.18. Recordation. Tenant shall not record (a) this Lease,
-----------
(b) any instrument to which this Lease may now or hereafter be attached, or (c)
any memorandum of this Lease.
Section 9.19. Effective Date. The submission of this Lease to Tenant
--------------
for examination does not constitute a reservation of or offer or option for the
Premises, and this Lease shall become effective only upon execution by both
Landlord and Tenant. The term "Effective Date" shall mean the date on which this
Lease is first fully executed by both Landlord and Tenant.
Section 9.20. Successors and Assigns. From and after the Effective
----------------------
Date, this Lease shall be binding upon, inure to the benefit of, and be
enforceable by the parties to this Lease and their respective successors and
assigns (subject to the provisions of this Lease). As used in this Lease, the
phrase "successors and assigns" is used in its broadest possible context and
includes, without limitation and as applicable, the respective heirs, personal
representatives, successors, and assigns of each of the parties to this Lease
and any person, partnership, corporation, or other entity succeeding to any
interest in this Lease, the Premises, the Building, or the Project. Nothing
contained in this Section 9.20 nor in the definition of Tenant Related Parties
shall serve to alter or vary the provisions of Section 6.2 prohibiting the types
of transfers by Tenant described in that Section.
Section 9.21. Joint and Several Liability. If there is more than one
---------------------------
party executing this Lease as Tenant, or if Tenant is a partnership, Tenant's
obligations under this Lease shall be the joint and several obligations of all
such parties executing as Tenant or all such partners constituting Tenant (as
applicable).
Section 9.22. Exhibits. The following Exhibits (and, if applicable,
--------
addenda, riders, or other attachments to this Lease) are attached, to and
incorporated in, this Lease for all purposes.
Exhibit "A" Property Description
Exhibit "B" Floor Plan
Exhibit "C" Rules and Regulations
Exhibit "D" Tenant Equipment License
Exhibit "E" Renewal Options
Exhibit "F" Subordination, Attornment and Non-Disturbance Agreement
Exhibit "G" Parking
Exhibit "H" Work Letter
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the Effective Date.
LANDLORD:
NEXCOMM ASSET ACQUISITION I, LP
a Texas limited partnership
<PAGE>
By: NEXCOM GP I, Inc., a Texas
corporation and general partner
By: /s/ Phillip J. Wise
---------------------------------------
Name: Philip J. Wise
Title: President
TENANT:
EQUINIX, INC., a Delaware corporation
By: /s/ [signature illegible]
---------------------------------------
Name:_____________________________________
Title:____________________________________
<PAGE>
EXHIBIT "A"
-----------
To Lease Agreement By and Between NEXCOMM ASSET ACQUISITION I, LP, as Landlord,
and EQUINIX, INC., as Tenant
PROPERTY DESCRIPTION
--------------------
BEING a [*] acre tract of land situated in the City of Dallas, Dallas County,
Texas and out of the James A. Sylvester Survey, Abstract No. [*] and being a
part of City of Dallas Block No. [*], also being the same tract of land conveyed
to Dallas Market Center Company by a Special Warranty Deed recorded in Volume
[*], Page [*] of the Deed Records of Dallas County, Texas, said [*] acre tract
of land being more particularly described as follows:
BEGINNING at a 1/2 inch iron rod found for the point of intersection of the
southwesterly right-of-way line of the [*] with the northwesterly right-of-way
line of [*];
THENCE with the northwesterly right-of-way line of [*] the following:
South 31 31'40" West a distance of 366.74 feet to an "X" chiseled in
concrete found for corner in a curve to the right, the radius point of said
curve bearing North 50 08'58" West a distance of 241.00 feet from said "X";
Southwesterly with said curve to the right through a central angle of 03
09'20" an arc distance of 13.27 feet to an "X" chiseled in concrete set for
the point of reverse curvature of a curve to the left having a radius of
259.00 feet;
Southwesterly with said curve to the left through a central angle of 11
28'43" an arc distance of 51.89 feet to a 1/2 inch iron rod found for the
point of reverse curvature of a curve to the right having radius of 129.00
feet;
Southwesterly with said curve to the right through a central angle of 24
06'22" an arc distance of 138.22 feet to a 1/2 inch iron rod set for the
point of compound curvature of a curve to the right having a radius of
50.00 feet;
Northwesterly with said curve to the right through a central angle of 24
06'22" an arc distance of 21.04 feet to a 1/2 inch iron rod found in the
northeasterly right-of-way line of [*] for the point of compound curvature
of a curve to the right having a radius of 1130.92 feet;
THENCE with the northeasterly right-of-way line of [*] the following:
Northwesterly with said curve to the right through a central angle of 07
24'40" an arc distance of 146.28 feet to a 1/2 inch iron rod found for the
point of tangency of said curve;
North 55 33'45" West a distance of 816.18 feet to a 1/2 inch iron rod found
for point of curvature of a curve to the left having a radius of 3289.04
feet;
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
E-1
<PAGE>
Northwesterly with said curve to the left through a central angle of 01
23'21" an arc distance of 79.74 feet to a bolt in concrete found for the
most southerly corner of a tract of land leased to [*] from [*]as recorded
in Volume [*], Page [*] of the Deed Records of Dallas County, Texas;
THENCE departing the northerly right-of-way line of [*] with the easterly line
of the [*] tract, North 09 21'30" East a distance of 1064.46 feet to a 1/2 inch
iron rod found for corner in the curving southwesterly right-of-way line of the
[*], the radius point of said curve being situated South 33 11'48" West a
distance of 1599.88 feet;
THENCE with the southerly right-of-way lien of the [*] the following:
Southeasterly with said curve to the right through a central angle of 02
41'48" an arc distance of 75.30 feet to a 1/2 inch iron rod found for
corner;
North 52 07'00" East a distance of 30.11 feet to a 1/2 inch iron rod found
for corner in a curve to the right, the radius point of said curve being
situated South 32 19'18" West a distance of 1553.95 feet;
Northwesterly with said curve to the right through a central angle of 21
26'39" an arc distance of 581.59 feet to a 1/2 inch iron rod set for
corner;
North 45 16'10" East a distance of 53.07 feet to 1/2 inch iron rod set for
corner;
South 31 48'40" East a distance of 976.20 feet to the POINT OF BEGINNING;
CONTAINING an area of 25.454 acres of land.
- --------------------------------------------------------------------------------
INITIALS
Landlord ________________ Tenant
- --------------------------------------------------------------------------------
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
E-2
<PAGE>
EXHIBIT "B"
-----------
To Lease Agreement By and Between NEXCOMM ASSET ACQUISITION I, LP, as Landlord,
and EQUINIX, INC., as Tenant
FLOOR PLAN
----------
(For Illustrative purposes only)
- --------------------------------------------------------------------------------
INITIALS
Landlord ________________ Tenant
- --------------------------------------------------------------------------------
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<PAGE>
EXHIBIT "C"
-----------
To Lease Agreement By and Between NEXCOMM ASSET ACQUISITION I, LP, as Landlord,
and EQUINIX, INC., as Tenant
RULES AND REGULATIONS
---------------------
1. No additional locks shall be placed on the doors of the Leased Premises by
Tenant, nor shall any existing locks be changed unless Landlord is
immediately furnished with two keys thereto. Landlord will without charge
furnish Tenant with two keys for each lock existing upon the entrance doors
when Tenant assumes possession with the understanding that at the
termination of the lease these keys shall be returned or paid for at five
dollars ($5.00) each. A deposit of one dollar ($1.00) each shall be
required for additional keys.
2. Tenant shall not at any time display a "For Rent" sign upon the Building or
the Leased Premises, or advertise the Leased Premises for rent.
3. Safes and other unusually heavy objects shall be placed by Tenant only in
such places as may be approved by Landlord. Any damage caused by
overloading the floor or by taking in or removing any object from the
Leased Premises or the Building shall be paid by Tenant.
4. Windows facing on corridors shall at all times be wholly clear and
uncovered (except for such signs as Landlord may approve) so that a full
unobstructed view of the interior of the Leased Premises may be had from
the corridors, unless otherwise approved in writing by Landlord.
5. No vehicles or animals shall be brought into the Building, other than as
required by handicapped persons.
6. Tenant shall not make any changes in the pipes, ducts, or wiring serving
the Leased Premises or add any additional pipes, ducts, or wiring without
the prior written consent of Landlord, and any such changes or additions
shall be made in such manner as Landlord may direct.
7. No sign, tag, label, picture, advertisement, or notice (other than price
tags of customary size used in marking samples) shall be displayed,
distributed, inscribed, painted or affixed by Tenant on any part of the
outside of the Building or of the Leased Premises without the prior written
consent of the Landlord.
8. In the event Landlord should advance upon the request, or for the account
of the Tenant, any amount for labor, material, packing, shipping, postage,
freight or express upon articles delivered to the Leased Premises or for
the safety, care, and cleanliness of the Leased Premises, the amount so
paid shall be regarded as additional rent and shall be due and payable
forthwith to the Landlord from the Tenant.
E-4
<PAGE>
9. The corridors and hallways of the Building shall not be used by Tenant for
any purpose other than ingress to or egress from the Leased Premises.
10. Tenant shall not do or permit to be done within the Leased Premises
anything which would unreasonably annoy or interfere with the rights of
other tenants in the Building, or which might constitute a potential hazard
to other tenants or visitors.
11. During the thirty (30) days prior to the expiration of this Lease, Landlord
may show the Leased Premises to prospective tenants.
12. Tenant shall not put or operate any steam engine, boiler, industrial
machinery or stove in the Building or upon the Leased Premises or do any
cooking thereon or use or allow to be kept in the Building or upon the
Leased Premises any explosives or any kerosene, camphene, bottled gas, oil
or other highly flammable materials, except gas supplied through metal
pipes for heating purposes and normal and customary cleaning and janitorial
supplies to the extent permitted under applicable laws.
