<PAGE>
As filed with the Securities and Exchange Commission on April 20, 2000.
Registration No. 333-93749
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
Amendment No. 2
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)
ALBERT M. AVERY, IV
President and Chief Executive Officer
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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 APRIL 20, 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 8.
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............................................................. 8
Forward-Looking Statements............................................... 16
Available Information.................................................... 16
Use of Proceeds.......................................................... 17
Change in Accountants.................................................... 17
Capitalization........................................................... 18
Selected Consolidated Financial Data..................................... 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 20
Business................................................................. 25
Management............................................................... 35
Related-Party Transactions............................................... 41
Principal Stockholders................................................... 43
Description of Other Indebtedness........................................ 45
The Exchange Offer....................................................... 48
Description of the Exchange Notes........................................ 57
Book-Entry; Delivery and Form............................................ 87
United States Federal Income Tax Considerations.......................... 90
Plan of Distribution..................................................... 95
Legal Matters............................................................ 95
Experts.................................................................. 95
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: Secretary
(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 10 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 Internet Business Exchange, or IBX,
centers where Internet businesses place their equipment and interconnect with
each other. Our 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. Our centers provide a
place where content providers, e-commerce related businesses and application
service providers, can come together and select from a number of partners to
grow their business. Equinix's IBX centers are designed to provide an
environment that gives its customers a choice of carriers, Internet service
providers, and other key e-business partners to meet their growing needs. As a
result, our customers are better positioned to capitalize on market
opportunities, expand their business offerings and enter new markets.
We intend to open approximately 30 IBX centers in major Internet markets in
the U.S., Europe, Asia, South America and Australia over the next four years.
In July 1999, we opened the Washington, D.C. IBX center, our first IBX center,
located in Ashburn, Virginia. In December 1999 and March 2000, we opened IBX
centers in Newark, New Jersey and San Jose, 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
led to chronic problems in the quality and reliability of Internet-related
services delivered to the end user. Infrastructure has not kept pace with
demand. As broadband access, e-commerce and streaming media applications
continue to gain market acceptance, businesses must find new solutions to
ensure that the Internet infrastructure will meet their needs for Internet
commerce.
The Equinix Solution
Our IBX centers are designed to solve many of the infrastructure problems
facing Internet businesses today. The IBX centers will provide environments
that stimulate efficient business growth by encouraging independent Internet
supplier companies to deliver a wide diversity of services. As a result, 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;
. reliability; and
. value-added services.
1
<PAGE>
Recent Developments
In January 2000, our board and stockholders approved a three-for-two stock
split to be effective on January 19, 2000. The financial statements and all
share numbers included in this prospectus have been adjusted to reflect this
stock split.
In January 2000, our board and stockholders approved an amendment to our
1998 Stock Plan increasing the aggregate number of common stock available for
issuance over the term of the Plan by 3,750,000 shares, post split, to a total
of 12,012,810 shares.
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 $14.6
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
statements of operations data for the period from June 22, 1998 (inception) to
December 31, 1998 and for the year ended December 31, 1999, and the balance
sheet data as of December 31, 1998 and 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.
<TABLE>
<CAPTION>
Period from June 22,
1998 (inception) to Year Ended
December 31, 1998 December 31, 1999
-------------------- -----------------
Statement of Operations Data: (in
thousands)
<S> <C> <C>
Revenues................................ $ -- 44
Costs and operating expenses:
Cost of revenues (includes stock-based
compensation of $25 in 1999)......... -- 2,791
Sales and marketing (includes stock-
based compensation of $351 in 1999).. 34 2,669
General and administrative (includes
stock-based compensation of $615
in 1999)............................. 748 8,287
Depreciation and amortization......... 4 609
------- -------
Total costs and operating expenses... 786 14,356
------- -------
Loss from operations.................. (786) (14,312)
Interest expense........................ -- 2,614
Interest income......................... (150) (2,138)
Interest charge on beneficial conversion
of convertible debt.................... 220 --
------- -------
Net loss................................ $ (856) (14,788)
======= =======
<CAPTION>
As of December 31,
--------------------------------------
1998 1999
-------------------- -----------------
Balance Sheet Data: (in thousands)
<S> <C> <C>
Cash, cash equivalents and short-term
investments............................ $ 9,165 222,974
Accounts receivable..................... -- 178
Restricted cash and short-term
investments............................ -- 38,609
Property and equipment, net............. 482 31,303
Construction in progress................ 31 14,176
Total assets............................ 10,001 316,768
Debt facilities and capital lease
obligations, excluding current
portion................................ -- 10,248
Senior notes............................ -- 191,088
Total stockholders' equity.............. 9,590 93,949
Other Financial Data:
EBITDA(1)............................... $ (782) (13,687)
Net cash used in operating activities... (796) (9,908)
Net cash used in investing activities... (5,265) (66,461)
Net cash provided by financing
activities............................. 10,226 295,178
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 and the year ended December 31, 1999 was $856,000 and $14,762,000
respectively.
7
<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 December 31, 1999, we had cumulative
net losses of $15.6 million and cumulative cash used by operating activities of
$10.7 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.
8
<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 $215.1 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 30 IBX
centers in major Internet markets around the world over the next four years. We
intend to finance 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 $223.0 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 eight IBX centers and expansion
projects within three 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.
9
<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;
10
<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. 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 and vice
president of IBX development. 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
11
<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 February 17, 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.
12
<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,
13
<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-
14
<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.
15
<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 certified 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.
16
<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 January 31, 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.
17
<PAGE>
CAPITALIZATION
The following table is derived from and is qualified by reference to the
audited consolidated financial statements and related notes, which are included
in the registration statement and sets forth our capitalization as of December
31, 1999 on an actual basis.
Please read this table in conjunction with our consolidated financial
statements, the related notes to the financial statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this registration statement.
<TABLE>
<CAPTION>
December 31, 1999
-----------------
(in thousands
except share
data)
<S> <C>
Cash and cash equivalents ................................... $222,974
========
Restricted cash and short-term investments(1)................ $ 38,609
========
Current portion of debt facilities and capital lease
obligations................................................. $ 4,395
========
Long-term debt, net of current portion:
Debt facilities and capital lease obligations.............. 10,248
13% Senior Notes due 2007.................................. 191,088
--------
Total long-term debt..................................... 201,336
--------
Stockholders' equity:
Series A convertible preferred stock, $0.001 par value;
32,000,000 shares authorized;18,682,500 shares issued and
outstanding(2)............................................ 19
Series B convertible preferred stock, $0.001 par value;
36,000,000 shares authorized; 15,762,373 shares issued and
outstanding............................................... 16
Common stock, $0.001 par value; 132,000,000 shares
authorized 11,672,196 shares issued and outstanding(3).... 12
Additional paid-in capital................................. 113,189
Deferred stock-based compensation.......................... (3,657)
Accumulated other comprehensive income..................... 14
Accumulated deficit........................................ (15,644)
--------
Total stockholders' equity............................... 93,949
--------
Total capitalization................................... $295,285
========
</TABLE>
- --------
(1) Reflects the portion of the net proceeds from this offering 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 $1,530,000 provided as collateral under three separate
security agreements for standby letters of credit 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 4,742,145 shares of common stock issuable upon the exercise of
outstanding warrants, and 2,615,394 shares of common stock issuable upon
the exercise of outstanding options, as of December 31, 1999.
18
<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. Our historical results are not
necessarily indicative of the results to be expected for future periods. 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>
Period from June 22,
1998 (inception) to Year Ended
December 31, 1998 December 31, 1999
-------------------- -----------------
Statement of Operations Data: (in
thousands)
<S> <C> <C>
Revenues................................... $ -- 44
Costs and operating expenses:
Cost of revenues (includes stock-based
compensation of $25 in 1999)............ -- 2,791
Sales and marketing (includes stock-based
compensation of $351 in 1999)........... 34 2,669
General and administrative (includes
stock-based compensation of $615 in
1999)................................... 748 8,287
Depreciation and amortization............ 4 609
------- -------
Total costs and operating expenses..... 786 14,356
------- -------
Loss from operations..................... (786) (14,312)
Interest expense........................... -- 2,614
Interest income............................ (150) (2,138)
Interest charge on beneficial conversion of
convertible debt.......................... 220 --
------- -------
Net loss................................... $ (856) (14,788)
======= =======
<CAPTION>
As of December 31,
--------------------------------------
1998 1999
-------------------- -----------------
Balance Sheet Data: (in thousands)
<S> <C> <C>
Cash, cash equivalents and short-term
investments............................... $ 9,165 222,974
Accounts receivable........................ -- 178
Restricted cash and short-term
investments............................... -- 38,609
Property and equipment, net................ 482 31,303
Construction in progress................... 31 14,176
Total assets............................... 10,001 316,768
Debt facilities and capital lease
obligations, excluding current portion.... -- 10,248
Senior notes............................... -- 191,088
Total stockholders' equity................. 9,590 93,949
Other Financial Data:
EBITDA(1).................................. $ (782) (13,687)
Net cash used in operating activities...... (796) (9,908)
Net cash used in investing activities...... (5,265) (66,461)
Net cash provided by financing activities.. 10,226 295,178
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 and the year ended December 31, 1999 was $856,000 and $14,762,000,
respectively.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Equinix designs, builds and operates Internet Business Exchange, or IBX,
centers where Internet businesses place their equipment and interconnect with
each other. Our 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. We intend to open
approximately 30 IBX centers in major Internet markets in the U.S., Europe,
Asia, South America and Australia. In July 1999, except for fiber connectivity
from our telecommunications carriers, we completed construction of our first
IBX center in the Washington, D.C. area. We opened additional IBX centers in
December 1999 and March 2000 in Newark, New Jersey and San Jose, California.
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 in the Washington, D.C., Newark, New Jersey and San Jose, California
areas, 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 which include interconnection
services to our customers through our centrally located switches and access to
our research and development testing environment and professional services
including "Smart Hands" service for customer equipment installations and
maintenance, and network consulting and system integration activities. 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.
In 1999, we recorded total deferred stock-based compensation of
approximately $4.7 million in connection with stock options granted during 1999
where the fair value of the underlying common stock exceeded the exercise price
on the date of grant. Approximately $991,000 was amortized to stock-based
compensation expense for the year ended December 31, 1999. 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 $3.7 million of deferred stock-based compensation will be amortized
over the remaining vesting period.
We expect increased competition in our market and, as a result, 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
20
<PAGE>
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
Period from Inception (June 22, 1998) through December 31, 1998 and Year Ended
December 31, 1999
Since our inception in June 1998, we have experienced operating losses and
negative cash flows from operations in each quarter. As of December 31, 1999,
we had an accumulated deficit of $15.6 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.
Revenues. We recognized revenues of $44,000 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 $2.9 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 $34,000 for
the period from the date of inception to December 31, 1998 to $2.7 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 $303,000. In addition, we established two regional
sales offices to support the New York City and Washington, D.C. 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 $1.9
million which will be amortized over the applicable vesting periods.
General and Administrative. General and administrative expenses increased
from $752,000 for the period from the date of inception to December 31, 1998 to
$8.7 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
$485,000, 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 $1.6 million which will be amortized over the applicable vesting
periods.
Interest Expense, net. Net interest expense increased from $70,000 for the
period from the date of inception to December 31, 1998 to $476,000 for the year
ended December 31, 1999. We recognized interest 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
21
<PAGE>
short-term investment balances resulting from the senior notes and preferred
financing activities. Interest expense was $2.6 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 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 December 31, 1999, 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 $311.5 million. Our principal source
of liquidity as of December 31, 1999 consists of $223.0 million in cash and
cash equivalents and $23.0 million in debt and capital lease facilities. As of
December 31, 1999, our total indebtedness from our senior notes, debt
facilities and capital lease obligations was $215.1 million. Our principal
source of liquidity as of December 31, 1998 consisted of $9.2 million in cash,
cash equivalents and short-term investments.
Net cash used in operating activities totaled $9.9 million for the year
ended December 31, 1999 compared to net cash used in operating activities of
$796,000 for the period from inception to December 31, 1998. Net cash used in
operating activities for the year ended December 31, 1999 was primarily due to
a net loss offset by an increase in accounts payable and accrued interest. Net
cash used in operating activities for the period from inception to December 31,
1999 was primarily due to a net loss.
Net cash used in investing activities totaled $66.5 million for the year
ended December 31, 1999 compared to net cash used from investing activities of
$5.3 million for the period from inception to December 31, 1998. The cash used
in investing activities for the year ended December 31, 1999 was primarily due
to the construction of our IBX centers and the purchase of restricted cash and
short-term investments. The cash used in investing activities for the period
from inception to December 31, 1998 was primarily due to the purchase of $5.0
million of short-term investments.
Net cash generated from financing activities totaled $295.2 million for the
year ended December 31, 1999 compared to net cash generated from financing
activities of $10.2 million for the period from inception to December 31, 1998.
The cash generated from 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. The cash generated from financing activities for the period from
inception to December 31, 1998 was due to the sale of Series A preferred stock.
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 December 31,
1999, 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, $9,004,000 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 $191,087,700 as of December 31, 1999.
22
<PAGE>
In December 1999, we completed the private sale of our Series B preferred
stock, net of issuance costs, in the amount of $82.8 million. As of December
31, 1999, we had $223.0 million of cash and cash equivalents, excluding
restricted cash and short-term investments.
We currently intend to open approximately 30 IBX centers over the next four
years. We intend to finance these IBX centers through current cash flow from
our existing IBX centers and approximately $750.0 million of additional
financing. At the end of February 2000, we had $213.1 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 eight IBX centers and three IBX center expansion
projects. 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 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.
We currently intend to open approximately 30 IBX centers over the next four
years, 13 of which we expect to complete by the end of 2000. We intend to fund
these IBX centers from our current cash and cash equivalent balances and
additional draws under our current debt and capital lease facilities. We
anticipate that the funds available to Equinix will be sufficient to fund the
capital expenditure and working capital requirements, including operating
losses, associated with the initial rollout of eight IBX centers and three IBX
center expansion projects, which we expect to complete by the end of 2000. We
expect that additional financing will be required in the future to complete the
implementation of our approximately 30 IBX center rollout plan within our
proposed time frame. Our future long-term capital needs will be highly
dependent on the actual number and actual cost of additional IBX centers to be
built, the timing of their opening and their success in terms of attracting and
retaining customers and generating revenues once opened and launched. Thus, any
projections of future long-term cash needs and cash flows are subject to
substantial uncertainty. We may seek to sell additional equity or debt
securities, enter into other debt facilities or capital lease obligations,
obtain a line of credit or curtail our expansion plans. However, the terms of
our senior notes covenants contain restrictions on our ability to incur
additional debt. We cannot be certain that additional financing will be
available to us on favorable terms when required, or at all.
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.
Impact of the Year 2000
As of February 17, 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. For example, some software
programs may have difficulty resolving the so-called "century leap year"
algorithm which will also occur during the year 2000.
23
<PAGE>
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.
24
<PAGE>
BUSINESS
Overview
Equinix designs, builds and operates Internet Business Exchange, or IBX,
centers where Internet businesses place their equipment and interconnect with
each other. Our 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. Our centers provide a
place where content providers, or CPs, e-commerce related businesses and
application service providers, or ASPs, can come together and select from a
number of partners to grow their business. Equinix's IBX centers are designed
to provide an environment that gives its customers a choice of carriers,
Internet service providers, or ISPs, and other key e-business partners to meet
their growing needs. As a result, our customers are better positioned to
capitalize on market opportunities, expand their business offerings and enter
new markets.
We intend to open approximately 30 IBX centers in major Internet markets in
the U.S., Europe, Asia, South America and Australia. In July 1999, except for
fiber connectivity from our telecommunications carriers, we opened our first
IBX center in the Washington, D.C. area. In December 1999 we opened our second
IBX center in Newark, New Jersey and in March 2000 we opened our third IBX
center in San Jose, California. Our current customers include Akamai,
Concentric Network, Ernst & Young Technologies, iBeam Broadcasting, MCI
WorldCom, NaviNet and NorthPoint Communications.
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 $300 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. Our stockholders are many of
the most influential companies driving the development, operation and
utilization of the Internet and its transformation to a reliable, trusted
medium for commerce. They include America Online, Artemis S.A., Benchmark
Capital, the Carlyle Group, Cisco Systems, Comdisco Ventures, Dell Corporation,
E*Trade Group, Enron Corporation, epartners Capital, or News Corp., Finlayson
Investments, or Temasek, Microsoft Corporation, Millennium System Trading
Limited, or Pacific Century Group, Morgan Stanley Dean Witter, NorthPoint
Communications, Reuters and Salomon Smith Barney.
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.
The Internet's explosive growth has led to chronic problems in the quality
and reliability of Internet-related services delivered to the end user.
Infrastructure has not kept pace with demand. Businesses have tried to
alleviate these problems by relocating Internet content closer to core
communications centers, upgrading network bandwidth and employing technologies
such as web page caching. Unfortunately, these attempts have not been
sufficient to ensure consistently high quality service. As broadband access, e-
commerce and streaming media applications continue to gain market acceptance,
businesses must find new solutions to ensure that the Internet infrastructure
will meet their needs for Internet commerce.
25
<PAGE>
Traditionally, the Internet was thought of as just a network of networks.
The distribution of content and delivery of services between thousands of
individual networks occurred at network access points, or NAPs. These original
NAPs were typically built in pre-existing telecommunications carrier facilities
and run by companies such as MCI WorldCom, Sprint and Pacific Bell. Because
operating the NAPs is not a core business for these carriers, they have not
made the necessary investments in the NAPs to effectively manage the rapid
growth in Internet traffic. As a result, these NAPs have emerged as one of the
primary bottlenecks to improved Internet communications. The problems inherent
in the NAPs stem from a number of sources:
Carrier monopoly. Ownership by the major carriers results in a lack of
neutrality, essentially providing the carriers with a monopoly on all
communications services provided. This can cause the services to be costly
and provides no redundancy to the ISPs and other carriers within the
facilities.
Limited scalability. There are a limited number of NAPs in the U.S. that
handle the majority of Internet traffic exchange. These NAPs are physically
constrained and unable to handle the tremendous growth in Internet traffic.
As a result, only the largest carriers and ISPs receive preferential space
allocation at the NAPs, leaving small and mid-sized companies without the
ability to colocate, or establish their telecommunications equipment, at
these facilities.
Legacy technologies. The NAPs were designed around outdated technologies
that have limited their capacity. For example, the core switches in these
facilities cannot scale to meet the traffic growth, which in some cases has
resulted in significant packet loss and latency. The lack of direct
connections between ISPs within the NAPs has compounded this problem.
On the Internet today, business content has become more valuable than many
of the networks that support it. In the legacy NAPs, however, the lack of AC
power, poor air conditioning, lack of financial-grade security, inadequately
trained support staff and limited facility access have made it impractical for
content providers to locate their content at central communications exchange
points.
A variety of businesses, including emerging carriers, Web site hosting
companies, ISPs and more focused new entrants are beginning to provide improved
colocation, the provision of space for a customer's telecommunications
equipment, services for Internet content. 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 revenue growth in the U.S. from approximately
$875 million in 1998 to approximately $14.7 billion by 2003. While the demand
for these colocation services is significant, most new colocation facilities
are being constructed by telecommunications carriers and ISPs. 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.
IDC estimates that the number of non-U.S. Internet users will grow from
approximately 79 million at the end of 1998 to approximately 325 million by the
end of 2003. Rapid growth of international Internet usage has created an
unprecedented need for additional internationally-based central Internet
traffic exchange points. Unfortunately, there are a limited number of NAPs
outside of the U.S. As a result, non-U.S. traffic is often routed through one
of the U.S. NAPs, whether or not that serves as the most efficient route,
resulting in inefficiency and wasted resources. These routing inefficiencies
burden international ISPs with high operating costs and often result in slow,
unreliable transmissions.
As a result of tremendous competitive, time-to-market and technological
pressures, Internet and e-commerce companies are demanding facilities that
provide multiple interconnections with a broad cross-section of service
providers and customers in a neutral environment conducive to rapid growth and
optimal flexibility. Unfortunately, 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.
26
<PAGE>
The Equinix Solution
Our IBX centers are designed to solve many of the infrastructure problems
facing Internet businesses today. The IBX centers will provide environments
that stimulate efficient business growth by encouraging independent Internet
supplier companies to deliver a wide variety of services. 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 facility 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. We design our IBX centers for 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. As a result, 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 multi-level
financial grade 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.
Value Added Services. In addition to our core services, we offer advanced
products and value-added services that are intended to assist customers in
improving the quality of their interconnection and traffic exchange. Such
services include high-speed interconnects as well as a collaborative research
environment. In addition, we enable collaborative research activities amongst
our customers, which provide our customers with the opportunity to test their
advanced products and services in a high-bandwidth production setting as well
as gain exposure to leading-edge Internet products and technologies.
Equinix Strategy
Our objective is to attract a wide variety of complementary business
partners and provide the highest level of service in our IBX centers. To
accomplish this objective we are employing the following strategies:
Capitalize on Our Neutrality. IBX neutrality means 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
27
<PAGE>
fundamental characteristics of an IBX center. We believe this is a
significantly improved approach compared with the current Internet model where
ISPs and telecommunications carriers own and operate the majority of colocation
and exchange facilities. 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 business Internet service
providers.
Target a Balanced IBX Customer Base. As a key aspect to fostering efficient
interaction and promoting choice, reliability and redundancy, we intend to
actively manage our customer base at each IBX center to include a balanced
number of Internet and e-commerce related businesses. For example, we will seek
to ensure that an e-mail service provider located in an Equinix IBX center will
be able to market its services to many CPs, ISPs, or, a CP located in an
Equinix IBX center will have a choice of multiple bandwidth providers to
establish redundancy while commanding the purchasing leverage to demand higher
service quality at a lower bandwidth cost.
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 launch an aggressive IBX center rollout
program over the next twelve to eighteen months and open a total of 13 IBX
centers in the United States and internationally. One additional IBX center is
scheduled to open in the United States by the end of the first quarter of 2000.
Another 10 IBX centers are scheduled to open in 2000 in the U.S., Europe and
Asia. We believe the demand for our international IBX facilities 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 Internet connections.
Through brand awareness and promotion we intend to create a strong following
among all top CPs, ISPs, carriers and CSPs. We believe that this strong brand
awareness, combined with our ability to provide the highest quality Internet
interconnection services and physical facilities and professional services will
provide us with a competitive advantage in our market.
Leverage Blue-Chip Investor Base. 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., Benchmark Capital, the
Carlyle Group, Cisco Systems, E*Trade Group, Enron Corporation, epartners
Capital, or News Corp., Finlayson Investments, or Temasek, Millennium System
Trading Limited, or Pacific Century Group, Morgan Stanley Dean Witter,
NorthPoint Communications, Reuters and Salomon Smith Barney.
Continue Providing Leading-Edge Products and Services. Part of our
competitive advantage is our ability to provide leading edge products and
services to our customers. To this end, we encourage our customers to research
and test their new technologies within our state-of-the-art research and
development environment. We make available our on-site support and research
areas and enable our customers to house their own equipment within the IBX
center. By collaborating with leading technology companies we believe we are
positioned at the forefront of Internet technology development. As we increase
our scale and customer base, we will have numerous opportunities to cross-sell
additional infrastructure services such as measurement and testing, network-
monitoring, network consulting and design and system integration.
Customers
Customers typically sign renewable contracts of one to three years in
length, often with options on additional space. Our current customers,
including Akamai, Concentric Network, Ernst & Young Technologies, iBeam
Broadcasting, MCI WorldCom, NaviNet, NorthPoint Communications, and others,
have subscribed for approximately 26% of the capacity of our Washington, D.C.
IBX center. Additionally, Akamai, MCI WorldCom and NorthPoint Communications
have signed multi-site agreements.
28
<PAGE>
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 turn to best-of-breed
suppliers to provide other elements of their product. These specialized players
include:
. content providers supplying information, education or entertainment
content and conducting the sale of goods and services;
. Internet service providers offering end-users Internet access and
customer support;
. telecommunications carriers; and
. component service providers offering ASP and web hosting, e-mail, usenet
newsgroups and content distribution.
We consider these specialized players to be the core of our customer base
and we offer each customer solutions that are designed to meet their unique and
changing needs.
We believe our IBX centers provide the following benefits to our customers:
Type of Customer: Benefits
Content Providers . Choice among multiple bandwidth providers and
CSPs
. Avoidance of carrier charges
. Scalable, flexible, fault-tolerant environment
. Cost savings through aggregating purchases at a
single location
. Expedited provisioning of services
. Minimize packet loss and latency, or time that
elapses between a request for information and
its arrival, issues
. Colocation at a central exchange point for
Internet traffic
. Financial grade security and 24 hours per day,
seven days per week Internet trained staff
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
. Elimination of capital investments for
facilities
. Centralized audience for products and services
Carriers . Economies of scale with reduced capital costs
. Ability to focus on core competencies
. Centralized market with access to dozens of
potential customers
Component Service
Providers . Proximity to customers reduces operations,
technology and marketing costs and speeds
service deployment
. Avoidance of carrier charges
. Improved quality of service through direct
connections
Services
Within our IBX centers we provide our customers with equipment colocation
and interconnection, value-added services, and professional services.
29
<PAGE>
Equipment Colocation Services
Within our IBX centers, customers can colocate and interconnect their
equipment and perform high bandwidth communications while bypassing the public
Internet and avoiding carrier charges often associated with such arrangements.
Customers can use these interconnections for a variety of purposes, including
private peering, delivery of services or connecting to private networks.
Cabinets. Customers have the choice of colocating their equipment in shared
cages or in their own locked, secure cabinets and, in either case, are able to
design their own unique cabinet configurations. Cabinet spaces are available in
half height, 42 inches, sufficient for a basic networking presence or full
height, 84 inches, 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 a biometric hand-geometry system.
Private Cages. Customers that contract for a minimum of ten 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 a biometric hand-geometry system.
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
Central Switching Fabric. Customers may choose to connect to our backed-up
central switching fabric, also known as the combination of hardware and
software that moves data coming in to a network, rather than purchase direct
connections. Our central switching fabric can accommodate select port
connections at various speeds.
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.
Emerging Technologies Environment. Our IBX customers enjoy access to a
research and development environment for testing new products and technology in
a production setting. For example, this environment features alternative
central switching fabric platforms on various participating vendor's equipment,
each operating with simulated production-level traffic, dedicated cabinet space
and on-site and remote technical support. Customers can connect to these
systems to perform various tests. Other technologies, such as new protocols,
server-based information services, multicast and caching may be staged and
tested in our IBX centers. Our philosophy is to collaborate with our customers
and work independently to test, prove and select the best technologies and
solutions for next-generation networking to enhance the scalability of
Internet-related businesses. Current projects address monitoring and caching
technologies, multicast networks and systems and various switching products.
Professional Services
Our IBX centers are staffed with highly trained Internet and
telecommunications specialists who are 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.
30
<PAGE>
"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.
Other Professional Services. We also provide network consulting and system
integration services to our customers.
IBX Design and Staffing
Our IBX centers are designed to provide a state-of-the-art, secure, full-
service, neutral operating environment of typically 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 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.
31
<PAGE>
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 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 30 IBX centers in major Internet markets in the
U.S., Europe, Asia, South America and Australia over the next four years. We
opened our first IBX center in July 1999 in Ashburn, Virginia, our Washington,
D.C. IBX center, and, in December 1999, we opened our second IBX center in
Newark, New Jersey and our third IBX center in San Jose, California in March
2000. Through the remainder of 2000, our rollout consists of opening IBX
centers in Boston, Massachusetts; Chicago, Illinois; Los Angeles, California;
New York City, New York; Seattle, Washington; London, England; Dallas, Texas;
Amsterdam, Netherlands and Paris, France. In addition, we are planning major
expansions to our Washington, D.C. and San Jose 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 competitive, technological,
regulatory 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
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.
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 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.
32
<PAGE>
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. While we may contemplate other
distribution channels and reseller arrangements in the future, through the year
2000 substantially all revenues will be generated by direct sales.
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, ISPs, carriers and CSPs.
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 in a business exchange
environment and to improve the quality of their colocation services. We expect
a substantial number of customers to contract for services at multiple IBX
centers and have already received orders from three 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
industry technical forums, participating in Internet industry standard-setting
bodies, such as the Internet Engineering Task Force, and delivering white
papers that address Internet infrastructure issues at conferences.
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
differentiate ourselves 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:
. Web site hosting, colocation and ISP companies such as AboveNet, Digital
Island, Exodus, Frontier GlobalCenter, Globix, PSINet and Verio;
. established communications carriers such as AT&T, Level 3, MCI WorldCom,
Qwest and Sprint; and
. emerging colocation service providers such as Colo.com, IX Europe,
Neutral Nap 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 services.
Furthermore, new competitors or alliances among competitors may emerge and
rapidly acquire
33
<PAGE>
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 December 31, 1999, we had 91 full-time employees and two full-time
consultants. We had 73 employees based at our corporate headquarters in Redwood
City, California and our regional sales offices in New York, NY and Reston, VA,
and 18 employees based at our Washington, D.C. and Newark, N.J. IBX centers. Of
those employees, 51 were in engineering and operations, 23 were in sales and
marketing and 17 were in management and finance.
Properties
Our executive offices are currently located in Redwood City, CA and after
June 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. 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.
34
<PAGE>
MANAGEMENT
Officers, Key Employees and Directors
Our officers, key employees and directors, and their ages as of March 15,
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
Gregory F. McHugh........... 51 Vice President, Operations
William B. Norton........... 36 Director of Business Development
Andrew S. Rachleff.......... 41 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.
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
35
<PAGE>
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, 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.
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.
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 senior vice
president, business development. 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.
36
<PAGE>
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.
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.
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
37
<PAGE>
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>
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 12,012,810 shares of our common stock for
38
<PAGE>
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.
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
39
<PAGE>
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 340,000 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.
40
<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.
41
<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.
42
<PAGE>
PRINCIPAL STOCKHOLDERS
The table below presents selected information regarding beneficial ownership
of our outstanding common stock, on an as converted basis, as of January 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 January 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 52,537,616 shares of common
stock outstanding as of January 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 4.9%
Jay S. Adelson (2).................................. 2,993,208 5.7
Philip J. Koen (3).................................. 660,000 1.3
Peter T. Ferris (4)................................. 510,000 1.0
Michelangelo Volpi (5).............................. -- --
170 West Tasman Drive
San Jose, CA 95134
Andrew S. Rachleff (6).............................. 8,535,000 16.2
2480 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Entities affiliated with Benchmark Capital (7)...... 8,535,000 16.2
2480 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Cisco Systems, Inc.................................. 6,459,375 12.3
170 West Tasman Drive
San Jose, CA 95134
Microsoft Corporation............................... 3,356,250 6.4
One Microsoft Way
Redmond, WA 98052
All directors and executive officers as a group (9
persons) (8)....................................... 16,515,708 31.0
</TABLE>
- --------
(1) Includes 1,647,562 shares subject to a right of repurchase by us as of
January 31, 2000.
(2) Includes 1,647,562 shares subject to a right of repurchase by us as of
January 31, 2000. Also includes 6,474 shares held as custodian for Rowan
Sharon Adelson. Mr. Adelson disclaims beneficial ownership of these
shares.
(3) Includes 505,312 shares subject to a right of repurchase by us as of
January 31, 2000.
(4) Includes 510,000 shares subject to a right of repurchase by us as of
January 31, 2000.
43
<PAGE>
(5) Mr. Volpi is a senior vice president of Cisco Systems, Inc., which holds
6,459,375 shares of Equinix.
(6) 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.
(7) 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.
(8) Includes the shares described in Notes 1 through 6. Also includes 675,000
shares subject to options that are exercisable within 60 days of January
31, 2000 and 562,500 shares subject to a right of repurchase by us as of
January 31, 2000.
44
<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 December
31, 1999 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 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
45
<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 December 31, 1999, 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 December 31, 1999, we have borrowed a total of $5.5
million under this facility.
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
46
<PAGE>
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.
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.
47
<PAGE>
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
48
<PAGE>
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;
49
<PAGE>
. 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.
50
<PAGE>
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
51
<PAGE>
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
52
<PAGE>
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;
53
<PAGE>
. 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."
54
<PAGE>
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.
55
<PAGE>
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."
56
<PAGE>
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;
57
<PAGE>
. 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
58
<PAGE>
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
59
<PAGE>
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.
60
<PAGE>
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
61
<PAGE>
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
62
<PAGE>
. 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
63
<PAGE>
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.
64
<PAGE>
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
65
<PAGE>
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.
66
<PAGE>
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
67
<PAGE>
. 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.
68
<PAGE>
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
69
<PAGE>
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.
70
<PAGE>
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;
71
<PAGE>
. 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.
72
<PAGE>
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.
73
<PAGE>
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
74
<PAGE>
. 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;
75
<PAGE>
. 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";
76
<PAGE>
. 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
77
<PAGE>
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
78
<PAGE>
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
79
<PAGE>
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.
80
<PAGE>
"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
81
<PAGE>
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.
82
<PAGE>
"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;
83
<PAGE>
. 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
84
<PAGE>
. 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
85
<PAGE>
. 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.
86
<PAGE>
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
87
<PAGE>
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.
88
<PAGE>
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.
89
<PAGE>
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
90
<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 $949.35 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.
91
<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.
92
<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.
93
<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.
94
<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. 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.
95
<PAGE>
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.
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 31,
------------------------
1998 1999
----------- -----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.......................... $ 4,164,500 222,973,600
Short-term investments............................. 5,000,000 --
Accounts receivable................................ -- 177,700
Current portion of restricted cash and short-term
investments....................................... -- 25,110,400
Prepaids and other current assets.................. 167,600 1,596,900
----------- -----------
Total current assets............................. 9,332,100 249,858,600
Property and equipment, net.......................... 482,000 31,303,000
Construction in progress............................. 30,700 14,175,800
Restricted cash and short-term investments, less
current portion..................................... -- 13,498,300
Debt issuance costs, net............................. -- 6,532,400
Other assets......................................... 156,400 1,400,300
----------- -----------
Total assets..................................... $10,001,200 316,768,400
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses.............. $ 159,200 4,143,200
Accrued construction costs......................... 252,300 9,772,200
Current portion of debt facilities and capital
lease obligations................................. -- 4,394,600
Accrued interest payable........................... -- 2,166,700
Other current liabilities.......................... -- 204,600
----------- -----------
Total current liabilities........................ 411,500 20,681,300
Debt facilities and capital lease obligations, less
current portion................................... -- 10,248,200
Senior notes....................................... -- 191,087,700
Other liabilities.................................. -- 802,400
----------- -----------
Total liabilities................................ 411,500 222,819,600
----------- -----------
Commitments and Contingencies
Stockholders' equity:
Series A convertible preferred stock, $0.001 par
value per share; 16,500,000 and 32,000,000 shares
authorized in 1998 and 1999, respectively;
15,697,500 and 18,682,500 shares issued and
outstanding in 1998 and 1999, respectively;
liquidation value of $10,465,000 and $12,455,000
in 1998 and 1999, respectively.................... 15,700 18,700
Series B convertible preferred stock, $0.001 par
value per share; none and 36,000,000 shares
authorized in 1998 and 1999, respectively; none
and 15,762,373 shares issued and outstanding in
1998 and 1999, respectively; liquidation value of
none and $84,066,000 in 1998 and 1999,
respectively...................................... -- 15,800
Common stock, $0.001 par value per share;
43,500,000 and 132,000,000 shares authorized in
1998 and 1999, respectively; 6,150,000 and
11,672,196 shares issued and outstanding in 1998
and 1999, respectively............................ 6,200 11,700
Additional paid-in capital......................... 10,423,600 113,188,500
Deferred stock-based compensation.................. -- (3,656,700)
Accumulated other comprehensive income............. 14,100
Accumulated deficit................................ (855,800) (15,643,300)
----------- -----------
Total stockholders' equity....................... 9,589,700 93,948,800
----------- -----------
Total liabilities and stockholders' equity....... $10,001,200 316,768,400
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
June 22,
1998
(inception)
to Year ended
December 31, December
1998 31, 1999
------------ -----------
<S> <C> <C>
Revenues............................................. $ -- 44,400
Costs and operating expenses:
Cost of revenues (includes stock-based compensation
of $25 in 1999).................................... -- 2,923,000
Sales and marketing (includes stock-based
compensation of $351 in 1999)...................... 34,200 2,668,600
General and administrative (includes stock-based
compensation of $615 in 1999)...................... 751,500 8,764,400
--------- -----------
Total costs and operating expenses............... 785,700 14,356,000
--------- -----------
Loss from operations............................... (785,700) (14,311,600)
Interest income...................................... 149,900 2,138,100
Interest expense..................................... -- (2,614,000)
Interest charge on beneficial conversion of
convertible debt.................................... (220,000) --
--------- -----------
Net loss............................................. $(855,800) (14,787,500)
========= ===========
</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 December 31, 1999
<TABLE>
<CAPTION>
Series A Series B
convertible convertible Accumulated
preferred stock preferred stock Common stock Additional Deferred other
------------------- ------------------ ------------------ paid-in stock-based comprehensive Accumulated
Shares Amount Shares Amount Shares Amount capital compensation income deficit
---------- ------- ---------- ------- ---------- ------- ----------- ------------ ------------- -----------
<S> <C> <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,
net of $29,500
offering costs... 15,037,500 15,000 -- -- -- -- 9,980,500 -- -- --
Conversion of
debt to Series A
preferred stock.. 660,000 700 -- -- -- -- 439,300 -- -- --
Net loss......... -- -- -- -- -- -- -- -- -- (855,800)
---------- ------- ---------- ------- ---------- ------- ----------- ---------- ------ -----------
Balances as of
December 31,
1998............. 15,697,500 15,700 -- -- 6,150,000 6,200 10,423,600 -- -- (855,800)
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,
net of $2,360,000
offering costs... -- -- 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......... -- -- -- -- -- -- 600,600 -- -- --
Issuance of
common stock
warrants......... -- -- -- -- -- -- 12,559,400 -- -- --
Deferred stock-
based
compensation..... -- -- -- -- -- -- 4,647,600 (4,647,600) -- --
Amortization of
stock-based
compensation..... -- -- -- -- -- -- -- 990,900 -- --
Comprehensive
income (loss):
Net loss........ -- -- -- -- -- -- -- -- -- (14,787,500)
Unrealized
appreciation on
short-term
investments..... -- -- -- -- -- -- -- -- 14,100 --
---------- ------- ---------- ------- ---------- ------- ----------- ---------- ------ -----------
Net
comprehensive
loss............ -- -- -- -- -- -- -- -- 14,100 (14,787,500)
---------- ------- ---------- ------- ---------- ------- ----------- ---------- ------ -----------
Balances as of
December 31,
1999............. 18,682,500 $18,700 15,762,373 $15,800 11,672,196 $11,700 113,188,500 (3,656,700) 14,100 (15,643,300)
========== ======= ========== ======= ========== ======= =========== ========== ====== ===========
<CAPTION>
Total
stockholders'
equity
-------------
<S> <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,
net of $29,500
offering costs... 9,995,500
Conversion of
debt to Series A
preferred stock.. 440,000
Net loss......... (855,800)
-------------
Balances as of
December 31,
1998............. 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,
net of $2,360,000
offering costs... 81,706,000
Issuance of
common stock upon
exercise of
common stock
options.......... 1,285,600
Issuance of
Series A
preferred stock
warrants......... 600,600
Issuance of
common stock
warrants......... 12,559,400
Deferred stock-
based
compensation..... --
Amortization of
stock-based
compensation..... 990,900
Comprehensive
income (loss):
Net loss........ (14,787,500)
Unrealized
appreciation on
short-term
investments..... 14,100
-------------
Net
comprehensive
loss............ (14,773,400)
-------------
Balances as of
December 31,
1999............. 93,948,800
=============
</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)
to Year ended
December 31, December 31,
1998 1999
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss........................................... $ (855,800) (14,787,500)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation....................................... 4,200 609,300
Interest charge on beneficial conversion of
convertible debt.................................. 220,000 --
Amortization of deferred stock-based
compensation...................................... -- 990,900
Amortization of senior note discount............... -- 91,700
Amortization of debt facilities and capital lease
obligation discount............................... -- 116,900
Amortization of debt issuance costs................ -- 67,600
Issuance of common stock warrants for strategic
agreement......................................... -- 366,500
Changes in operating assets and liabilities:
Accounts receivable............................... -- (177,700)
Prepaids and other current assets................. (167,600) (1,429,300)
Other assets...................................... (156,400) (1,243,900)
Accounts payable and accrued expenses............. 159,200 2,313,800
Accrued interest payable.......................... -- 2,166,700
Other current liabilities......................... -- 204,600
Other liabilities................................. -- 802,400
----------- -----------
Net cash used in operating activities........... (796,400) (9,908,000)
----------- -----------
Cash flows from investing activities:
Purchase of short-term investments................. (5,000,000) (28,800,000)
Sales and maturities of short-term investments..... -- 33,814,100
Purchases of property and equipment................ (486,200) (28,241,400)
Additions to construction in progress.............. (30,700) (14,145,100)
Accrued construction costs......................... 252,300 9,519,900
Purchase of restricted cash and short-term
investments....................................... -- (38,608,700)
----------- -----------
Net cash used in investing activities........... (5,264,600) (66,461,200)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock............. 4,000 --
Proceeds from exercise of stock options............ 6,000 1,285,600
Proceeds from debt facilities and capital lease
obligations....................................... -- 16,114,500
Repayment of debt facilities and capital lease
obligations....................................... -- (988,000)
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)
Proceeds from issuance of convertible preferred
stock, net........................................ 9,995,500 84,886,000
----------- -----------
Net cash provided by financing activities....... 10,225,500 295,178,300
----------- -----------
Net increase in cash and cash equivalents........... 4,164,500 218,809,100
Cash and cash equivalents at beginning of period.... -- 4,164,500
----------- -----------
Cash and cash equivalents at end of period.......... $ 4,164,500 222,973,600
=========== ===========
Noncash financing and investing activities:
Cash paid for taxes................................ $ -- 67,500
=========== ===========
Cash paid for interest............................. $ -- 153,400
=========== ===========
Noncash financing and investing activities:
Preferred stock warrants issued for financing
commitments....................................... $ -- 600,600
=========== ===========
Common stock warrants issued for strategic
agreement......................................... $ -- 366,500
=========== ===========
Common stock warrants issued for services.......... $ -- 3,188,900
=========== ===========
Conversion of notes payable to convertible
preferred stock................................... $ 440,000 --
=========== ===========
Unrealized appreciation on investments............. $ -- 14,100
=========== ===========
Assets recorded under capital lease................ $ -- 660,700
=========== ===========
Deferred compensation on grants of stock options... $ -- 4,647,600
=========== ===========
</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.
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.
Restricted Cash and Short-term Investments
Restricted cash and short-term investments 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. 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
F-7
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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.
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 fees from customer use of the IBX centers
and related services and installation. Revenues from customer use of the
IBX centers are billed monthly and recognized ratably over the term of the
contract, generally one year. Service fees are recognized in the period in
which the services are provided. Installation fees are recognized ratably
over the term of the contract.
F-8
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 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
F-9
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
(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.
Property & Equipment
Property and equipment is comprised of the following as of December 31:
<TABLE>
<CAPTION>
1998 1999
-------- ----------
<S> <C> <C>
Leasehold improvements................................... $240,600 19,523,200
IBX plant and machinery.................................. -- 8,235,400
Computer equipment and software.......................... 77,000 3,126,000
IBX equipment............................................ -- 658,700
Furniture and fixtures................................... 168,600 373,200
-------- ----------
486,200 31,916,500
Less accumulated depreciation............................ 4,200 613,500
-------- ----------
$482,000 31,303,000
======== ==========
</TABLE>
Leasehold improvements and certain computer equipment and software and
furniture and fixtures, recorded under capital leases, aggregated none and
$660,700 as of December 31, 1998 and 1999, respectively. Amortization on
the assets recorded under capital leases is included in depreciation
expense.
Included within leasehold improvements is the value attributed to the
MCI Warrant and the Bechtel Warrant totaling $2,145,600 and $1,043,300,
respectively (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 as
of December 31 1999:
<TABLE>
<S> <C>
United States treasury notes:
Due within one year.......................................... $ 25,110,400
Due after one year through two years......................... 11,968,200
Restricted cash in accordance with security agreements......... 1,530,100
------------
38,608,700
Less current portion........................................... (25,110,400)
------------
$ 13,498,300
============
</TABLE>
As of December 31, 1999, cost approximated market value of restricted
cash and short-term investments; unrealized gains and losses were not
significant.
F-10
<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 as of
December 31:
<TABLE>
<CAPTION>
1998 1999
-------- ---------
<S> <C> <C>
Accounts payable.......................................... $ 33,800 1,978,200
Accrued preferred stock issuance costs.................... -- 1,180,000
Accrued compensation...................................... 23,200 303,000
Deferred rent............................................. 42,400 18,000
Income taxes payable...................................... 39,800 --
Accrued debt issuance costs............................... -- 490,200
Other..................................................... 20,000 173,800
-------- ---------
$159,200 4,143,200
======== =========
</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
$331,500).................................................................. $ 4,710,600
Venture Leasing Loan Agreement (net of unamortized discount of $93,200)..... 9,358,400
Comdisco Master Lease Agreement and Addendum (net of unamortized discount of
$59,000)................................................................... 573,800
-----------
14,642,800
Less current portion........................................................ (4,394,600)
-----------
$10,248,200
===========
</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, $5,042,100 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 $0.67, dividend yield of
0%, expected volatility of 80%, risk-free interest rate of 5.0% and a
contractual life of 10 years, was $428,700, 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.
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
F-11
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 $0.67, dividend yield 0%, expected
volatility of 80%, risk-free interest rate of 5.0% and a contractual life
of 10 years, was $15,000 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, $42,200 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 $0.67, dividend yield 0%, expected volatility of 80%, risk-free
interest rate of 5.0% and a contractual life of seven years, was $52,300,
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-12
<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 $0.67,
dividend yield 0%, expected volatility of 80%, risk-free interest rate of
5.0% and a contractual life of seven years, was $104,600, 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................................... 1,142,800 169,400 1,312,200
2004................................... -- -- --
---------- -------- ----------
14,493,700 830,600 15,324,300
Less amount representing interest.... -- (197,800) (197,800)
---------- -------- ----------
14,493,700 632,800 15,126,500
Less amount representing unamortized
discount............................ (424,700) (59,000) (483,700)
---------- -------- ----------
14,069,000 573,800 14,642,800
Less current portion................. (4,220,300) (174,300) (4,394,600)
---------- -------- ----------
9,848,700 399,500 10,248,200
========== ======== ==========
</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, $9,004,000 was allocated to additional
paid-in capital for the 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
F-13
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
interest rate of 13.6% 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 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
$191,087,700 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 $6,532,400 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.
F-14
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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, 4,888,875 and
3,522,375 shares are subject to repurchase at a price of $0.00033 per
share, respectively.
F-15
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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. This right lapses over the
vesting period. As of December 31, 1998 and 1999, there were 45,000 and
4,590,735 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.
F-16
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A summary of the Plan is as follows:
<TABLE>
<CAPTION>
1998 1999
-------------------- ---------------------
Weighted- Weighted-
average average
exercise exercise
Shares price Shares price
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Outstanding at beginning of
period........................ -- $ -- 2,074,050 $0.10
Granted........................ 2,164,050 0.10 6,404,040 0.46
Forfeited...................... -- -- (340,500) 0.09
Exercised...................... (90,000) 0.10 (5,522,196) 0.23
--------- ----------
Outstanding at end of period... 2,074,050 0.10 2,615,394 0.67
========= ==========
Shares available for future
grant......................... 6,098,760 35,220
========= ==========
Exercisable at end of period... 20,001 76,431
========= ==========
Weighted-average grant date
fair value of options granted
to employees during the period
at fair value................. 0.01 0.01
Weighted-average grant date
fair value of options granted
to non-employees during the
period at fair value.......... 0.56 0.56
Weighted-average grant date
fair value of options granted
to employees during the period
at below fair value........... -- 1.28
Weighted-average grant date
fair value of options granted
to non-employees during the
period at below fair value.... -- 1.77
</TABLE>
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.......... 1,383,144 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 -- --
--------- ------
2,615,394 9.53 0.67 76,431 0.07
========= ======
</TABLE>
The weighted-average remaining contractual life of options outstanding
at December 31, 1999 was 9.53 years.
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
F-17
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
employee stock option grants in those instances in which the fair value of
the underlying common stock exceeds the exercise price of the stock options
at the date of grant. The Company recorded deferred stock-based
compensation related to employees of $4,313,500 in respect to stock options
granted through December 31, 1999, of which $788,300 has been amortized to
stock-based compensation expense for the year ended December 31, 1999 on an
accelerated basis over the vesting period of the individual options, 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
(inception)
to Year ended
December 31, December 31,
1998 1999
------------- ------------
<S> <C> <C>
Net loss:
As reported.................................. $(855,800) $(14,787,500)
Pro forma.................................... (857,500) (14,831,800)
</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.
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 $334,100
through December 31, 1999, of which $202,600 has been amortized to stock-ba
sed compensation expense for the year ended December 31, 1999 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 and the year ended December 31, 1999: 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 and 5.48% in the year ended
December 31, 1999; 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 $366,500 using the
Black-Scholes option-pricing model and was immediately expensed to general
and administrative expenses. In addition, the following assumptions were
used in determining the fair value of
F-18
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
the warrant: deemed fair market value per share of $1.33, 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 $2,145,600 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 $3.67, 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 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 $1,043,300 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 $3.67, 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
=========
</TABLE>
F-19
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<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>
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>
F-20
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
(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>
F-21
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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
$366,500 using the Black-Scholes option-pricing model and was immediately
expensed to general and administrative expenses.
(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.
F-22
<PAGE>
EQUINIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 warrants to
purchase up to 33,100 shares of the Company's common stock at $6.00 per
share. The warrants are exercisable upon certain defined events occurring
through May 28, 2000 and expire in ten years from the date of grant.
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.
F-23
<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 Exhibits 10.6
and 10.7).
5.1 Opinion of Counsel.
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 August
26, 1999, by and between the Registrant, the Series A Purchasers, the
Series B Purchasers and members of the Registrant's management.
10.7** Amendment No.1 to the Amended and Restated Investors' Rights
Agreement and Amended and Restated Voting Agreement, dated as of
August 26, 1999, by and between the Registrant, the Series A
Purchasers, the Series B Purchasers and members of the Registrant's
management, effective as of November 30, 1999.
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.
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. 2 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 20th day of April, 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. 2 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 April 20, 2000
______________________________________ Officer (Principal
Albert M. Avery, IV Executive Officer) and
Director
Jay S. Adelson* Vice President, April 20, 2000
______________________________________ Engineering and Site
Jay S. Adelson Development, Chief
Technology Officer and
Director
/s/ Philip J. Koen Chief Financial Officer April 20, 2000
______________________________________ (Principal Financial and
Philip J. Koen Accounting Officer)
Andrew S. Rachleff* Director April 20, 2000
______________________________________
Andrew S. Rachleff
Michelangelo Volpi* Director April 20, 2000
______________________________________
Michelangelo Volpi
/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 Exhibits 10.6
and 10.7).
5.1 Opinion of Counsel.
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 August
26, 1999, by and between the Registrant, the Series A Purchasers, the
Series B Purchasers and members of the Registrant's management.
10.7** Amendment No.1 to the Amended and Restated Investors' Rights
Agreement and Amended and Restated Voting Agreement, dated as of
August 26, 1999, by and between the Registrant, the Series A
Purchasers, the Series B Purchasers and members of the Registrant's
management, effective as of November 30, 1999.
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
------- -----------
<C> <S>
10.21** Customer Agreement between Equinix, Inc. and MCI Worldcom, Inc., dated
November 16, 1999.
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.
<PAGE>
April 20, 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
December 1, 1999 in connection with the issuance of the Old Notes 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.
April 20, 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>
EXHIBIT 10.13
[***]=Certain information in this Exhibit has been omitted and filed separately
with the Securities and Exchange Commission.
TELECOMMUNICATIONS OFFICE LEASE
-------------------------------
CARRIER CENTER LOS ANGELES
600 SEVENTH STREET ASSOCIATES, INC.,
a California corporation
as Landlord,
and
EQUINIX, INC.,
a Delaware corporation,
as Tenant
<PAGE>
CARRIER CENTER LOS ANGELES
--------------------------
INDEX
-----
<TABLE>
<CAPTION>
ARTICLE SUBJECT MATTER PAGE
- ------- -------------- ----
<S> <C> <C>
ARTICLE 1 PREMISES, BUILDING, PROJECT, AND COMMON AREAS................. 1
ARTICLE 2 LEASE TERM; OPTION TERMS...................................... 1
ARTICLE 3 BASE RENT..................................................... 1
ARTICLE 4 ADDITIONAL RENT............................................... 1
ARTICLE 5 USE OF PREMISES............................................... 6
ARTICLE 6 SERVICES AND UTILITIES........................................ 7
ARTICLE 7 REPAIRS....................................................... 9
ARTICLE 8 ADDITIONS AND ALTERATIONS..................................... 10
ARTICLE 9 COVENANT AGAINST LIENS........................................ 11
ARTICLE 10 INSURANCE..................................................... 12
ARTICLE 11 DAMAGE AND DESTRUCTION........................................ 14
ARTICLE 12 NONWAIVER..................................................... 16
ARTICLE 13 CONDEMNATION.................................................. 16
ARTICLE 14 ASSIGNMENT AND SUBLETTING..................................... 16
ARTICLE 15 SURRENDER OF PREMISES; OWNERSHIP
AND REMOVAL OF TRADE FIXTURES................................. 20
ARTICLE 16 HOLDING OVER.................................................. 20
ARTICLE 17 ESTOPPEL CERTIFICATES......................................... 20
ARTICLE 18 SUBORDINATION................................................. 21
ARTICLE 19 DEFAULTS; REMEDIES............................................ 21
ARTICLE 20 COVENANT OF QUIET ENJOYMENT................................... 23
ARTICLE 21 SECURITY DEPOSIT.............................................. 23
ARTICLE 22 SUPPLEMENTAL EQUIPMENT........................................ 24
ARTICLE 23 SIGNS......................................................... 27
ARTICLE 24 COMPLIANCE WITH LAW........................................... 27
ARTICLE 25 LATE CHARGES.................................................. 27
ARTICLE 26 LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT.......... 27
ARTICLE 27 ENTRY BY LANDLORD............................................. 28
ARTICLE 28 PARKING....................................................... 28
ARTICLE 29 MISCELLANEOUS PROVISIONS...................................... 28
</TABLE>
EXHIBITS
A-1 OUTLINE OF SUITE 600
A-2 ROOF SPACE AND ROOF SYSTEMS SUPPORT PAD
A-3 OUTLINE OF MUST TAKE SPACE
B TENANT WORK LETTER
C FORM OF NOTICE OF LEASE TERM DATES
D RULES AND REGULATIONS
E FORM OF TENANT'S ESTOPPEL CERTIFICATE
F FORM NON-DISTURBANCE AGREEMENT
G PROJECT SOUND REQUIREMENTS AND SPECIFICATIONS
H ANTENNA SPACE RIDER
I FORM OF MEMORANDUM OF LEASE
-i-
<PAGE>
CARRIER CENTER LOS ANGELES
--------------------------
INDEX OF MAJOR DEFINED TERMS
----------------------------
<TABLE>
<CAPTION>
LOCATION OF
DEFINITION IN
DEFINED TERMS OFFICE LEASE
- ------------- ------------
<S> <C>
Abatement Event...................................................................... 13
Acceptable Changes................................................................... 15
Accountant........................................................................... 11
Additional Electrical Supply......................................................... 12
Additional Rent...................................................................... 5
Alterations.......................................................................... 14
Antenna Conduit Space......................................................... Exhibit H
Antenna Conduits.............................................................. Exhibit H
Antenna Space................................................................. Exhibit H
Antenna Space Effective Date.................................................. Exhibit H
Antennas...................................................................... Exhibit H
Auxiliary Space...................................................................... 30
Base Building........................................................................ 15
Base Rent............................................................................ 5
Base Year............................................................................ 5
BOMA................................................................................. 2
Brokers.............................................................................. 37
Building............................................................................. 1
Building Structure................................................................... 14
Building Systems..................................................................... 14
Claims........................................................................... 17, 31
Collocation Agreements............................................................... 23
Common Areas......................................................................... 1
Connecting Equipment................................................................. 29
Contract...................................................................... Exhibit B
Cost Pools........................................................................... 9
Customers............................................................................ 23
Damage Termination Date.............................................................. 20
Damage Termination Notice............................................................ 20
Direct Expenses...................................................................... 5
Effective Date....................................................................... iv
Electrical Equipment................................................................. 12
Eligibility Period................................................................... 13
Estimate............................................................................. 10
Estimate Statement................................................................... 10
Estimated Excess..................................................................... 10
Excess............................................................................... 9
Exercise Date........................................................................ 3
Expense Year......................................................................... 6
Fair Rental Value.................................................................... 3
Final Costs................................................................... Exhibit B
Fire-Suppression System.............................................................. 29
Force Majeure........................................................................ 35
Future Mortgage...................................................................... 26
HVAC................................................................................. 12
Landlord............................................................................. iv
Landlord Parties..................................................................... 16
Landlord Repair Notice............................................................... 19
Lease................................................................................ iv
Lease Commencement Date.............................................................. 2
Lease Expiration Date................................................................ 3
Lease Term........................................................................... 2
Lease Year........................................................................... 3
License.............................................................................. 29
Lines................................................................................ 30
Notices.............................................................................. 35
Operating Expenses................................................................... 6
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
Option Rent.......................................................................... 3
Option Rent Notice................................................................... 3
Premises............................................................................. 1
Project.............................................................................. 1
Proposition 13....................................................................... 8
Quoted Rent.......................................................................... 22
Renovations.......................................................................... 37
Rent................................................................................. 5
Review Period........................................................................ 10
Security Deposit..................................................................... 28
Statement............................................................................ 9
Subject Space........................................................................ 21
Summary.............................................................................. iv
Supplemental Equipment............................................................... 30
Tax Expenses......................................................................... 8
Tenant............................................................................... iv
Tenant Damage Event.................................................................. 20
Tenant Work Letter................................................................... 1
Tenant's Conduit..................................................................... 30
Tenant's Exercise Notice............................................................. 3
Tenant's HVAC Equipment.............................................................. 29
Tenant's Share....................................................................... 9
Transfer Notice...................................................................... 21
Transfer Premium..................................................................... 23
Transferee........................................................................... 21
Transferee's Rent.................................................................... 22
Transfers............................................................................ 21
</TABLE>
-iii-
<PAGE>
CARRIER CENTER LOS ANGELES
--------------------------
TELECOMMUNICATIONS OFFICE LEASE
-------------------------------
This Telecommunications Office Lease (the "Lease"), dated as of the date
set forth in Section 1 of the Summary of Basic Lease Information (the
---------
"Summary"), below, is made by and between 600 SEVENTH STREET ASSOCIATES, INC., a
California corporation ("Landlord"), and EQUINIX, INC., a Delaware corporation
("Tenant").
SUMMARY OF BASIC LEASE INFORMATION
----------------------------------
TERMS OF LEASE DESCRIPTION
- -------------- -----------
1. Date: August 6, 1999 (the "Effective
Date)
2. Premises
(Article 1).
---------
2.1 Building: [*]
Los Angeles, California 90014
Building RSF: ______________
2.2 Premises: Approximately [*] rentable square
feet of space consisting of (i)
approximately [*] rentable square
feet of space comprising the entire
sixth (6th) floor of the Building,
and known as Suite 600 (the "Suite
600 Space"), and (ii) approximately
[*] rentable square feet of space
located on the roof of the Building
(the "Roof Space"), both as further
set forth in Exhibit A-1 and
-----------
Exhibit A-2 to this
-----------
Telecommunications Office Lease.
3. Lease Term
(Article 2).
---------
3.1 Length of Term: One Hundred Eighty (180) months.
3.2 Lease Commencement June 1, 2000
Date:
3.3 Lease Expiration Date: The date immediately preceding the
one hundred eightieth (180th) month
anniversary of the Lease
Commencement Date.
4. Base Rent (Article 3):
---------
4.1 Base Rent:
Annual
Monthly Rental Rate
Months of Annual Installment per Rentable
Lease Term Base Rent of Base Rent Square Foot
- ---------- --------- ------------ -----------
1 - 12 $[*] $[*] $[*]
13 - 24 $[*] $[*] $[*]
25 - 36 $[*] $[*] $[*]
37 - 48 $[*] $[*] $[*]
49 - 60 $[*] $[*] $[*]
61 - 72 $[*] $[*] $[*]
73 - 84 $[*] $[*] $[*]
85 - 96 $[*] $[*] $[*]
97 - 108 $[*] $[*] $[*]
109 - 120 $[*] $[*] $[*]
*CONFIDENTIAL TREATMENT REQUESTED CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
-iv-
<PAGE>
121 - 132 $[*] $[*] $[*]
133 - 144 $[*] $[*] $[*]
145 - 156 $[*] $[*] $[*]
157 - 168 $[*] $[*] $[*]
169 - 180 $[*] $[*] $[*]
4.2 Base Rent Abatement Tenant shall be entitled to an abatement of Base
(Section 3.2): Rent for a portion of the Premises during the
first (1st) [*] months of the Lease Term
pursuant to the terms and conditions of Section
3.2.
5. Base Year Calendar year 2000.
(Article 4):
---------
6. Tenant's Share Approximately [*]%.
(Article 4):
---------
7. Permitted Use General office use and operation of
(Article 5): telecommunications equipment consistent with a
---------
first-class telecommunications building
8. Security Deposit $[*]
(Article 21):
----------
9. Address of Tenant 901 Marshall Avenue, 2nd Floor
(Section 29.18): Redwood City, CA 94063
-------------
Attention: Art Chinn
with a copy to:
[*]
Suite 600
Los Angeles, CA 90014
10. Address of Landlord See Section 29.18 of the Lease.
(Section 29.18): -------------
-------------
11. Parking Subject to the terms and conditions of Section
(Article 28) -------
----------
28, Tenant shall be permitted to rent up to
--
fifteen (15) undesignated and unreserved parking
passes in the Parking Structure.
12. Broker(s) Landlord's Representative:
(Section 29.24): -------------------------
-------------
Telecom Real Estate Services, Inc.
*CONFIDENTIAL TREATMENT REQUESTED CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
-v-
<PAGE>
ARTICLE 1
---------
PREMISES, BUILDING, PROJECT, AND COMMON AREAS
---------------------------------------------
1.1 Premises, Building, Project and Common Areas.
--------------------------------------------
1.1.1 The Premises. Landlord hereby leases to Tenant and Tenant
------------
hereby leases from Landlord the premises set forth in Section 2.2 of the Summary
-----------
(the "Premises"). The outline of the Premises is set forth in Exhibit A-1 and
-----------
Exhibit A-2 attached hereto. The parties hereto agree that the lease of the
- -----------
Premises is upon and subject to the terms, covenants and conditions herein set
forth, and Tenant covenants as a material part of the consideration for this
Lease to keep and perform each and all of such terms, covenants and conditions
by it to be kept and performed and that this Lease is made upon the condition of
such performance. The parties hereto hereby acknowledge that the purpose of
Exhibits A-1, A-2 and A-3 is to show the approximate location of the Premises
- -------------------------
and the Must Take Space and the First Offer Space in the "Building," as that
term is defined in Section 1.1.2, below, only, and such Exhibits are not meant
-------------
to constitute an agreement, representation or warranty as to the construction of
the Premises or the Must Take Space, the precise area thereof or the specific
location of the "Common Areas," as that term is defined in Section 1.1.3, below,
-------------
or the elements thereof or of the accessways to the Premises, Must Take Space or
the "Project," as that term is defined in Section 1.1.2, below. Except as
-------------
specifically set forth in this Lease and in the work letter attached hereto as
Exhibit B (the "Tenant Work Letter"), Landlord shall not be obligated to provide
- ---------
or pay for any improvements, work or services related to the improvement,
remodeling or refurbishment of the Premises, and Tenant shall accept the
Premises in its "AS IS" condition on the Lease Commencement Date. Tenant also
acknowledges that neither Landlord nor any agent of Landlord has made any
representation or warranty regarding the condition of the Premises, the Building
or the Project or with respect to the suitability of any of the foregoing for
the conduct of Tenant's business. The taking of possession of the Premises by
Tenant shall conclusively establish that the Premises and the Building were at
such time in good and sanitary order, condition and repair.
1.1.2 The Building and The Project. The Premises are a part of that
----------------------------
certain seven (7) story office building set forth in Section 2.1 of the Summary
-----------
(the "Building"). The Building is part of an office project known as "Carrier
Center Los Angeles. The term "Project," as used in this Lease, shall mean (i)
the Building and the Common Areas, and (ii) the land (which is improved with
landscaping and other improvements) upon which the Building and the Common Areas
are located, and (iii) at Landlord's reasonable discretion, any additional real
property, areas, land, buildings or other improvements added thereto outside of
the Project, which Landlord reasonably anticipates will directly benefit Tenant.
1.1.3 Common Areas. Tenant shall have the non-exclusive right to use
------------
in common with other tenants in the Project, and subject to the rules and
regulations referred to in Article 5 of this Lease, those portions of the
---------
Project which are provided, from time to time, for use in common by Landlord,
Tenant and any other tenants of the Project (such areas, together with such
other portions of the Project designated by Landlord, in its discretion,
including certain areas designated for the exclusive use of certain tenants, or
to be shared by Landlord and certain tenants, are collectively referred to
herein as the "Common Areas"). The manner in which the Common Areas are
maintained and operated shall be consistent with other similarly situated
telecommunications buildings in the downtown Los Angeles area and Tenant's use
thereof shall be subject to such rules, regulations and restrictions as Landlord
may make from time to time. Landlord reserves the right to close temporarily,
make alterations or additions to, or change the location of elements of the
Project and the Common Areas, provided that Landlord shall use commercially
reasonable efforts to ensure that any such alterations or additions to the
Common Areas do not unreasonably interfere with Tenant's use and occupancy of
the Premises.
1.1.4 Access. Landlord agrees that, subject to Landlord's reasonable
------
rules and regulations, and access control systems and procedures, Tenant shall
have access to the Premises 24 hours a day, 365 days a year during the Lease
Term.