13. Landlord reserves the right to prescribe reasonable qualifications for
admission into the Building.
14. Models, salespersons or other employees or representatives of Tenant, shall
not model, demonstrate display, or show in any manner any merchandise
outside of the Leased Premises in the Building or on the Property without
Landlord's prior written consent.
15. As a courtesy, but not as an obligation, Landlord may, at Landlord's
option, upon request by Tenant, receive and store articles or merchandise
delivered to Tenant at the Building; provided, however that such articles
of merchandise are properly addressed and identified and all postage,
handling and delivery charges are prepaid by Tenant. Landlord assumes no
responsibility whatsoever for the loss, damage or destruction of such
articles of merchandise received at the Building by Landlord on behalf of
Tenant, and Tenant hereby waives all claims against Landlord for any damage
or loss arising at any time from the loss, damage or destruction of such
articles of merchandise. Tenant agrees to pay to Landlord as additional
rent the amount of all storage, delivery, handling and other expenses
incurred by Landlord as a result of the receipt and storage of such
articles of merchandise.
16. Canvassing, peddling, soliciting and distribution of handbills or any other
written material in the Building or in the Building's parking areas are
prohibited, and each tenant shall cooperate to prevent the same.
17. If the Leased Premises front on the atrium within the Building, Tenant
shall cause the Leased Premises to be kept open for business and occupied
by Tenant's personnel during all normal business hours of the Building.
18. These Rules and Regulations are in addition to, and shall not be construed
to in any way modify or amend, in whole or in part, the terms, covenants,
agreements and conditions of any lease of space in the Building.
E-5
<PAGE>
19. Landlord reserves the right to make such other and reasonable rules and
regulations as in its judgment may from time to time be needed for the
safety, care and cleanliness of the Building, and for the preservation of
good order therein.
20. Smoking is permitted within the Building only in areas so designated by
Landlord. Smoking within the Leased Premises is at the discretion of
Tenant, provided, however, that such smoke does not migrate into the
Building's common areas, hallways, etc. or into another tenant's premises.
Tenant hereby indemnifies Landlord from any and all claims resulting from
Tenant's permitting of smoking within the Leased Premises. Landlord
reserves the right to change areas where smoking is permitted and change
these Regulations, including designating the Building as non-smoking.
21. A visitor information directory system will be provided by Landlord to
assist visitors in locating tenants.
22. To the extent that meeting rooms are offered, a tenant's meeting room use
will be coordinated on a reservation basis and all tenants will be
eligible. Standard fees will be applied and Landlord will control the
rental of these areas and the use of the areas will be coordinated by the
buyer/tenant services department of Landlord. Reservations for meeting room
space within the Building will be on a first-come first-served basis.
23. If, and only if, the Tenant's permitted use allows the operation of a
showroom, warehousing and onsite delivery to customers is prohibited in
permanent showrooms and in exhibit space when used in conjunction with
showrooms, payment for products or services that of a retail sales nature
are prohibited (provided, however, payment or partial payment for orders
taken at the Building for future delivery to a buyer will be allowed if it
is within the applicable tenant's normal business practices and is not of a
retail sales nature, it being the intention of this provision to permit
payments or partial payments intended to bind an order for future delivery
without in any way qualifying or circumventing the prohibition within the
Building against retail sales).
24. Landlord may amend these Rules and Regulations from time to time and such
--- -----
changes shall be binding upon Tenant.
------------------------------------------------------------------------------
INITIALS
Landlord___________________ Tenant
------------------------------------------------------------------------------
______________________
E-6
<PAGE>
EXHIBIT "D"
-----------
To Lease Agreement By and Between NEXCOMM ASSET ACQUISITION I, LP, as Landlord
and EQUINIX, INC., as Tenant
TENANT EQUIPMENT LICENSE
------------------------
This Exhibit "D" describes the licenses to install and operate certain specified
"Tenant Equipment" in the Building which is being granted by Landlord to Tenant
upon the following terms and conditions:
1. DEFINED TERMS. For purposes of this Exhibit, all terms defined in this
-------------
Lease (including other exhibits to this Lease) will be used in this Exhibit
without further definition. In addition, when delineated with initial capital
letters, the following terms will have the following respective meanings:
a) "Antenna Equipment" means the satellite antenna, together with related
wiring and equipment, or Tenant's Customer's equipment which are
approved by Landlord pursuant to this Exhibit.
b) "Antenna Fee" means Zero Dollars ($0.00) per month.
c) "Building Grade" means the type, brand and/or quality of materials
which Landlord designates from time to time to be the minimum quality
to be used in the Building or the exclusive type, grade, or quality of
material to be used in the Building.
d) "Cable" means only (i) optical fibers encased in an aluminum sleeve,
(ii) EMT conduit, (iii) copper cable, or (iv) other materials approved
by Landlord. The Cable (or Conduit) shall not exceed four inches in
diameter.
e) "Conduit" means a plastic or metal sleeve, no more than four (4)
inches in aggregate diameter, unless a larger size is expressly
approved by Landlord in writing, in which Cable is encased and/or
through which Cable passes.
f) "Cooling Equipment" means dry cooling units, together with related
wiring, piping, vents, and equipment, which are approved by Landlord
pursuant to this Exhibit.
g) "Cooling Equipment Fee" means Zero Dollars ($0.00) per month.
h) "Generator" means generators with automatic transfer switches, 80db
(max) sound/weather enclosure and load bank equipment.
i) "Generator Fee" for the initial Generator pad shall be waived.
Additional pads may not be added without the prior approval of
Landlord (which may be granted, denied, or conditioned in Landlord's
sole discretion); and the size and location of each additional pad
will be at Landlord's sole option. The Generator Fee applicable to
any additional pad will be at the then current Landlord's charge for
each such additional pad.
j) "License Fees" means, collectively, the Antenna Fee, the Pathway Fee,
the Cooling Equipment Fee, the Generator Fee, and any other sums of
money becoming due and payable to Landlord hereunder.
E-7
<PAGE>
k) "License Term" means a term commencing on the Commencement Date and
shall expire upon the expiration or earlier termination of the Lease
Term, unless sooner terminated pursuant to the provisions of this
Exhibit.
l) "Normal Business Hours" for the Building means 8:30 a.m. to 5:00 p.m.
Mondays through Fridays, exclusive of normal business holidays.
m) "Pathway" means a riser, raceway, or other vertical and/or horizontal
space or pathway within the Building of no more than four inches in
diameter (unless a greater size is approved in writing by Landlord)
used for routing telecommunications cables and ancillary equipment
from Tenant's point of presence in the Building which has been
designated by Landlord. The precise location of the Pathways
applicable to this Telecommunications License will be designated by
Landlord and the Telecommunications Equipment (as defined herein) will
be installed only as designated by Landlord.
n) "Pathway Fee" means the sum calculated for all installed Cable or
Conduit from Tenant's point of presence to other locations or
customers in the Building at the rates identified in Schedule 1 per
----------
month.
o) "Service Fee" means the sum calculated for all installed services from
the Licensee's point of presence to other locations or customers in
the Building at the rates identified in Schedule 2 per month during
----------
each month of the License Term.
p) "Tank" means the__________ gallon fossil fuel tank and associated
transfer pumps, to be installed by Tenant at the location designated
by Landlord. The Tank must have self-contained spill control
features, be installed in a secure and safe location above ground, and
must conform to all Legal Requirements (defined in Paragraph 15 below)
concerning tank tightness, spill control and monitoring features.
q) "Telecommunications Equipment" means the Cable, Conduit, junction
boxes, hangers, pull boxes, grounding wiring, and related equipment
used in the normal course of Tenant's business, which will be
installed by Tenant, after approval by Landlord, into the designated
Service Areas and Pathways to be used by Tenant, pursuant to the terms
of this License.
r) "Tenant Equipment" means, individually, or collectively, as
applicable, the Antenna Equipment, the Cooling Equipment, the
Generator, the Telecommunications Equipment, and the Tank.
s) "Tenant Equipment Areas" means, individually or collectively, as
applicable, the Pathways, Service Areas, and sites for the location of
the Antenna Equipment, the Generator, the Cooling Equipment, and the
Telecommunications Equipment designated by Landlord under this
Exhibit. The designated Service Areas and Pathways may also be used
by Landlord and others, and Landlord's designation of these areas does
not confer an exclusive right for Tenant to use those areas.
---
2. GRANT OF LICENSE. Subject to and upon the terms set forth in this
----------------
Exhibit, Landlord grants the following licenses to Tenant:
a) TELECOMMUNICATIONS LICENSE. A license to use the Pathways,
--------------------------
designated by Landlord and to install Cable in those designated Pathways
which connects to various tenants of the Building on a non-exclusive basis
("Telecommunications License"). Landlord specifically reserves the right
to contract with competitors of Tenant
E-8
<PAGE>
for the same or similar services in the Building and acknowledges that
Landlord has entered into other such contracts prior to the date of this
Telecommunications License. Landlord shall have no obligation to assist
Tenant in marketing its equipment and/or services in the Building or to any
other property owned by Landlord. In addition, Tenant shall have the right
to install and use four (4) four-inch (4") conduits at no charge in the
Pathways, in a location determined by Landlord and reasonably acceptable to
Tenant, for the exclusive use of Tenant's telecommunication cabling to
connect from a minimum point of entry into the Building to the Premises.
b) ANTENNA LICENSE. A license to install, operate, maintain, and
---------------
repair the Antenna Equipment located at a location designated by Landlord.
The size of the pad shall not exceed 36' X 36', and the location, and
manner of installation of the Antenna Equipment shall be determined at
Landlord's sole discretion, which discretion will take into consideration
(a) the functional requirements of the Antenna Equipment and any other
satellite antenna dishes located on the roof of the Building; (b) standards
of architectural integrity with respect to the Building (and, in that
regard, the Antenna Equipment shall be located so as to not be visible
except from above the Building, shall match the Building colors, and shall
have no visible marking or logo). Tenant shall be permitted to install and
test the equipment from and after the Commencement Date and prior to the
Rent Commencement Date, subject to the terms hereof except that the
obligation to pay the Antenna License Fee will not commence until the Rent
Commencement Date. With respect to the installation of the Antenna
Equipment, the Antenna Equipment shall not be affixed by nail, bolt, screw
or other device which penetrates the roof of the Building; and all wiring
penetrations shall be subject to Landlord's prior approval and shall be
made by Landlord's roofing contractor at Tenant's sole cost and expense.
Notwithstanding anything to the contrary in this Paragraph, Landlord shall
reserve, for the use of Tenant, space for two (2) four-inch (4") conduits
or cabling from the Leased Premises to the roof of the Building at no
charge to Tenant.
c) GENERATOR LICENSE. A license to install, operate, maintain, and
-----------------
repair the Generators and the tanks at such location on the Property as is
approved in writing by Landlord ("Generator License"). The Generator
License includes the right for Tenant (i) to use such locations on the
Property as are approved in writing by Landlord in order for Tenant to
install the Generators cabling to, and core drilling of, the Building core
structural wall (it being acknowledged that Landlord has made no
representation to Tenant that Tenant will be able to utilize any existing
utility easements in this regard), and (ii) to use such Pathways as are
approved in writing by Landlord in order for Tenant to install its
Generators cabling from the points of entry at the Building core structural
wall to the Leased Premises.
d) COOLING EQUIPMENT LICENSE. A license to install, operate,
-------------------------
maintain, repair, and replace the Cooling Equipment in an area outside the
Building as outlined on the site plan attached hereto as Schedule 5. The
----------
size, location, and manner of installation of the Cooling Equipment shall
be approved by Landlord as a part of the approval of the Plans and
Specifications pursuant to the Work Letter attached as Exhibit H to this
Lease, which approval will take into consideration the functional
requirements of the Cooling Equipment and of any other equipment located in
the vicinity of the Cooling Equipment and shall be subject to standards of
structural and architectural integrity with respect to the Building. In
that regard, the Cooling Equipment shall be
E-9
<PAGE>
located so as not to be visible from any public approach to the Building.
The area to be covered by the Cooling Equipment, including necessary
walkways and required air space, shall not exceed ______ square feet.
Because of existing rights granted to other tenants and the location of the
Service Areas within the Building, Tenant acknowledges that the most
efficient, direct, or cost effective route for such Cooling Equipment may
not be available.
For purposes hereof, the Telecommunications License, the Antenna License, the
Generator License and the Cooling Equipment License will sometimes be
collectively referred to as the "License" in this Exhibit.
3. LICENSE TERM. This License shall be in effect during the License
------------
Term. However, Tenant shall have the right to use and occupy the Tenant
Equipment Areas as provided hereunder from and after the Commencement Date for
the purpose of installing the Tenant Equipment. If any Tenant Equipment Areas
are not available due to the omission, delay or default of Tenant, or anyone
acting under or for Tenant, the obligations of Tenant under this Exhibit,
including, without limitation, the obligation to pay License Fees shall
nonetheless commence as of the Commencement Date. Prior to the expiration or
earlier termination of this License, unless Landlord otherwise agrees in writing
at the time of Landlord's giving of its approval for Tenant's installation or
thereafter during the Term, Tenant shall remove all of Tenant's Equipment that
can be removed without causing any material damage to the Building and shall
surrender and deliver the Tenant Equipment Areas to Landlord in the same
condition in which they existed at the Commencement Date, excepting only
ordinary wear and tear and damage arising from any cause not required to be
repaired by Tenant. In the event that Tenant fails to comply with the terms of
this Paragraph 3, (i) all such Tenant's Equipment remaining within the Property
may, at Landlord's option, become the sole property of Landlord or (ii) Landlord
may, if it so elects, perform any act which Tenant is required to perform and/or
remove the Tenant's Equipment and other property at Tenant's cost, and Tenant
shall pay Landlord promptly all costs incurred in removing said property within
ten (10) Working Days of demand.
4. USE. The Tenant Equipment Areas shall be used solely for the
---
installation, operation and maintenance of the Tenant Equipment and for no other
purpose whatsoever. Any use of the Tenant Equipment Areas for any other purpose
or any attempt by Tenant to allow the use or occupation of the Tenant Equipment
Areas by anyone other than Tenant shall, unless otherwise agreed to by Landlord
in writing shall be a default; and Landlord shall have the right to immediately
terminate this License unless such default is not cured within five (5) Working
Days after notice thereof. Tenant shall not use or permit the use of the Tenant
Equipment Areas for any purpose which is illegal, dangerous to life, limb or
property, or which, in Landlord's reasonable opinion, creates a nuisance or
which would increase the cost of insurance coverage with respect to the
Building. In particular, no semiconductors or other electronic equipment
containing polychlorinated biphenyls (PCB's) or other environmentally hazardous
materials will either be used or stored in or around the Tenant Equipment Areas
except as otherwise specifically provided in this Paragraph; and no such
materials will be used in any of the Tenant Equipment installed by Tenant in the
Tenant Equipment Areas. Notwithstanding the foregoing, Tenant may use and store
fossil fuels for its Generators and batteries for its emergency electrical
backup systems in its Premises, so long as Tenant does so in compliance with all
applicable Legal Requirements. Tenant will not permit unauthorized persons or
persons with insufficient
E-10
<PAGE>
expertise or experience to enter Service Areas to maintain or operate the Tenant
Equipment. Tenant understands that the mechanical rooms within these Service
Areas must be kept locked and secure at all times must not be available or open
to the public. Landlord may, at Landlord's discretion, authorize other licensees
and tenants of the Building to use portions of the designated Pathways or
Service Areas, or to use portions of other Pathway or Service Areas in the
Building, whether for the installation of telecommunications equipment or
otherwise, so long as such uses would not require Tenant to remove its
previously installed Cable from the designated Pathways or Telecommunications
Equipment from the designated Service Area. Tenant acknowledges that
interruptions in utility services are not uncommon in facilities such as the
Building and that any sensitive electronic equipment which may be used in the
Building should be protected by Tenant from utility service interruptions by the
use of backup power supplies, surge protectors, and other appropriate safety
systems.
5. INSTALLATION. The point of presence and network interface will be in
------------
accordance with the rules and regulations established by the Public Utility
Commission or other governmental authority with jurisdiction over such matters
in the State of Texas. The installation of the Tenant Equipment in the Tenant
Equipment Area) shall be at the sole cost and expense of Tenant. All Tenant
Equipment will be installed in a good and workmanlike manner, and the
installation must be approved by Landlord's technical representative prior to
the commencement of use of any Tenant Equipment by Tenant.
6. LICENSE FEE PAYMENT.
-------------------
a) The License Fees for each calendar month or portion thereof during the
License Term shall be due and payable in advance on the first day of
each month during the License Term without any setoff or deduction
whatsoever; and Tenant shall pay the License Fees monthly, in advance,
on or before the first day of each calendar month, and without demand.
All installments of the License Fees which are not paid within five
(5) Working Days of the date when due will bear interest, and if not
paid within five (5) Working Days' notice thereof shall be subject to
a late charge of five percent (5%) of the amount then due, and be
subject to the provisions of Section 8.1 of the Lease.
b) In addition to the License Fees, Tenant shall pay Landlord if, and
when due, any sales, use or other taxes or assessments which are
assessed or due by reason of this License hereunder.
c) Upon each anniversary date of the Commencement Date, including any
renewal term, the License Fees payable by Tenant shall increase as
follows and using the following definitions:
i) "Consumer Price Index" - The monthly indexes of the National
Consumer Price Index for All Urban Consumers (CPI-U) - All Items,
issued by the Bureau of Labor Statistics.
ii) "Base Price Index Number" - The Consumer Price Index as of
December of the year in which the Commencement Date occurs.
E-11
<PAGE>
iii) "Current Index Number" - The Consumer Price Index as of December
of the year in which the calculations are being done.
iv) If the Current Index Number is greater than the Base Price Index
Number, then the "Percentage of Increase" shall be calculated as
follows:
(Current Index Number - Base Price Index Number) / Base Price Index = Percentage
of Increase
This Percentage of Increase shall be multiplied by the License Fees
defined above to obtain the new rate to go into effect on each
anniversary of the Commencement Date of this License. This Percentage
of Increase applies to License Fees only and does not apply to any
charges in the Base Rent.
d) Tenant shall keep an accurate set of books and records of all
installed service from and business conducted by Tenant in the
Building, and all supporting records such as book orders, and other
records which are necessary to verify and substantiate the amount of
Tenant's Pathway Fee and Service Fee, at Tenant's business office
located in the Premises. All such books and records shall be retained
and preserved for at least twenty-four (24) months after the end of
the calendar year to which they relate and shall be subject to
inspection and audit by Landlord and its agents at all reasonable
times. The acceptance by Landlord of any payment of any License Fees
shall be without prejudice to Landlord's right to examination of
Tenant's books and records in order to verify the computation of the
Service Fee or the Pathway Fee provided by Tenant. In the event
Landlord is not satisfied with any monthly statement or annual
statement submitted by Tenant, Landlord shall have the right to have
its auditors make a special audit of all books and records, where-ever
located, pertaining to sales made in or from the Building during the
period in question. If such statements are found to be incorrect to
an extent of more than two percent (2%) over the figure submitted by
Tenant, Tenant shall pay for such audit. Tenant shall promptly pay to
Landlord any deficiency or Landlord shall promptly credit to Tenant
any overpayment, as the case may be, which is established by such
audit.