1.2 Must Take Space.
---------------
1.2.1 Description of Must Take Space. Commencing as of [*] (the
------------------------------
"Must Take Space Commencement Date") the Premises shall be expanded to include a
portion of the seventh (7th) floor of the Building consisting of approximately
[*] rentable square feet of space as more particularly shown on the floor plan
attached hereto as Exhibit A-3 (the "Must Take Space"). The Must Take Space
shall not include the areas shown as the "Leasing and Management Office" and
"Historic Suite" on Exhibit A-3.
------------
1.2.2 Base Rent. In addition to the Base Rent payable by Tenant to
---------
Landlord for the Premises, commencing upon the Must Take Commencement Date (as
defined above), Tenant shall pay to Landlord, as Base Rent for each rentable
square foot of the Must Take Space, an amount equal to the
*CONFIDENTIAL TREATMENT REQUESTED CONDIDENTIAL PORTION HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
Base Rent paid by Tenant for each rentable square foot of the original Premises
as of the Must Take Space Commencement Date and shall be subject to adjustment
as set forth in Section 4 of the Summary. Tenant shall not be entitled to any
---------
Base Rent Abatement for the Must Take Space pursuant to Section 3.2 below. In
-----------
addition, for purposes of calculating Tenant's Share of Directing Expenses in
excess of Direct Expenses for the Base Year, effective as of the Must Take
Commencement Date, Tenant's Share shall be increased to [*]%, calculated by
dividing the rentable square feet of the Premises and Must Take Space by the
total rentable square feet within the Project.
1.2.3 Term. The lease term for the Must-Take Space shall commence as
----
of the Must Take Commencement Date, and shall expire at the expiration of the
Lease Term (as may be extended pursuant to Section 2.2 below).
-----------
1.2.4 Improvement of Must Take Space. The Must Take Space shall be
------------------------------
delivered to Tenant on the Must-Take Commencement Date in its "AS IS" condition,
without any obligation on Landlord's part to construct or pay for any Tenant
Improvements or alterations for the Must-Take Space; provided, however, Landlord
shall provide Tenant with a tenant improvement allowance for the Must Take Space
("Must Take Improvement Allowance") equal to $25.00 per square foot of the Must
Take Space for the construction of certain Tenant Improvements in the Must-Take
Space pursuant to the provisions of Exhibit B attached to this Lease, except for
purposes of the Must-Take Space only, the following modifications to Exhibit B
shall apply with respect to the Must Take Space: (i) all references in Exhibit B
to the "Premises" shall, for purposes of this Section 1.2, mean the "Must Take
Space" .1.2.5 Other Terms. The Must Take Space shall become part of the
-----------
Premises for all purposes of this Lease as of the Must Take Commencement Date,
and except as otherwise expressly provided in this Section 1.2, all of the terms
and conditions of this Lease shall apply to the Must Take Space following the
Must Take Commencement Date as though the Must Take Space was originally part of
the Premises. Following delivery of the Must-Take Space to Tenant, Tenant shall
execute an amendment adding such Must-Take Space to this Lease upon the
foregoing terms and conditions within thirty (30) days of delivery of such
amendment to Tenant by Landlord.
1.2.6 Additional Roof Rights: Commencing on the Must Take space
commencement date defined in Section 1.2.1 above, Tenant shall be entitled to
utilize the portion of the roof system support pad designated as Portion B on
Exhibit A-2 attached hereto for the installation of additional Tenants to
service the Must Take space.
1.4 Rentable Square Feet. The rentable square feet of the Premises are
--------------------
approximately as set forth in Section 2.2 of the Summary, and the rentable
-----------
square feet of the Building is approximately as set forth in Section 2.1 of the
-----------
Summary. For purposes hereof, the "rentable square feet" of the Premises, and
the Must Take Space shall be calculated by Landlord pursuant to the Standard
Method for Measuring Floor Area in Office Buildings, ANSI Z65.1-1996 ("BOMA"),
as modified for the Project pursuant to Landlord's standard rentable area
measurements for the Project, to include, among other calculations, (i) a
portion of the Common Areas and service areas of the Project, and (ii) the
vertical penetrations of the Project used for telecommunications and utility
purposes (i.e. the bus duct risers and conduit chases). The rentable square
feet of the Premises, the rentable square feet of the Must Take Space and the
rentable square feet of the Building are not subject to adjustment or
remeasurement by Tenant, but shall be remeasured by Landlord within ninety (90)
days following the delivery of the respective Premises, Expansion Space and any
First Offer Space to Tenant, and which measurements are subject to verification
from time to time by Landlord through Landlord's planner/designer, and such
verification shall be made in accordance with the provisions of this Section
-------
1.4. The determination of Landlord's planner/designer shall be conclusive and
- ---
binding upon the parties. In the event that Landlord's planner/designer
determines that the rentable square footage shall be different from those set
forth in this Lease, all amounts, percentages and figures appearing or referred
to in this Lease based upon such incorrect rentable square feet (including,
without limitation, the amount of the Base Rent and Tenant's Share) shall be
modified in accordance with such determination. If such determination is made,
it will be confirmed in writing by Landlord to Tenant.
*CONFIDENTIAL TREATMENT REQUESTED CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
-2-
<PAGE>
ARTICLE 2
---------
LEASE TERM; OPTION TERMS
------------------------
2.1 Lease Term. The terms and provisions of this Lease shall be effective
----------
as of the date of this Lease. The term of this Lease (the "Lease Term") shall
be as set forth in Section 3.1 of the Summary, shall commence on the date set
-----------
forth in Section 3.2 of the Summary (the "Lease Commencement Date"), and shall
-----------
terminate on the date set forth in Section 3.3 of the Summary (the "Lease
-----------
Expiration Date") unless this Lease is sooner terminated as hereinafter
provided. For purposes of this Lease, the term "Lease Year" shall mean each
consecutive twelve (12) month period during the Lease Term; provided, however,
that the last Lease Year shall end on the Lease Expiration Date. At any time
during the Lease Term, Landlord or Tenant may deliver to the other party a
notice in the form as set forth in Exhibit C, attached hereto, as a confirmation
---------
only of the information set forth therein, which receiving party shall execute
and return such notice to the other party within ten (10) days of receipt
thereof.
2.2 Option Term.
-----------
2.2.1 Option Right. Landlord hereby grants to Tenant two (2)
------------
consecutive options to extend the Lease Term for a period of five (5) years each
(each, an "Option Term"), each of which options shall be exercisable only by
written notice delivered by Tenant to Landlord as provided below, provided that,
as of the date of delivery of any such notice, Tenant is not in default under
this Lease and Tenant has not previously been in default under this Lease beyond
any applicable cure periods more than three (3) times. Upon the proper exercise
of any such option to extend, and provided that, as of the end of the initial
Lease Term or initial Option Term, Tenant is not in default under this Lease
beyond any applicable cure periods and Tenant has not previously been in default
under this Lease beyond any applicable cure periods more than three (3) times,
the Lease Term, as it applies to the Premises, shall be extended for the
applicable Option Term. The rights contained in this Section 2.2 shall be
-----------
personal to the Original Tenant (and any Permitted Affiliates) and may only be
exercised by the Original Tenant and any assignee (including any Permitted
Affiliate) to which Tenant's entire interest in this Lease has been assigned
pursuant to Article 14 below, and may only be exercised by the Original Tenant
----------
or such assignee, as the case may be (but not by any sublessee or other
transferee of Tenant's interest in this Lease or the Premises) if the Original
Tenant or such assignee, as the case may be, occupies at least seventy percent
(70%) of the Premises as of the date Tenant purports to exercise the right to
lease the Expansion Space.
2.2.2 Option Rent. The "Rent," as that term is defined in Section
----------- -------
4.1, below, payable by Tenant during the applicable Option Term (the "Option
- ---
Rent") shall be equal to the greater of (i) the "Fair Rental Value" for the
Premises as of the commencement of the then applicable Option Term, and (ii) the
Rent payable by Tenant for the period immediately prior to the end of the Lease
Term or then applicable Option Term. The "Fair Rental Value" shall mean the
rent (including the obligation to directly pay electrical and janitorial
expenses and including additional rent and considering any "base year" or
"expense stop" applicable thereto), including all escalations, at which tenants
using their premises predominantly for telecommunications oriented purposes
(including without limitation the One Wilshire and 611 Wilshire buildings
located in Los Angeles, California), as of the commencement of the applicable
Option Term, are leasing non-sublease, non-encumbered, non-equity space
comparable in size, location and quality to the Premises for a term of five (5)
years, which comparable space is located in the Building or in comparable
buildings in the downtown Los Angeles office market.
2.2.3 Exercise of Option. The applicable option contained in this
------------------
Section 2.2 shall be exercised by Tenant, if at all, and only in the following
- -----------
manner: (i) Tenant shall deliver written notice to Landlord not more than
eighteen (18) months nor less than nine (9) months prior to the expiration of
the applicable Lease or Option Term, stating that Tenant may be interested in
exercising its option; (ii) Landlord, after receipt of Tenant's notice, shall
deliver notice (the "Option Rent Notice") to Tenant not less than seven (7)
months prior to the expiration of the applicable Lease or Option Term, setting
forth Landlord's determination of the Option Rent; and (iii) if Tenant wishes to
exercise such option, Tenant shall, on or before the date (the "Exercise Date")
which is the earlier of (A) the date occurring six (6) months prior to the
expiration of the applicable Lease or Option Term, and (B) the date occurring
thirty (30) days after Tenant's receipt of the Option Rent Notice, exercise the
option by delivering written notice thereof to Landlord ("Tenant's Exercise
Notice"), and concurrent with, such exercise, and in Tenant's Exercise Notice,
Tenant may, at its option, object to the Option Rent contained in the Option
Rent Notice, in which case the parties shall follow the procedure, and the
Option Rent shall be determined, as set forth in Section 2.2.4 below. Tenant's
failure to deliver Tenant's Exercise Notice on or before the Exercise Date,
shall be deemed to constitute Tenant's waiver of its extension rights hereunder.
2.2.4. Determination of Option Rent. In the event Tenant timely and
----------------------------
appropriately objects in Tenant's Exercise Notice to the Option Rent initially
determined by Landlord, Landlord and
<PAGE>
Tenant shall attempt to agree upon the Option Rent, using their best good-faith
efforts. If Landlord and Tenant fail to reach agreement within thirty (30) days
following Landlord's receipt of Tenant's Exercise Notice objecting to the Option
Rent (the "Outside Agreement Date"), then each party shall submit to the other
party a separate written determination of the Option Rent within ten (10)
business days after the Outside Agreement Date, and such determinations shall be
submitted to arbitration in accordance with Sections 2.2.4.1 through 2.2.4.8
below. Failure of Tenant or Landlord to submit a written determination of the
Option Rent within such ten (10) business day period shall conclusively be
deemed to be the non-determining party's approval of the Option Rent submitted
within such ten (10) business day period by the other party.
2.2.4.1 Landlord and Tenant shall each appoint one arbitrator who
shall by profession be an independent real estate broker who shall have been
active over the five (5) year period ending on the date of such appointment in
the leasing of comparable commercial office buildings in Los Angeles County,
California. The determination of the arbitrators shall be limited solely to the
issue of whether Landlord's or Tenant's submitted Option Rent is the closest to
the actual Fair Market Rent for the Premises as determined by the arbitrators,
taking into account the requirements of Section 2 above. Each such arbitrator
shall be appointed within thirty (30) days after the Outside Agreement Date.
2.2.4.2 The two (2) arbitrators so appointed shall within ten (10)
days of the date of the appointment of the last appointed arbitrator agree upon
and appoint a third arbitrator who shall be qualified under the same criteria
set forth hereinabove for qualification of the initial two (2) arbitrators.
2.2.4.3 The three (3) arbitrators shall within thirty (30) days after
the appointment of the third arbitrator reach a decision as to whether the
parties shall use Landlord's or Tenant's submitted Option Rent and shall notify
Landlord and Tenant thereof.
2.2.4.4 The decision of the majority of the three (3) arbitrators
shall be binding upon Landlord and Tenant.
2.2.4.5 If either Landlord or Tenant fails to appoint an arbitrator
within thirty (30) days after the applicable Outside Agreement Date, the
arbitrator appointed by one of them shall reach a decision, notify Landlord and
Tenant thereof, and such arbitrator's decision shall be binding upon Landlord
and Tenant.
2.2.4.6 If the two (2) arbitrators fail to agree upon and appoint a
third arbitrator within the time period provided in Section 2.2.4.2 above, then
the parties shall mutually select the third arbitrator. If Landlord and Tenant
are unable to agree upon the third arbitrator within ten (10) days, then either
party may, upon at least five (5) days prior written notice to the other party,
request the Presiding Judge of the Los Angeles County Superior Court, acting in
his private and nonjudicial capacity, to appoint the third arbitrator. Following
the appointment of the third arbitrator, the panel of arbitrators shall within
thirty (30) days thereafter reach a decision as to whether Landlord's or
Tenant's submitted Option Rent shall be used and shall notify Landlord and
Tenant thereof.
2.2.4.7 The cost of the arbitrators and the arbitration proceeding
shall be paid by Landlord and Tenant equally, except that each party shall pay
for the cost of its own witnesses and attorneys.
2.2.4.8 Notwithstanding any such determination of Fair Market Rent by
any such arbitrators, in no event shall the Annual Base Rent payable by Tenant
during the Option Term be less than the Annual Base Rent payable by Tenant for
the Lease Year immediately preceding Tenant's exercise of the applicable Option
Term.
-2-
<PAGE>
2.3 Delay in Delivery of Possession/Early Occupancy.
-----------------------------------------------
2.3.1 Delay in Delivery of Possession. Landlord shall endeavor to
-------------------------------
deliver possession of the Premises to Tenant on or before December 1, 1999 (the
"Scheduled Delivery Date"). If Landlord fails to deliver the Premises to Tenant
on or before the Scheduled Delivery Date, Landlord shall not be in default under
this Lease, and shall not be liable to Tenant for any damages or expenses
resulting therefrom. In such event the Lease Commencement Date shall be delayed
(i) day for day for each such day of Landlord Delay for the first sixty (60)
days of such delay beyond the Scheduled Delivery Date (the "First Delay
Period"), (ii) two (2) days for each such day of Landlord Delay beyond the First
Delay Period until the date which is one hundred twenty (120) days following the
Scheduled Delivery Date (the "Second Delay Period"), and (iii) three (3) days
for each such day of Landlord Delay beyond the Second Delay Period until the
date which is one hundred eighty (180) days following the Scheduled Delivery
Date (the "Third Delay Period"). Notwithstanding the foregoing limitation on
Landlord's liability to the contrary, if Landlord fails to deliver possession of
the Premises to Tenant on or before June 1, 2000 (the "Outside Delivery Date"),
then Tenant, as its sole and exclusive remedy, shall have the right to terminate
this Lease by written notice delivered to Landlord by no later than June 15,
2000. Notwithstanding the foregoing, Tenant shall not be entitled to either (i)
the Lease Commencement Date delays set forth in this Section 2.3.1(ii) and (iii)
--------- -----
hereinabove, or (ii) the termination right set forth in this Section 2.3.1, if
-------------
Landlord's inability to deliver the Premises to Tenant on the Scheduled Delivery
Date or Outside Delivery Date, as applicable, results from a Force Majeure Event
described in Section 29.16 below.
-------------
2.3.2 Early Occupancy. If Landlord delivers possession of the
---------------
Premises to Tenant prior to the Lease Commencement Date, all the provisions of
this Lease shall apply with respect to Tenant's possession and/or occupancy of
the Premises, except that Tenant shall not be obligated to pay Base Rent during
any such early occupancy period.
ARTICLE 3
---------
BASE RENT
---------
3.1 Base Rent. Subject to Section 3.2 below, Tenant shall pay, without
--------- -----------
prior notice or demand, to Landlord or Landlord's agent at the management office
of the Project, or, at Landlord's option, at such other place as Landlord may
from time to time designate in writing, by a check for currency which, at the
time of payment, is legal tender for private or public debts in the United
States of America, base rent for the Premises ("Base Rent") as set forth in
Section 4 of the Summary, payable in equal monthly installments as set forth in
- ---------
Section 4 of the Summary in advance on or before the first day of each and every
- ---------
calendar month during the Lease Term, without any setoff or deduction whatsoever
except as otherwise set forth herein. The Base Rent for the first full month of
the Lease Term shall be paid at the time of Tenant's execution of this Lease.
If any Rent payment date (including the Lease Commencement Date) falls on a day
of the month other than the first day of such month or if any payment of Rent is
for a period which is shorter than one month, the Rent for any fractional month
shall accrue on a daily basis for the period from the date such payment is due
to the end of such calendar month or to the end of the Lease Term at a rate per
day which is equal to 1/365 of the applicable annual Rent. All other payments
or adjustments required to be made under the terms of this Lease that require
proration on a time basis shall be prorated on the same basis.
3.2 Base Rent Abatement. Notwithstanding anything to the contrary
-------------------
contained in Section 3.1, Landlord hereby waives Tenant's obligation to pay Base
-----------
Rent for [*] rentable square feet of the initial Premises (the "Rent Abatement
Space") for the first [*] ([*]) months after the Lease Commencement Date (the
"Abatement Period"); provided, however, that if at any time during the Abatement
Period (i) Tenant commences to utilize any portion of the Rent Abatement Space
for installation or operation of Customer or Tenant's telecommunications
equipment, or (ii) Landlord issues a notice to Tenant respecting a default on
the part of Tenant which default is not cured within the applicable grace
period, if any, Landlord's agreement to waive payment of Base Rent shall (a) in
the event of item (i) above, be immediately revoked without further notice to
Tenant and the rights of Tenant pursuant to this Section 3.2 shall be null and
-----------
void with respect to the portion of the Rent Abatement Space from which Tenant
has commenced business operations, and (b) in the event of item (ii) above, be
completely and immediately revoked without further notice to Tenant and the
rights of Tenant pursuant to this Section 3.2 shall be null and void. In any
-----------
such notice given by Landlord, Landlord shall have the right to demand any and
all Base Rent which would have been due and payable in accordance with the Lease
absent the waiver contained in this Section 3.2. Notwithstanding anything to
-----------
the contrary contained in this Section 3.2, Tenant shall be required to make all
-----------
payments of Direct Expenses and Additional Rent during the Abatement Period and
throughout the Lease Term.
*CONFIDENTIAL TREATMENT REQUESTED CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
ARTICLE 4
---------
ADDITIONAL RENT
---------------
4.1 General Terms. In addition to paying the Base Rent specified in
-------------
Article 3 of this Lease, Tenant shall pay "Tenant's Share" of the annual "Direct
- ---------
Expenses," as those terms are defined in Sections 4.2.6 and 4.2.2 of this Lease,
-------------- -----
respectively allocated to the tenants of the Building, to the extent such Direct
Expenses allocated to the tenants of the Building are in excess of Tenant's
share of Direct Expenses applicable to the "Base Year," as that term is defined
in Section 4.2.1 of this Lease. Such payments by Tenant, together with any and
-------------
all other amounts payable by Tenant to Landlord pursuant to the terms of this
Lease (including without limitation the Conduit Rental described in Section 6.4
-----------
below), are hereinafter collectively referred to as the "Additional Rent", and
the Base Rent and the Additional Rent are herein collectively referred to as
"Rent." All amounts due under this Article 4 as Additional Rent shall be
---------
payable for the same periods and in the same manner as the Base Rent. Without
limitation on other obligations of Tenant which survive the expiration of the
Lease Term, the obligations of Tenant to pay the Additional Rent provided for in
this Article 4 shall survive the expiration of the Lease Term.
---------
4.2 Definitions of Key Terms Relating to Additional Rent. As used in this
----------------------------------------------------
Article 4, the following terms shall have the meanings hereinafter set forth:
- ---------
4.2.1 "Base Year" shall mean the period set forth in Section 5 of the
---------
Summary.
4.2.2 "Direct Expenses" shall mean "Operating Expenses" and "Tax
Expenses."
4.2.3 "Expense Year" shall mean each calendar year in which any
portion of the Lease Term falls, through and including the calendar year in
which the Lease Term expires, provided that Landlord, upon notice to Tenant, may
change the Expense Year from time to time to any other twelve (12) consecutive
month period, and, in the event of any such change, Tenant's Share of Direct
Expenses shall be equitably adjusted for any Expense Year involved in any such
change.
4.2.4 "Operating Expenses" shall mean all expenses, costs and amounts
of every kind and nature which Landlord pays or accrues during any Expense Year
because of or in connection with the ownership, management, maintenance,
security, repair, replacement, restoration or operation of the Project, or any
portion thereof. Without limiting the generality of the foregoing, Operating
Expenses shall specifically include any and all of the following: (i) the cost
of supplying all utilities (except for utilities provided to the Premises or to
the premises of other tenants in the Building), the cost of operating,
repairing, maintaining, and renovating the utility, telephone, mechanical,
sanitary, storm drainage, and elevator systems, and the cost of maintenance and
service contracts in connection therewith; (ii) the cost of licenses,
certificates, permits and inspections and the cost of contesting any
governmental enactments which may affect Operating Expenses, and the costs
incurred in connection with a transportation system management program or
similar program; (iii) the cost of all insurance carried by Landlord in
connection with the Project, and the amounts of insurance deductibles to the
extent otherwise includable in Operating Expenses; (iv) the cost of landscaping,
relamping, and all supplies, tools, equipment and materials used in the
operation, repair and maintenance of the Project, or any portion thereof; (v)
costs incurred in connection with any parking areas servicing the Building
(including without limitation the Parking Structure); (vi) fees and other costs,
including management fees, consulting fees, legal fees and accounting fees, of
all contractors and consultants in connection with the management, operation,
maintenance and repair of the Project (including city sidewalks); (vii) payments
under any equipment rental agreements and the fair rental value of any
management office space; (viii) wages, salaries and other compensation and
benefits, including taxes levied thereon, of all persons engaged in the
operation, maintenance and security of the Project; (ix) costs under any
instrument pertaining to the sharing of costs by the Project; (x) operation,
repair, maintenance and replacement of all systems and equipment and components
thereof of the Building; (xi) the cost of janitorial (except for janitorial
services provided to the Premises or to the premises of other tenants in the
Building), alarm, security and other services, replacement of wall and floor
coverings, ceiling tiles and fixtures in the Project and in the Common Areas,
maintenance and replacement of curbs and walkways, repair to roofs and re-
roofing; (xii) amortization (including interest on the unamortized cost at a
rate equal to the floating commercial loan rate announced from time by Bank of
America, a national banking association, or its successors, as its prime rate,
plus two percent (2%) per annum (the "Interest Rate")) of the cost of acquiring
or the rental expense of personal property used in the maintenance, operation
and repair of the Project, or any portion thereof; (xiii) the cost of capital
improvements or other costs incurred in connection with the Project (A) which
are intended to effect economies in the operation or maintenance of the Project,
or any portion thereof, to the extent of any reasonably anticipated savings by
Landlord (B) that are required to comply with present or anticipated
conservation programs, (C) which are replacements or modifications of
nonstructural items located in the Project required to keep the Project in good
order or condition, or (D) that are required under any governmental law or
regulation enacted after the Lease Commencement Date; provided, however, that
any capital expenditure shall be amortized (including interest on the
<PAGE>
unamortized cost at the Interest Rate in effect at the time such expenditure is
placed in service) over its useful life as Landlord shall reasonably determine;
(xiv) costs, fees, charges or assessments imposed by, or resulting from any
mandate imposed on Landlord by, any federal, state or local government for fire
and police protection, trash removal, community services, or other services
which do not constitute "Tax Expenses" as that term is defined in Section 4.2.5,
-------------
below; and (xv) payments under any easement, license, operating agreement,
declaration, restrictive covenant, or instrument pertaining to the sharing of
costs by the Building. If the Project is not at least ninety-five percent (95%)
occupied during all or a portion of any Expense Year, Landlord shall make an
adjustment to the components of Operating Expenses for such year to determine
the amount of Operating Expenses that would have been incurred had the Building
been ninety-five percent (95%) occupied; and the amount so determined shall be
deemed to have been the amount of Operating Expenses for such year. Operating
Expenses for the Base Year shall not include market-wide labor-rate increases
due to extraordinary circumstances, including, but not limited to, boycotts and
strikes, and utility rate increases due to extraordinary circumstances
including, but not limited to, conservation surcharges, boycotts, embargoes or
other shortages, or amortized costs relating to capital improvements provided
that, upon written request by Tenant, Landlord shall give Tenant notice of any
such items which were not included in Operating Expenses for the Base Year. In
no event shall the components of Direct Expenses for any Expense Year related to
electrical costs be less than the components of Direct Expenses related to
electrical costs in the Base Year.
In the event Landlord does not carry earthquake insurance during the
Base Year, and if Landlord adds earthquake insurance during any subsequent
Expense Year, then from and after the date upon which such earthquake insurance
is so added and continuing throughout the period during which such earthquake
insurance is carried, Operating Expenses for the Base Year shall be deemed to be
increased during the period of the Lease Term for which such earthquake
insurance is maintained by Landlord in an amount equal to the actual cost of
such earthquake insurance in the Expense Year it was implemented by Landlord,
Notwithstanding the foregoing, for purposes of this Lease, Operating
Expenses shall not, however, include:
(A) bad debt expenses, rent loss or reserves for bad debts and
interest, principal payments, attorneys' fees, points and fees on debts,
including lender costs and closing costs (except in connection with the
financing of items which may be included in Operating Expenses) or amortization
on any ground lease, mortgage or mortgages or any other debt instrument
encumbering the Building or Project;
(B) marketing costs, including leasing commissions, incurred in
connection with lease, sublease and/or assignment transactions with present or
prospective tenants or other occupants of the Building;
(C) legal fees incurred in negotiating and enforcing tenant leases or
other occupancy agreements or the defense of Landlord's title to or interest in
the Project;
(D) costs, including permit, license and inspection costs or
architects and engineers fees, incurred with respect to the installation of
other tenants' or occupants' improvements made for tenants or other occupants in
the Project or incurred in renovating or otherwise improving, decorating,
painting or redecorating vacant space for tenants or other occupants in the
Project;
(E) the cost of providing any service directly to and paid directly
by any tenant of the Building;
(F) costs of any items (including, but not limited to, costs incurred
by Landlord for the repair of damage to the Project or for items which are
reimbursable under any contractor, manufacturer or supplier warranty), to the
extent Landlord receives reimbursement from insurance proceeds (or would have
received had Landlord maintained the insurance required under this Lease),
condemnation proceeds or from a contractor, manufacturer, supplier or any other
third party (other than reimbursement by tenants pursuant to the Operating
Expenses pass-through provisions of their leases); such proceeds shall be
credited to Operating Expenses in the year in which received, except that any
deductible amount under any insurance policy shall be included within Operating
Expenses in an amount of up to but not exceeding twenty thousand dollars
($20,000) per Expense Year;
(G) costs of capital additions, capital alterations or capital
improvements (including any replacements) in excess of a total of $25,000 for
the Building per Expense Year, except those set forth in Section 4.2.4 (xiii)
--------------------
above;
(H) depreciation, amortization and interest payments, except as set
forth in Sections 4.2.4 (vii), (xii) and (xiii) above, and except on materials,
--------------------------------------
tools, supplies and vendor-type equipment purchased by Landlord to enable
Landlord to supply services Landlord might otherwise contract for with
-2-
<PAGE>
a third party, where such depreciation, amortization and interest payments would
otherwise have been included in the charge for such third party's services, all
as determined in accordance with standard accounting practices and when
depreciation or amortization is permitted or required, the item shall be
amortized over its reasonably anticipated useful life;
(I) Tax Expenses;
(J) expenses in connection with services, utilities or other benefits
which are not offered to Tenant or for which Tenant is charged for directly but
which are provided to another tenant or occupant of the Project without charge;
(K) costs and the overhead and profit increment paid to Landlord or
to subsidiaries or affiliates of Landlord for goods and/or services in the
Project to the extent the same exceeds the costs of such by unaffiliated third
parties on a competitive basis;
(L) Landlord's general corporate overhead and general and
administrative expenses, including without limitation, all compensation above
that which is normal and customary in the Los Angeles market to employees of
Landlord above the level of building manager;
(M) advertising and promotional expenditures, and costs of signs in
or on the Project identifying the owner of the Project or other tenants' signs;
(N) tax penalties on the Project arising out of Landlord's acts or
omissions incurred as a result of Landlord's negligence, inability or
unwillingness to make payments or file returns when due;
(O) costs arising from Landlord's charitable or political
contributions;
(P) costs, penalties, fines, awards or interest necessitated by or
resulting from the gross negligence or willful misconduct of Landlord, or any of
its agents, employees or independent contractors;
(Q) rent and other payments under any ground or underlying lease of
the Building or Project;
(R) the cost of correcting any latent defects in the initial design
or construction of the Building or the Project improvements other than any cost
arising out of the Tenant Improvements or Alterations;
(S) costs of removing or remediating any asbestos or asbestos
containing materials in the Project;
(T) costs incurred to remove, remedy, contain, or treat Hazardous
Materials (defined in Section 5.2.4 below), which (i) were in existence in the
-------------
Building or Project prior to the Lease Commencement Date, (ii) are brought into
the Building or Project after the Lease Commencement Date by Landlord or
Landlord's employees, agents, contractors or other tenants and which are of such
a nature, at the time of such introduction, that a federal, state or municipal
governmental authority, if it had then had knowledge of such hazardous materials
would have then required the removal of such hazardous materials or other
remedial or containment action with respect thereto or (iii) migrated onto the
Project after the Lease Commencement Date, and which are of such a nature, at
the time off such introduction, that a federal, state, or municipal government
authority, if it had knowledge of such Hazardous Material migration of the time
of such migration would have then required the removal of such Hazardous
Material or other remedial or containment action with respect thereto;
(U) wages or salaries of employees or attendants in parking garages,
newsstands or other commercial concessions, if any, operated by Landlord in the
Building;
(V) costs of purchasing, installing and replacing artwork; and
(W) the cost of any management fees paid to the manager of the
Project in excess of the management fee being charged or paid by other landlords
for first class office buildings in the downtown Los Angeles office market.
4.2.5 Taxes.
-----
4.2.5.1 "Tax Expenses" shall mean all federal, state, county, or
local governmental or municipal taxes, fees, charges or other impositions of
every kind and nature, whether general, special, ordinary or extraordinary,
(including, without limitation, real estate taxes, general and special
assessments, transit taxes, leasehold taxes or taxes based upon the receipt of
rent, including gross receipts or sales taxes applicable to the receipt of rent,
unless required to be paid by Tenant, personal
-3-
<PAGE>
property taxes imposed upon the fixtures, machinery, equipment, apparatus,
systems and equipment, appurtenances, furniture and other personal property used
in connection with the Project, or any portion thereof), which shall be paid or
accrued during any Expense Year (without regard to any different fiscal year
used by such governmental or municipal authority) because of or in connection
with the ownership, leasing and operation of the Project, or any portion
thereof.
4.2.5.2 Tax Expenses shall include, without limitation: (i)
any tax on the rent, right to rent or other income from the Project, or any
portion thereof, or as against the business of leasing the Project, or any
portion thereof; (ii) any assessment, tax, fee, levy or charge in addition to,
or in substitution, partially or totally, of any assessment, tax, fee, levy or
charge previously included within the definition of real property tax, it being
acknowledged by Tenant and Landlord that Proposition 13 was adopted by the
voters of the State of California in the June 1978 election ("Proposition 13")
and that assessments, taxes, fees, levies and charges may be imposed by
governmental agencies for such services as fire protection, street, sidewalk and
road maintenance, refuse removal and for other governmental services formerly
provided without charge to property owners or occupants, and, in further
recognition of the decrease in the level and quality of governmental services
and amenities as a result of Proposition 13, Tax Expenses shall also include any
governmental or private assessments or the Project's contribution towards a
governmental or private cost-sharing agreement for the purpose of augmenting or
improving the quality of services and amenities normally provided by
governmental agencies; (iii) any assessment, tax, fee, levy, or charge allocable
to or measured by the area of the Premises or the Rent payable hereunder,
including, without limitation, any business or gross income tax or excise tax
with respect to the receipt of such rent, or upon or with respect to the
possession, leasing, operating, management, maintenance, alteration, repair, use
or occupancy by Tenant of the Premises, or any portion thereof; and (iv) any
assessment, tax, fee, levy or charge, upon this transaction or any document to
which Tenant is a party, creating or transferring an interest or an estate in
the Premises.
4.2.5.3 Any costs and expenses (including, without
limitation, reasonable attorneys' fees) incurred in attempting to protest,
reduce or minimize Tax Expenses shall be included in Tax Expenses in the Expense
Year such expenses are paid. Tax refunds shall be credited against Tax Expenses
and refunded to Tenant regardless of when received, based on the Expense Year to
which the refund is applicable, provided that in no event shall the amount to be
refunded to Tenant for any such Expense Year exceed the total amount paid by
Tenant as Tax Expenses under this Article 4 for such Expense Year. If Tax
---------
Expenses for any period during the Lease Term or any extension thereof are
increased after payment thereof for any reason, including, without limitation,
error or reassessment by applicable governmental or municipal authorities,
Tenant shall pay Landlord upon demand Tenant's Share of any such increased Tax
Expenses included by Landlord as Building Tax Expenses pursuant to the terms of
this Lease. Notwithstanding anything to the contrary contained in this Section
-------
4.2.5 there shall be excluded from Tax Expenses (i) all excess profits taxes,
- -----
franchise taxes, gift taxes, capital stock taxes, inheritance and succession
taxes, estate taxes, federal and state income taxes, and other taxes to the
extent applicable to Landlord's general or net income (as opposed to rents,
receipts or income attributable to operations at the Project), (ii) any items
included as Operating Expenses, and (iii) any items paid by Tenant under Section
-------
4.5 of this Lease.