7. CONDITION OF THE TENANT EQUIPMENT AREA. Tenant accepts the Tenant
--------------------------------------
Equipment Area "as is" without benefit of any improvements to be constructed or
made by Landlord.
8. MAINTENANCE AND REPAIR BY LANDLORD. Landlord shall maintain and
----------------------------------
repair the Pathways, the exterior and load-bearing walls of the Building, floors
of the mechanical rooms (but not floor coverings), and the roof of the Building,
which may be required from time to time, but only after such required repairs
have been requested by Tenant in writing. In no event shall Landlord be
responsible for the maintenance or repair of improvements which are not composed
of Building Grade materials.
9. SERVICE AREA AND ROOF ACCESS. Except in the case of an emergency,
----------------------------
Tenant shall not enter or attempt access to any of the Service Areas (including
air, electrical, mechanical or telecommunications risers, ducts, closets,
conduits, duct work, rooms or other
E-12
<PAGE>
horizontal or vertical spaces in the Building) or attempt to obtain access to
the roof of the Building without notifying Landlord in writing at least two (2)
days in advance. In the case of an emergency, Tenant may enter or seek access to
the roof of the Building or to the Pathways through the Service Areas provided
Tenant gives Landlord at least two (2) hours prior notice and provided that a
Building security guard must unlock such Service Area or access door to the
roof. If Landlord is also experiencing an emergency situation in the Building at
the same time that Tenant has notified Landlord of an emergency, Landlord shall
have no obligation to first address or respond to Tenant's emergency and shall
only be obligated to accommodate Tenant's concerns promptly as time permits
thereafter. Tenant also agrees to furnish Landlord, within two (2) Working Days
thereafter, a written report explaining all repairs and procedures which were
conducted during any such emergency operations, in sufficient detail to permit
Landlord's engineers to evaluate same. Any access to the Service Areas or to the
roof shall require Tenant to sign in at the security department console, and
Tenant shall permit the Landlord's security guard or a representative of
Landlord to accompany Tenant during any such work within a Service Area or on
the roof, if Landlord so desires. Except in the case of an emergency, no
installation, alterations or repairs shall be initiated without first delivering
to Landlord's engineers plans and specifications of the proposed changes, in
substance and form acceptable to Landlord. As soon as reasonably practicable
after the occurrence of an emergency, plans and specification shall be submitted
to Landlord for approval with respect to those repairs or replacements. No oral
approval of these plans and specifications shall be effective. No electrical
grounding shall be permitted to other equipment in the mechanical rooms without
Landlord's specific written approval of the method and location of such
grounding. No monitoring or inspection of Tenant's work by Landlord's
representatives shall be deemed supervision of Tenant's employees or shall be
deemed to be a representation or warranty of any particular level of
telecommunications expertise attained by Landlord's representative. Tenant shall
monitor and supervise its own employees and shall assume responsibility for the
expertise and quality of its work and shall not rely upon Landlord for same.
10. NO ACCESS TO OTHER TENANTS' PREMISES. Tenant acknowledges that
------------------------------------
nothing in this License entitles it to enter and connect the Tenant Equipment to
any tenant's premises in the Building without the prior written consent of
Landlord. Tenant also acknowledges that it has been informed that
telecommunications connections to individual tenant's premises in the Building
will normally require removal of ceiling panels, at each tenant's expense, with
such removal operations only being performable by Landlord's agents or
employees.
11. LICENSES AND PERMITS. Prior to commencing any work in the Tenant
--------------------
Equipment Area, Tenant shall obtain all necessary licenses, permits and consents
related to such installation activities and to the operation and use of the
Tenant Equipment and provide copies of same to Landlord. Landlord shall have
the right to monitor all such work, at its own expense.
12. COSTS. Tenant shall be responsible for any and all cost, damage or
-----
expense arising from the installation, maintenance, repair or operation of the
Tenant Equipment, including, without limitation, any and all cost, damage or
expense to the Building or the property of Landlord or other licensees or
tenants of the Building arising from such installation, maintenance, repair, or
operations. Tenant will make any and all repairs necessary in a timely manner.
If Tenant does not make required repairs to Landlord's satisfaction within
twenty-four
E-13
<PAGE>
(24) hours of notification from Landlord that said repairs are
necessary within a tenant's space or within ten (10) days of notification from
Landlord that said repairs are necessary pursuant to Paragraph 13 of this
Exhibit then Landlord will have the right but not the obligation to perform any
such repairs at Tenant's sole cost and expense. Tenant shall on demand pay to
Landlord as additional License Fees (i) the cost of such work plus fifteen
percent (15%) thereof as administrative costs; plus (ii) interest thereon at the
rate of 12% per annum from the date of demand.
13. MAINTENANCE, REPAIRS, AND ALTERATIONS BY TENANT. Tenant shall not
-----------------------------------------------
commit any waste or allow any waste to be committed within or on any portion of
the Tenant Equipment Areas or in any Service Area and will maintain Tenant's
installations in the Tenant Equipment Areas in a clean, attractive condition and
in good repair. Tenant will remove all excess cable, tools, and equipment and
will keep all areas neat and clean at all times. Provided Tenant fails to do so
after ten (10) Working Days notice given by Landlord to Tenant, Landlord shall
have the right, at its option, but at Tenant's cost and expense, to repair or
replace any damage done to the Building, or any part thereof, caused by Tenant
(or by any contractor, agent, or employee of Tenant); and Tenant shall pay the
reasonable cost thereof (net of any applicable insurance proceeds) to Landlord
within ten (10) Working Days of demand as additional License Fees. Tenant shall
not make or allow any alterations to such Tenant Equipment Areas materially
affecting mechanical, electrical, plumbing, or other basic systems within the
Building, its structure, or its operations without the prior written consent of
Landlord. Tenant shall not place signs on any of the doors or corridors leading
to the Tenant Equipment Areas, without first obtaining the prior written consent
of Landlord in each such instance, which consent may be given or arbitrarily
withheld on such conditions as Landlord may elect. Landlord shall have the
right, at its option, at Tenant's own cost and expense, to remove any signs
placed by Tenant without Landlord's prior written consent, and to repair any
damage caused by the such signs. Except as provided in Section 5.4 of this
Lease with respect to Tenant's Trade Fixtures, any and all alterations to the
Tenant Equipment Areas shall become the property of Landlord upon termination of
this License.
14. USE OF ELECTRICAL SERVICES BY TENANT. All electrical usage associated
------------------------------------
with the Tenant Equipment will be governed by the provisions of Section 2.5 of
the Lease.
15. LAWS, REGULATIONS, AND INTERFERENCE. Tenant, at Tenant's sole cost,
-----------------------------------
shall (a) comply with all Legal Requirements and Insurance Requirements
applicable to Tenant's use and occupancy of the Building (including, without
limitation, the installation, maintenance, repair, or operation of Tenant
Equipment), and (b) take all measures necessary to assure that the Tenant
Equipment strictly complies with all applicable Legal Requirements and Insurance
Requirements. Tenant shall also pay promptly when due all royalties or other
fees due in connection with the operation of the Tenant Equipment. In the event
compliance with this paragraph shall require modifications or alterations of the
Tenant Equipment or the Tenant Equipment Areas, no modification or alteration
shall be made without Landlord's prior written consent, which consent may be
withheld in Landlord's sole judgment or granted on such terms and conditions as
Landlord may determine in its sole judgment. Tenant shall take all measures
necessary to assure that the Tenant Equipment does not interfere with or disturb
the operation of any other equipment or business of Landlord or of any other
licensee, tenant, or occupant of the
E-14
<PAGE>
Building. Tenant shall modify the Tenant Equipment or relocate the Tenant
Equipment to another area approved by Landlord in the event that the Tenant
Equipment, in Landlord's sole judgment, causes any interference with or disturbs
the operation of any other equipment or business of Landlord or of any other
occupants or licensees of the Building or creates or results in any unreasonable
noise, odor, or nuisance to any other occupants of the Building, or areas
adjacent to the Building. Tenant must immediately shut off the relevant Tenant
Equipment upon notification of interference with other installations or
activities and may restart, modify, or relocate that Tenant Equipment to test
for interference only with Landlord's permission. "Insurance Requirements" means
all terms and any insurance policy obtained by Landlord or Tenant covering or
applicable to the Property, the Leased Premises, or the Tenant Equipment Area,
all requirements for the issuing of each such insurance policy; and all orders,
rules, regulations, and other requirements of the National Board of Fire
Underwriters (or any other bodies exercising any similar functions) which are
applicable to the Building, the Property or any use or condition of the Building
or the Property. "Legal Requirements" shall mean all laws, statutes, codes,
acts, ordinances, orders, judgments, decrees, injunctions, rules, regulations,
permits, licenses, authorizations, and requirements of all governmental
authorities foreseen or unforeseen which now or at any time hereafter may be
applicable to the Building or the Property, including, without limitation, the
Americans with Disabilities Act, all federal, state, and local laws regulations
and ordinances pertaining to air and water quality, hazardous materials, waste
disposal, and other environmental matters, and all laws, codes, and regulations
pertaining to zoning, land use, health, or safety.
16. SITE TECHNICAL STANDARDS. Tenant will strictly comply with the Site
------------------------
Technical Standards (Schedule 4) as adopted and altered by Landlord from time to
----------
time and will cause all of the Tenant Related Parties to do so. All changes to
such standards will be sent by Landlord to Tenant in writing. "Tenant Related
Party" means Tenant's officers, partners, employees, agents, contractors,
licensees, concessionaires, customers, and invitees.
17. ENTRY BY LANDLORD. Landlord and the Landlord-Related Parties shall
-----------------
have access to the Tenant Equipment Areas at all times to inspect the same,
clean the same, or make repairs, alterations or additions thereto and Tenant
shall not be entitled to any abatement or reduction of License Fee by reason of
any such entry. [However, Landlord will use reasonable efforts to protect the
Tenant Equipment from damage or injury during any such entry.]
18. INDEMNIFICATION. Intentionally deleted.
---------------
19. DAMAGE. Landlord shall not be liable to Tenant for any loss or damage
------
to all or any part of the Tenant Equipment occasioned by theft, fire, act of
God, public enemy, injunction, riot, vandalism, malicious mischief, earthquake,
flood, strike, insurrection, war, court order, requisition, or order of
governmental body or authority, or by any other cause beyond the control of the
Landlord whatsoever. Nor shall Landlord be liable for any damage or
inconvenience which may arise through the repair or alteration of any part of
the Building.
20. INSURANCE. In addition to the insurance obligations of Tenant under
---------
the Lease, Tenant shall maintain a policy or policies of fire and extended
coverage insurance on the Tenant Equipment, in such amounts as Tenant may deem
appropriate;
E-15
<PAGE>
21. TRANSFERS BY TENANT. Except in connection with the transfer of the
-------------------
Lease to an Affiliate as provided in Section 5.4 of the Lease, Tenant shall not
assign, convey, mortgage, pledge, hypothecate, encumber, or otherwise transfer
any license or grant any license, concession, or other right with respect to the
License without the prior written consent of Landlord, which consent may be
granted or withheld in Landlord's sole discretion; and the License shall, at
Landlord's sole option, terminate upon the occurrence of any attempted transfer
of the License or the Lease or upon a subletting of the Premises except in
connection with a transfer of the Lease to an Affiliate as provided for in the
Lease.
22. DEFAULT BY TENANT. In addition to provisions of Article 8 of the
-----------------
Lease, Tenant shall be deemed to be in default with respect to the License in
the event that (a) Tenant shall fail to pay the License Fees within ten (10)
days after Tenant's receipt of Landlord's written notice of such failure to pay;
provided Landlord shall be required to give such notice only twice in any twelve
(12) month period and thereafter Tenant shall be in default if any such payment
is not received when due and without notice, or (b) Tenant shall fail to
maintain the Tenant Equipment in good order and repair and in a safe condition
as provided in this Exhibit and shall fail to remedy that condition within [(i)]
twenty-four (24) hours after notice from Landlord [if such failure has an
adverse effect on Landlord or other tenants of the Building or creates a
possibility of immediate harm to person or property or (ii) thirty (30) days
after notice from Landlord in all other circumstances], or (c) Tenant shall fail
to maintain all necessary licenses and permits with respect to the operation of
the Tenant Equipment. Upon a default by Tenant with respect to the License,
Landlord may, at Landlord's sole election, pursue the remedies granted to
Landlord for default under the Lease or, in the alternative, terminate any
License granted hereunder without terminating the Lease or terminating Tenant's
right to possession of the Leased Premises under the Lease.
23. SURVIVAL. Certain provisions of this Exhibit relate to the rights and
--------
obligations of Landlord and Tenant subsequent to the termination or expiration
of the Lease Term. Such provisions include, without limitation, the restoration
obligations of Tenant under Paragraph 13 hereof and the indemnification
obligations of Tenant under Paragraph 19 hereof. Such provisions shall survive
the expiration or other termination of the Lease Term and the License granted to
Tenant hereunder.
E-16
<PAGE>
SCHEDULE "1"
------------
To Exhibit D to Lease Agreement By and Between NEXCOMM ASSET ACQUISITION I, LP,
as Landlord and EQUINIX, INC., as Tenant
PRICING SCHEDULE
----------------
Any conduits allowed by Landlord in addition to Paragraph 2.a. shall be at a
rate of $250.00 per diameter inch per month.
S-1
<PAGE>
SCHEDULE "2"
------------
To Exhibit D to Lease Agreement By and Between NEXCOMM ASSET ACQUISITION I, LP,
as Landlord and EQUINIX, INC., as Tenant
SERVICE FEES
------------
The Service Fee is intentionally deleted
S-2
<PAGE>
SCHEDULE "3"
------------
To Exhibit D to Lease Agreement By and Between NEXCOMM ASSET ACQUISITION I, LP,
as Landlord and EQUINIX, INC., as Tenant
LIST OF TENANTS TO WHOM LICENSEE MAY PROVIDE SERVICES
=====================================================
AS MAY BE AMENDED FROM TIME TO TIME
MFS Intelenet of Texas (Worldcom)
Allegiance Telecom
IXC
Splitrock Communications
RSL
Communications
ENRON Communications
Time Warner Communications
MetroFiber Networks
Prism Communications
Logix
Focal Communications
Telegent
Wynstar
Verio, Inc.
Kintetsu Global
The Planet
Leasenet
Nextlink One
Nextlink Texas
American Telesource
Unicomp
Level 3
S-3
<PAGE>
SCHEDULE "4"
------------
To Exhibit D to Lease Agreement By and Between NEXCOMM ASSET ACQUISITION I, LP,
as Landlord and EQUINIX, INC., as Tenant
TELECOMMUNICATIONS EQUIPMENT SYSTEMS DIAGRAM
============================================
This schematic describes the telecommunications equipment systems to be
installed for the limited purpose of the license described herein.
S-4
<PAGE>
SCHEDULE "5"
------------
To Exhibit D to Lease Agreement By and Between NEXCOMM ASSET ACQUISITION I, LP,
as Landlord and EQUINIX, INC., as Tenant
LOCATION OF COOLING EQUIPMENT
=============================
S-5
<PAGE>
SCHEDULE "6"
------------
To Exhibit D to Lease Agreement By and Between NEXCOMM ASSET ACQUISITION I, LP,
as Landlord and EQUINIX, INC., as Tenant
SITE TECHNICAL STANDARDS
========================
1. The fiber transmission cables and all copper telephone cables must be
Teflon (or of City approved fire retardant material) jacketed type cable,
and secured by either stainless steel clamps or approved equal when not run
in EMT type conduit. Excess transmission line must be removed.
2. Each fiber or copper telephone line or conduit shall be identified with
stainless steel tags that identifies the user/Licensee: (1) at the
equipment cabinet; (2) at each side of horizontal/vertical penetration (3)
as the line traverses the Building at a minimum of 72' intervals,
coincident with column lines, and (4) at the termination point(s).
3. The location and installation of all equipment and conduit will be
designated by the site coordinator. These locations will be shown on the
License. Changes must be approved in writing by the site coordinator. Any
conduit or cable failing to meet the above standards will be immediately
removed from the Building at Licensee's expense. In the event Licensee
fails to promptly remove any such conduit or cable, Licensor may do so at
Licensee's expense.
4. On a 24-hour notice, the Site Equipment will be made available for
inspection by the site coordinator to assure compliance with the above
standards.
5. The following information is essential for site coordination and must be
provided. Any and all changes must have prior approval and be reported to
the site coordinator.
a) Manufacturer and model number of all end equipment.
b) Type and length of all cable and lines.
c) The name, address and telephone number of the person or group directly
responsible for the day-to-day maintenance.
d) The name, address and telephone number of the person or group directly
responsible for the License Agreement.
S-6
<PAGE>
SCHEDULE "7"
------------
To Exhibit D to Lease Agreement By and Between NEXCOMM ASSET ACQUISITION I, LP,
as Landlord and EQUINIX, INC., as Tenant
LOCATION OF GENERATOR AND TANK
==============================
S-7
<PAGE>
EXHIBIT "E"
-----------
To Lease Agreement By and Between NEXCOMM ASSET ACQUISITION I, LP, as Landlord
and EQUINIX, INC., as Tenant
RENEWAL OPTIONS
---------------
This Exhibit "E" describes the renewal option described below, which is being
granted upon the following terms and conditions:
1. DEFINED TERMS. For purposes of this Exhibit "E", all terms defined in this
--------------
Lease (including other exhibits to this Lease) will be used in this Exhibit
without further definition. In addition, when delineated with initial
capital letters, the following terms shall have the following respective
meanings:
(a) "Renewal Date" shall mean the first day next following the expiration
date of the Lease Term.
(b) "Renewal Term" shall mean a period commencing on the Renewal Date and
continuing for sixty (60) full calendar months.
(c) "Prevailing Market Rate" shall mean the rate of base rental rate being
charged by Landlord to new tenants having a financial condition
comparable to that of Tenant for comparable space within the Building
for a comparable term as of the date of Tenant's exercise of the
Option. For purposes of this Exhibit, the phrase "new tenants" shall
mean (i) tenants who executed comparable leases within six (6) months
prior to Tenant's exercise of the applicable Option or (ii) if no
comparable lease exists within that six (6) month period, tenants who
have executed comparable leases within twelve (12) months prior to
Tenant's exercise of that Option. Landlord shall notify Tenant of the
then prevailing market rate ("Rate Notice") promptly after Tenant's
exercise of the Option; and if such rate is not acceptable to Tenant,
then Tenant has the right to rescind its exercise of the Option by
providing a written revocation notice to Landlord within ten (10) days
of Tenant's receipt of Landlord's Rate Notice. In such case Tenant
will have no further right to renew this Lease under Exhibit "E".
2. GRANT OF OPTION. Tenant shall have the following options ("Options") to
----------------
renew this Lease:
(a) Tenant may, by notifying Landlord of its election in writing at least
six (6) full calendar months prior to the end of the Lease Term, renew
this Lease for the first (1/st/) Renewal Term. Such renewal shall be
on all of the terms and conditions of this Lease which are not
inconsistent with the terms of this Exhibit.