- ---
4.2.5.4 The amount of Tax Expenses for the Base Year
attributable to the valuation of the Project, inclusive of tenant improvements,
shall be known as "Base Taxes." If in any comparison year subsequent to the Base
Year, the amount of Tax Expenses decreases below the amount of Base Taxes, then
for purposes of all subsequent comparison years, including the comparison year
in which such decrease in Tax Expenses occurred, the Base Taxes shall be
decreased by an amount equal to the decrease in Tax Expenses.
4.2.6 "Tenant's Share" shall mean the percentage set forth in Section
-------
6 of the Summary, and is based on the ratio of the rentable square footage of
- -
the Premises to the total rentable square footage of the Building.
4.3 Allocation of Direct Expenses; Cost Pools. Landlord shall have the
-----------------------------------------
right, from time to time, to equitably allocate some or all of the Direct
Expenses for the Project among different portions or occupants of the Project
(the "Cost Pools"), in Landlord's reasonable discretion. Such Cost Pools may
include, but shall not be limited to, the office space tenants and
telecommunications tenants of the Project. The Direct Expenses within each such
Cost Pool shall be allocated and charged to the tenants within such Cost Pool in
an equitable manner.
4.4 Calculation and Payment of Additional Rent. Tenant shall pay to
------------------------------------------
Landlord, in the manner set forth in Section 4.4.1 below, the Additional Rent as
-------------
follows:
4.4.1 Calculation of Excess. If for any Expense Year ending or
---------------------
commencing within the Lease Term, Tenant's Share of Direct Expenses for such
Expense Year exceeds Tenant's Share of the amount of Direct Expenses applicable
to the Base Year, then Tenant shall pay to Landlord, in the manner
-4-
<PAGE>
set forth in Section 4.4.2, below, and as Additional Rent, an amount equal to
-------------
such excess of the Direct Expenses, as applicable (the "Excess").
4.4.2 Statement of Actual Direct Expenses and Payment by Tenant.
---------------------------------------------------------
Landlord shall endeavor to give to Tenant following the end of each Expense
Year, a statement (the "Statement") which shall state the Direct Expenses
incurred or accrued for such preceding Expense Year, and which shall indicate
the amount of the Excess. Within ten (10) days of receiving the Statement for
each Expense Year, if an Excess is present, Tenant shall pay the full amount of
the Excess for such Expense Year, less the amounts, if any, paid during such
Expense Year as "Estimated Excess," as that term is defined in Section 4.4.3
-------------
below. If the Statement indicates that the amount of Estimated Excess paid by
Tenant to Landlord for the applicable Expense Year exceeds the actual amount of
the Excess for such year, Landlord shall refund to Tenant such overpayment
within thirty (30) days after such Statement is delivered to Tenant. The
failure of Landlord to timely furnish the Statement for any Expense Year shall
not prejudice Landlord or Tenant from enforcing its rights under this Article 4.
---------
Even though the Lease Term has expired and Tenant has vacated the Premises, when
the final determination is made of Tenant's Share of Direct Expenses for the
Expense Year in which this Lease terminates, if an Excess if present, Tenant
shall immediately pay to Landlord such amount (or Landlord shall, within such
thirty (30) day period, refund to Tenant any overpayment of any Estimated Excess
paid by Tenant for such Expense Year). The provisions of this Section 4.4.2
-------------
shall survive the expiration or earlier termination of the Lease Term.
4.4.3 Statement of Estimated Direct Expenses. In addition, Landlord
--------------------------------------
shall endeavor to give Tenant a yearly expense estimate statement (the "Estimate
Statement") which shall set forth Landlord's reasonable estimate (the
"Estimate") of what the total amount of Direct Expenses for the then-current
Expense Year shall be and the estimated excess (the "Estimated Excess") as
calculated by comparing the Direct Expenses for such Expense Year, which shall
be based upon the Estimate, to the amount of Direct Expenses for the Base Year.
The failure of Landlord to timely furnish the Estimate Statement for any Expense
Year shall not preclude Landlord from enforcing its rights to collect any
Estimated Excess under this Article 4, nor shall Landlord be prohibited from
---------
revising any Estimate Statement or Estimated Excess theretofore delivered to the
extent necessary. Thereafter, Tenant shall pay, with its next installment of
Base Rent due, a fraction of the Estimated Excess for the then-current Expense
Year (reduced by any amounts paid pursuant to the next to last sentence of this
Section 4.4.3). Such fraction shall have as its numerator the number of months
- -------------
which have elapsed in such current Expense Year, including the month of such
payment, and twelve (12) as its denominator. Until a new Estimate Statement is
furnished (which Landlord shall have the right to deliver to Tenant at any
time), Tenant shall pay monthly, with the monthly Base Rent installments, an
amount equal to one-twelfth (1/12) of the total Estimated Excess set forth in
the previous Estimate Statement delivered by Landlord to Tenant.
4.5 Taxes and Other Charges for Which Tenant Is Directly Responsible.
----------------------------------------------------------------
4.5.1 Tenant shall be liable for and shall pay ten (10) days before
delinquency, taxes levied against Tenant's equipment (including without
limitation Tenant's switching and antenna equipment), furniture, fixtures and
any other personal property located in or about the Premises. If any such taxes
on Tenant's equipment, furniture, fixtures and any other personal property are
levied against Landlord or Landlord's property or if the assessed value of
Landlord's property is increased by the inclusion therein of a value placed upon
such equipment, furniture, fixtures or any other personal property and if
Landlord pays the taxes based upon such increased assessment, which Landlord
shall have the right to do regardless of the validity thereof but only under
proper protest if requested by Tenant, Tenant shall upon demand repay to
Landlord the taxes so levied against Landlord or the proportion of such taxes
resulting from such increase in the assessment, as the case may be.
4.5.2 If the tenant improvements in the Premises, whether installed
and/or paid for by Landlord or Tenant and whether or not affixed to the real
property so as to become a part thereof, are assessed for real property tax
purposes at a valuation higher than the valuation at which tenant improvements
conforming to Landlord's "building standard" in other space in the Building are
assessed, then the Tax Expenses levied against Landlord or the property by
reason of such excess assessed valuation shall be deemed to be taxes levied
against personal property of Tenant and shall be governed by the provisions of
Section 4.5.1, above.
- -------------
4.5.3 Notwithstanding any contrary provision herein, Tenant shall pay
prior to delinquency any (i) rent tax or sales tax, service tax, transfer tax or
value added tax, or any other applicable tax on the rent or services herein or
otherwise respecting this Lease, (ii) taxes assessed upon or with respect to the
possession, leasing, operation, management, maintenance, alteration, repair, use
or occupancy by Tenant of the Premises or any portion of the Project, including
the Project parking facility; or (iii) taxes assessed upon this transaction or
any document to which Tenant is a party creating or transferring an interest or
an estate in the Premises.
-5-
<PAGE>
4.6 Tenant Audit. In the event Tenant disputes the amount of the Direct
------------
Expenses set forth in the Statement delivered by Landlord to Tenant pursuant to
Section 4.4.2 above, Tenant shall have the right, at Tenant's cost, after
reasonable notice to Landlord, to inspect, at Landlord's office during normal
business hours, Landlord's books and records directly relevant to the Direct
Expenses set forth in such Statement; provided, however, Tenant shall have no
right to conduct such inspection, have an audit performed by the Accountant as
described below, or object to or otherwise dispute the amount of the Direct
Expenses set forth in any Statement, unless Tenant does so within one (1) year
immediately following Landlord's delivery of the particular Statement in
question (the "Review Period"); provided, further, that notwithstanding any such
timely objection, dispute, inspection and/or audit, and as a condition precedent
to Tenant's exercise of its right of objection, dispute, inspection and/or audit
as set forth in this Section 4.6, Tenant shall not be permitted to withhold
-----------
payment of, and Tenant shall timely pay to Landlord, the full amounts as
required by the provisions of this Article 4 in accordance with such Statement.
However, such payment may be made under protest pending the outcome of any audit
which may be performed by the Accountant as described below. If after such
inspection, Tenant still disputes the amount of the Direct Expenses set forth in
the Statement, Tenant shall have the right, within the Review Period, to cause
an independent certified public accountant which shall be one of the "Big 5"
national accounting firms selected by Tenant which (i) has not represented or
been engaged by Tenant on Tenant's behalf in the past ten (10) years, and (ii)
is not paid on a contingent fee basis (the "Accountant"), to commence and
complete an audit of Landlord's books and records directly relevant to
Landlord's calculation of the Direct Expenses to determine the proper amount of
the Direct Expenses incurred and amounts payable by Tenant for the Expense Year
which is the subject of such Statement, which audit shall be final and binding
upon Landlord and Tenant. If such audit reveals that Landlord has over-charged
Tenant, then within thirty (30) days after the results of such audit are made
available to Landlord, Landlord shall reimburse to Tenant the amount of such
over-charge. If the audit reveals that the Tenant was under-charged, then
within thirty (30) days after the results of such audit are made available to
Tenant, Tenant shall reimburse to Landlord the amount of such under-charge.
Tenant agrees to pay the cost of such audit unless it is subsequently determined
that Landlord's original Statement which was the subject of such audit was in
error to Tenant's disadvantage by more than five percent (5%), in which case
Landlord shall reimburse Tenant for the reasonable cost of such audit. The
payment by Tenant of any amounts pursuant to this Article 4 shall not preclude
Tenant from questioning the correctness of any Statement provided by Landlord at
any time during the Review Period, but the failure of Tenant to object thereto,
conduct and complete its inspection and request that Landlord have the
Accountant conduct and finalize the audit as described above prior to the
expiration of the Review Period shall be conclusively deemed Tenant's approval
of the Statement in question and the amount of Direct Expenses shown thereon.
ARTICLE 5
---------
USE OF PREMISES
---------------
5.1 Use. Tenant shall use the Premises solely for the Permitted Use set
---
forth in Section 7 of the Summary, and Tenant shall not use or permit the
---------
Premises to be used for any other purpose or purposes whatsoever. Tenant
further covenants and agrees that it shall not use, or suffer or permit any
person or persons to use, the Premises or any part thereof for any use or
purpose contrary to the Rules and Regulations, or in violation of the laws of
the United States of America, the State of California, or the ordinances,
regulations or requirements of the local municipal or county governing body or
other lawful authorities having jurisdiction over the Project (including laws
pertaining to Hazardous Materials, as defined below). Tenant shall comply with
the Rules and Regulations. Landlord shall not be responsible to Tenant for the
nonperformance of any of such Rules and Regulations by or otherwise with respect
to the acts or omissions of any other tenants or occupants of the Project.
Tenant shall comply with all recorded covenants, conditions, and restrictions
now or hereafter affecting the Project.
5.2 Hazardous Materials.
-------------------
5.2.1 Prohibition on Use. Tenant shall not use or allow another
------------------
person or entity to use any part of the Premises for the storage, use,
treatment, manufacture or sale of Hazardous Materials. Landlord acknowledges,
however, that Tenant will maintain products in the Premises which are incidental
to the operation of its telecommunications and ancillary offices, such as dry or
gel cell batteries, photocopy supplies, secretarial supplies and limited
janitorial supplies, which products contain chemicals which are categorized as
Hazardous Materials. Landlord agrees that the use of such products in the
Premises in compliance with all applicable laws and in the manner in which such
products are designed to be used shall not be a violation by Tenant of this
Section 5.2.1.
- -------------
5.2.2 Indemnity. Tenant agrees to indemnify, defend, protect and
---------
hold Landlord and the Landlord Parties (as defined in Section 10.1 below)
------------
harmless from and against any and all claims, actions, administrative
proceedings (including informal proceedings), judgments, damages, punitive
damages, penalties, fines, costs, liabilities, interest or losses, including
reasonable attorneys' fees and expenses, consultant fees, and expert fees,
together with all other costs and expenses of any kind or
-6-
<PAGE>
nature, that arise during or after the Lease Term directly or indirectly from or
in connection with the presence, suspected presence, release or suspected
release of any Hazardous Materials in or into the air, soil, surface water or
groundwater at, on, about, under or within the Premises or Project or any
portion thereof, caused by Tenant, its customers, assignees or subtenants and/or
their respective agents, employees, contractors, licensees or invitees
(collectively, "Tenant Parties").
5.2.3 Remedial Work. In the event any investigation or monitoring of
-------------
site conditions or any clean-up, containment, restoration, removal or other
remedial work (collectively, the "Remedial Work") is required under any
applicable federal, state or local laws or by any judicial order, or by any
governmental entity as the result of operations or activities upon, or any use
or occupancy of any portion of the Premises by Tenant or the Tenant Parties,
Tenant shall perform or cause to be performed the Remedial Work in compliance
with such laws or order. All Remedial Work shall be performed by one or more
contractors, selected by Tenant and approved in advance in writing by Landlord.
All costs and expenses of such Remedial Work shall be paid by Tenant, including,
without limitation, the charges of such contractor(s), the consulting engineers,
and Landlord's reasonable attorneys' fees and costs incurred in connection with
monitoring or review of such Remedial Work.
5.2.4 Definition of Hazardous Materials. As used herein, the term
---------------------------------
"Hazardous Materials" means any hazardous or toxic substance, material or waste
which is or becomes regulated by any local governmental authority, the State of
California or the United States Government, including, without limitation, any
material or substance which is (i) defined or listed as a "hazardous waste,"
"extremely hazardous waste," "restricted hazardous waste," "hazardous substance"
or "hazardous material" under any applicable federal, state or local law or
administrative code promulgated thereunder, (ii) petroleum, or (iii) asbestos.
ARTICLE 6
---------
SERVICES AND UTILITIES
----------------------
6.1 Standard Tenant Services.
------------------------
6.1.1 Heating and air conditioning ("HVAC") service in the Premises
will be provided by Tenant, at Tenant's sole cost and expense, through separate
package units which shall be subject to the direct control of Tenant. Subject
to Landlord's prior written approval of Tenant's plans and specifications, such
approval not to be unreasonably withheld or delayed, Tenant shall have the right
to install in a location within the Premises and/or Project designated in
writing by Landlord "Tenant's HVAC Equipment" pursuant to Article 22 below. The
----------
acquisition and operation of Tenant's HVAC Equipment (including without
limitation the purchase, installation, and maintenance thereof) shall be at
Tenant's sole cost and expense, and the electrical consumption resulting from
Tenant's usage of Tenant's HVAC equipment shall be separately metered, billed to
Tenant and paid by Tenant pursuant to Section 6.1.2 below.
-------------
6.1.2 Tenant shall install in the Premises, at Tenant's sole cost and
expense and subject to Landlord's prior approval of the plans and specifications
therefore such approval not be unreasonably withheld or delayed, a transformer
tying into the Building's bus duct system to obtain an electrical supply for the
Premises providing up to 10,000 amps at 480 volts, three-phase wiring, through
two (2) separate bus ducts run to the Premises. The cost of such electrical
supply and all other electricity provided to the Premises shall be separately
metered to the Premises at Tenant's sole cost and expense (including without
limitation, the cost of any metering equipment or the installation cost
thereof). Tenant shall pay directly to Landlord within ten (10) days after
receipt of written demand and as Additional Rent under this Lease (and not as
part of Operating Expenses) the cost of all electricity and HVAC provided to
and/or consumed in the Premises and by all of Tenant's equipment (including
without limitation Tenant's HVAC Equipment) plus a Landlord administration fee
equal to two and one-half percent (2 1/2%) of the total utility bill for Tenant
at the Project. In addition, Tenant shall bear the cost of replacement of
lamps, starters and ballasts for lighting fixtures within the Premises. In the
event Tenant desires electric power in excess of the level set forth in the
first sentence in this Section 6.1.2 or available from Landlord ("Additional
-------------
Electrical Supply"), Tenant may, at its own expense, elect to make direct
arrangements with the Los Angeles Department of Water and Power to obtain such
Additional Electric Supply directly from the Department of Water and Power, if
feasible. Landlord makes no representations or warranties regarding such
arrangements (including their feasibility), but agrees to cooperate with Tenant
and the Department of Water and Power reasonably and in good faith in this
regard. The plans and specifications for any new vault or transformer space
(including, but not limited to, the location of such space within the Building,
which shall be designated by Landlord in its discretion, provided that Landlord
is willing to make such space available) and for any transformer, related
equipment, facilities or connections to provide the Additional Electrical
Supply, shall be subject to Landlord's prior written approval. Tenant agrees to
pay all bills from the Department of Water and Power for such direct electrical
service when due and shall pay a reasonable rental as established by Landlord in
its good faith, but sole, discretion for any new vault or transformer space used
by Tenant to provide the Additional Electrical Supply. The initial
-7-
<PAGE>
transformer to be installed by Tenant as described above, and any subsequent
transformers and other electrical equipment which Tenant elects to install to
provide Additional Electrical Supply to the Premises, shall sometimes be
referred to herein collectively as the "Electrical Equipment." Notwithstanding
anything in this Lease to the contrary, commencing on the earlier to occur of
(i) the date which is the thirty-sixth (36th) month of the Lease Term, and (ii)
the date upon which Tenant has placed ninety percent (90%) of its collocation
Customers in the Premises, Landlord shall have the right to meter and test
Tenant's connected peak amperage load used at the Premises, and in the event
that over a thirty (30) day period, Landlord's metering and testing procedures
demonstrate that Tenant is not utilizing on a daily average business day basis,
all of the amps initially reserved by Tenant in this Section 6.1.2, Landlord may
-------------
reclaim up to seventy-five percent of any amperage Landlord reasonably
determines through such process is being unused by Tenant.
6.1.3 Landlord shall not provide janitorial services to the Premises.
Tenant shall be solely responsible, at Tenant's sole cost and expense, for
keeping all areas of the Project used by Tenant, in a neat, clean and safe
condition, and for performing all janitorial services and other cleaning of the
Premises appropriate to maintain the Premises in a manner consistent with a
first-class telecommunications building; provided that Tenant shall use a
janitor on Landlord's designated Building janitorial list (which list shall
contain two or more janitorial companies) for all janitorial services within the
Project.
6.1.4 Landlord shall furnish unheated water from mains for drinking,
lavatory and toilet purposes drawn through fixtures installed by Landlord, or by
Tenant with Landlord's prior written consent, and heated water for lavatory
purposes from regular building supply in such quantities as required in
Landlord's judgment for the comfortable and normal use of the Premises. Tenant
shall pay Landlord, as Additional Rent, for any additional water which is
furnished for any other purpose. The amount that Tenant shall pay Landlord for
such additional water shall be the average price per gallon charged to the
Landlord for the Building by the entity providing water.
6.2 Interruption of Use. Tenant agrees that Landlord shall not be liable
-------------------
for damages, by abatement of Rent (except as expressly provided in Section 6.3
-----------
below) or otherwise, for failure to furnish or delay in furnishing any service
(including without limitation telephone, telecommunication and emergency power
services), or for any diminution or interruption in the quality or quantity
thereof, when such failure or delay or diminution is occasioned, in whole or in
part, by repairs, replacements, or improvements, by any strike, lockout or other
labor trouble, by inability to secure electricity, gas, water, or other fuel at
the Building or Project after commercially reasonable effort to do so, by any
accident or casualty whatsoever, by act or default of Tenant or other parties,
or by any other cause; and such failures or delays or diminution shall never be
deemed to constitute an eviction or disturbance of Tenant's use and possession
of the Premises or relieve Tenant from paying Rent or performing any of its
obligations under this Lease. Furthermore, Landlord shall not be liable under
any circumstances for a loss of, or injury to, property or for injury to, or
interference with, Tenant's business, including, without limitation, loss of
profits, however occurring, through or in connection with or incidental to a
failure to furnish any of the services or utilities as set forth in this Article
-------
6. Landlord may comply with voluntary controls or guidelines promulgated by any
- -
governmental entity relating to the use or conservation of energy, water, gas,
light or electricity or the reduction of automobile or other emissions without
creating any liability of Landlord to Tenant under this Lease, provided that
such voluntary compliance with such controls shall not unreasonable interfere
with Tenant's use or occupancy of the Premises. As a material inducement to
Landlord's entry into this Lease, Tenant waives and releases any rights it may
have to make repairs at Landlord's expense under Sections 1941 and 1942 of the
California Civil Code.
6.3 Special Abatement of Rent. Notwithstanding the provisions of Section
------------------------- -------
6.2 above to the contrary, in the event that during the Lease Term Tenant is
- ---
prevented from using, and does not use, the Premises or any portion thereof as a
result of (i) any failure by Landlord to provide any of the essential utilities
and services to the Premises required to be provided by Landlord under Section
-------
6.1 of this Lease, (ii) any failure by Landlord to provide access to the
- ---
Premises (including as a result of any Renovations undertaken by Landlord
pursuant to Section 29.30 of this Lease or construction pursuant to Section
------------- -------
29.32), (iii) any act by Landlord which unreasonably prevents Tenant from
- -----
conducting its business in the Premises (and Tenant does not conduct its
business in the Premises as a result of such act) or (iv) Landlord's failure to
promptly, timely and diligently perform any repairs, maintenance or alterations
required by this Lease to be performed by Landlord, after the Lease Commencement
Date, which substantially interferes with Tenant's use of the Premises (any such
set of circumstances as set forth in items (i) through (iv), above, to be known
as an "Abatement Event"), then Tenant shall give Landlord notice of such
Abatement Event. If such Abatement Event continues for five (5) consecutive
business days after Landlord's receipt of any such notice from Tenant
("Eligibility Period"), then the Base Rent shall be abated or reduced, as the
case may be, during such time after the Eligibility Period that Tenant continues
to be so prevented from using, and does not use, the Premises or a portion
thereof, in the proportion that the rentable area of the portion of the Premises
that Tenant is prevented from using, and does not use, bears to the total
rentable area of the Premises; provided, however, in the event that Tenant is
prevented from using, and does not use, a portion of the Premises for a period
of time in excess of the
-8-
<PAGE>
Eligibility Period, then for such time after expiration of the Eligibility
Period during which Tenant is so prevented from effectively conducting its
business therein, the Base Rent shall be abated for such time as Tenant
continues to be so prevented from using, and does not use, the Premises. If,
however, Tenant re-occupies any portion of the Premises during such period, the
Base Rent allocable to such re-occupied portion, based on the proportion that
the rentable square feet of such re-occupied portion of the Premises bears to
the total rentable square feet of the Premises, shall be payable by Tenant from
the date Tenant re-occupies such portion of the Premises. For purposes of this
Section 6.3, Tenant shall not be deemed to be occupying or using the Premises
- -----------
merely by having Tenant's furniture or personal property remaining in the
Premises. Such right to abate Base Rent shall be Tenant's sole and exclusive
remedy at law or in equity for an Abatement Event; provided, however, that if
Landlord does not cure such Abatement Event within one hundred eighty (180) days
after Landlord's receipt from Tenant of notice of the occurrence of the
Abatement Event, Tenant shall have the right to terminate this Lease during the
first five (5) business days in each calendar month following the end of such
one hundred eighty (180) day period until such time as Landlord has cured the
Abatement Event, which right may be exercised only by delivery of thirty (30)
days notice to Landlord (the "Abatement Event Termination Notice") during such
ten (10) business day period and shall be effective as of the date set forth in
the Abatement Event Termination Notice (the "Abatement Event Termination Date"),
which Abatement Event Termination Date shall not be less than thirty (30) days
and not more than one hundred twenty (120) days, following the delivery of the
Abatement Event Termination Notice. The foregoing abatement and termination
rights shall not be applicable if the Abatement Event is caused by damage or
destruction or an eminent domain taking described in Articles 11 and 13 of this
----------- --
Lease, since Tenant's rent abatement rights with respect to such events are set
forth in Articles 11 and 13 of this Lease. Except as expressly provided in this
----------- --
Section 6.3, nothing contained herein shall be interpreted to mean that Tenant
- -----------
is excused from paying Rent due hereunder.
ARTICLE 7
---------
REPAIRS
-------
7.1 Landlord's Repairs. Landlord shall maintain in good order, repair and
------------------
condition (i) the structural portions of the Building, including the foundation,
roof, curtain wall, mullions, columns, beams, shafts (including elevator
shafts), stairwells, elevator cabs, and Building mechanical, electrical and
telephone closets (collectively, "Building Structure"), (ii) the Building's
mechanical, electrical, life safety, plumbing, sprinkler and HVAC systems
located outside the Premises (collectively, the "Building Systems"), and (iii)
the Common Areas. Notwithstanding anything in this Lease to the contrary,
Tenant shall be required to pay for the cost of repairs to the Building
Structure, the Building Systems and/or the Common Areas to the extent required
because of (1) Tenant's use of the Premises for other than normal and customary
business office operations, and/or (2) Tenant's Alterations (as defined in
Section 8.1 below).
- -----------
7.2 Tenant's Repairs. Subject to Landlord's repair obligations set forth
----------------
in Section 7.1 above, Tenant shall, at Tenant's own expense, pursuant to the
-----------
terms of this Lease, including without limitation Article 8 hereof, keep the
---------
Premises, including all improvements, fixtures, equipment (including without
limitation the Supplemental Equipment) and furnishings therein, in good order,
repair and condition at all times during the Lease Term. In addition, Tenant
shall, at Tenant's own expense, but under the supervision and subject to the
prior approval of Landlord, and within any reasonable period of time specified
by Landlord, pursuant to the terms of this Lease, including without limitation
Article 8 hereof, promptly and adequately repair all damage to the Premises and
- ---------
replace or repair all damaged, broken, or worn fixtures and appurtenances,
except for damage caused by ordinary wear and tear or beyond the reasonable
control of Tenant; provided however, if Tenant fails to make such repairs
following any applicable notice and cure rights of Tenant, Landlord may, but
need not, make such repairs and replacements, and Tenant shall pay Landlord the
cost thereof, including an administration fee equal to five percent (5%) of the
cost thereof (to be uniformly established for the Building and/or the Project)
sufficient to reimburse Landlord for all overhead, general conditions, fees and
other costs or expenses arising from Landlord's involvement with such repairs
and replacements forthwith upon being billed for same. Tenant hereby waives any
and all rights under and benefits of subsection 1 of Section 1932 and Sections
1941 and 1942 of the California Civil Code or under any similar law, statute, or
ordinance now or hereafter in effect.
ARTICLE 8
---------
ADDITIONS AND ALTERATIONS
-------------------------
8.1 Landlord's Consent to Alterations. Tenant may not make any
---------------------------------
improvements, alterations, additions or changes to the Premises or any
mechanical, plumbing or HVAC facilities or systems pertaining to the Premises
(collectively, the "Alterations") without first procuring the prior written
consent (the "Alteration Consent Request") of Landlord to such Alterations,
which consent shall be requested by Tenant not less than thirty (30) days prior
to the commencement thereof, and which
-9-
<PAGE>
consent shall not be unreasonably withheld by Landlord, provided it shall be
deemed reasonable for Landlord to withhold its consent to any Alteration which
adversely affects the structural portions or the systems or equipment of the
Building or is visible from the exterior of the Building. Landlord shall notify
Tenant of its approval or denial of any Alterations within fifteen (15) days of
receipt of the applicable Alteration Consent Request, and Landlord's failure to
respond within such fifteen (15) day period shall be deemed Landlord's consent
to the Alteration described in the applicable Alteration Consent Request. The
construction of the initial improvements to the Premises shall be governed by
the terms of the Tenant Work Letter and not the terms of this Article 8.
---------
Notwithstanding the foregoing, Tenant may make non-structural changes to the
Premises (such non-structural changes to be referred to hereafter collectively
as the "Acceptable Changes") without Landlord's prior consent provided (i)
Tenant delivers to Landlord written notice of such Acceptable Changes at least
fifteen (15) days prior to the commencement thereof, (ii) such Acceptable
Changes do not cost in excess of Twenty Five Thousand Dollars ($25,000.00) for
any one (1) job, (iii) such Acceptable Changes do not affect the exterior
appearance of the Building or Common Areas, the structural aspects of the
Building, or the Building systems and equipment of the Premises or Building, and
(iv) Tenant obtains and delivers to Landlord prior to commencement of
construction of such Acceptable Changes, all permits and approvals required by
any local, state or federal authorities for such Acceptable Changes.
8.2 Manner of Construction. Landlord may impose, as a condition of its
----------------------
consent to any and all Alterations or repairs of the Premises or about the
Premises, such requirements as Landlord in its reasonable discretion may deem
desirable, including, but not limited to, the requirement that Tenant utilize
for such purposes only contractors, subcontractors, materials, mechanics and
materialmen selected by Tenant from a list provided and approved by Landlord
(provided such list shall include more than one (1) contractor and shall also
include Carlson and/or any other Carlson entity reasonably approved by
Landlord), the requirement that upon Landlord's request, Tenant shall, at
Tenant's expense, remove such Alterations upon the expiration or any early
termination of the Lease Term if Landlord gave Tenant written notice that such
removal would be required at the time Landlord consented to such Alteration. If
such Alterations will involve the use of or disturb Hazardous Materials or
substances existing in the Premises, Tenant shall comply with Landlord's rules
and regulations concerning such Hazardous Materials or substances. Tenant shall
construct such Alterations and perform such repairs in a good and workmanlike
manner, in conformance with any and all applicable federal, state, county or
municipal laws, rules and regulations and pursuant to a valid building permit,
issued by the City of Los Angeles, all in conformance with Landlord's
construction rules and regulations. In the event Tenant performs any
Alterations in the Premises which require or give rise to governmentally
required changes to the "Base Building," as that term is defined below, then
Landlord shall, at Tenant's expense, make such changes to the Base Building.
The "Base Building" shall include the structural portions of the Building, and
the public restrooms and the systems and equipment located in the internal core
of the Building on the floor or floors on which the Premises are located. In
performing the work of any such Alterations, Tenant shall have the work
performed in such manner so as not to obstruct access to the Project or any
portion thereof, by any other tenant of the Project, and so as not to obstruct
the business of Landlord or other tenants in the Project. Tenant shall not use
(and upon notice from Landlord shall cease using) contractors, services,
workmen, labor, materials or equipment that, in Landlord's reasonable judgment,
would disturb labor harmony with the workforce or trades engaged in performing
other work, labor or services in or about the Building or the Common Areas. In
addition to Tenant's obligations under Article 9 of this Lease, upon completion
---------
of any Alterations, Tenant agrees to cause a Notice of Completion to be recorded
in the office of the Recorder of the County of Los Angeles in accordance with
Section 3093 of the Civil Code of the State of California or any successor
statute, and Tenant shall deliver to the Project management office a
reproducible copy of the "as built" drawings of the Alterations as well as all
permits, approvals and other documents issued by any governmental agency in
connection with the Alterations.
8.3 Payment for Improvements. If payment is made directly to contractors,
------------------------
Tenant shall comply with Landlord's requirements for final lien releases and
waivers in connection with Tenant's payment for work to contractors. Whether or
not Tenant orders any work directly from Landlord, Tenant shall reimburse
Landlord for any and all reasonable costs and expenses arising from Landlord's
involvement with such work.
8.4 Construction Insurance. In addition to the requirements of Article 10
---------------------- ----------
of this Lease, in the event that Tenant makes any Alterations, prior to the
commencement of such Alterations, Tenant shall provide Landlord with evidence
that Tenant carries "Builder's All Risk" insurance in an amount approved by
Landlord covering the construction of such Alterations, and such other insurance
as Landlord may reasonably require, it being understood and agreed that all of
such Alterations shall be insured by Tenant pursuant to Article 10 of this Lease
----------
immediately upon completion thereof. In addition, Landlord may, in its
discretion, require Tenant to obtain a lien and completion bond or some
alternate form of security satisfactory to Landlord in an amount sufficient to
ensure the lien-free completion of such Alterations and naming Landlord as a co-
obligee.
8.5 Landlord's Property. All Alterations, improvements, fixtures,
-------------------
conduit, (excluding Tenant's Generator, generator enclosures, paralleling gear,
DC plant or UPS system and Tenant HVAC
-10-
<PAGE>
Equipment, Liebert units and chillers [collectively, "Tenant's Trade Fixtures"])
and/or appurtenances which may be installed or placed in or about the Premises,
from time to time, including any non-general office use improvements made at the
time of Tenant's initial occupancy of the Premises, shall be at the sole cost of
Tenant and shall be and become the property of Landlord, and shall be and remain
part of the Premises and shall not be removed by Tenant at the end of the term
of this Lease, unless Landlord agreed to its removal at the time Landlord
consented to such Alteration. Such fixtures, alterations, additions, repairs,
improvements and/or appurtenances shall include, without limitation, the Base,
Shell and Core (as defined in the Tenant Work Letter) and improvements, built-in
utilities such as heating, ventilating and air conditioning units in the
Premises, floor coverings, drapes, paneling, molding, doors, kitchen and
dishwashing fixtures, plumbing systems, electrical systems, lighting systems,
silencing equipment, switching conduit and cabling, all fixtures and outlets for
the systems mentioned above and for all telephone, radio, telegraph and
television purposes, and any special flooring or ceiling installations.
Notwithstanding the foregoing, Landlord may, by written notice to Tenant at the
time Tenant requests Landlord's consent to any Alteration pursuant to Section
-------
8.1 or Section 22, or given following any earlier termination of this Lease,
- --- ----------
require Tenant, at Tenant's expense, to remove any Alterations, improvements,
fixtures, conduits and/or appurtenances (not including the initial Tenant
Improvements to be constructed by Tenant pursuant to the Tenant Work Letter) in
the Premises and Project, and to repair any damage to the Premises and Building
caused by such removal and return the affected portion of the Premises and
Project to a building standard tenant improved condition as determined by
Landlord. If Tenant fails to complete such removal and/or to repair any damage
caused by the removal of any Alterations, improvements, fixtures, conduits
and/or appurtenances in the Premises and Project, and returns the affected
portion of the Premises and Project to a building standard tenant improved
condition as determined by Landlord, Landlord may do so and may charge the cost
thereof to Tenant. Tenant hereby protects, defends, indemnifies and holds
Landlord harmless from any liability, cost, obligation, expense or claim of lien
in any manner relating to the installation, placement, removal or financing of
any such Alterations, improvements, fixtures, conduit, and/or appurtenances in,
on or about the Premises and Project, which obligations of Tenant shall survive
the expiration or earlier termination of this Lease.
8.6 Landlord Lien Waivers. Subject to Article 9 below, within a reasonable
--------------------- ---------
period of time after receipt of written request therefor from a lender and/or a
vendor under a conditional sales agreement or other agreement requiring a
security interest in any furniture, trade fixtures or equipment installed or to
be installed in the Premises, Landlord shall execute a commercially reasonable
form of landlord lien waiver agreement which shall assure the vendor of the
seniority of the vendor's lien claim relative to such furniture, trade fixtures
and equipment in relation to Landlord's interest therein; such agreement shall
permit the removal of such affected furniture, fixtures and equipment at any
time during the Lease Term upon prior written notice to Landlord and shall
require such vendor to repair any damage resulting from such removal.
ARTICLE 9
---------
COVENANT AGAINST LIENS
----------------------
Except as provided in Section 8.6 above, Tenant shall keep the Project and
-----------------
Premises free from any liens or encumbrances arising out of the work performed,
materials furnished or obligations incurred by or on behalf of Tenant, and shall
protect, defend, indemnify and hold Landlord harmless from and against any
claims, liabilities, judgments or costs (including, without limitation,
reasonable attorneys' fees and costs) arising out of same or in connection
therewith. Tenant shall give Landlord notice at least twenty (20) days prior to
the commencement of any such work on the Premises (or such additional time as
may be necessary under applicable laws) to afford Landlord the opportunity of
posting and recording appropriate notices of non-responsibility. Tenant shall
remove any such lien or encumbrance by bond or otherwise within ten (10 ) days
after notice by Landlord, and if Tenant shall fail to do so, Landlord may pay
the amount necessary to remove such lien or encumbrance, without being
responsible for investigating the validity thereof. The amount so paid shall be
deemed Additional Rent under this Lease payable upon demand, without limitation
as to other remedies available to Landlord under this Lease. Nothing contained
in this Lease shall authorize Tenant to do any act which shall subject
Landlord's title to the Premises to any liens or encumbrances whether claimed by
operation of law or express or implied contract. Any claim to a lien or
encumbrance upon the Premises arising in connection with any such work or
respecting the Premises not performed by or at the request of Landlord shall be
null and void, or at Landlord's option shall attach only against Tenant's
interest in the Premises and shall in all respects be subordinate to Landlord's
title to the Project, Building and Premises.
-11-
<PAGE>
ARTICLE 10
----------
INSURANCE
---------
10.1 Indemnification.
---------------
10.1.1 Tenant's Indemnification of Landlord and Waiver. Subject to
-----------------------------------------------
the limitations, exclusions and Landlord's indemnity of Tenant as set forth in
Sections 10.1.2 and 10.1.3 below, Tenant hereby (i) assumes all risk of damage
- --------------- ------
to property or injury to persons in, upon or about the Premises from any cause
whatsoever and (ii) agrees that Landlord, its partners, subpartners and their
respective officers, agents, servants, employees, and independent contractors
(collectively, "Landlord Parties") shall not be liable for, and are hereby
released from any responsibility for, any damage either to person or property or
resulting from the loss of use thereof, which damage is sustained by Tenant or
by other persons claiming through Tenant. Tenant shall indemnify, defend,
protect, and hold harmless the Landlord Parties from any and all loss, cost,
damage, expense and liability including without limitation court costs and
reasonable attorneys' fees (collectively, "Claims") incurred in connection with
or arising from any cause in, on or about the Premises, any acts, omissions or
negligence of Tenant or of any person claiming by, through or under Tenant, or
of any of Tenant's Customers (as defined in Section 14.6 below) (except to the
------------
extent such Customer is a tenant of the Project and the Claims do not arise as a
result of such Customer's activities in the Premises), the contractors, agents,
servants, employees, invitees, guests or licensees of Tenant or any such person,
in, on or about the Project or any breach of the terms of this Lease, provided
that the terms of the foregoing indemnity shall not apply to any Claims to the
extent caused by the gross negligence or willful misconduct of Landlord and not
insured or required to be insured by Tenant under this Lease. Should Landlord
be named as a defendant in any suit brought against Tenant in connection with or
arising out of Tenant's occupancy of the Premises, Tenant shall pay to Landlord
its costs and expenses incurred in such suit, including without limitation, its
actual professional fees such as appraisers', accountants' and attorneys' fees.
Further, Tenant's agreement to indemnify Landlord pursuant to this Section 10.1
------------
is not intended and shall not relieve any insurance carrier of its obligations
under policies required to be carried by Tenant pursuant to the provisions of
this Lease, to the extent such policies cover the matters subject to Tenant's
indemnification obligations; nor shall they supersede any inconsistent agreement
of the parties set forth in any other provision of this Lease. The provisions
of this Section 10.1 shall survive the expiration or sooner termination of this
------------
Lease with respect to any claims or liability arising in connection with any
event occurring prior to such expiration or termination.
10.1.2 Exclusion from Tenant's Indemnity; Landlord's Indemnification
-------------------------------------------------------------
of Tenant. The terms of the assumption of risk, waiver, release and
- ---------
indemnification by Tenant of Landlord set forth in Section 10.1.1 above shall
--------------
not, however, include any Claims to the extent resulting from (i) the negligence
or willful misconduct of the Landlord Parties in connection with the Landlord
Parties' activities in the Building and/or breach by Landlord of the Landlord's
obligations under this Lease (except for damage to the Tenant Improvements, and
all Alterations and leasehold improvements in the Premises, and Tenant's
personal property, fixtures, furniture and equipment in the Premises, to the
extent such Claims are covered by insurance maintained by Tenant pursuant to
this Lease or would have been covered had Tenant maintained the insurance
required pursuant to this Lease), or (ii) damage to any portion of the Building
or Common Areas located outside the Premises to the extent such Claims are
covered by Landlord's insurance pursuant to Section 10.2 of this Lease (or would
------------
have been covered had Landlord maintained such insurance), even if resulting
from the negligence or willful misconduct of the Tenant Parties, and, subject to
the limitations in Section 10.1.3 below, Landlord shall indemnify, defend,
--------------
protect and hold Tenant and Tenant's partners, subpartners, and their respective
officers, agents, employees and independent contractors, harmless from and
against any and all such excluded Claims.
10.1.3 Limitation on Consequential Damages. Notwithstanding anything
-----------------------------------
to the contrary contained in the foregoing provisions of this Article 10 or
----------
elsewhere in this Lease, nothing in this Article 10 or this Lease shall impose
----------
any obligations on Tenant or Landlord to be responsible or liable for, and each
hereby releases the other from all liability for, consequential damages other
than those consequential damages (i) permitted to be recovered by Landlord
following a termination of this Lease after a default by Tenant pursuant to
Section 19.2.1 above, (ii) incurred by Landlord in connection with a holdover of
- --------------
the Premises by Tenant after the expiration or earlier termination of this
Lease, or (iii) incurred by Landlord in connection with any repair, physical
construction or improvement work performed by or on behalf of Tenant in the
Project.
10.1.4 Survival. The provisions of this Section 10.1 shall survive
-------- ------------
the expiration or sooner termination of this Lease with respect to any claims or
liability occurring prior to such expiration or termination.
10.2 Landlord's Insurance.
---------------------
-12-
<PAGE>
10.2.1 Property Damage. Landlord shall, from and after the date
---------------
hereof until the expiration of the Lease Term, maintain "All Risk" or "Special
Causes of Loss" Physical Damage covering the Building (including the Building
Structure and Building Systems, but excluding the Tenant Improvements,
Alterations, and leasehold improvements in the Premises, Tenant's personal
property, the Supplemental Equipment and other property Tenant is required to
insure pursuant to Section 10.3.2 below). Such insurance shall be in an amount
--------------
not less than one hundred percent (100%) of the full replacement cost of the
property insured, exclusive of architectural and engineering fees, excavation,
footing and foundations, and in amounts that meet any co-insurance clauses of
the policy. Landlord shall also have the right, but not the obligation, to
maintain earthquake and/or flood insurance, and insurance against such other
risks and perils as Landlord may from time to time determine.
10.2.2 Liability Insurance. Landlord shall, from and after the date
-------------------
hereof until the expiration of the Lease Term, also maintain Commercial General
Liability Insurance covering Landlord's liability for all claims or losses for
bodily injury and property damage arising out of Landlord's operations or use of
the Real Property.
10.2.3 Tenant's Compliance With Landlord's Fire and Casualty
-----------------------------------------------------
Insurance. Tenant shall, at Tenant's expense, comply with all customary
- ---------
insurance company requirements pertaining to the use of the Premises, provided
that such insurance requirements shall not unreasonably interfere with Tenant's
use and occupancy of the Premises. If Tenant's conduct or use of the Premises
other than for normal office purposes causes any increase in the premium for any
insurance policies carried by Landlord, then Tenant shall reimburse Landlord for
any such increase. Tenant, at Tenant's expense, shall comply with all rules,
orders, regulations or requirements of the American Insurance Association
(formerly the National Board of Fire Underwriters) and with any similar body.
10.3 Tenant's Insurance. Tenant shall maintain the following coverages in
------------------
the following amounts.
10.3.1 Commercial General Liability Insurance covering the insured
against claims of bodily injury, personal injury and property damage (including
loss of use thereof) arising out of Tenant's operations (and the operations of
any Customers (defined in Section 14.6 below) of Tenant), and contractual
------------
liabilities (covering the performance by Tenant of its indemnity agreements)
including a Broad Form endorsement covering the insuring provisions of this
Lease and the performance by Tenant of the indemnity agreements set forth in
Section 10.1 of this Lease, for limits of liability not less than:
- ------------
Bodily Injury and $5,000,000 each occurrence
Property Damage Liability $5,000,000 annual aggregate
Personal Injury Liability $5,000,000 each occurrence
$5,000,000 annual aggregate
0% Insured's participation
10.3.2 Physical Damage Insurance covering (i) all office furniture,
business and trade fixtures, office equipment, free-standing cabinet work,
movable partitions, merchandise and all other items of Tenant's property on the
Premises installed by, for, or at the expense of Tenant, (ii) the "Base, Shell
and Core," as that term is defined in the Tenant Work Letter, attached hereto as
Exhibit B and incorporated by this reference, and any other improvements which
- ---------
exist in the Premises as of the Lease Commencement Date (excluding the Base
Building), (iii) the Supplemental Equipment, and (iv) the "Tenant Improvements,"
as that term is defined in the Tenant Work Letter attached hereto as Exhibit B
---------
and incorporated herein by this reference, and all other improvements,
alterations and additions to the Premises. Such insurance shall be written on
an "all risks" of physical loss or damage basis, for the full replacement cost
value (subject to reasonable deductible amounts) new without deduction for
depreciation of the covered items and in amounts that meet any co-insurance
clauses of the policies of insurance and shall include coverage for damage or
other loss caused by fire or other peril including, but not limited to,
vandalism and malicious mischief, theft, water damage of any type, including
sprinkler leakage, bursting or stoppage of pipes, and explosion, and providing
business interruption coverage for a period of one year.
10.3.3 Worker's Compensation and Employer's Liability or other
similar insurance pursuant to all applicable state and local statutes and
regulations.
10.4 Form of Policies. The minimum limits of policies of insurance
----------------
required of Tenant under this Lease shall in no event limit the liability of
Tenant under this Lease. Such insurance shall (i) with respect to the coverages
required under Sections 10.3.2(ii) and (iv) above, name Landlord, and any other
------------------- ----
party the Landlord so specifies, as an additional insured, including Landlord's
managing agent, if any; (ii) specifically cover the liability assumed by Tenant
under this Lease, including, but not limited to, Tenant's obligations under
Section 10.1 of this Lease; (iii) be issued by an insurance company having a
- ------------
rating of not less than A-X in Best's Insurance Guide or which is otherwise
acceptable to Landlord and
-13-
<PAGE>
licensed to do business in the State of California; (iv) be primary insurance as
to all claims thereunder and provide that any insurance carried by Landlord is
excess and is non-contributing with any insurance requirement of Tenant; (v) be
in form and content reasonably acceptable to Landlord; and (vi) provide that
said insurance shall not be canceled or coverage changed unless thirty (30)
days' prior written notice shall have been given to Landlord and any mortgagee
of Landlord. Tenant shall deliver said policy or policies or certificates
thereof to Landlord on or before the Lease Commencement Date and at least thirty
(30) days before the expiration dates thereof. In the event Tenant shall fail to
procure such insurance, or to deliver such policies or certificate, Landlord
may, at its option, procure such policies for the account of Tenant, and the
cost thereof shall be paid to Landlord within five (5) days after delivery to
Tenant of bills therefor.
10.5 Subrogation. Landlord and Tenant intend that their respective
-----------
property loss risks shall be borne by reasonable insurance carriers to the
extent above provided, and Landlord and Tenant hereby agree to look solely to,
and seek recovery only from, their respective insurance carriers in the event of
a property loss to the extent that such coverage is agreed to be provided
hereunder. The parties each hereby waive all rights and claims against each
other for such losses, and waive all rights of subrogation of their respective
insurers, provided such waiver of subrogation shall not affect the right to the
insured to recover thereunder. The parties agree that their respective
insurance policies are now, or shall be, endorsed such that the waiver of
subrogation shall not affect the right of the insured to recover thereunder, so
long as no material additional premium is charged therefor. Landlord or Tenant
shall immediately notify the other if such party is unable to obtain the above
required waiver of subrogation.
10.6 Additional Insurance Obligations. Tenant shall carry and maintain
--------------------------------
during the entire Lease Term, at Tenant's sole cost and expense, increased
amounts of the insurance required to be carried by Tenant pursuant to this
Article 10 and such other reasonable types of insurance coverage and in such
- ----------
reasonable amounts covering the Premises and Tenant's operations therein, as may
be reasonably requested by Landlord provided that Landlord shall not require
Tenant to change its insurance requirements more than one time in any Lease
Year.
ARTICLE 11
----------
DAMAGE AND DESTRUCTION
----------------------
11.1 Repair of Damage to Premises by Landlord. Tenant shall promptly
----------------------------------------
notify Landlord of any damage to the Premises resulting from fire or any other
casualty. If the Premises or any Common Areas serving or providing access to
the Premises shall be damaged by fire or other casualty, Landlord shall promptly
and diligently, subject to reasonable delays for insurance adjustment or other
matters beyond Landlord's reasonable control, and subject to all other terms of
this Article 11, restore the Base Building and such Common Areas. Such
----------
restoration shall be to substantially the same condition of the Base Building
and the Common Areas prior to the casualty, except for modifications required by
zoning and building codes and other laws or by the holder of a mortgage on the
Building or Project or any other modifications to the Common Areas deemed
desirable by Landlord, provided that access to the Premises and any common
restrooms serving the Premises shall not be materially impaired. Upon the
occurrence of any damage to the Premises, upon notice (the "Landlord Repair
Notice") to Tenant from Landlord, Tenant shall assign to Landlord (or to any
party designated by Landlord) all insurance proceeds payable to Tenant under
Tenant's insurance required under Sections 10.3.2(ii) and (iv) of this Lease,
----------------------------
and Landlord shall repair any injury or damage to tenant improvements and
Alterations in the Premises (but not any Supplemental Equipment or any of
Tenant's personal property which shall be promptly and with due diligence
repaired and restored by Tenant at Tenant's sole cost and expenses, unless and
to the extent Landlord elects in its sole discretion to restore all or a part of
the Supplemental Equipment) installed in the Premises and shall return the Base,
Shell and Core, Tenant's Work and any such tenant improvements and Alterations
in the Premises (and any Supplemental Equipment Landlord elects to repair in its
sole discretion) to their original condition; provided that if the cost of such
repair by Landlord exceeds the amount of insurance proceeds received by Landlord
from Tenant's insurance carrier, as assigned by Tenant, the cost of such repairs
shall be paid by Tenant to Landlord prior to Landlord's commencement of repair
of the damage. Except as otherwise set forth in Section 7.1, in the event that
-----------
Landlord does not deliver the Landlord Repair Notice within sixty (60) days
following the date the casualty becomes known to Landlord, Tenant shall, at its
sole cost and expense, repair any injury or damage to the Tenant's Work and the
Base, Shell and Core installed in the Premises and shall return such Tenant's
Work and Base, Shell and Core to their original condition. In the event
Landlord delivers a Landlord Repair Notice, prior to the commencement of
construction, Tenant shall submit to Landlord, for Landlord's review and
approval, all plans, specifications and working drawings relating thereto, and
Landlord shall select and Tenant shall reasonably approve the contractors to
perform such improvement work. Landlord shall not be liable for any
inconvenience or annoyance to Tenant or its visitors, or injury to Tenant's
business resulting in any way from such damage or the repair thereof; provided
however, that if such fire or other casualty shall have damaged the Premises or
Common Areas necessary to Tenant's occupancy, Landlord shall allow Tenant a
proportionate abatement of Base Rent, during the time and to the extent the
Premises are unfit for occupancy for the purposes permitted under this Lease,
and not occupied by Tenant as a
-14-
<PAGE>
result thereof; provided, further, however, that if the damage or destruction is
due to the negligence or willful misconduct of Tenant or any of its agents,
employees, contractors, invitees or guests, Tenant shall be responsible for any
reasonable, applicable insurance deductible (which shall be payable to Landlord
upon demand) and there shall be no rent abatement. In the event that Landlord
shall not deliver the Landlord Repair Notice, Tenant's right to rent abatement
pursuant to the preceding sentence shall terminate as of the date which is
reasonably determined by Landlord to be the date Tenant should have completed
repairs to the Premises assuming Tenant used reasonable due diligence in
connection therewith.
11.2 Landlord's Option to Repair. Notwithstanding the terms of Section
--------------------------- -------
11.1 of this Lease, Landlord may elect not to rebuild and/or restore the
- ----
Premises, Building and/or Project, and instead terminate this Lease, by
notifying Tenant in writing of such termination within sixty (60) days after the
date of damage, such notice to include a termination date giving Tenant sixty
(60) days to vacate the Premises, but Landlord may so elect only if the Building
or Project shall be damaged by fire, earthquake or other casualty or cause,
whether or not the Premises are affected, and one or more of the following
conditions is present: (i) in Landlord's reasonable judgment, repairs cannot
reasonably be completed within one hundred eighty (180) days after the date of
discovery of the damage (when such repairs are made without the payment of
overtime or other premiums); or (ii) the damage is not fully covered by
Landlord's insurance policies; provided, however, that (A) if Landlord does not
elect to terminate this Lease pursuant to Landlord's termination right as
provided above, (B) the damage constitutes a "Tenant Damage Event" (as defined
below), and (C) repair of such damage cannot, in the reasonable judgment of an
architect or contractor selected by Landlord, be substantially completed within
two hundred seventy (270) days after the date of the damage, then Tenant may
elect, not later than ninety (90) days after nor earlier then thirty (30) days
after the date Tenant receives notice from the architect or contractor that the
repairs cannot be completed within such two hundred seventy (270) day period, to
terminate this Lease by written notice to Landlord effective as of the date
specified in the notice, which date shall not be less than thirty (30) days nor
more than sixty (60) days after the date such notice is given by Tenant. As
used herein, a "Tenant Damage Event" shall mean damage by fire or other
casualty, to all or any part of the Premises, the Building or of the Common
Areas providing access to the Premises, which damage is not the result of the
negligence or willful misconduct of Tenant or any of Tenant's employees, agents,
contractors, licensees or invitees, and which damage substantially interferes
with Tenant's use of or access to the Premises and would entitle Tenant to an
abatement of Base Rent pursuant to Section 11.1 above. Furthermore, if neither
------------
Landlord nor Tenant has terminated this Lease, and the repairs of a Tenant
Damage Event are not actually completed within the later of the Estimated Repair
Period or two hundred seventy (270) days after the date of the damage, Tenant
shall have the right (but only on the initial occasion of Tenant sending the
Damage Termination Notice) to terminate this Lease within five (5) business days
of the end of such period and thereafter during the first five (5) business days
of each calendar month following the end of such period until such time as the
repairs are substantially complete, by notice to Landlord (the "Damage
Termination Notice"), effective as of a date set forth in the Damage Termination
Notice (the "Damage Termination Date"), which Damage Termination Date shall not
be less than five (5) business days following the end of such period or each
such month, as the case may be, and not later than ninety (90) days after the
end of such period or each such month, as the case may be. Notwithstanding the
foregoing, if Tenant delivers a Damage Termination Notice to Landlord, then
Landlord shall have the right to suspend the occurrence of the Damage
Termination Date for a period ending thirty (30) days after the Damage
Termination Date set forth in the Damage Termination Notice by delivering to
Tenant, within five (5) business days of Landlord's receipt of the Damage
Termination Notice, a certificate of Landlord's contractor responsible for the
repair of the damage certifying that it is such contractor's good faith judgment
that the repairs shall be substantially completed within thirty (30) days after
the Damage Termination Date. If repairs shall be substantially completed prior
to the expiration of such thirty (30) day period, then the Damage Termination
Notice shall be of no force or effect, but if the repairs shall not be
substantially completed within such thirty-day period, then this Lease shall
terminate upon the expiration of such thirty-day period.
11.3 Waiver of Statutory Provisions. The provisions of this Lease,
------------------------------
including this Article 11, constitute an express agreement between Landlord and
----------
Tenant with respect to any and all damage to, or destruction of, all or any part
of the Premises, the Building or the Project, and any statute or regulation of
the State of California, including, without limitation, Sections 1932(2) and
1933(4) of the California Civil Code, with respect to any rights or obligations
concerning damage or destruction in the absence of an express agreement between
the parties, and any other statute or regulation, now or hereafter in effect,
shall have no application to this Lease or any damage or destruction to all or
any part of the Premises, the Building or the Project.
ARTICLE 12
----------
NONWAIVER
---------
No provision of this Lease shall be deemed waived by either party hereto
unless expressly waived in a writing signed thereby. The waiver by either party
hereto of any breach of any term, covenant or
-15-
<PAGE>
condition herein contained shall not be deemed to be a waiver of any subsequent
breach of same or any other term, covenant or condition herein contained. The
subsequent acceptance of Rent hereunder by Landlord shall not be deemed to be a
waiver of any preceding breach by Tenant of any term, covenant or condition of
this Lease, other than the failure of Tenant to pay the particular Rent so
accepted, regardless of Landlord's knowledge of such preceding breach at the
time of acceptance of such Rent. No acceptance of a lesser amount than the Rent
herein stipulated shall be deemed a waiver of Landlord's right to receive the
full amount due, nor shall any endorsement or statement on any check or payment
or any letter accompanying such check or payment be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the full amount due. No receipt of monies by
Landlord from Tenant after the termination of this Lease shall in any way alter
the length of the Lease Term or of Tenant's right of possession hereunder, or
after the giving of any notice shall reinstate, continue or extend the Lease
Term or affect any notice given Tenant prior to the receipt of such monies, it
being agreed that after the service of notice or the commencement of a suit, or
after final judgment for possession of the Premises, Landlord may receive and
collect any Rent due, and the payment of said Rent shall not waive or affect
said notice, suit or judgment.
ARTICLE 13
----------
CONDEMNATION
------------
If the twenty-five percent (25%) or more of the Premises, Building or
Project shall be taken by power of eminent domain or condemned by any competent
authority for any public or quasi-public use or purpose, or if any adjacent
property or street shall be so taken or condemned, or reconfigured or vacated by
such authority in such manner as to require the use, reconstruction or
remodeling of any part of the Premises, Building or Project, or if Landlord
shall grant a deed or other instrument in lieu of such taking by eminent domain
or condemnation, Landlord shall have the option to terminate this Lease
effective as of the date possession is required to be surrendered to the
authority. If more than twenty-five percent (25%) of the rentable square feet
of the Premises is taken, or if access to the Premises is substantially
impaired, in each case for a period in excess of one hundred eighty (180) days,
Tenant shall have the option to terminate this Lease effective as of the date
possession is required to be surrendered to the authority. Tenant shall not
because of such taking assert any claim against Landlord or the authority for
any compensation because of such taking and Landlord shall be entitled to the
entire award or payment in connection therewith, except that Tenant shall have
the right to file any separate claim available to Tenant for any taking of
Tenant's personal property and fixtures belonging to Tenant and removable by
Tenant upon expiration of the Lease Term pursuant to the terms of this Lease,
and for moving expenses, so long as such claims do not diminish the award
available to Landlord, its ground lessor with respect to the Building or Project
or its mortgagee, and such claim is payable separately to Tenant. All Base Rent
shall be apportioned as of the date Tenant is physically dispossessed of the
Premises. If any part of the Premises shall be taken, and this Lease shall not
be so terminated, the Rent shall be proportionately abated. Tenant hereby
waives any and all rights it might otherwise have pursuant to Section 1265.130
of The California Code of Civil Procedure. Notwithstanding anything to the
contrary contained in this Article 13, in the event of a temporary taking of all
----------
or any portion of the Premises for a period of one hundred and eighty (180) days
or less, then this Lease shall not terminate but the Base Rent and the
Additional Rent shall be abated for the period of such taking in proportion to
the ratio that the amount of rentable square feet of the Premises taken bears to
the total rentable square feet of the Premises. Landlord shall be entitled to
receive the entire award made in connection with any such temporary taking.
ARTICLE 14
----------
ASSIGNMENT AND SUBLETTING
-------------------------
14.1 Transfers. Except as otherwise provided herein, Tenant shall not,
---------
without the prior written consent of Landlord, assign, mortgage, pledge,
hypothecate, encumber, or permit any lien to attach to, or otherwise transfer,
this Lease or any interest hereunder, permit any assignment, or other transfer
of this Lease or any interest hereunder by operation of law, sublet the Premises
or any part thereof, or enter into any license, "co-location" or concession
agreements or otherwise permit the occupancy or use of the Premises or any part
thereof by any persons other than Tenant and its employees and contractors (all
of the foregoing are hereinafter sometimes referred to collectively as
"Transfers" and any person to whom any Transfer is made or sought to be made is
hereinafter sometimes referred to as a "Transferee"). If Tenant desires
Landlord's consent to any Transfer, Tenant shall notify Landlord in writing,
which notice (the "Transfer Notice") shall include (i) the proposed effective
date of the Transfer, which shall not be less than fifteen (15) days nor more
than one hundred eighty (180) days after the date of delivery of the Transfer
Notice, (ii) a description of the portion of the Premises to be transferred (the
"Subject Space"), (iii) all of the terms of the proposed Transfer and the
consideration therefor, including calculation of the "Transfer Premium", as that
term is defined in Section 14.3 below, in connection with such Transfer, the
------------
name and address of the proposed Transferee, and a copy of all existing executed
and/or proposed documentation pertaining to the proposed Transfer, including all
existing operative documents to be executed to evidence such Transfer or the
agreements incidental or related to such
-16-
<PAGE>
Transfer, (iv) current financial statements of the proposed Transferee certified
by an officer, partner or owner thereof, business credit and personal references
and history of the proposed Transferee and any other information reasonably
required by Landlord which will enable Landlord to determine the financial
responsibility, character, and reputation of the proposed Transferee, nature of
such Transferee's business and proposed use of the Subject Space, and (v) an
executed estoppel certificate from Tenant in the form attached hereto as Exhibit
-------
E. Any Transfer made without Landlord's prior written consent shall, at
- --
Landlord's option, be null, void and of no effect, and shall, at Landlord's
option, constitute a default by Tenant under this Lease. Whether or not Landlord
consents to any proposed Transfer, Tenant shall pay Landlord's review and
processing fees, as well as any reasonable professional fees (including, without
limitation, attorneys', accountants', architects', engineers' and consultants'
fees) incurred by Landlord, within thirty (30) days after written request by
Landlord not to exceed $1,000 per Transfer.
14.2 Landlord's Consent. Landlord shall not unreasonably withhold its
------------------
consent to any proposed Transfer of the Subject Space to the Transferee on the
terms specified in the Transfer Notice. Without limitation as to other
reasonable grounds for withholding consent, the parties hereby agree that it
shall be reasonable under this Lease and under any applicable law for Landlord
to withhold consent to any proposed Transfer where one or more of the following
apply:
14.2.1 The Transferee is of a character or reputation or engaged in a
business which is not consistent with the quality of the Building or the
Project, or would be a significantly less prestigious occupant of the Building
than Tenant;
14.2.2 The Transferee intends to use the Subject Space for purposes
which are not permitted under this Lease;
14.2.3 The Transferee is either a governmental agency or
instrumentality thereof;
14.2.4 The Transfer occurs during the period from the Lease
Commencement Date until the earlier of (i) the fourth anniversary of the Lease
Commencement Date or (ii) the date at least ninety-five percent (95%) of the
rentable square feet of the Building is leased, and the rent charged by Tenant
to such Transferee during the term of such Transfer (the "Transferee's Rent"),
calculated using a net present value analysis, is less than ninety-five percent
(95%) of the rent being quoted by Landlord at the time of such Transfer for
comparable space in the Building for a comparable term (the "Quoted Rent"),
calculated using a present value analysis;
14.2.5 The Transferee is not a party of reasonable financial worth
and/or financial stability in light of the responsibilities to be undertaken in
connection with the Transfer on the date consent is requested;
14.2.6 The proposed Transfer would cause a violation of another lease
for space in the Project, or would give an occupant of the Project a right to
cancel its lease;
14.2.7 Either the proposed Transferee, or any person or entity which
directly or indirectly, controls, is controlled by, or is under common control
with, the proposed Transferee, (i) occupies space in the Project at the time of
the request for consent, or (ii) is negotiating or has negotiated with Landlord
to lease space in the Project.
If Landlord consents to any Transfer pursuant to the terms of this Section
-------
14.2 (and does not exercise any recapture rights Landlord may have under Section
- ---- -------
14.4 of this Lease), Tenant may within six (6) months after Landlord's consent,
- ----
but not later than the expiration of said six-month period, enter into such
Transfer of the Premises or portion thereof, upon substantially the same terms
and conditions as are set forth in the Transfer Notice furnished by Tenant to
Landlord pursuant to Section 14.1 of this Lease, provided that if there are any
------------
changes in the terms and conditions from those specified in the Transfer Notice
(i) such that Landlord would initially have been entitled to refuse its consent
to such Transfer under this Section 14.2, or (ii) which would cause the proposed
------------
Transfer to materially be more favorable to the Transferee than the terms set
forth in Tenant's original Transfer Notice, Tenant shall again submit the
Transfer to Landlord for its approval and other action under this Article 14
----------
(including Landlord's right of recapture, if any, under Section 14.4 of this
------------
Lease). Notwithstanding anything to the contrary in this Lease, if Tenant or
any proposed Transferee claims that Landlord has unreasonably withheld or
delayed its consent under Section 14.2 or otherwise has breached or acted
------------
unreasonably under this Article 14, their sole remedies shall be a declaratory
----------
judgment and an injunction for the relief sought without any monetary damages
(other than reasonable attorneys fees), and Tenant hereby waives all other
remedies, including, without limitation, any right at law or equity to terminate
this Lease, on its own behalf and, to the extent permitted under all applicable
laws, on behalf of the proposed Transferee. Tenant shall indemnify, defend and
hold harmless Landlord from any and all liability, losses, claims, damages,
costs, expenses, causes of action and proceedings involving any third party or
parties (including without limitation Tenant's proposed subtenant or assignee)
who claim they were damaged by Landlord's wrongful withholding or conditioning
of Landlord's consent.
-17-
<PAGE>
14.3 Transfer Premium. If Landlord consents to a Transfer (not including
----------------
any Collocation Agreement pursuant to Section 14.6 below), as a condition
------------
thereto which the parties hereby agree is reasonable, Tenant shall pay to
Landlord fifty percent (50%) of any "Transfer Premium," as that term is defined
in this Section 14.3, received by Tenant from such Transferee. "Transfer
------------
Premium" shall mean all rent, additional rent or other consideration payable by
such Transferee in connection with the Transfer in excess of the Rent and
Additional Rent payable by Tenant under this Lease during the term of the
Transfer on a per rentable square foot basis if less than all of the Premises is
transferred, after deducting the reasonable expenses incurred by Tenant for (i)
any changes, alterations and improvements to the Premises in connection with the
Transfer, (ii) any free base rent reasonably provided to the Transferee, (iii)
any brokerage commissions in connection with the Transfer, (iv) any reasonable
attorneys fees incurred by Tenant in conjunction with documenting such Transfer.