(b) The Base Rental payable beginning on the first (1/st/) Renewal Date
and continuing for sixty (60) months thereafter shall be at the
prevailing market rate.
S-8
<PAGE>
(c) If Tenant exercises its option to renew this Lease for the first
(1/st/) Renewal Term, then Tenant may, by notifying Landlord of its
election in writing at least six (6) full calendar months prior to the
end of the first (1/st/) Renewal Term, renew this Lease for the second
(2/nd)/ Renewal Term. Such renewal shall be on all of the terms and
conditions of this Lease which are not inconsistent with the terms of
this Exhibit, except that no renewal option shall exist during the
second (2/nd/) Renewal Term.
(d) The Base Rental payable beginning on the second (2/nd/) Renewal Date
and continuing for sixty (60) months thereafter shall be at the
prevailing market rate.
3. GENERAL PROVISIONS. Tenant's failure to notify Landlord of Tenant's
------------------
election to exercise the Option in the manner and within the specified time
limit, shall constitute an irrevocable waiver of such Option. Tenant's
failure to provide Landlord with a revocation notice in the manner and
within the specified time limit shall be an irrevocable waiver of Tenant's
revocation option. Notwithstanding the foregoing, the Option shall not be
applicable at any time when there is an uncured event of default under the
Lease. In addition, the Option shall automatically terminate upon the
termination of the Lease Term, whether by Landlord upon the occurrence of
an event of default or otherwise or, at the option of Landlord, in its sole
discretion, upon the assignment, subletting, or other transfer by Tenant,
whether or not with the approval of Landlord, to any person or entity other
than to an Affiliate allowed by the provisions of this Lease.
-----------------------------------------------------------------------------
INITIALS
Landlord___________________ Tenant _________________
-----------------------------------------------------------------------------
S-9
<PAGE>
EXHIBIT "F"
-----------
To Lease Agreement By and Between NEXCOMM ASSET ACQUISITION I, LP, as Landlord
and EQUINIX, INC., as Tenant
_______________________________________________________________________________
SUBORDINATION, ATTORNMENT AND
NON-DISTURBANCE AGREEMENT
This SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE AGREEMENT (this
"Agreement"), is made as of the _______ day of ______, 1999, between GERMAN
- ----------
AMERICAN CAPITAL CORPORATION and its successors and assigns ("Beneficiary"),
-----------
[LANDLORD] ("Landlord") and [TENANT] ("Tenant").
-------- ------
WHEREAS, Beneficiary has agreed to make a loan to Landlord to be
secured by a Deed of Trust, Security Agreement, Financing Statement, Fixture
Filing and Assignment of Leases, Rents and Security Deposits (together with any
UCC-1 Financing Statements in connection therewith, the "Mortgage"), as well as
--------
by a separate Assignment of Leases, Rents and Security Deposits (the
"Assignment"; the Assignment and the Mortgage, as the same may hereafter be
----------
amended, modified, extended, consolidated, severed, spread, increased, replaced
or supplemented, are collectively referred to as the "Security Documents")
------------------
covering Landlord's interest in certain real and personal property located in
Dallas, Texas and more particularly described in Exhibit A hereto (the
"Property"); and
--------
WHEREAS, Tenant has entered into a certain lease, as the same may have
been amended, modified or supplemented (the "Lease") dated ________________,
-----
19__, with Landlord (or its predecessor), covering a certain portion of the
Property (the "Premises"); and
--------
WHEREAS, Beneficiary, Landlord and Tenant desire to confirm their
understanding, with respect to the Lease, the Mortgage and the Assignment;
NOW, THEREFORE, in consideration of the promises set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
1. Subordination. Subject to the provisions hereof, Tenant agrees
-------------
that the Lease, as it may hereafter be amended from time to time, shall in all
respects be, and is hereby expressly made, subject and subordinate at all times
to the lien of the Security Documents and to all of the terms, conditions and
provisions thereof and to all advances and/or payments made or to be made
thereunder, as the same may hereafter be amended from time to time. Nothing
contained in this Agreement shall in any way impair or affect the lien created
by the Security Documents.
2. Attornment.
----------
(a) In the event that Beneficiary acquires or succeeds to the
interests of Landlord under the Lease by reason of a foreclosure, deed-in-lieu
of foreclosure or otherwise (collectively, a "Foreclosure"), Tenant shall be
-----------
bound to Beneficiary under all of the terms, covenants and conditions of the
Lease, except as provided in this Agreement, for the balance of
S-10
<PAGE>
the term thereof remaining, with the same force and effect as if Beneficiary
were Landlord. Tenant hereby agrees in such event to (i) attorn to Beneficiary
as its landlord on such terms, (ii) affirm its obligations under the Lease, and
(iii) make payments of all sums thereafter becoming due under the Lease to
Beneficiary. Said attornment, affirmation and agreement is to be effective and
self-operative without the execution of any further instruments upon Beneficiary
succeeding to the interests of Landlord under the Lease.
(b) Tenant agrees to execute and deliver at any time and from
time to time, upon the request of Landlord or Beneficiary, any instrument or
certificate deemed to be necessary or appropriate to evidence such attornment.
(c) If any act or omission of Landlord would give Tenant the
right, immediately or after the lapse of a period of time, to cancel or
terminate the Lease or abate the rent payable thereunder or to claim a partial
or total eviction, Tenant shall not exercise such right until (i) it has given
written notice of such act or omission to Landlord and Beneficiary, (ii)
Landlord fails to remedy such act or omission within the applicable time period
stated in the Lease for effecting such remedy and (iii) a reasonable period for
remedying such act or omission shall have elapsed following the failure of
Landlord to effect such remedy and following the time when Beneficiary shall
have become entitled under the Mortgage to remedy the same (which reasonable
period shall in no event be less than the period to which Landlord is entitled
under the Lease or otherwise, after similar notice, to effect such remedy, plus
two additional weeks). In the case of an act or omission which Beneficiary
undertakes to remedy but which cannot practicably be remedied by Beneficiary
without taking possession of the Premises [and provided that Beneficiary
notifies Tenant in writing that Beneficiary will in fact cure that default as
soon as reasonably practicable after Beneficiary has taken possession, then] (i)
such reasonable period shall not commence until Beneficiary has possession of
the Premises and (ii) Beneficiary shall proceed with reasonable diligence to
obtain possession of the Premises, and upon obtaining such possession shall with
reasonable diligence remedy such act or omission.
(d) From and after such attornment, Beneficiary shall be bound
to Tenant under all the terms, covenants and conditions of the Lease; provided,
however, Beneficiary shall not be:
(1) obligated to cure any defaults under the Lease of any
prior landlord (including Landlord) which occurred prior to the date Beneficiary
obtained title to or possession of the Property;
(2) liable for any act or omission of any prior landlord
(including Landlord) which occurred prior to the date Beneficiary obtained title
or possession of the Property;
(3) obligated to fund any security deposit unless actually
received by Beneficiary;
(4) bound by any amendment, modification or termination of
the Lease unless such amendment, modification or termination was consented to in
writing by Beneficiary;
S-11
<PAGE>
(5) subject to any offsets or defenses which Tenant might
have against any prior landlord (including Landlord); or
(6) bound by any base rental or additional rental or
advance payment of rent which Tenant paid for more than the current month to any
prior landlord (including Landlord).
(e) Anything herein or in the Lease to the contrary
notwithstanding, in the event that Beneficiary shall acquire title to the
Premises by reason of a Foreclosure, Beneficiary shall have no obligation, nor
incur any liability, beyond Beneficiary's then interest, if any, in the Property
(including any title and casualty insurance proceeds and condemnation awards
actually paid to Beneficiary), and Tenant shall look exclusively to such
interest of Beneficiary in the Property for the payment and discharge of any
obligations which may be imposed upon Beneficiary hereunder or under the Lease.
3. Non-Disturbance. Provided Tenant is not in default under the
---------------
terms of the Lease and complies with this Agreement, Beneficiary agrees that in
the event Beneficiary acquires title to the Property by reason of a Foreclosure,
Tenant's possession and occupancy of the Premises and Tenant's rights and
privileges under the Lease during the term thereof (including any renewal term)
shall not be disturbed, subject to limitations or conditions set forth in this
Agreement and Beneficiary shall recognize the Lease and Tenant's rights
hereunder. Subject to the limitations and conditions contained herein,
Beneficiary upon Foreclosure shall be deemed to be Landlord and shall assume the
obligations of Landlord under the Lease thereafter arising or accruing.
4. Notices.
-------
(a) All notices, demands and requests (collectively the "Notices")
required or permitted to be given under this Agreement must be in writing and
shall be deemed to have been given if personally delivered or delivered by
reliable overnight courier or mailed by certified mail, return receipt
requested, postage prepaid and shall be deemed delivered as of the date of such
Notice if (i) delivered to the party intended; (ii) delivered to the then
current address of the party intended, or (iii) rejected at the then current
address of the party intended, provided such Notice was sent prepaid. The
addresses of the parties are:
If to Beneficiary: German American Capital Corporation
31 West 52/nd/ Street
New York, New York 10019[ ]
Attention: General Counsel
If to Tenant: _____________________________________________
_____________________________________________
_____________________________________________
S-12
<PAGE>
If to Landlord: _____________________________________________
_____________________________________________
_____________________________________________
(b) Upon at least ten (10) days prior written Notice, each
party shall have the right to change its address to any other address within the
United States of America.
5. Miscellaneous. This Agreement (i) contains the entire
-------------
agreement with respect to the subject matter hereof; (ii) may not be modified or
terminated, nor may any provision hereof be waived, orally or in any manner
other than by an agreement in writing signed by the parties hereto or their
respective successors, administrators and assigns; and (iii) shall inure to the
benefit of, and be binding upon, the parties hereto, and their successors and
assigns (including, without limitation, (a) Tenant's permitted assignees and (b)
any purchaser of the Property pursuant to a Foreclosure).
6. Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the laws of the state in which the Property is
located.
IN WITNESS WHEREOF, Beneficiary, Landlord and Tenant have
executed this Agreement effective as of the day and year first above written.
GERMAN AMERICAN CAPITAL CORPORATION
By:___________________________________________
Its:
[TENANT]
By:___________________________________________
Its:
[LANDLORD]
By:___________________________________________
Its:
S-13
<PAGE>
EXHIBIT "G"
-----------
To Lease Agreement By and Between NEXCOMM ASSET ACQUISITION I, LP, as Landlord
and EQUINIX, INC., as Tenant
PARKING
-------
This Exhibit "F" describes and specifies Tenant's non-exclusive option, but not
the obligation to use non-reserved parking spaces ("Garage Spaces") located
inside the Building's exterior card access parking garage ("Parking Garage"),
and reserved parking spaces ("Lower Level Spaces") on the lower level of the
Building's interior card access parking garage ("Lower Level Garage"). For
convenience, the Garage Spaces and the Lower Level Spaces will sometimes be
collectively referred to as the "Spaces" in this Exhibit. Landlord reserves the
right at Landlord's sole discretion to relocate any of the Spaces.
Additionally, spaces in the surface parking lots associated with the Building
and located on the Property ("Surface Parking") are provided for the non-
exclusive and common use of Landlord, all tenants of the Building, and their
respective guests and invitees. Utilization of the Surface Parking is subject
to availability (and Landlord shall have no obligation to provide available
Surface Parking) and to such rules and regulations as may be promulgated by
Landlord from time to time. Use of the Parking Garage, Lower Level Garage and
the Surface Parking is subject to the terms and conditions set forth below.
1. DEFINITIONS. Terms which are defined in the Lease will be used without
-----------
further definition in this Exhibit.
2. GRANT AND RENTAL FEE. Provided no event of default has occurred and is
--------------------
continuing under the Lease, Tenant shall be permitted non-exclusive use of
Spaces in the Parking Garage during the Lease Term for the parking of
fifty-three (53) vehicles at such monthly rates and subject to such terms,
conditions, and regulations as are, from time to time, promulgated by
Landlord and charged or applicable to patrons of said parking Garage for
spaces similarly situated within said Parking Garage. The parking rate for
each of the Spaces as of the date hereof is $45.00. Provided no event of
default has occurred and is continuing under the Lease, Tenant shall be
permitted exclusive use of eighteen (18) reserved Lower Level Spaces in the
Lower Level Garage upon availability during the Lease Term at such monthly
rates and subject to such terms, conditions, and regulations as are, from
time to time, promulgated by Landlord and charged or applicable to patrons
of said Lower Level Garage. The parking rate for each of the Lower Level
Spaces as of the date hereof is $60.00 for spaces designated on the
attached Schedule 1 "Lower Level Garage Pricing Schedule" as "circle"
parking and $90.00 for spaces designated as "diamond" parking. Tenant shall
also have the right to use the Surface Parking, free of charge, during the
Lease Term.
3. RISK. All motor vehicles (including all contents thereof) shall be parked
----
in the Garage Spaces, Lower Level Spaces or in the Surface Parking, as
applicable, at the sole risk of Tenant, its employees, agents, invitees and
licensees, it being expressly agreed and understood that Landlord has no
duty to insure any of said motor vehicles (including the contents thereof),
and that Landlord is not responsible for the protection and security of
such vehicles. Landlord shall have no liability whatsoever for any property
damage
S-14
<PAGE>
and/or personal injury which might occur as a result of or in connection
with the parking of said motor vehicles in any of the Garage Spaces, Lower
Level Spaces or in the Surface Parking, as applicable, and Tenant hereby
agrees to indemnify and hold Landlord harmless from and against any and all
costs, claims, expenses, and/or causes of action which Landlord may incur
in connection with or arising out of Tenant's use of the Garage Spaces,
Lower Level Spaces or the Surface Parking pursuant to this Agreement.
4. RULES AND REGULATIONS. In its use of the Garage Spaces, Lower Level Spaces
---------------------
and the Surface Parking, Tenant shall follow all of the Rules and
Regulations of the Building (attached to the Lease as Exhibit "B")
applicable thereto, as the same may be amended from time to time. Upon the
occurrence of any breach of such rules or default by Tenant under the
Lease, Landlord shall be entitled to terminate this Exhibit, in which event
Tenant's right to utilize the Garage Spaces, Lower Level Spaces and/or the
Surface Parking shall thereupon automatically cease.
5. SECURITY. Landlord shall be entitled to utilize whatever access device
--------
Landlord deems necessary (including but not limited to the issuance of
parking stickers or access cards), to insure that only tenants authorized
to use spaces in the Parking Garage and Lower Level Garage are using such
spaces. In the event Tenant, its agents or employees wrongfully park in any
of the Parking Garage's or Lower Level Parking Garage's spaces, Landlord
shall be entitled and is hereby authorized to have any such vehicle towed
away, at Tenant's sole risk and expense, and Landlord is further authorized
to impose upon Tenant a penalty of $25.00 for each such occurrence. Tenant
hereby agrees to pay all amounts falling due hereunder upon demand
therefor, and the failure to pay any such amount shall additionally be
deemed an event of default under the Lease, entitling Landlord to all of
its rights and remedies thereunder.
6. ADDITIONAL SPACES. In the event that Tenant expands the Leased Premises,
-----------------
Tenant shall be entitled to additional Garage Spaces within the Parking
Garage based upon a ratio of one (1) additional Space per additional 1,000
Usable Square Feet incorporated into the Leased Premises and additional
Lower Level Spaces within the Lower Level Garage based upon a ratio of one
(1) reserved parking space per 3,000 Rentable Square Feet incorporated into
the Lease Premises upon availability. Such additional Garage Spaces and
Lower Level Spaces shall be subject to such monthly rates, terms,
conditions, and regulations as are, from time to time, promulgated by
Landlord and charged or applicable to patrons of said Parking Garage or
Lower Level Garage for spaces similarly situated within said Parking Garage
or Lower Level Garage.
Schedule 1- Lower Level Garage Price Schedule
------------------------------------------------------------------------------
INITIALS
Landlord___________________ Tenant________________________
------------------------------------------------------------------------------
S-15
<PAGE>
SCHEDULE "1"
------------
To Exhibit E to Lease Agreement By and Between NEXCOMM ASSET ACQUISITION I, LP.,
as Landlord and [TENANT NAME], as Tenant
________________________________________________________________________________
Lower Level Garage Price Schedule
(For illustrative purposes only)
S-16
<PAGE>
EXHIBIT "H"
-----------
To Lease Agreement By and Between NEXCOMM ASSET ACQUISITION I, LP, as Landlord
and EQUINIX, INC., as Tenant
WORK LETTER
-----------
This Work Letter ("Work Letter") describes and specifies the right and
obligations of Landlord and Tenant with respect to certain allowances granted to
Tenant hereunder and rights and responsibilities of Landlord and Tenant with
respect to the design, construction and payment for the completion of Tenant's
installation of the Tenant Equipment defined in Exhibit D (the "Improvements")
within the Leased Premises, in the Building or on the Property.
1. DEFINITIONS. Terms which are defined in the Lease shall have the
------------
same meaning in this Work Letter. Additionally, as used in this Work Letter,
the following terms (when delineated with initial capital letters) shall have
the respective meaning indicated for each as follows:
(a) "Allowance" is intentionally omitted.
---------
(b) "Basic Construction of the Building" shall mean the
----------------------------------
structure of the Building as built on the date of this Work Letter.
(c) "Landlord's Architect" shall mean the architect designated
--------------------
by Landlord as its architect, from time to time, to perform the functions of
Landlord's Architect hereunder.
(d) "Plans and Specifications" shall mean collectively, the
------------------------
plans, specifications and other information prepared or to be prepared by
Tenant's Architect and, where necessary, by Landlord's electrical, mechanical
and structural engineers, all at Tenant's expense, which shall detail the Work
required by Tenant in the Leased Premises and which shall be approved in writing
by both Tenant and Landlord prior to the commencement of such Work.
(e) "Tenant's Architect" shall mean an architect, selected by
------------------
Tenant, and approved by Landlord in an exercise of reasonable discretion who is
an architect licensed to practice in the State of Texas.
(f) "Work" shall mean all materials and labor to be added to the
----
Basic Construction of the Building in order to complete the installation of the
Improvements within the Leased Premises, in the Building or on the Property for
Tenant in accordance with the Plans and Specifications, including, without
limitation any modifications to the Building, any electrical or plumbing work
required to meet Tenant's electrical and plumbing requirements, and any special
air conditioning work required to be performed in the Leased Premises, in the
Building or on the Property.
(g) "Cost of the Work" shall mean the cost of all materials and
----------------
labor to be added to the Basic Construction of the Building in order to complete
the installation of the
S-17
<PAGE>
Improvements within the Leased Premises, in the Building or on the Property in
accordance with the Plans and Specifications.
(h) "Tenant's Costs" shall mean that portion of the Cost of the
--------------
Work in excess of Allowance.
(i) "Change Costs" shall mean all costs or expenses attributable
------------
to any change in the Plans and Specifications which, when added to other costs
and expenses incurred in completing the Work, exceed Allowance, including,
without limitation, (i) any cost caused by direction of Tenant to omit any item
of Work contained in the Plans and Specifications, (ii) any additional
architectural or engineering services, (iii) any changes to materials in the
process of fabrication, (iv) the cancellation or modification of supply or
fabricating contracts, (v) the removal or alteration of any Work or any plans
completed or in process, or (vi) delays affecting the schedule of the Work.