"Transfer Premium" shall also include, but not be limited to, key money, bonus
money or other cash consideration paid by Transferee to Tenant in connection
with such Transfer, and any payment in excess of fair market value for services
rendered by Tenant to Transferee or for assets, fixtures, inventory, equipment,
or furniture transferred by Tenant to Transferee in connection with such
Transfer.
14.4 Landlord's Option as to Subject Space. Notwithstanding anything to
-------------------------------------
the contrary contained in this Article 14, and except with respect to
----------
"Collocation Agreements" and "Non-Transfers," as those terms are defined in
Sections 14.6 and 14.7, below, Landlord shall have the option, by giving written
- ------------- ----
notice to Tenant within thirty (30) days after receipt of any Transfer Notice
involving more than fifty percent (50%) of the Premises, to recapture the
Subject Space. Such recapture notice shall cancel and terminate this Lease with
respect to the Subject Space as of the date stated in the Transfer Notice as the
effective date of the proposed Transfer until the last day of the term of the
Transfer as set forth in the Transfer Notice (or at Landlord's option, shall
cause the Transfer to be made to Landlord or its agent, in which case the
parties shall execute the Transfer documentation promptly thereafter). In the
event of a recapture by Landlord, if this Lease shall be canceled with respect
to less than the entire Premises, the Rent reserved herein shall be prorated on
the basis of the number of rentable square feet retained by Tenant in proportion
to the number of rentable square feet contained in the Premises, and this Lease
as so amended shall continue thereafter in full force and effect, and upon
request of either party, the parties shall execute written confirmation of the
same. If Landlord declines, or fails to elect in a timely manner to recapture
the Subject Space under this Section 14.4, then, provided Landlord has consented
------------
to the proposed Transfer, Tenant shall be entitled to proceed to transfer the
Subject Space to the proposed Transferee, subject to provisions of this Article
-------
14. Landlord shall be responsible for the cost of installing any demising walls
- --
to be used to separate any Subject Space recaptured pursuant to this Section
14.4 from the remaining portion of the Premises.
14.5 Effect of Transfer. If Landlord consents to a Transfer, (i) the terms
------------------
and conditions of this Lease shall in no way be deemed to have been waived or
modified, (ii) such consent shall not be deemed consent to any further Transfer
by either Tenant or a Transferee, (iii) Tenant shall deliver to Landlord,
promptly after execution, an original executed copy of all documentation
pertaining to the Transfer in form reasonably acceptable to Landlord, (iv)
Tenant shall furnish upon Landlord's request a complete statement, certified by
an independent certified public accountant, or Tenant's chief financial officer,
setting forth in detail the computation of any Transfer Premium Tenant has
derived and shall derive from such Transfer, and (v) no Transfer relating to
this Lease or agreement entered into with respect thereto, whether with or
without Landlord's consent, shall relieve Tenant or any guarantor of the Lease
from any liability under this Lease, including, without limitation, in
connection with the Subject Space. Landlord or its authorized representatives
shall have the right at all reasonable times to audit the books, records and
papers of Tenant relating to any Transfer, and shall have the right to make
copies thereof. If the Transfer Premium respecting any Transfer shall be found
understated, Tenant shall, within thirty (30) days after demand, pay the
deficiency, and if understated by more than two percent (2%), Tenant shall pay
Landlord's costs of such audit.
14.6 Collocation Agreements. Landlord acknowledges that Tenant's business
----------------------
to be conducted on the Premises requires the installation on the Premises of
certain communications equipment by telecommunications customers of Tenant
("Customers") in order for such Customers to interconnect with Tenant's terminal
facilities or to permit Tenant to manage or operate their equipment. Tenant
represents to Landlord that such arrangements will require access by each
Customer to the Premises only on an infrequent basis, and only when accompanied
by a representative of Tenant. Notwithstanding anything contained elsewhere in
this Article 14, Landlord hereby consents in advance to any sublease, license
----------
agreement, "Co-Location Agreement" or like agreement (collectively, "Collocation
Agreements") between Tenant and such a Customer for the limited purpose of
permitting such an arrangement as is described in this Section 14.6. The
------------
effectiveness of such advance consent as to a particular Customer Sublease is
conditioned on (a) Tenant not giving such Customer any rights not given Tenant
under this Lease, and (b) Tenant providing Landlord with same-day advance
facsimile notice of all Customers authorized to enter the Premises and Project
during Business Hours, and same-day advance verbal authorization to and approval
by the Project manager for any authorized entry of the Premises and Project
during hours other than the Business Hours. Tenant shall be liable to Landlord
for any violation by its Customers of any provisions of this Lease.
-18-
<PAGE>
14.7 Additional Transfers. For purposes of this Lease, the term "Transfer"
--------------------
shall also include (i) if Tenant is a partnership, the withdrawal or change,
voluntary, involuntary or by operation of law, of fifty percent (50%) or more of
the partners, or transfer of twenty-five percent or more of partnership
interests, within a twelve (12)-month period, or the dissolution of the
partnership without immediate reconstitution thereof, and (ii) if Tenant is a
closely held corporation (i.e., whose stock is not publicly held and not traded
----
through an exchange or over the counter), (A) the dissolution, merger,
consolidation or other reorganization of Tenant, or (B) the sale or other
transfer of more than an aggregate of fifty percent (50%) of the voting shares
of Tenant (other than the original issuance of voting shares by Tenant and/or
the transfer of voting shares to immediate family members by reason of gift or
death), within a twelve (12)-month period.
14.8 Non-Transfers. Notwithstanding anything to the contrary contained in
-------------
this Lease, neither (i) the sale or exchange of any capital stock of Tenant on
a public exchange, (ii) an assignment of this Lease to a transferee of all or
substantially all of the assets of Tenant, (iii) an assignment of this Lease or
sublease of the Premises to a transferee which is either (A) the resulting
entity of a merger or consolidation of Tenant with another entity or (B)
acquiring all or substantially all of the assets of Tenant, (iv) subject to
Landlord's reasonable approval of any leasehold mortgage documentation, the
mortgage, pledge or hypothecation of Tenant's interest under the Lease to any
institutional lender, nor (v) an assignment or subletting of all or a portion of
the Premises to an affiliate of Tenant (an entity which is controlled by,
controls, or is under common control with, Tenant), shall be deemed a Transfer
under Article 14 of this Lease (and thus shall not be subject to Landlord's
----------
prior consent or recapture rights pursuant to Section 14.1 and 14.4 or rights to
------------ ----
receive any Transfer Premium pursuant to Section 14.3), provided that (1) Tenant
------------
notifies Landlord of any such assignment or sublease at least five (5) days
prior to the effective thereof, and thereafter promptly supplies Landlord with
any documents or information reasonably requested by Landlord regarding such
transfer or transferee, (2) such assignment or sublease is not a subterfuge by
Tenant to avoid its obligations under this Lease, (3) such transferee or
affiliate (which for purposes of this Lease shall be referred to as a "Permitted
Affiliate") shall have a tangible net worth (not including goodwill as an asset)
computed in accordance with generally accepted accounting principles (the "Net
Worth") sufficient to satisfy the obligations and responsibilities to be
undertaken in connection with such assignment or sublease, (4) such transferee
or affiliate, shall with respect to an Assignment of this Lease, deliver to
Landlord an agreement assuming all the obligations of Tenant under this Lease
arising after the effective date of such assignment, and (5) with respective to
any mortgage, pledge or hypothecation of Tenant's leasehold interest in the
Premises, Landlord reasonably approves any financing or mortgage documentation.
14.9 Occurrence of Default. Any Transfer hereunder shall be subordinate
---------------------
and subject to the provisions of this Lease, and if this Lease shall be
terminated during the term of any Transfer, Landlord shall have the right to:
(i) treat such Transfer as canceled and repossess the Subject Space by any
lawful means, or (ii) require that such Transferee (not including any Customer
under a Collocation Agreement) attorn to and recognize Landlord as its landlord
under any such Transfer. If Tenant shall be in default under this Lease,
Landlord is hereby irrevocably authorized, as Tenant's agent and attorney-in-
fact, to direct any Transferee (not including any Customer under a Collocation
Agreement) to make all payments under or in connection with the Transfer
directly to Landlord (which Landlord shall apply towards Tenant's obligations
under this Lease) until such default is cured. Such Transferee shall rely on
any representation by Landlord that Tenant is in default hereunder, without any
need for confirmation thereof by Tenant. Upon any assignment, the assignee
shall assume in writing all obligations and covenants of Tenant thereafter to be
performed or observed under this Lease. No collection or acceptance of rent by
Landlord from any Transferee shall be deemed a waiver of any provision of this
Article 14 or the approval of any Transferee or a release of Tenant from any
- ----------
obligation under this Lease, whether theretofore or thereafter accruing. In no
event shall Landlord's enforcement of any provision of this Lease against any
Transferee be deemed a waiver of Landlord's right to enforce any term of this
Lease against Tenant or any other person. If Tenant's obligations hereunder
have been guaranteed, Landlord's consent to any Transfer shall not be effective
unless the guarantor also consents to such Transfer.
ARTICLE 15
----------
SURRENDER OF PREMISES; OWNERSHIP AND
------------------------------------
REMOVAL OF TRADE FIXTURES
-------------------------
15.1 Surrender of Premises. No act or thing done by Landlord or any agent
---------------------
or employee of Landlord during the Lease Term shall be deemed to constitute an
acceptance by Landlord of a surrender of the Premises unless such intent is
specifically acknowledged in writing by Landlord. The delivery of keys to the
Premises to Landlord or any agent or employee of Landlord shall not constitute a
surrender of the Premises or effect a termination of this Lease, whether or not
the keys are thereafter retained by Landlord, and notwithstanding such delivery
Tenant shall be entitled to the return of such keys at any reasonable time upon
request until this Lease shall have been properly terminated. The voluntary or
other surrender of this Lease by Tenant, whether accepted by Landlord or not, or
a mutual termination hereof,
-19-
<PAGE>
shall not work a merger, and at the option of Landlord shall operate as an
assignment to Landlord of all subleases or subtenancies affecting the Premises
or terminate any or all such sublessees or subtenancies.
15.2 Removal of Tenant Property by Tenant. Upon the expiration of the
------------------------------------
Lease Term, or upon any earlier termination of this Lease, Tenant shall, subject
to the provisions of this Article 15, quit and surrender possession of the
----------
Premises to Landlord in as good order and condition as when Tenant took
possession and as thereafter improved by Landlord and/or Tenant, reasonable wear
and tear and repairs which are specifically made the responsibility of Landlord
hereunder excepted. Upon such expiration or termination, Tenant shall, without
expense to Landlord, remove or cause to be removed from the Premises all debris
and rubbish, and such items of furniture, equipment, business and trade
fixtures, free-standing cabinet work, movable partitions and other articles of
personal property owned by Tenant or installed or placed by Tenant at its
expense in the Premises, and such similar articles of any other persons claiming
under Tenant, as Landlord may, in its sole discretion, require to be removed,
and Tenant shall repair at its own expense all damage to the Premises and
Building resulting from such removal; provided that Tenant shall not be
permitted to remove any of the Supplemental Equipment other than Tenant's Trade
Fixtures such Supplemental Equipment becoming the sole property of Landlord upon
expiration of the Lease Term.
ARTICLE 16
----------
HOLDING OVER
------------
If Tenant holds over after the expiration of the Lease Term or earlier
termination thereof, with or without the express or implied consent of Landlord,
such tenancy shall be from month-to-month only, and shall not constitute a
renewal hereof or an extension for any further term, and in such case Base Rent
shall be payable at a monthly rate equal to one hundred twenty-five percent
(125%) (the "Percentage Rate") of the Base Rent applicable during the last
rental period of the applicable Lease or Option Term for the first ninety (90)
days of such holdover tenancy, provided that the Percentage Rate shall be
increased to two hundred percent (200%) for any holdover tenancy by Tenant in
excess of ninety (90) days. Such month-to-month tenancy shall be subject to
every other applicable term, covenant and agreement contained herein. Nothing
contained in this Article 16 shall be construed as consent by Landlord to any
----------
holding over by Tenant, and Landlord expressly reserves the right to require
Tenant to surrender possession of the Premises to Landlord as provided in this
Lease upon the expiration or other termination of this Lease. The provisions of
this Article 16 shall not be deemed to limit or constitute a waiver of any other
----------
rights or remedies of Landlord provided herein or at law. If Tenant fails to
surrender the Premises upon the termination or expiration of this Lease, in
addition to any other liabilities to Landlord accruing therefrom, Tenant shall
protect, defend, indemnify and hold Landlord harmless from all loss, costs
(including reasonable attorneys' fees) and liability resulting from such
failure, including, without limiting the generality of the foregoing, any claims
made by any succeeding tenant founded upon such failure to surrender and any
lost profits to Landlord resulting therefrom.
ARTICLE 17
----------
ESTOPPEL CERTIFICATES
---------------------
Within ten (10) days following a request in writing by Landlord or Tenant,
the non-requesting party shall execute, acknowledge and deliver to the
Requesting Party an estoppel certificate, which, as submitted by the Requesting
Party , shall be substantially in the form of Exhibit E, attached hereto (or
---------
such other form as may be required by any prospective mortgagee or purchaser of
the Project, or any portion thereof), indicating therein any exceptions thereto
that may exist at that time, and shall also contain any other information
reasonably requested by the Requesting Party or The requesting Party's mortgagee
or prospective mortgagee. Any such certificate may be relied upon by any
prospective mortgagee or purchaser of all or any portion of the Project. The
non-requesting party shall execute and deliver whatever other instruments may be
reasonably required for such purposes. At any time during the Lease Term,
Landlord may require Tenant to provide Landlord with a current financial
statement and financial statements of the two (2) years prior to the current
year provided that Landlord shall keep such information confidential pursuant to
the requirements of Section 29.28 below. Such statements shall be prepared in
-------------
accordance with generally accepted accounting principles and, if such is the
normal practice of Tenant, shall be audited by an independent certified public
accountant. Failure of Tenant to timely execute, acknowledge and deliver such
estoppel certificate or other instruments shall constitute an acceptance of the
Premises and an acknowledgment by Tenant that statements included in the
estoppel certificate are true and correct, without exception.
-20-
<PAGE>
ARTICLE 18
----------
SUBORDINATION
-------------
18.1 Subordination. This Lease is subject and subordinate to all present
-------------
and future ground or underlying leases of the Building or Project and to the
lien of any mortgage, trust deed or other encumbrances now or hereafter in force
against the Building or Project or any part thereof, if any, and to all
renewals, extensions, modifications, consolidations and replacements thereof,
and to all advances made or hereafter to be made upon the security of such
mortgages or trust deeds, unless the holders of such mortgages, trust deeds or
other encumbrances, or the lessors under such ground lease or underlying leases,
require in writing that this Lease be superior thereto. Notwithstanding the
foregoing to the contrary, Landlord agrees to provide Tenant with commercially
reasonable non-disturbance agreement(s) in favor of Tenant from any ground
lessors, mortgage holders or deed of trust beneficiaries under any ground lease,
mortgage or deed of trust affecting the Project which comes into existence at
any time after the date of execution of this Lease but prior to the expiration
of the Lease Term ("Future Mortgage") in consideration of, and as a condition
precedent to, Tenant's agreement to be bound by the terms of this Article 18
----------
with respect to such Future Mortgage. Tenant covenants and agrees in the event
any proceedings are brought for the foreclosure of any such mortgage or deed in
lieu thereof (or if any ground lease is terminated), to attorn, without any
deductions or set-offs whatsoever except as expressly provided for in this
Lease, to the lienholder or purchaser or any successors thereto upon any such
foreclosure sale or deed in lieu thereof (or to the ground lessor), if so
requested to do so by such purchaser or lienholder or ground lessor, and to
recognize such purchaser or lienholder or ground lessor as the lessor under this
Lease, provided such lienholder or purchaser or ground lessor shall agree to
accept this Lease and not disturb Tenant's occupancy, so long as Tenant timely
pays the rent and observes and performs the terms, covenants and conditions of
this Lease to be observed and performed by Tenant. Landlord's interest herein
may be assigned as security at any time to any lienholder. Tenant shall, within
ten (10 ) days of request by Landlord, execute such further instruments or
assurances as Landlord may reasonably deem necessary to evidence or confirm the
subordination or superiority of this Lease to any such mortgages, trust deeds,
ground leases or underlying leases, provided Tenant has received or will receive
a commercially reasonable nondisturbance agreement in favor of Tenant from any
such party requesting such further instruments or assurances. Tenant hereby
irrevocably authorizes Landlord to execute and deliver in the name of Tenant any
such instrument or instruments if Tenant fails to do so in accordance with the
requirements with this Lease; provided that such authorization shall in no way
relieve Tenant from the obligation of executing such instruments of
subordination or superiority. Tenant waives the provisions of any current or
future statute, rule or law which may give or purport to give Tenant any right
or election to terminate or otherwise adversely affect this Lease and the
obligations of Tenant hereunder in the event of any foreclosure proceeding or
sale.
18.2 Non-Disturbance Agreement From Existing Lender. In the event that as
----------------------------------------------
of the date of execution of this Lease, there exists any deed of trust or ground
lease encumbering the Project which is not terminated, released or reconveyed
within sixty (60) days thereafter, then Landlord shall obtain and deliver to
Tenant a commercially reasonable non-disturbance agreement from the beneficiary
under such deed of trust a form of which is attached hereto as Exhibit F.
---------
Tenant shall execute and return such non-disturbance agreement to Landlord
within thirty (30) days after Tenant's receipt thereof.
ARTICLE 19
----------
DEFAULTS; REMEDIES
------------------
19.1 Events of Default. The occurrence of any of the following shall
-----------------
constitute a default of this Lease by Tenant:
19.1.1 Any failure by Tenant to pay any Rent or any other charge
required to be paid under this Lease, or any part thereof, when due unless such
failure is cured within five (5) days after receipt of written notice by Tenant;
provided, however, that any such notice shall be in lieu of, and not in addition
to, any notice required under California Code of Civil Procedure section 1161 or
any similar successor law, or
19.1.2 Except where a specific time period is otherwise set forth for
Tenant's performance in this Lease, in which event the failure to perform by
Tenant within such time period shall be a default by Tenant under this Section
-------
19.1.2, any failure by Tenant to observe or perform any other provision,
- ------
covenant or condition of this Lease to be observed or performed by Tenant where
such failure continues for ten (10) days after written notice thereof from
Landlord to Tenant; provided that if the nature of such default is such that the
same cannot reasonably be cured within a ten (10) day period, Tenant shall not
be deemed to be in default if it diligently commences such cure within such
period and thereafter diligently proceeds to rectify and cure such default, but
in no event exceeding a period of time in excess of sixty (60 ) days after
written notice thereof from Landlord to Tenant; or
-21-
<PAGE>
19.1.3 To the extent permitted by law, a general assignment by Tenant
or any guarantor of the Lease for the benefit of creditors, or the taking of any
corporate action in furtherance of bankruptcy or dissolution whether or not
there exists any proceeding under an insolvency or bankruptcy law, or the filing
by or against Tenant or any guarantor of any proceeding under an insolvency or
bankruptcy law, unless in the case of a proceeding filed against Tenant or any
guarantor the same is dismissed within sixty (60) days, or the appointment of a
trustee or receiver to take possession of all or substantially all of the assets
of Tenant or any guarantor, unless possession is restored to Tenant or such
guarantor within thirty (30) days, or any execution or other judicially
authorized seizure of all or substantially all of Tenant's assets located upon
the Premises or of Tenant's interest in this Lease, unless such seizure is
discharged within thirty (30) days; or
19.1.4 Abandonment of all or a substantial portion of the Premises by
Tenant; or
19.1.5 The failure by Tenant to observe or perform according to the
provisions of Articles 5, 14, 17 or 18 of this Lease where such failure
---------- -- -- --
continues for more than two (2) business days after notice from Landlord; or
The notice periods provided herein are in lieu of, and not in addition to,
any notice periods provided by law.
19.2 Remedies Upon Default. Upon the occurrence of any event of default by
---------------------
Tenant, Landlord shall have, in addition to any other remedies available to
Landlord at law or in equity (all of which remedies shall be distinct, separate
and cumulative), the option to pursue any one or more of the following remedies,
each and all of which shall be cumulative and nonexclusive, without any notice
or demand whatsoever.
19.2.1 Terminate this Lease, in which event Tenant shall immediately
surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may,
without prejudice to any other remedy which it may have for possession or
arrearages in rent, enter upon and take possession of the Premises and expel or
remove Tenant and any other person who may be occupying the Premises or any part
thereof, without being liable for prosecution or any claim or damages therefor;
and Landlord may recover from Tenant the following:
(i) The worth at the time of any unpaid rent which has been
earned at the time of such termination; plus
(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 Tenant proves could
have been reasonably avoided; plus
(iii) The worth at the time of award of the amount by which the
unpaid rent for the balance of the Lease Term after the time of award
exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; plus
(iv) Any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom, specifically including but not limited
to, brokerage commissions and advertising expenses incurred, expenses of
remodeling the Premises or any portion thereof for a new tenant, whether
for the same or a different use, and any special concessions made to obtain
a new tenant; and
(v) At Landlord's election, such other amounts in addition to
or in lieu of the foregoing as may be permitted from time to time by
applicable law.
The term "rent" as used in this Section 19.2 shall be deemed to be and to
------------
mean all sums of every nature required to be paid by Tenant pursuant to the
terms of this Lease, whether to Landlord or to others. As used in Paragraphs
19.2.1(i) and (ii), above, the "worth at the time of award" shall be computed by
allowing interest at the rate set forth in Article 25 of this Lease, but in no
----------
case greater than the maximum amount of such interest permitted by law. As used
in Paragraph 19.2.1(iii) above, the "worth at the time of award" shall be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus two percent (2%).
19.2.2 Landlord shall have the remedy described in California Civil
Code Section 1951.4 (lessor may continue lease in effect after lessee's breach
and abandonment and recover rent as it becomes due, if lessee has the right to
sublet or assign, subject only to reasonable limitations). Accordingly, if
Landlord does not elect to terminate this Lease on account of any default by
Tenant, Landlord may, from time to time, without terminating this Lease, enforce
all of its rights and remedies under this Lease, including the right to recover
all rent as it becomes due.
-22-
<PAGE>
19.2.3 Landlord shall at all times have the rights and remedies
(which shall be cumulative with each other and cumulative and in addition to
those rights and remedies available under Sections 19.2.1 and 19.2.2, above, or
--------------- ------
any law or other provision of this Lease), without prior demand or notice except
as required by applicable law, to seek any declaratory, injunctive or other
equitable relief, and specifically enforce this Lease, or restrain or enjoin a
violation or breach of any provision hereof.
19.3 Subleases of Tenant. Whether or not Landlord elects to terminate this
-------------------
Lease on account of any default by Tenant, as set forth in this Article 19,
----------
Landlord shall have the right to terminate any and all subleases, licenses,
concessions or other consensual arrangements for possession entered into by
Tenant and affecting the Premises or may, in Landlord's sole discretion, succeed
to Tenant's interest in such subleases, licenses, concessions or arrangements.
In the event of Landlord's election to succeed to Tenant's interest in any such
subleases, licenses, concessions or arrangements, Tenant shall, as of the date
of notice by Landlord of such election, have no further right to or interest in
the rent or other consideration receivable thereunder.
19.4 Form of Payment After Default. Following the occurrence of two (2) or
-----------------------------
more events of monetary default in any twelve (12) month period by Tenant,
Landlord shall have the right to require that any or all subsequent amounts paid
by Tenant to Landlord hereunder, whether to cure the default in question or
otherwise, be paid in the form of cash, money order, cashier's or certified
check drawn on an institution acceptable to Landlord, or by other means approved
by Landlord, notwithstanding any prior practice of accepting payments in any
different form.
19.5 Efforts to Relet. No re-entry or repossession, repairs, maintenance,
----------------
changes, alterations and additions, reletting, appointment of a receiver to
protect Landlord's interests hereunder, or any other action or omission by
Landlord shall be construed as an election by Landlord to terminate this Lease
or Tenant's right to possession, or to accept a surrender of the Premises, nor
shall same operate to release Tenant in whole or in part from any of Tenant's
obligations hereunder, unless express written notice of such intention is sent
by Landlord to Tenant. Tenant hereby irrevocably waives any right otherwise
available under any law to redeem or reinstate this Lease.
ARTICLE 20
----------
COVENANT OF QUIET ENJOYMENT
---------------------------
Landlord covenants that Tenant, on paying the Rent, charges for services
and other payments herein reserved and on keeping, observing and performing all
the other terms, covenants, conditions, provisions and agreements herein
contained on the part of Tenant to be kept, observed and performed, shall,
during the Lease Term, peaceably and quietly have, hold and enjoy the Premises
subject to the terms, covenants, conditions, provisions and agreements hereof
without interference by any persons lawfully claiming by or through Landlord.
The foregoing covenant is in lieu of any other covenant express or implied.
ARTICLE 21
----------
SECURITY DEPOSIT
----------------
Concurrent with Tenant's execution of this Lease, Tenant shall deposit with
Landlord a security deposit (the "Security Deposit") in the amount set forth in
Section 8 of the Summary, as security for the faithful performance by Tenant of
- ---------
all of its obligations under this Lease. If Tenant defaults with respect to any
provisions of this Lease, including, but not limited to, the provisions relating
to the payment of Rent, the removal of property and the repair of resultant
damage, Landlord may, without notice to Tenant, but shall not be required to
apply all or any part of the Security Deposit for the payment of any Rent or any
other sum in default and Tenant shall, upon demand therefor, restore the
Security Deposit to its original amount. Any unapplied portion of the Security
Deposit shall be returned to Tenant, or, at Landlord's option, to the last
assignee of Tenant's interest hereunder, within forty-five (45) days following
the expiration of the Lease Term. Tenant shall not be entitled to any interest
on the Security Deposit. Tenant hereby waives the provisions of Section 1950.7
(excluding 1950.7(b)) of the California Civil Code, or any successor statute.
ARTICLE 22
----------
SUPPLEMENTAL EQUIPMENT
----------------------
22.1 Supplemental Equipment. Landlord hereby grants to Tenant and Tenant
----------------------
hereby accepts from Landlord, on the terms and conditions set forth herein, a
license (the "License") coupled with Tenant's leasehold interest granting Tenant
the right (but with respect to Tenant's HVAC Equipment and Electrical Equipment
in the Premises, Tenant shall have the obligation), to install, at Tenant's sole
cost and expense and subject to the provisions of this Article 22, the
----------
following:
-23-
<PAGE>
22.1.1 Subject to the satisfactory completion of the Roof Systems
Support Pad (as defined in Section 2.4 of the Tenant work letter), a heating,
ventilating and air conditioning system and related connections to the Premises
(the "Tenant's HVAC Equipment") on the portion of the Roof System Support Pad
shown as "Area A". on Exhibit A-2 attached hereto;
-----------
22.1.2 A dry-pipe, FM 200 or gas-based fire suppression system (the
"Fire-Suppression System") in the Premises in a location designated in writing
by Landlord. In connection with Tenant's installation of the Fire Suppression
System, Tenant shall have the right to disconnect and cap, if necessary, in
compliance with applicable law, and in accordance with the terms of Section 22.3
------------
below, any existing fire-suppression system in the Premises.;
22.1.3 Subject to the satisfactory completion of the Roof Systems
Support Pad (as defined in Section 2.4 of the Tenant Work Letter), four (4)
1,500 Kilowatt emergency generators ("Tenant's Generators") on that portion of
the Roof System Support Pad shown as "Area A" on Exhibit A-2 attached hereto.
-----------
Tenant shall install Tenant's Generators in compliance with all applicable law,
and in accordance with the terms and conditions of this Section 22, and shall be
----------
solely responsible for (i) all costs and expenses incurred in connection with
the installation, maintenance and operation of Tenant's Generator, and (ii) all
permits and other governmental approvals required to install, operate and
maintain Tenant's Generator. Tenant shall conduct all testing of Tenant's
Generators in accordance with Landlord's testing rules during non-business hours
and shall give Landlord not less than forty-eight (48) hours advance written
notice of any such tests.
In addition, from and after the Must Take Space Commencement Date
(defined in Section 1.2 above) Landlord shall permit Tenant to install, at
-----------
Tenant's sole cost and expense one (1) additional 1500-kilowatt emergency
generator (the "Expansion Generator") in an area of Landlord's designated
project generator room (the "Project Generator Room)" approved by Landlord;
provided that, if Tenant elects to install the Expansion Generator Tenant shall
reimburse Landlord for its proportionate share (to be determined by dividing the
number of generator pads used by Tenant by the total number of generator pads in
the Project Generator Room) of all reasonable costs incurred by Landlord in
constructing the Project Generator Room.
22.1.4 Tenant shall be entitled to utilize up to, but not exceeding
10,000 gallons of Landlord's designated generator stand-by fuel storage tank
(the "Generator Fuel Tank") in the Project's fuel storage area to provide fuel
for Tenant's Generators. Notwithstanding anything to the contrary contained in
this Article 22, Landlord shall acquire and install (i) the Generator Fuel Tank
(ii) reasonably sufficient fuel piping from the Generator Fuel Tank to Tenant's
fuel tank header in the basement of the Building and to Tenant's Generators, and
(iii) a fuel usage meter to measure and record Tenant's fuel consumption from
the Generator Fuel Tank, provided that Tenant shall pay Landlord for all costs
and expenses (which cost and expenses shall be deducted from the Tenant
Improvement Allowance pursuant to the Tenant Work Letter attached hereto),
incurred as a result of Landlord's installation and acquisition of the fuel
piping, any metering equipment and Tenant's prorata share of the Generator Fuel
Tank. Tenant's Generators, the Expansion Generators (if added pursuant to
Section 22.1.3 above), shall sometimes herein be collectively referred to as
- --------------
"Tenant's Generator Equipment."
22.1.5 The Electrical Equipment described in Section 6.1.2 above;
-------------
22.1.6 Subject to available capacity of the Building, such connection
equipment, such as conduits, cables, risers, feeders and materials
(collectively, the "Connecting Equipment") in the shafts, ducts, conduits,
chases, utility closets and other facilities of the Building as is reasonably
necessary to connect Tenant's HVAC Equipment, Tenant's Generator Equipment, the
Generator Fuel Tank, the Electrical Equipment and the Fire-Suppression System to
Tenant's other machinery and equipment in the Premises, subject however, to the
provisions of Section 22.3 below and subject to the availability of vertical
------------
riser and feeder excess capacity;
22.1.7 Up to (i) eight (8) four inch (4.0") aluminum conduits running
from the Premises to the seventh (7th) floor and basement of the Building, in
each of the two (2) main telecommunications riser of the Building (the "Main
Telecom Risers") in locations designated or approved in writing by Landlord and
in the basement from the main telecommunication riser to the two (2) minimum
points of entry in the basement of the Building to connect with the fiberoptic
network of Tenant's chosen fiber optic service providers, and (ii) eight (8)
four inch (4.0") aluminum conduits in the interconnect riser of the Building
(the "Interconnect Riser") running from the second (2nd) floor to the seventh
(7th) floor of the Building (collectively "Tenant's Conduit"). Notwithstanding
anything in this Lease to the contrary, commencing on the earlier to occur of
(i) the date occurring thirty-six (36) months following the Effective Date And
(ii) the date upon which Tenant has placed ninety percent (90%) of its
collocation Customers in the Premises, Landlord shall have the right to
recapture from Tenant up to seventy five
-24-
<PAGE>
percent of any of the Tenant's Conduit allocated to Tenant pursuant to this
Section 22.1.7, which Landlord reasonably determines is not actually being used
to carry Tenant's or Tenant's Customers fiber throughout the Project;
22.1.8 New telecommunications lines and related equipment
(collectively the "Lines") in the Tenant's Conduit described in Section 22.1.7
--------------
above. Tenant shall install its Lines in the Building and Project in a
"backbone" configuration with horizontal Lines on applicable floors of the
Building being connected to a single Line in a vertical riser. Once the
backbone configuration is constructed, any and all new Lines installed by Tenant
pursuant to the terms of this Section 22 shall be attached to such backbone
----------
configuration. Notwithstanding anything to the contrary contained in this
Lease, Tenant shall only use Tenant's Lines in the Interconnect Riser to make
direct connections with other tenants in the Project.
22.1.9 Tenant's HVAC Equipment, the Fire Suppression System, Tenant's
Generator Equipment, the Electrical Equipment, the Connecting Equipment,
Tenant's Conduit and the Lines are sometimes collectively referred to as the
"Supplemental Equipment."
22.2 License Areas. The areas within the Building and Project which are
-------------
outside the Premises and are occupied by the Supplemental Equipment (including
without limitation, Tenant's non-exclusive use, in common with one or more other
tenants of the Project and Landlord, the vertical shafts and horizontal raceways
of the Building to the extent Tenant's use of such areas are approved in writing
by Landlord) are referred to herein collectively as the "License Areas". The
precise amount and location of the License Areas shall be designated by
Landlord. It is expressly understood that Landlord retains the right to use the
License Areas for any purpose whatsoever provided that Tenant shall have
reasonable access to, and Landlord shall not unduly interfere with the use of,
the Supplemental Equipment therein.
22.3 Installation. Except for the Project Radiators and Generator Fuel
------------
Tank which are to be installed by Landlord pursuant to Section 22.1.4, the
--------------
installation of the Supplemental Equipment shall constitute Alterations and
shall be performed in accordance with and subject to the provisions of Article 8
---------
of this Lease.
22.4 Tenant's Obligations. For the purposes of determining Tenant's
--------------------
obligations with respect to the License Areas, the License Areas shall be deemed
to be a portion of the Premises; consequently, unless otherwise provided in this
Article 22, all of the provisions of this Lease with respect to Tenant's
- ----------
obligations hereunder shall apply to the installation, use and maintenance of
the License Areas and the Supplemental Equipment, including without limitation,
provisions relating to compliance with requirements as to insurance, indemnity,
janitorial services, repairs, maintenance and compliance with law, except that
unless otherwise provided herein Tenant shall have no obligation to pay Base
Rent for the License Areas.
22.5 Tenant's Compliance with HVAC Sound/Vibration Specifications.
------------------------------------------------------------
Notwithstanding anything to the contrary contained herein, in addition to the
complying with the other requirements set forth in this Article 22, Tenant shall
----------
comply with Landlord's "Project Sound Requirements and Specifications" set forth
on Exhibit G attached hereto and all requirements of the City of Los Angeles
---------
(including without limitation, sound attenuation and vibration mitigation) in
the installation and operation of Tenant's HVAC Equipment and Tenant's Generator
Equipment. Provided that Tenant is not in default in any of its obligations
under this Lease, Tenant shall be allocated a proportionate share of Landlord's
sound budget for the Project.
22.6 Indemnity. Tenant shall install, use, maintain and repair the
---------
Supplemental Equipment, and use the License Areas, so as not to damage or
interfere with the operation of the Building, the Building systems or with the
occupancy or activities of any other tenant of the Building; and Tenant hereby
agrees to indemnify and hold harmless the Landlord Parties from and against any
and all claims (including but not limited to claims for bodily injury or
property damage), actions, mechanic's liens, losses, liabilities, and expenses
(including reasonable attorney fees and costs of defense by Landlord's legal
counsel) (collectively, "Claims"), which may arise from the installation,
operation, use, maintenance or removal of the Supplemental Equipment and use of
the License Areas. Similarly, Tenant shall pay upon demand by Landlord the
costs to repair any physical damage to the Building and the License Areas caused
by such installation, operation, use, maintenance or removal. Tenant hereby
waives and releases the Landlord Parties from any Claims Tenant may have at any
time (including but not limited to Claims relating to interruptions in services)
arising out of or relating in any way to the installation, operation, use,
maintenance, and/or removal of the Supplemental Equipment and/or use of the
License Areas. Such waiver and release shall not apply to Claims to the extent
caused by Landlord's gross negligence or willful misconduct and not insured or
required to be insured by Tenant under this Lease.
-25-
<PAGE>
However, in no event shall Landlord or any member of the Landlord Parties be
liable to Tenant for lost profits or consequential or incidental damages of any
kind.
22.7 Tenant Waiver. Landlord shall not have any obligations with respect
-------------
to the Supplemental Equipment or License Areas or compliance with any
requirements relating thereto, nor shall Landlord be responsible for any damage
that may be caused to the Supplemental Equipment or License Areas except to the
extent caused by the gross negligence or willful misconduct of Landlord and not
insured or required to be insured by Tenant under this Lease. Landlord makes no
representation that the Supplemental Equipment or License Areas will be able to
operate without interference or disturbance and Tenant agrees that Landlord
shall not be liable to Tenant therefor.
22.8 Protective Installations. Tenant, at Tenant's sole cost and expense,
------------------------
shall install such fencing and other protective equipment on or about the
Supplemental Equipment and License Areas as Landlord may determine.
22.9 Damage to Supplemental Equipment/Taxes on Supplemental Equipment.
----------------------------------------------------------------
Notwithstanding anything in Article 11 to the contrary, Tenant shall (i) be
----------
solely responsible for any damage caused as a result of and/or to the
Supplemental Equipment except to the extent such damage arises out of the gross
negligence or willful misconduct of Landlord and is not insured or required to
be insured by Tenant under this Lease, (ii) promptly pay any tax, license or
permit fees charged pursuant to any requirements in connection with the
installation, maintenance or use of the Supplemental Equipment and comply with
all precautions and safeguards recommended by all governmental authorities, and
(iii) make necessary repairs, replacements or to maintenance of the Supplemental
Equipment and License Areas (unless and to the extent Landlord has elected in
Section 11.1 to repair the Supplemental Equipment) or License Areas.
- ------------
22.10 Landlord's Rights. If any of the conditions set forth in this
-----------------
Article 22 are not complied with by Tenant, or if Tenant's use of the
- ----------
Supplemental Equipment is interfering with the activity or occupancy of any
other tenant in the Building, then without limiting Landlord's rights and
remedies it may otherwise have under this Lease, Tenant shall, upon written
notice from Landlord, have the option either to (i) immediately discontinue its
use of the Supplemental Equipment and License Areas, remove the same, and make
such repairs and restoration as required under Section 22.10 below, (ii)
-------------
reposition any Supplemental Equipment to a location designated by Landlord if
Landlord elects to permit such repositioning, and make such repairs and
restorations as required under Section 22.10 below, or (iii) correct such
-------------
noncompliance within thirty (30) days after receipt of notice. If Tenant fails
to correct noncompliance within thirty (30) days after receipt of notice, then,
subject to Section 22.10 below, Tenant shall immediately discontinue its use of
-------------
the applicable Supplemental Equipment and remove the same and discontinue use of
the related License Areas. Tenant acknowledges and agrees that any exercise by
Landlord of its rights under this Section 22.9 shall not relieve Tenant of any
------------
of its obligations under the Lease.
22.11 Removal of Supplemental Equipment. Notwithstanding anything in this
---------------------------------
Lease to the contrary (including without limitation Article 15), upon the
----------
expiration of the Lease Term or upon any earlier termination of this Lease,
Landlord shall have the option, but not the obligation, of requiring that
Tenant, subject to the control of and direction from Landlord, remove all or any
portion of the Supplemental Equipment, repair any damage caused thereby, and
restore the License Areas and other facilities of the Building and Project to
their condition existing prior to the installation of the Supplemental
Equipment; provided that Tenant shall be permitted to remove Tenant's Trade
Fixtures upon the expiration of the Lease Term so long as it meets the repair
and restoration requirements set forth hereinabove.
ARTICLE 23
----------
SIGNS
-----
23.1 Full Floors. Subject to Landlord's prior written approval, in its
-----------
reasonable discretion, and provided all signs are in keeping with the quality,
design and style of the Building and Project, Tenant, if the Premises comprise
an entire floor of the Building, at its sole cost and expense, may install
identification signage anywhere in the Premises including in the elevator lobby
of the Premises, provided that such signs must not be visible from the exterior
of the Building.
23.2 Multi-Tenant Floors. If other tenants occupy space on the floor on
-------------------
which the Premises is located, Tenant's identifying signage shall be provided by
Landlord, at Tenant's cost, and such signage shall be comparable to that used by
Landlord for other similar floors in the Building and shall comply with
Landlord's Building standard signage program.
-26-
<PAGE>
23.3 Prohibited Signage and Other Items. Any signs, notices, logos,
----------------------------------
pictures, names or advertisements which are installed and that have not been
separately approved by Landlord may be removed without notice by Landlord at the
sole expense of Tenant. Tenant may not install any signs on the exterior or
roof of the Project or the Common Areas. Any signs, window coverings, or blinds
(even if the same are located behind the Landlord-approved window coverings for
the Building), or other items visible from the exterior of the Premises or
Building, shall be subject to the prior approval of Landlord, in its sole
discretion.
ARTICLE 24
----------
COMPLIANCE WITH LAW
-------------------
Tenant shall not do anything or suffer anything to be done in or about the
Premises or the Project which will in any way conflict with any law, statute,
ordinance or other governmental rule, regulation or requirement now in force or
which may hereafter be enacted or promulgated. At its sole cost and expense,
Tenant shall promptly comply with all such governmental measures. Should any
standard or regulation now or hereafter be imposed on Landlord or Tenant by a
state, federal or local governmental body charged with the establishment,
regulation and enforcement of occupational, health or safety standards for
employers, employees, landlords or tenants, then Tenant agrees, at its sole cost
and expense, to comply promptly with such standards or regulations; provided
that Landlord shall comply with any standards or regulations which relate to the
Common Areas, Building Structure and those portion of the Building Systems
located outside the Premises, unless such compliance obligations are directly
related to and result from Tenant's particular manner of use of the Premises or
the tenant improvements (including the initial Tenant Improvements constructed
pursuant to the Tenant Work Letter) or the Alterations installed in or to the
Premises after the date hereof, in which event such compliance obligations shall
be at Tenant's sole cost and expense. Tenant shall be responsible, at its sole
cost and expense, to make all alterations to the Premises as are required to
comply with the governmental rules, regulations, requirements or standards
described in this Article 24. The judgment of any court of competent
----------
jurisdiction or the admission of Tenant in any judicial action, regardless of
whether Landlord is a party thereto, that Tenant has violated any of said
governmental measures, shall be conclusive of that fact as between Landlord and
Tenant.
ARTICLE 25
----------
LATE CHARGES
------------
If any installment of Rent or any other sum due from Tenant shall not be
received by Landlord or Landlord's designee within five (5) days after said
amount is due, then Tenant shall pay to Landlord a late charge equal to five
percent (5%) of the overdue amount plus any reasonable attorneys' fees incurred
by Landlord by reason of Tenant's failure to pay Rent and/or other charges when
due hereunder. The late charge shall be deemed Additional Rent and the right to
require it shall be in addition to all of Landlord's other rights and remedies
hereunder or at law and shall not be construed as liquidated damages or as
limiting Landlord's remedies in any manner. In addition to the late charge
described above, any Rent or other amounts owing hereunder which are not paid
within ten (10) days after the date they are due shall bear interest from the
date when due until paid at a rate per annum equal to the lesser of (i) the
Interest Rate, and (ii) the highest rate permitted by applicable law.
ARTICLE 26
----------
LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT
----------------------------------------------------
26.1 Landlord's Cure. All covenants and agreements to be kept or performed
---------------
by Tenant under this Lease shall be performed by Tenant at Tenant's sole cost
and expense and without any reduction of Rent, except to the extent, if any,
otherwise expressly provided herein. If Tenant shall fail to perform any
obligation under this Lease, and such failure shall continue in excess of the
time allowed under Section 19.1.2, above, unless a specific time period is
--------------
otherwise stated in this Lease, Landlord may, but shall not be obligated to,
make any such payment or perform any such act on Tenant's part without waiving
its rights based upon any default of Tenant and without releasing Tenant from
any obligations hereunder.
26.2 Tenant's Reimbursement. Except as may be specifically provided to the
----------------------
contrary in this Lease, Tenant shall pay to Landlord, within five (5) days after
delivery by Landlord to Tenant of statements therefor: (i) sums equal to
expenditures reasonably made and obligations incurred by Landlord in connection
with the remedying by Landlord of Tenant's defaults pursuant to the provisions
of Section 26.1; and (ii) sums equal to all losses, costs, liabilities, damages
------------
and expenses referred to in Article 10 of this Lease. Tenant's obligations
----------
under this Section 26.2 shall survive the expiration or sooner termination of
------------
the Lease Term.
-27-
<PAGE>
ARTICLE 27
----------
ENTRY BY LANDLORD
-----------------
Landlord reserves the right at all reasonable times and upon reasonable
notice to Tenant (except in the case of an emergency) to enter the Premises with
a representative of Tenant made reasonably available by Tenant to (i) inspect
them; (ii) show the Premises to (x) prospective purchasers, mortgagees, (y)
tenants during the last twelve (12) months of Lease Term, or to (z) current or
prospective mortgagees, ground or underlying lessors or insurers; (iii) post
notices of nonresponsibility; or (iv) alter, improve or repair the Premises or
the Building, or for structural alterations, repairs or improvements to the
Building or the Building's systems and equipment. Notwithstanding anything to
the contrary contained in this Article 27, Landlord may enter the Premises at
----------
any time to (A) take possession due to any breach of this Lease in the manner
provided herein; and (B) perform any covenants of Tenant which Tenant fails to
perform after any applicable notice and cure period. Landlord may make any such
entries without the abatement of Rent and may take such reasonable steps as
required to accomplish the stated purposes. Except as provided in Section 6.3
----------
above, Tenant hereby waives any claims for damages or for any injuries or
inconvenience to or interference with Tenant's business, lost profits, any loss
of occupancy or quiet enjoyment of the Premises, and any other loss occasioned
thereby. For each of the above purposes, Landlord shall at all times have a key
with which to unlock all the doors in the Premises, excluding Tenant's vaults,
safes and special security areas designated in advance by Tenant. In an
emergency, Landlord shall have the right to use any means that Landlord may deem
proper to open the doors in and to the Premises. Any entry into the Premises by
Landlord in the manner hereinbefore described shall not be deemed to be a
forcible or unlawful entry into, or a detainer of, the Premises, or an actual or
constructive eviction of Tenant from any portion of the Premises. No provision
of this Lease shall be construed as obligating Landlord to perform any repairs,
alterations or decorations except as otherwise expressly agreed to be performed
by Landlord herein.
ARTICLE 28
----------
PARKING
-------
For so long as Landlord owns the Parking Structure, Tenant shall, subject
to availability, be permitted to rent up to the number of parking passes set
forth in Section 11 of the Summary for parking in the Parking Structure. Tenant
----------
shall pay to Landlord for said parking passes on a monthly basis the prevailing
rate charged by Landlord from time to time for parking passes at the location of
such passes, plus all applicable parking taxes. Landlord specifically reserves
the right to sell the Parking Structure, to change the location, size,
configuration, design, layout and all other aspects of the Parking Structure at
any time and Tenant acknowledges and agrees that Landlord may, without incurring
any liability to Tenant and without any abatement of Rent under this Lease, from
time to time, close-off or restrict access to the Parking Structure for purposes
of permitting or facilitating any such construction, alteration or improvements.
The parking passes provided to Tenant pursuant to this Article 28 are provided
----------
solely for use by Tenant's own personnel and such passes may not be transferred,
assigned, subleased or otherwise alienated by Tenant without Landlord's prior
approval. Landlord may delegate its responsibilities hereunder to a parking
operator in which case such parking operator shall have all the rights of
control attributed hereby to Landlord.
ARTICLE 29
----------
MISCELLANEOUS PROVISIONS
------------------------
29.1 Terms; Captions. The words "Landlord" and "Tenant" as used herein
---------------
shall include the plural as well as the singular. The necessary grammatical
changes required to make the provisions hereof apply either to corporations or
partnerships or individuals, men or women, as the case may require, shall in all
cases be assumed as though in each case fully expressed. The captions of
Articles and Sections are for convenience only and shall not be deemed to limit,
construe, affect or alter the meaning of such Articles and Sections.
29.2 Binding Effect. Subject to all other provisions of this Lease, each
--------------
of the covenants, conditions and provisions of this Lease shall extend to and
shall, as the case may require, bind or inure to the benefit not only of
Landlord and of Tenant, but also of their respective heirs, personal
representatives, successors or assigns, provided this clause shall not permit
any assignment by Tenant contrary to the provisions of Article 14 of this Lease.
----------
29.3 No Air Rights. No rights to any view or to light or air over any
-------------
property, whether belonging to Landlord or any other person, are granted to
Tenant by this Lease. If at any time any windows of the Premises are
temporarily darkened or the light or view therefrom is obstructed by reason of
any repairs, improvements, maintenance or cleaning in or about the Project, the
same shall be without liability to Landlord and without any reduction or
diminution of Tenant's obligations under this Lease.
-28-
<PAGE>
29.4 Modification of Lease. Should any current or prospective mortgagee or
---------------------
ground lessor for the Building or Project require a modification of this Lease,
which modification will not cause an increased cost or expense to Tenant or in
any other way unreasonably or adversely change the rights and obligations of
Tenant hereunder, then and in such event, Tenant agrees that this Lease may be
so modified and agrees to execute whatever documents are reasonably required
therefor and to deliver the same to Landlord within ten (10) days following a
request therefor. At the request of Landlord or any mortgagee or ground lessor,
Tenant agrees to execute a short form of Lease and deliver the same to Landlord
within ten (10) days following the request therefor. Landlord and Tenant agree
that within thirty (30) days of the Lease Commencement Date, Landlord and Tenant
shall execute a memorandum of Lease in the form of Exhibit I attached hereto.
---------
29.5 Transfer of Landlord's Interest. Tenant acknowledges that Landlord
-------------------------------
has the right to transfer all or any portion of its interest in the Project or
Building and in this Lease, and Tenant agrees that in the event of any such
transfer, Landlord shall automatically be released from all liability under this
Lease arising after the date of such transfer and Tenant agrees to look solely
to such transferee for the performance of Landlord's obligations hereunder after
the date of transfer and such transferee shall be deemed to have fully assumed
and be liable for all obligations of this Lease to be performed by Landlord,
including the return of any Security Deposit, and Tenant shall attorn to such
transferee. Tenant further acknowledges that Landlord may assign its interest
in this Lease to a mortgage lender as additional security and agrees that such
an assignment shall not release Landlord from its obligations hereunder and that
Tenant shall continue to look to Landlord for the performance of its obligations
hereunder. Landlord agrees that any unapplied portion of the Security Deposit
held pursuant to Article 21 herein, shall be transferred or credited to any
----------
purchaser of the Project from Landlord.
29.6 Prohibition Against Recording. Except as provided in Section 29.4 of
----------------------------- ------------
this Lease, neither this Lease, nor any memorandum, affidavit or other writing
with respect thereto, shall be recorded by Tenant or by anyone acting through,
under or on behalf of Tenant.
29.7 Landlord's Title. Landlord's title is and always shall be paramount
----------------
to the title of Tenant. Nothing herein contained shall empower Tenant to do any
act which can, shall or may encumber the title of Landlord.
29.8 Relationship of Parties. Nothing contained in this Lease shall be
-----------------------
deemed or construed by the parties hereto or by any third party to create the
relationship of principal and agent, partnership, joint venturer or any
association between Landlord and Tenant.
29.9 Application of Payments. Landlord shall have the right to apply
-----------------------
payments received from Tenant pursuant to this Lease, regardless of Tenant's
designation of such payments, to satisfy any obligations of Tenant hereunder, in
such order and amounts as Landlord, in its sole discretion, may elect.
29.10 Time of Essence. Time is of the essence with respect to the
---------------
performance of every provision of this Lease in which time of performance is a
factor.
29.11 Partial Invalidity. If any term, provision or condition contained in
------------------
in this Lease shall, to any extent, be invalid or unenforceable, the remainder
of this Lease, or the application of such term, provision or condition to
persons or circumstances other than those with respect to which it is invalid or
unenforceable, shall not be affected thereby, and each and every other term,
provision and condition of this Lease shall be valid and enforceable to the
fullest extent possible permitted by law.
29.12 No Warranty. In executing and delivering this Lease, Tenant has not
-----------
relied on any representations, including, but not limited to, any representation
as to the amount of any item comprising Additional Rent or the amount of the
Additional Rent in the aggregate or that Landlord is furnishing the same
services to other tenants, at all, on the same level or on the same basis, or
any warranty or any statement of Landlord which is not set forth herein or in
one or more of the exhibits attached hereto.
29.13 Landlord Exculpation. The liability of Landlord or the Landlord
--------------------
Parties to Tenant for any default by Landlord under this Lease or arising in
connection herewith or with Landlord's operation, management, leasing, repair,
renovation, alteration or any other matter relating to the Project or the
Premises shall be limited solely and exclusively to an amount which is equal to
the equity interest Landlord would have in the Building if the Building were
encumbered by third-party debt in an amount equal to eighty percent (80%) of the
value of the Building (as such value is determined by Landlord), provided that
in no event shall such liability extend to any insurance proceeds received by
Landlord or the Landlord Parties in connection with the Project, Building or
Premises. Neither Landlord, nor any of the Landlord Parties shall have any
personal liability therefor, and Tenant hereby expressly waives and releases
such personal liability on behalf of itself and all persons claiming by, through
or under Tenant. The limitations of liability contained in this Section 29.13
-------------
shall inure to the benefit of Landlord's and the Landlord Parties' present and
future partners, beneficiaries, officers, directors, trustees, shareholders,
agents and employees, and their respective partners, heirs, successors and
assigns. Under no
-29-
<PAGE>
circumstances shall any present or future partner of Landlord (if Landlord is a
partnership), or trustee or beneficiary (if Landlord or any partner of Landlord
is a trust), have any liability for the performance of Landlord's obligations
under this Lease. Notwithstanding any contrary provision herein, neither
Landlord nor the Landlord Parties shall be liable under any circumstances for
injury or damage to, or interference with, Tenant's business, including but not
limited to, loss of profits, loss of rents or other revenues, loss of business
opportunity, loss of goodwill or loss of use, in each case, however occurring.
29.14 Entire Agreement. It is understood and acknowledged that there are
----------------
no oral agreements between the parties hereto affecting this Lease and this
Lease and the Exhibits hereto, constitute the parties' entire agreement with
respect to the leasing of the Premises and supersedes and cancels any and all
previous negotiations, arrangements, brochures, agreements and understandings,
if any, between the parties hereto or displayed by Landlord to Tenant with
respect to the subject matter thereof, and none thereof shall be used to
interpret or construe this Lease. None of the terms, covenants, conditions or
provisions of this Lease can be modified, deleted or added to except in writing
signed by the parties hereto.
29.15 Right to Lease. Landlord reserves the absolute right to effect such
--------------
other tenancies in the Project as Landlord in the exercise of its sole business
judgment shall determine to best promote the interests of the Building or
Project. Tenant does not rely on the fact, nor does Landlord represent, that
any specific tenant or type or number of tenants shall, during the Lease Term,
occupy any space in the Building or Project.
29.16 Force Majeure. Any prevention, delay or stoppage due to strikes,
-------------
lockouts, labor disputes, acts of God, inability to obtain services, labor, or
materials or reasonable substitutes therefor, governmental actions, civil
commotions, fire or other casualty, and other causes beyond the reasonable
control of the party obligated to perform, except with respect to the
obligations imposed with regard to Rent except as otherwise provided for in this
Lease and other charges to be paid by Tenant pursuant to this Lease and except
as to Tenant's obligations under Articles 5 and 24 (except for Alterations
---------- --
required to be constructed by Tenant pursuant to Article 24 of this Lease)
--------
(collectively, a "Force Majeure"), notwithstanding anything to the contrary
contained in this Lease, shall excuse the performance of such party for a period
equal to any such prevention, delay or stoppage and, therefore, if this Lease
specifies a time period for performance of an obligation of either party, that
time period shall be extended by the period of any delay in such party's
performance caused by a Force Majeure.
29.17 Waiver of Redemption by Tenant. Tenant hereby waives, for Tenant and
------------------------------
for all those claiming under Tenant, any and all rights now or hereafter
existing to redeem by order or judgment of any court or by any legal process or
writ, Tenant's right of occupancy of the Premises after any termination of this
Lease.
29.18 Notices. All notices, demands, statements, designations, approvals
-------
or other communications (collectively, "Notices") given or required to be given
by either party to the other hereunder or by law shall be in writing, shall be
(A) transmitted by telecopy, if such telecopy is promptly followed by a Notice
sent by Overnight Courier, (B) delivered by a nationally recognized overnight
courier ("Overnight Courier"), or (D) delivered personally. Any Notice shall be
sent, transmitted, or delivered, as the case may be, to Tenant at the
appropriate address set forth in Section 10 of the Summary, or to such other
----------
place as Tenant may from time to time designate in a Notice to Landlord, or to
Landlord at the addresses set forth below, or to such other places as Landlord
may from time to time designate in a Notice to Tenant. Any Notice will be
deemed given (i) the date the telecopy is transmitted, (ii) the date the
overnight courier delivery is made or attempted to be made, or (iii) the date
personal delivery is made or attempted to be made. If Tenant is notified of the
identity and address of Landlord's mortgagee or ground or underlying lessor,
Tenant shall give to such mortgagee or ground or underlying lessor written
notice of any default by Landlord under the terms of this Lease by registered or
certified mail, and such mortgagee or ground or underlying lessor shall be given
a reasonable opportunity to cure such default prior to Tenant's exercising any
remedy available to Tenant. As of the date of this Lease, any Notices to
Landlord must be sent, transmitted, or delivered, as the case may be, to the
following addresses:
600 W. 7th Street Associates, Inc.
c/o Telecom Real Estate Services, Inc.
617 South Olive Street, Suite 810
Los Angeles, CA 90014
Attention: Kevin Keating
-30-
<PAGE>
With copy to:
Allen, Matkins, Leck, Gamble & Mallory LLP
333 Bush Street, 17th Floor
San Francisco, California 94104-2806
Attention: Todd A. Chapman, Esq.
Fax: (415) 837-1516
Phone: (415) 837-1515
29.19 Joint and Several. If there is more than one Tenant, the obligations
-----------------
imposed upon Tenant under this Lease shall be joint and several.
29.20 Authority. If Tenant is a corporation, trust or partnership, each
---------
individual executing this Lease on behalf of Tenant hereby represents and
warrants that Tenant is a duly formed and existing entity qualified to do
business in California and that Tenant has full right and authority to execute
and deliver this Lease and that each person signing on behalf of Tenant is
authorized to do so. In such event, Tenant shall, within ten (10) days after
execution of this Lease, deliver to Landlord satisfactory evidence of such
authority and, if a corporation, upon demand by Landlord, also deliver to
Landlord satisfactory evidence of (i) good standing in Tenant's state of
incorporation and (ii) qualification to do business in California.
29.21 Attorneys' Fees. In the event that either Landlord or Tenant should
---------------
bring suit for the possession of the Premises, for the recovery of any sum due
under this Lease, or because of the breach of any provision of this Lease or for
any other relief against the other, then all costs and expenses, including
reasonable attorneys' fees, incurred by the prevailing party therein shall be
paid by the other party, which obligation on the part of the other party shall
be deemed to have accrued on the date of the commencement of such action and
shall be enforceable whether or not the action is prosecuted to judgment.
29.22 Governing Law; WAIVER OF TRIAL BY JURY. This Lease shall be
--------------------------------------
construed and enforced in accordance with the laws of the State of California.
IN ANY ACTION OR PROCEEDING ARISING HEREFROM, LANDLORD AND TENANT HEREBY CONSENT
TO (I) THE JURISDICTION OF ANY COMPETENT COURT WITHIN THE STATE OF CALIFORNIA,
(II) SERVICE OF PROCESS BY ANY MEANS AUTHORIZED BY CALIFORNIA LAW, AND (III) IN
THE INTEREST OF SAVING TIME AND EXPENSE, TRIAL WITHOUT A JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE
OTHER OR THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN
CONNECTION WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S
USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY
EMERGENCY OR STATUTORY REMEDY. IN THE EVENT LANDLORD COMMENCES ANY SUMMARY
PROCEEDINGS OR ACTION FOR NONPAYMENT OF BASE RENT OR ADDITIONAL RENT, TENANT
SHALL NOT INTERPOSE ANY COUNTERCLAIM OF ANY NATURE OR DESCRIPTION (UNLESS SUCH
COUNTERCLAIM SHALL BE MANDATORY) IN ANY SUCH PROCEEDING OR ACTION, BUT SHALL BE
RELEGATED TO AN INDEPENDENT ACTION AT LAW.
29.23 Submission of Lease. Submission of this instrument for examination
-------------------
or signature by Tenant does not constitute a reservation of, option for or
option to lease, and it is not effective as a lease or otherwise until execution
and delivery by both Landlord and Tenant.
29.24 Brokers. Landlord and Tenant hereby warrant to each other that they
-------
have had no dealings with any real estate broker or agent in connection with the
negotiation of this Lease, excepting only the real estate brokers or agents
specified in Section 12 of the Summary (the "Brokers"), and that they know of no
----------
other real estate broker or agent who is entitled to a commission in connection
with this Lease. Each party agrees to indemnify and defend the other party
against and hold the other party harmless from any and all claims, demands,
losses, liabilities, lawsuits, judgments, costs and expenses (including without
limitation reasonable attorneys' fees) with respect to any leasing commission or
equivalent compensation alleged to be owing on account of any dealings with any
real estate broker or agent, other than the Brokers, occurring by, through, or
under the indemnifying party.
29.25 Independent Covenants. This Lease shall be construed as though the
---------------------
covenants herein between Landlord and Tenant are independent and not dependent
and Tenant hereby expressly waives the benefit of any statute to the contrary
and agrees that if Landlord fails to perform its obligations set forth herein,
Tenant shall not be entitled to make any repairs or perform any acts hereunder
at Landlord's expense or to any setoff of the Rent or other amounts owing
hereunder against Landlord.
29.26 Project or Building Name and Signage. Landlord shall have the right
------------------------------------
at any time to change the name of the Project or Building and to install, affix
and maintain any and all signs on the
<PAGE>
exterior and on the interior of the Project or Building as Landlord may, in
Landlord's sole discretion, desire. Tenant shall not use the name of the Project
or Building or use pictures or illustrations of the Project or Building in
advertising or other publicity or for any purpose other than as the address of
the business to be conducted by Tenant in the Premises, without the prior
written consent of Landlord.
29.27 Counterparts. This Lease may be executed in counterparts with the
------------
same effect as if both parties hereto had executed the same document. Both
counterparts shall be construed together and shall constitute a single lease.
29.28 Confidentiality. Tenant acknowledges that the content of this Lease
---------------
and any related documents are confidential information. Tenant shall keep such
confidential information strictly confidential and shall not disclose such
confidential information to any person or entity other than Tenant's financial,
legal, space planning consultants and prospective sublessees, transferees or
assignees of Tenant.
29.29 Transportation Management. Tenant shall fully comply with all
-------------------------
present or future programs intended to manage parking, transportation or traffic
in and around the Building, and in connection therewith, Tenant shall take
responsible action for the transportation planning and management of all
employees located at the Premises by working directly with Landlord, any
governmental transportation management organization or any other transportation-
related committees or entities.
29.30 Building Renovations. It is specifically understood and agreed that
--------------------
Landlord has made no representation or warranty to Tenant and has no obligation
and has made no promises to alter, remodel, improve, renovate, repair or
decorate the Premises, Building, the Project or any part thereof and that no
representations respecting the condition of the Premises, the Building, the
Project or any part thereof have been made by Landlord to Tenant except as
specifically set forth herein or in the Tenant Work Letter. However, Tenant
hereby acknowledges that Landlord is currently renovating or may during the
Lease Term renovate, improve, alter, or modify (collectively, the "Renovations")
the Project, the Building and/or the Premises including without limitation the
parking structure, common areas, systems and equipment, roof, and structural
portions of the same, which Renovations may include, without limitation, (i)
installing sprinklers in the Building common areas and tenant spaces, (ii)
modifying the common areas and tenant spaces to comply with applicable laws and
regulations, including regulations relating to the physically disabled, seismic
conditions, and building safety and security, and (iii) installing new floor
covering, lighting, and wall coverings in the Building common areas, and in
connection with any Renovations, Landlord may, among other things, erect
scaffolding or other necessary structures in the Building, limit or eliminate
access to portions of the Project, including portions of the common areas, or
perform work in the Building, which work may create noise, dust or leave debris
in the Building. Tenant hereby agrees that such Renovations and Landlord's
actions in connection with such Renovations shall in no way constitute a
constructive eviction of Tenant nor entitle Tenant to any abatement of Rent.
Landlord shall have no responsibility or for any reason be liable to Tenant for
any direct or indirect injury to or interference with Tenant's business arising
from the Renovations, nor shall Tenant be entitled to any compensation or
damages from Landlord for loss of the use of the whole or any part of the
Premises or the License Areas or of Tenant's personal property or improvements
(including the Supplemental Equipment) resulting from the Renovations or
Landlord's actions in connection with such Renovations, or for any inconvenience
or annoyance occasioned by such Renovations or Landlord's actions; provided,
however, that Landlord shall use commercially reasonable efforts to minimize any
unreasonable interference such construction may have on Tenant's use and occupy
of the Premises.
29.31 No Violation. Tenant hereby warrants and represents that neither its
------------
execution of nor performance under this Lease shall cause Tenant to be in
violation of any agreement, instrument, contract, law, rule or regulation by
which Tenant is bound, and Tenant shall protect, defend, indemnify and hold
Landlord harmless against any claims, demands, losses, damages, liabilities,
costs and expenses, including, without limitation, reasonable attorneys' fees
and costs, arising from Tenant's breach of this warranty and representation.
29.32 Construction of Project and Other Improvements. Tenant acknowledges
----------------------------------------------
that portions of the Project may be under construction following Tenant's
occupancy of the Premises, and that such construction may result in levels of
noise, dust, obstruction of access, etc. which are in excess of that present in
a fully constructed project. Tenant hereby waives any and all rent offsets or
claims of constructive eviction which may arise in connection with such
construction; provided, however, that Landlord shall use commercially reasonable
efforts to minimize any unreasonable interference such construction may have on
Tenant's use and occupy of the Premises.
[Signatures on following page]
-32-
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
executed the day and date first above written.