(j) "Working Days" shall mean all days of the week other than
------------
Saturday, Sunday, and legal holidays.
(k) "Contractor" shall mean the contractor or contractors
----------
engaged by Tenant to perform the Work in accordance with the provisions of
Section 4.2(b) of the Lease.
2. PROCEDURE AND SCHEDULES FOR THE COMPLETION OF PLANS AND
-------------------------------------------------------
SPECIFICATIONS. The Plans and Specifications shall be completed in accordance
- ---------------
with the following procedure and time schedules:v
(a) Design Drawings. Within ninety (90) Working Days from execution
---------------
of the Lease, Tenant shall submit to Landlord four (4) sets of prints of design
drawings, specifying the intended design, character and finishing of the
Improvements within the Leased Premises, in the Building or on the Property.
Such package shall include separate drawings for signs in accordance with
Landlord's sign criteria. The design drawings shall set forth the requirements
of Tenant with respect to the installation of the Improvements within the Leased
Premises, in the Building or on the Property, and such drawings shall include,
without limiting their scope, a Tenant approved space plan, architectural design
of the space, including office front, plans, elevations, sections, and
renderings indicating materials, color selections and finishes.
(i) After receipt of design drawings, Landlord shall return
to Tenant one set of Prints of design drawings with Landlord's suggested
modifications and/or approval. If, upon receipt of approved design drawings
bearing Landlord's comments, Tenant wishes to take exception thereto, Tenant may
do so in writing, by certified mail addressed to Landlord, within five (5)
Working Days from the date of receipt of Landlord's comments on the design
drawings. Unless such action is taken, Tenant will be deemed to have accepted
and approved all of Landlord's comments on the design drawings.
(ii) If design drawings are returned to Tenant with
comments, but not bearing approval of Landlord, the design drawings shall be
immediately revised by Tenant and resubmitted to Landlord for approval within
ten (10) Working Days of their receipt by Tenant.
S-18
<PAGE>
(b) Completion of Plans and Specifications. All Plans and
--------------------------------------
Specifications shall be prepared in strict compliance with applicable Building
standards and requirements, this Work Letter and otherwise, and shall also
adhere to the design drawings approved by Landlord. In order to assure the
compatibility of Tenant's electrical and mechanical systems and the
compatibility of Tenant's structural requirements with the existing Building and
in order to expedite the preparation of Tenant's electrical, mechanical and
structural drawings, Tenant or Tenant's Architect shall deliver to Landlord's
Architect, not later than thirty (30) Working Days from the date of Landlord's
approval of design drawings, a detailed plan setting forth any and all
electrical, mechanical and structural requirements, and Landlord's Architect
shall retain, at Tenant's expense, Landlord's electrical, mechanical and
structural engineers to prepare all necessary electrical, mechanical and
structural construction drawings which shall be included as a part of the Plans
and Specifications. All construction documents and calculations prepared by
Tenant's Architect shall be submitted by Tenant, in the form of four (4) sets of
blueline prints, to Landlord for approval within ten (10) Working Days after the
date of receipt by Tenant of Landlord's approval of design drawings. If the
Plans and Specifications are returned to Tenant with comments, but not bearing
approval of Landlord, the Plans and Specifications shall be immediately revised
by Tenant and resubmitted to Landlord for approval within fifteen (15) Working
Days of their receipt by Tenant.
(i) The fees for Tenant's Architect and any consultants or
engineers retained by or on behalf of Tenant or Tenant's Architect (including,
but not limited to, the electrical, mechanical and structural engineers required
to be retained under this paragraph) shall be paid by Tenant. Tenant shall also
pay for any preliminary drawings by Landlord's Architect for review of the
design drawings, the Plans and Specifications, and any revisions to such
documents, and the fees and expenses of Landlord's Architect for inspection of
the Work, as required by Landlord. Tenant may use funds from the Allowance to
make such payments.
(ii) Tenant shall have the sole responsibility for
compliance of the Plans and Specifications with all applicable statutes, codes,
ordinances and other regulations, and the approval of the Plans and
Specifications or calculations included therein by Landlord shall not constitute
an indication, representation or certification by Landlord that such Plans and
Specifications or calculations are in compliance with said statutes, codes,
ordinances and other regulations. In instances where several sets of
requirements must be met, the requirements of Landlord's insurance underwriter
or the strictest applicable requirements shall apply where not prohibited by
applicable codes.
3. TERMINATION RIGHT. If for any reason (other than default by
-----------------
Tenant) Landlord and Tenant have not agreed in writing upon final Plans and
Specifications on or before the date which is ninety (90) Working Days from the
date hereof, then Landlord or Tenant shall have the right to terminate the Lease
by providing the other party with written notice of the electing parties'
decision to terminate this Lease within thirty (30) days from the expiration of
such ninety (90) day period. The failure of either party to exercise such
termination right in the manner and within the time period specified above shall
be deemed to be an irrevocable waiver of such right.
4. PAYMENT. In the event Landlord acts as the general contractor for
-------
the Improvements in the Leased Premises, in the Building or on the Property, the
Allowance will be
S-19
<PAGE>
applied to offset the amounts due Landlord as reflected in the monthly invoices
therefor submitted by Landlord to Tenant. In the event Landlord does not act as
the general contractor for the Improvements in the Leased Premises, in the
Building or on the Property, Landlord shall pay the Allowance to Tenant within
forty-five (45) days of Landlord's receipt of general contractor's waiver of
lien submitted by Tenant to Landlord.
5. PERFORMANCE OF WORK AND DELAYS. Tenant shall cause the Contractor
------------------------------
to perform the Work in strict accordance with the Plans and Specifications. If
a delay shall occur in the completion of the Work by Tenant as the probable
result of (i) any failure to furnish when due Tenant's design drawings, Tenant's
electrical, mechanical and/or structural requirements, Tenant's Plans and
Specifications or any revision to any such documents, (ii) any change by Tenant
in any of the Plans and Specifications, (iii) any state of facts which gives
rise to a change referred to in the definition of Change Costs or any changes
resulting in a Change Cost, (iv) any other act or omission of Tenant, its agents
or employees, including any violation of the provisions of the Lease or any
delay in giving authorizations or approvals pursuant to this Work Letter, or (v)
any other cause except (a) as specified in Section 8.1 of the Lease or (b)
arising from a default by Landlord, then any such delay shall not justify any
---
extension of the Commencement Date of the Lease.
6. CHANGE ORDERS. All changes and modifications in the Work from
-------------
that contemplated in the Plans and Specifications, whether or not such change or
modification gives rise to a Change Cost, must be evidenced by a written Change
Order executed by both Landlord and Tenant. In that regard, Tenant shall submit
to Landlord such information as Landlord shall require with respect to any
Change Order requested by Tenant. After receipt of requested Change Order,
together with such information as Landlord shall require with respect thereto,
Landlord shall return to Tenant either the executed Change Order, which will
evidence Landlord's approval thereof, or the Plans and Specifications with
respect thereto with Landlord's suggested modification.
7. WHOLE AGREEMENT; NO ORAL MODIFICATION. This Work Letter embodies
-------------------------------------
all representations, warranties and agreements of Landlord and Tenant with
respect to the matter described herein, and this Work Letter may not be altered
or modified except by an agreement in writing signed by the parties.
8. PARAGRAPH HEADINGS. The paragraph headings contained in this Work
------------------
Letter are for convenient reference only and shall not in any way affect the
meaning or interpretation of such paragraphs.
9. NOTICES. All notices required or contemplated hereunder shall be
-------
given to the parties in the manner specified for giving notices under the Lease.
10. BINDING EFFECT. This Work Letter shall be construed under the
--------------
laws of the State of Texas and shall be binding upon and shall inure to the
benefit of the parties hereto and their respective permitted successors and
assigns.
11. CONFLICT. In the event of conflict between this Work Letter and
--------
any other exhibits or addenda to this Lease, this Work Letter shall prevail.
S-20
<PAGE>
- --------------------------------------------------------------------------------
INITIALS
Landlord __________ Tenant _______________
- --------------------------------------------------------------------------------
S-21
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
S-22
<PAGE>
EXHIBIT 16.1
May 9, 2000
Securities and Exchange Commission
Washington, D.C. 20549
Ladies and Gentlemen:
We were previously principal accountants for Equinix, Inc. and, under the date
of January 21, 2000, except as to Note 10, which is as of January 28, 2000, we
reported on the consolidated financial statements of Equinix, Inc. and
subsidiary as of December 31, 1998 and 1999, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the period
from June 27, 1998 (inception) to December 31, 1998 and the year ended
December 31, 1999. On March 7, 2000 we resigned. We have read Equinix, Inc.'s
statements included under "Change in Accountants" in Amendment No.3 to Form
S-4 dated May 9, 2000, and we agree with such statements, except that we are not
in a position to agree or disagree with Equinix, Inc.'s statement that the
change in accountants was approved by the board of directors and that Equinix,
Inc. did not consult with PriceWaterhouseCoopers LLP on any accounting or
financial reporting matters in the periods prior to their appointment.
Very truly yours,
KPMG LLP
<PAGE>
EXHIBIT 23.1
The Board of Directors
Equinix, Inc.:
We consent to the use of our report dated January 21, 2000, except as to Note
10, which is as of January 28, 2000, relating to the consolidated balance sheets
of Equinix, Inc and subsidiary, as of December 31, 1998 and 1999 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the period from June 22, 1998 (inception) to December 31, 1998 and for the year
ended December 31, 1999 which report is included in the registration statement
on Form S-4, and to the reference to our firm under the heading "Experts" in the
prospectus.
/s/ KPMG LLP
Mountain View, California
May 8, 2000