"Landlord":
600 SEVENTH STREET ASSOCIATES, INC., a California
corporation
By: /s/ [signature illegible]
-----------------------------------------------
Name:_______________________________________
Title:______________________________________
"Tenant":
EQUINIX, INC., a Delaware corporation
By: /s/ [signature illegible]
-----------------------------------------------
Name:_______________________________________
Title:______________________________________
By: ____________________________________________
Name:_______________________________________
Title:______________________________________
-33-
<PAGE>
EXHIBIT A-1
-----------
CARRIER CENTER LOS ANGELES
--------------------------
OUTLINE OF SUITE 600
--------------------
[GRAPHIC OF SUITE 600 FLOOR PLAN]
EXHIBIT A-1 - Page 1
<PAGE>
EXHIBIT A-2
-----------
CARRIER CENTER LOS ANGELES
--------------------------
OUTLINE OF ROOF SPACE AND ROOF SYSTEMS SUPPORT PAD
--------------------------------------------------
[GRAPHIC OF ROOF SPACE AND ROOF SYSTEMS SUPPORT PAD FLOOR PLAN]
EXHIBIT A-2 - Page 1
<PAGE>
EXHIBIT A-3
-----------
CARRIER CENTER LOS ANGELES
--------------------------
OUTLINE OF MUST TAKE SPACE
--------------------------
[GRAPHIC OF MUST TAKE SPACE FLOOR PLAN]
EXHIBIT A-3 - Page 1
<PAGE>
EXHIBIT B
---------
CARRIER CENTER LOS ANGELES
--------------------------
TENANT WORK LETTER
------------------
This Tenant Work Letter ("Work Letter") shall set forth the terms and
conditions relating to the construction of improvements for the Premises. All
references in this Work Letter to "the Lease" shall mean the relevant portions
of the Lease to which this Work Letter is attached as Exhibit B.
---------
SECTION 1
---------
GENERAL CONSTRUCTION OF THE PREMISES
------------------------------------
1.1 Base, Shell and Core. Landlord shall deliver the base, shell, and
--------------------
core (i) of the Premises and (ii) of the floor of the Building on which the
Premises is located (collectively, the "Base, Shell, and Core") in its current
"AS-IS" condition existing as of the date of the Lease, and except as expressly
set forth in this Work Letter, Landlord shall have no obligation to construct or
pay for any alterations or improvements to, or repairs of equipment in, the
Premises, the Building or the Real Property. For purposes hereof, the Base,
Shell and Core shall include and Landlord shall construct in the Premises at its
cost: (A) concrete floors of the Premises; (B) Building structure and perimeter
walls, including windows, and existing window coverings "AS IS"; (C) new
building standard restroom facilities servicing the Premises; (D) new building
standard electrical panels and closets, with service and distribution power
boards and transformers; (E) new building standard telephone closets; (F)
drywall on core walls; (G) HVAC to the utilized Common Areas; (H) abatement of
all exposed or assessable friable asbestos in the Premises, (I) fire/life-safety
and alarm system(s), on an unoccupied basis; (J) passenger and freight elevator
lobbies on multi-tenant floors; (K) fire exit stairs; (L) Building standard
elevators in their "AS-IS" condition and (M) the demolition of all existing
HVAC, lighting, partitions and vinyl flooring in the Premises. Notwithstanding
any of the foregoing provisions of this Section 1 to the contrary, in the event
that any portions of the Base, Shell and Core are not in compliance with
applicable ordinances and codes, including the Americans With Disabilities Act
and Title 24, as of the date the Premises are delivered to Tenant (as such
compliance shall be determined (1) with respect to any portion of the Building
located outside the Premises and the restrooms within the Premises, on an
occupied basis assuming the Premises will be occupied for general office use
with standard office improvements, and (2) with respect to any portion of the
Premises, including the areas above the ceiling, and any portion of the HVAC,
electrical, fire/life-safety and mechanical systems and equipment of the
Building located within the Premises, on an unoccupied basis and without regard
to any Tenant Improvements or Alterations which Tenant proposes to construct
pursuant to this Work Letter or the Lease), then Landlord shall be responsible
for correcting any such non-compliance (the "Compliance Work"). Such Compliance
Work, if any, shall be constructed by Landlord in a reasonable and diligent
manner after Landlord's receipt of notice of the need for such Compliance Work.
If any such Compliance Work is discovered during Tenant's design and/or
construction of the Tenant Improvements, Landlord may elect to have the
Contractor selected by Tenant to perform the Tenant Improvements perform such
Compliance Work, at Landlord's cost, during the construction of the Tenant
Improvements in order to obtain efficiencies and expedite construction of such
Compliance Work and the Tenant Improvements. Notwithstanding the foregoing to
the contrary, Tenant may elect to construct Item (C) hereinabove, as part of the
Tenant Improvements and receive the corresponding amount which Landlord
anticipated expending to construct Item (C) of the Base, Shell and Core.
1.2 Substantial Completion. For purposes of the Lease and this Work
----------------------
Letter, Landlord's obligations under this Section 1 shall be satisfied upon (i)
the substantial completion of construction of items (A) through (L) listed in
Section 1.2 above, with the exception of (x) any minor or decorative punch list
---
items or Compliance Work which do not or will not materially interfere with
Tenant's commencement of construction of the Tenant Improvement Work (which
punch list and Compliance Work shall be completed by Landlord in a diligent
manner), and (y) any Base, Shell and Core items which Tenant has agreed to
complete as part of Tenant's construction of the Tenant Improvements.
SECTION 2
---------
TENANT IMPROVEMENTS
-------------------
2.1 Improvement Allowances.
----------------------
2.1.1 Tenant Improvement Allowance. Tenant shall be entitled to a
----------------------------
one-time tenant improvement allowance (the "Tenant Improvement Allowance") in an
amount up to, but not exceeding, the product of (i) $20.00 and (ii) the number
of rentable square feet of the Suite 600 Space as of the Lease Commencement
Date, to be used to help Tenant pay for the costs of design and construction of
Tenant's
EXHIBIT B - Page 1
<PAGE>
improvements set forth in the approved Final Drawings (as defined herein) which
are permanently affixed to the Premises (collectively, the "Tenant
Improvements") and the other Tenant Improvement Allowance Items (as such term is
defined below). In no event shall Landlord be obligated to make disbursements
pursuant to this Tenant Work Letter in a total amount which exceeds the Tenant
Improvement Allowance. Tenant shall not be entitled to receive any cash payment
or credit against Rent or otherwise for any portion of the Tenant Improvement
Allowance which is not used to pay for the Tenant Improvement Allowance Items;
provided, however, to the extent there remains any unused portion of the Tenant
Improvement Allowance and thus Landlord is not providing any Additional
Allowance, Tenant may use such excess to help Tenant pay for any Alterations
Tenant installs in the Premises pursuant to Article 8 of the Lease after
substantial completion of the Tenant Improvements. Such excess amount shall be
disbursed by Landlord after Tenant has completed the Alterations and has
delivered to Landlord appropriate invoices, paid receipts, lien releases and
other information reasonably requested by Landlord.
2.2 Disbursement of the Tenant Improvement Allowance. Except as otherwise
------------------------------------------------
set forth in this Tenant Work Letter, the Tenant Improvement Allowance shall be
disbursed by Landlord only for the following items and costs and in the order
provided below (collectively, the "Tenant Improvement Allowance Items"):
2.2.1 the cost of engineering, acquiring, and installing Tenant's
Generator Fuel Tank and connecting equipment thereto (to be installed pursuant
to Section 22.1.4 of the Lease);
2.2.2 the cost of engineering, acquisition and installation of the
Roof Systems Support Pad (as defined in Section 2.4 hereinbelow);
-----------------------
2.2.3 any and all seismic or structural support added to the Project
by Landlord as a result of the installation of the Roof Systems Support Pad;
2.2.4 payment of the fees of the "Architect" and the "Engineers," as
those terms are defined in Section 3.1 of this Work Letter and payment of the
-----------
out-of-pocket costs and fees paid by Landlord to Landlord's consultants in
connection with the preparation and review of the "Construction Drawings", as
that term is defined in Section 3.1 of this Work Letter;
-----------
2.2.5 the payment of plan check, permit and license fees relating to
construction of the Tenant Improvements;
2.2.6 the cost of construction of the Tenant Improvements, including,
without limitation, cost of labor and materials contractors' fees and general
conditions, testing and inspection costs, and costs of trash removal and hoists
(but during the construction of the Tenant Improvements and Tenant's initial
move-in to the Premises, Tenant shall not be charged for the use of any
utilities, or for use of the freight elevators);
2.2.7 the cost of any changes in the Base, Shell and Core required by
the Construction Drawings, except to the extent such changes constitute
Compliance Work which is Landlord's responsibility to perform pursuant to
Section 1 above; such cost to include all direct architectural and/or
- --------
engineering fees and expenses incurred in connection therewith;
2.2.8 the cost of any changes to the Construction Drawings or Tenant
Improvements required by applicable laws and building codes (collectively,
"Code");
2.2.9 sales and use taxes and Title 24 fees;
2.2.10 all other costs to be expended by Tenant in connection with
the construction of the Tenant Improvements such as, but not limited to
demolition of any existing improvements so designated for demolition in the
Premises, construction management fees, and voice and data cabling; and
2.2.11 Disbursement of Tenant Improvement Allowance. During the
--------------------------------------------
construction of the Tenant Improvements, Landlord shall make disbursements of
the Tenant Improvement Allowance once per month (or on a more frequent basis as
Landlord may determine) to pay for the Tenant Improvement Allowance Items
following Landlord's receipt of: (i) a request for payment of the Contractor,
Architect and/or Engineers, as applicable (as such terms are defined below),
approved by Tenant, showing the schedule, by trade, of percentage of completion
of the design and/or construction of the Tenant Improvements in the Premises;
(ii) invoices for labor rendered and materials delivered to the Premises; and
(iii) executed mechanic's lien releases from all of Tenant's Agents (as that
term is defined in Section 4.1.2 below) which shall comply with the appropriate
-------------
provisions of California Civil Code Section 3262(d). Landlord may make such
disbursements of the Tenant Improvement Allowance jointly to Tenant and the
Contractor or jointly to the Tenant and the Architect, Engineers or other
vendors to whom direct payment is to be made, and may provide for up to a ten
percent (10%) retention (so long as such retention is not duplicative of any
retention already provided in Tenant's payment request or
EXHIBIT B - Page 2
<PAGE>
specified in the applicable contractor's contract) for each such disbursement
(but such retention shall not apply to payment of the fees of the Architect
and/or Engineers unless expressly provided in the contracts with such entities).
Landlord's payment of such amounts shall not be deemed Landlord's approval or
acceptance of the work furnished or materials supplied as set forth in Tenant's
payment request. Landlord shall disburse all retentions following the completion
of construction of the Premises and Landlord's receipt of properly executed
mechanics lien releases in compliance with both California Civil Code Section
3262(d)(2) and either Section 3262(d)(3) or Section 3262(d)(4).
2.3 Tenant Special Requirements. Tenant has established specifications
---------------------------
(the "Specifications") for the Premises standard components to be used in the
construction of the Tenant Improvements in the Premises (collectively, the
"Tenant's Special Requirements"), a copy of which Specifications is attached
hereto as Schedule 2.
----------
2.4 Notwithstanding anything to the contrary continued herein or in the
Lease, Tenant shall be required to install as part of the Tenant Improvements, a
steel support pad in a designated location on the roof of the Building more
particularly shown on Exhibit A-2 attached to the Lease (the "Roof Systems
-----------
Support Pad") which Roof Systems Support Pad shall be designed and installed in
accordance with design standards and specifications approved by Landlord in its
reasonable discretion.
SECTION 3
---------
CONSTRUCTION DRAWINGS
---------------------
3.1 Architect and Construction Drawings. Tenant has retained Western
-----------------------------------
Carlson Design and Construction (or other Carlson entity reasonably approved by
Landlord) as its architect/space planner (the "Architect") to prepare the
Construction Drawings (as hereinafter defined in this Section 3.1). Tenant
-----------
shall retain engineering consultants as approved by Landlord, which approval
shall not be unreasonably withheld or delayed, to prepare plans and engineering
working drawings relating to the structural, mechanical, electrical, plumbing,
HVAC, life-safety, and sprinkler work in the Premises (the "Specialty Work") or,
at Tenant's option, the Specialty Work may be constructed under a "design/build"
contract where each respective subcontractor, reasonably approved by Landlord,
shall prepare plans and engineering working drawings relating to the Specialty
Work. For purposes of this Work Letter, any of the aforementioned parties who
shall provide such plans and engineering working drawings shall be referred to
herein as the "Engineers". The plans and drawings to be prepared by the
Architect and the Engineers hereunder shall be known collectively as the
"Construction Drawings". All Construction Drawings shall be subject to
Landlord's approval, which shall not be unreasonably withheld or conditioned,
and which disapproval shall only be for the following factors (collectively,
"Design Problems"): (i) design defects in or incompleteness of the Construction
Drawings; (ii) failure of the Construction Drawings to comply with Code; (iii)
failure of the Construction Drawings to comply with Section 2.4 above; (iv)
-----------
adverse effect of the Tenant Improvements on the exterior appearance of the
Building or Common Areas and/or on Building's systems or equipment; (v) changes
to the Base, Shell and Core required by or in connection with the Construction
Drawings or Tenant Improvements; (vi) failure of the Construction Drawings to
substantially comply with the base building plans for the Building previously
delivered to Tenant; and/or (vii) any material inconsistencies in the portion of
the Construction Drawings then subject to review as compared to any prior
version thereof approved by Landlord. Landlord shall advise Tenant within ten
(10) days after Landlord's receipt of the applicable portion of the Construction
Drawings if they are approved or if there are any Design Problems therewith, as
reasonably determined by Landlord. If Tenant is so advised of any Design
Problems, Tenant shall promptly (A) revise the portion of the Construction
Drawings to correct the Design Problems in accordance with such disapproval of
Landlord, and (B) deliver such revised Construction Drawings to Landlord. The
Construction Drawings shall be approved by Landlord prior to commencement of
construction of the Tenant Improvements for the Premises. Once the final
Construction Drawings have been approved by Landlord, the same shall be referred
to hereinafter as the "Final Drawings." Tenant and the Architect shall verify,
in the field, the dimensions and conditions as shown on the relevant portions of
the base building plans, and Tenant and Architect shall be solely responsible
for the same, and Landlord shall have no responsibility in connection therewith
(subject, however, to the Landlord Delay provisions of Section 5(v) below).
------------
Landlord's review and/or approval of the Construction Drawings, as set forth in
this Section 3, shall be for its sole purpose and shall not imply Landlord's
---------
review of the same, or obligate Landlord to review the same, for quality,
design, Code compliance or other like matters. Accordingly, notwithstanding
that any Construction Drawings are reviewed and approved by Landlord or its
space planner, architect, engineers and consultants, and notwithstanding any
advice or assistance which may be rendered to Tenant by Landlord or Landlord's
space planner, architect, engineers, and consultants, Landlord shall have no
liability whatsoever in connection therewith and shall not be responsible for
any omissions or errors contained in the Construction Drawings.
EXHIBIT B - Page 3
<PAGE>
3.2 Permits. After approval by Landlord of the Final Drawings, Tenant
-------
shall promptly submit the same to the appropriate governmental authorities for
all applicable building permits. Tenant hereby agrees that neither Landlord nor
Landlord's consultants shall be responsible for obtaining any building permit or
certificate of occupancy for the Premises and that the obtaining of the same, as
is required by any governmental agencies having jurisdiction over the Building,
shall be Tenant's responsibility; provided, however, that Landlord shall, in any
event, cooperate with Tenant in executing permit applications and performing
other ministerial acts reasonably necessary to enable Tenant to obtain any such
permit or certificate of occupancy. No changes, modifications or alterations in
any portion of the Construction Drawings as approved by Landlord may be made
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld, conditioned, or delayed.
SECTION 4
---------
CONSTRUCTION OF THE TENANT IMPROVEMENTS
---------------------------------------
4.1 Tenant's Selection of Contractor and Tenant's Agents.
----------------------------------------------------
4.1.1 Contractor. The contractor which will construct the Tenant
----------
Improvements ("Contractor") shall be Carlson Group, Inc. (or other Carlson
entity reasonably approved by Landlord).
4.1.2 Tenant's Agents. All subcontractors, laborers, materialmen,
---------------
and suppliers used by Tenant to install or construct items other than Tenant's
computers in the Premises, and specifically excluding movers (such
subcontractors, laborers, materialmen, and suppliers, and the Contractor to be
known collectively as "Tenant's Agents") must be approved in writing by
Landlord, which approval shall not be unreasonably withheld or delayed.
4.2 Construction of Tenant Improvements by Tenant's Agents.
------------------------------------------------------
Construction Contract; Cost Budget. Prior to Tenant's execution of
----------------------------------
the construction contract and general conditions with Contractor (the
"Contract"), Tenant shall submit the Contract to Landlord for its approval,
which approval shall not be unreasonably withheld or delayed. Prior to the
commencement of the construction of the Tenant Improvements, and after Tenant
has accepted all bids for the Tenant Improvements, Tenant shall provide Landlord
with a detailed breakdown, by trade, of the final costs to be incurred, or which
have been incurred, as set forth more particularly in Sections 2.2.1.1 through
----------------
2.2.1.8 above, in connection with the design and construction of the Tenant
- -------
Improvements to be performed by or at the direction of Tenant or the Contractor
(which costs form a basis for the amount of the Contract, if any (the "Final
Costs"). Prior to the commencement of construction of the Tenant Improvements,
Tenant shall supply Landlord with a completion bond in an amount equal to the
Final Costs to ensure Landlord of the completion of the Tenant Improvements.
4.2.2 Tenant's Agents. Tenant's and Tenant's Agents' construction of
---------------
the Tenant Improvements shall comply with the following: (i) the Tenant
Improvements shall be constructed in accordance with the Final Drawings; (ii)
Tenant and Tenant's Agents shall not, in any way, unreasonably interfere with,
obstruct, or delay, the work of Landlord's contractor and subcontractors in the
Building; and (iii) Tenant shall abide by all reasonable rules made by
Landlord's Building contractor or Landlord's Building manager with respect to
the use of freight, loading dock and service elevators, storage of materials,
coordination of work with the contractors of other tenants, and any other matter
in connection with this Work Letter, including, without limitation, the
construction of the Tenant Improvements.
4.2.3 Indemnity. Tenant shall indemnify, protect, defend and hold
---------
Landlord harmless from and against any and all losses, claims, damages and
expenses arising from the actions or omissions of the Architect, the Engineers
and Tenant's Agents on the Premises or in the Building.
4.2.4 Insurance Requirements. All of Tenant's Agents shall carry
----------------------
worker's compensation insurance covering all of their respective employees, and
shall also carry public liability insurance, including property damage, all with
limits, in form and with companies as are required to be carried by Tenant as
set forth in the Lease. In addition, Tenant shall carry "Builder's All Risk"
insurance (excluding earthquake and flood insurance) in an amount reasonably
specified by Landlord prior to commencement of construction of the Tenant
Improvements, covering the construction of the Tenant Improvements, and such
other insurance (excluding earthquake and flood insurance) as Landlord may
reasonably require. Such insurance shall be in amounts and shall include such
extended coverage endorsements as may be reasonably required by Landlord, and in
form and with companies as are required to be carried by Tenant as set forth in
the Lease. Certificates for all insurance carried pursuant to this Section
-------
4.2.4 shall be delivered to Landlord before the commencement of construction of
- -----
the Tenant Improvements and before the Contractor's equipment is moved onto the
site. All such policies of insurance must contain a provision that the company
writing said policy will give Landlord thirty (30) days prior written notice of
any cancellation or lapse of the effective date or any reduction in the amounts
of such insurance. All policies carried under this Section 4.2.4 shall insure
-------------
Landlord and Tenant, as their
EXHIBIT B - Page 4
<PAGE>
interests may appear, as well as Contractor and Tenant's Agents, and shall name
as additional insureds Landlord's property manager, and all mortgagees and
ground lessors of the Building. All insurance, except Workers' Compensation,
maintained by Tenant's Agents shall preclude subrogation claims by the insurer
against anyone insured thereunder. Such insurance shall provide that it is
primary insurance as respects the owner and that any other insurance maintained
by owner is excess and noncontributing with the insurance required hereunder.
The requirements for the foregoing insurance shall not derogate from the
provisions for indemnification of Landlord by Tenant under Section 4.2.3 of this
-------------
Work Letter.
4.2.5 Governmental Compliance. Tenant shall cause the Tenant
-----------------------
Improvements to be constructed by Contractor in compliance in all respects with
all applicable laws, codes, ordinances and regulations, including, without
limitation, the Code and the Americans With Disabilities Act.
4.3 Inspection by Landlord. Landlord shall have the right to inspect the
----------------------
Tenant Improvements at all times, provided however, that (i) Landlord shall not
unreasonably interfere with Tenant's construction of the Tenant Improvements in
connection with any such inspection, and (ii) Landlord's failure to inspect the
Tenant Improvements shall in no event constitute a waiver of any of Landlord's
rights hereunder nor shall Landlord's inspection of the Tenant Improvements
constitute Landlord's approval of the same. Should Landlord reasonably
disapprove any portion of the Tenant Improvements, Landlord shall notify Tenant
in writing of such reasonable disapproval and shall specify the items
disapproved. Any defects or deviations in, and/or disapproval by Landlord of,
the Tenant Improvements shall be rectified by Tenant at no expense to Landlord.
4.4 Notice of Completion; Copy of "As Built" Plans. Within ten (10) days
----------------------------------------------
after completion of construction of the Tenant Improvements, Tenant shall cause
a Notice of Completion to be recorded in the office of the Recorder of the
County in which the Building is located in accordance with Section 3093 of the
Civil Code of the State of California or any successor statute, and shall
furnish a copy thereof to Landlord upon such recordation. If Tenant fails to do
so, Landlord may execute and file the same on behalf of Tenant as Tenant's agent
for such purpose, at Tenant's sole cost and expense. In addition, within thirty
(30) days after the substantial completion of the Premises, Tenant shall deliver
to the Building management office a copy of the "record set" of mylar as-built
drawings for the Tenant Improvements.
SECTION 5
---------
MISCELLANEOUS
-------------
5.1 Tenant's Representative. Tenant has designated Art Chinn as its sole
-----------------------
representative with respect to the matters set forth in this Tenant Work Letter,
who until further notice to Landlord, shall have full authority and
responsibility to act on behalf of the Tenant as required in this Tenant Work
Letter.
5.2 Landlord's Representative. Landlord has designated Eric Berman as its
-------------------------
sole representative with respect to the matters set forth in this Tenant Work
Letter, who, until further notice to Tenant, shall have full authority and
responsibility to act on behalf of the Landlord as required in this Tenant Work
Letter.
5.3 Arbitration. Any dispute concerning whether any term of this Work
-----------
Letter has been breached or properly interpreted or complied with shall be
submitted to arbitration as provided in this Section 5.3. The arbitration shall
-----------
be conducted in Los Angeles, California. The party desiring such arbitration
shall give written notice thereof to the other specifying the Work Letter
dispute to be arbitrated. Within ten (10) business days after the date on which
the arbitration procedure is invoked as provided in this Section 5.3, each party
-----------
shall appoint an experienced arbitrator qualified to arbitrate such dispute
(e.g., the arbitrator shall be an architect if the dispute involves
architectural/design issues, or a contractor if such dispute involves
construction/contractor issues) and notify the other party of the arbitrator's
name and address. The two arbitrators so appointed shall appoint a third
qualified experienced arbitrator.. If the three arbitrators to be so appointed
are not appointed within fifteen (15) business days after the date the
arbitration procedure is invoked, then the arbitrator or arbitrators, if any,
who have been selected shall proceed to carry out the arbitration. The
arbitrator or arbitrators so selected shall furnish Landlord and Tenant with a
written decision within fifteen (15) business days after the date of selection
of the last of the arbitrators to be so selected. Any decision so submitted
shall be signed by a majority of the arbitrators if more than two have been
selected. If only two arbitrators have been selected and they are unable to
agree, then either or both Landlord and Tenant shall be entitled to apply to the
presiding Judge of the Superior Court of the County of Los Angeles, California
for the selection of a third arbitrator who shall be selected from a list of
names of experienced qualified arbitrators submitted by either or both parties,
as the case may be. In designating arbitrators and deciding the dispute, the
arbitrators shall act in accordance with the Commercial Rules of Arbitration
then in force of the American Arbitration Association, subject, however, to such
limitations as may be placed upon them by the provisions of this Lease. The
decision of the arbitrators shall be final and binding upon the parties, and
judgment on the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. Neither party
EXHIBIT B - Page 5
<PAGE>
shall be in default under this Work Letter with respect to any dispute under any
provision hereof during the time period commencing as of the date the
arbitration procedure is invoked with regard to said dispute and ending on the
date of resolution by the arbitrators; provided, however, that during said
period, each party shall continue to make all payments of money required by this
Work Letter and the Lease and to otherwise perform all duties and obligations
required to be performed by such party under this Work Letter and the Lease and,
with respect to the issue under arbitration, shall maintain the status quo.
EXHIBIT B - Page 6
<PAGE>
SCHEDULE 1 TO EXHIBIT B
-----------------------
BUILDING CONSTRUCTION RULES
---------------------------
The following are general rules and regulations governing all work in the
Building, including Tenant's Work and any Alterations (collectively, "Tenant's
work"). The manager for the Building ("Building Manager") will be Landlord's
representative in coordinating and supervising Tenant's work. Nothing contained
in these Construction Rules shall (i) create any contractual obligations for
Landlord or Building Manager in connection with Tenant's work or (ii) in any way
affect, modify or supersede any of the terms set forth in this Lease. The
Construction Rules may be modified and supplemented from time to time as
Landlord may reasonably require for the proper monitoring and control of
construction at the Building.
1. Neither Building Manager nor Landlord will be responsible for any
material, equipment, tools or other property belonging to Tenant's general
contractor for Tenant's work, or any subcontractors, employees, agents or others
associated in any way with Tenant's work.
2. The Building is equipped with a freight elevator serving all floors.
The contractor and all construction personnel must use only the freight elevator
for transportation of workers, materials and equipment. No contractor or any
construction personnel, nor any materials or equipment, are permitted in, nor
shall any of the foregoing be transported in, the passenger elevators. If the
contractor or any construction personnel are found in the passenger elevators,
the contractor or subcontractor may be removed from the job and the elevators
will be immediately inspected for damage. All damage resulting from such use
shall be corrected by Building Manager at Tenant's expense.
3. The contractor shall furnish Building Manager with a list of
subcontractors prior to commencement of Tenant's work. This list will include
phone numbers and contacts for the contractor and each subcontractor, including
home and emergency telephone numbers. Any persons not on the approved
contractor list will be denied access to the Premises. NO EXCEPTIONS. Access
badges, authorizing access to the Premises, will be issued by Building Manager
to all personnel designated by the contractor on such list. The contractor and
all construction personnel working over the weekend and after the normal hours
shall provide Building Manager with a list of workers 24 hours prior to the
worker being on site or they will be denied access. The list should also
include an estimated time the contractor and all construction personnel will be
working, the location of the work to be done, the number of employees and the
working supervisor who will be present in the Building during the performance of
the work. Any deviation will require Building Manager's approval.
4. Unless Building Manager requires otherwise, all contractors and other
construction personnel shall enter and exit through the loading dock or main
lobby at all times. Additionally, all contractors and subcontractors shall sign
in and sign out at the security desk. Building security personnel have the
right to inspect all tool boxes of any and all construction personnel upon
departure from the Building. Loading dock and freight elevator procedures and
hours will be provided by Building Manager.
5. When working on a tenant-occupied floor, all deliveries are to be
accepted, moved and delivered to the contracted suite by 7:30 a.m. All
equipment and material deliveries shall be made at the loading dock or service
entry between the hours of 6:00 p.m. and 6:00 a.m. Monday through Friday or all
day Saturday and Sunday via a freight reservation. If deliveries are to be made
at other times, prior approval must be obtained from Building Manager. At no
other time will material be transported through the Building lobby or public
areas unless specifically authorized in writing. When making deliveries,
reinforced, non-staining masonite board acceptable to Building Manager must be
installed by the contractor (in a manner approved by Building Manager) to
protect all wall and floor finishes, including the freight elevator. The
contractor and subcontractors shall consult with Building Manager for complete
rules and procedures relating to corridor, elevator and public area protection.
All contractors and other construction personnel shall leave the Building lobby
and other public areas in a neat and clean condition consistent with other
Comparable Buildings (including, without limitation, sweeping and mopping the
lobby floors, dusting all furniture in the lobby and otherwise removing all
debris and dust) and otherwise in a condition satisfactory to Building Manager
and Landlord. Tenant shall be responsible for all costs incurred by Building
Manager if this clean-up work is not performed satisfactorily.
6. The contractor must notify Building Manager prior to conducting any of
Tenant's work that will require ceiling access, specifying the areas that will
be worked on and the length of time needed to complete or perform work in the
space.
SCHEDULE 1 TO EXHIBIT B - Page 1
<PAGE>
7. No drilling, hammering, loud noise, vibrations or disturbances of any
nature will be allowed during the business day (i.e., from 8:00 a.m. to 7:00
p.m., Monday through Friday, and from 9:00 a.m. to 2:00 p.m. on Saturday).
8. The contractor shall keep all spaces affected by Tenant's work clean
at all times, including all public areas such as corridors, restrooms, janitor's
closets, etc. The contractor shall erect and maintain dust barriers at all exit
areas of construction and proper dust covers (including walk-off mats) on the
floors at exit areas of construction and at the doors to the freight elevator.
The contractor is responsible for taking all extra precautions to safeguard the
floors, walls and/or elevators from damage which may be caused by the movement
of materials, equipment or debris.
9. Sprinkler shut down and construction procedures:
a. The contractor or the subcontractor requiring the shutdown
and draining of the fire sprinkler system on any floor must follow the
Building's procedures for this process.
b. All work performed on fire sprinklers and/or fire standpipes
must be scheduled with The Building Chief Engineer at least 24 hours in advance.
c. Isolation and draining of the sprinkler system must be done
by the Building Engineering Department.
d. Prior to start of work, the contractor must report to
Building Manager on the loading dock, and the contractor will be given
instructions and assistance. Building supplied shut- off tags are to be placed
on all closed valves.
10. Construction personnel shall at all times maintain the highest level
of project cleanliness. All construction waste and debris shall be removed via
the freight elevator or stairs to the loading dock on a daily basis and shall
not be allowed to accumulate or produce a fire hazard. No construction waste or
debris may be placed in the Building dumpster/compactor. The contractor and all
construction personnel shall provide for removal of waste and debris from the
Building at their own expense, and shall dispose of all waste and debris in an
environmentally safe manner and in full compliance with all laws and ordinances.
If a dumpster is required (space allowing), the location must be approved by
Building Manager. If the contractor fails or refuses to keep such spaces free
of accumulated waste, debris, dust, etc., Building Manager reserves the right to
enter such spaces (including the Premises) and to clean and remove the debris,
dust, etc. at Tenant's expense. In addition, all public areas, i.e., corridors,
restrooms, janitor's closets, etc. shall be maintained and kept free of
construction debris, dust, etc.
11. Removal of combustible objects such as cardboard, empty paint cans,
paint rags and other combustible materials shall occur on a daily basis; such
objects shall be disposed of in an approved receptacle and in an environmentally
safe manner in full compliance with all laws and ordinances. The storage of all
flammable liquids (paint, lacquer thinners, paint thinners, etc.) shall be in UL
approved fire rated (for flammable liquids) storage cabinets or the liquids are
to be removed from the Building daily. If such liquids are to be stored in the
proper storage cabinets, Building Manager shall be notified of their existence,
location and quantity. Upon completion of Tenant's work, all remaining
flammable liquids shall be removed from the Building and disposed of in an
environmentally safe manner in full compliance with all laws and ordinances.
Any flammable or hazardous materials (i.e. paint) may only be stored on the
Premises with permission of Building Manager who shall designate an area for
such storage. No gasoline operated devices (e.g., concrete saws, coring
machines, welding machines, etc.) shall be permitted within the Building. All
work requiring such devices shall be performed by means of electrically operated
substitutes. All approved gas and oxygen canisters shall be properly chained
and supported to eliminate all potential hazards. At the completion of use,
said containers shall be promptly removed from the Building.
12. All electrical and telephone rooms on construction floors are to be
kept clean and orderly at all times and must be locked at the end of each
workday. These rooms cannot be used as storage for tools or supplies. At the
end of each day, all garbage and wire remnants are to be removed and a clear
pathway maintained to all panels. Initial access to electrical and telephone
equipment rooms must be arranged through Building Manager. Keys will be issued
by Building security. Doors to electrical and telephone equipment rooms may not
be propped or blocked open in any way. Tenant equipment may not be installed in
electrical rooms. All panels are to be replaced and properly labeled upon
completion of work. All penetrations through floors, walls and ceilings shall
be properly fire rated upon completion.
13. Upon completion and termination of all electrical circuits, and before
energizing, the contractor must notify the Building's engineer so that a neutral
to ground bonding test can be performed.
SCHEDULE 1 TO EXHIBIT B - Page 2
<PAGE>
14. Specific restrooms will be designated for use by construction
personnel. The contractor is responsible for maintenance while using such
designated restrooms. Upon completion of Tenant's work, the contractor will be
responsible for restoring all designated restrooms to their original state.
Anyone found using restrooms other than those specified, or anyone using the
janitorial closets, will be subject to dismissal. No one is permitted to use
the janitorial closets without Building Manager permission. Janitors' slop
sinks cannot be used for disposal of flammable material, hazardous waste or
drywall.
15. Any use of telephone room chase way must be approved in advance by the
Building's engineer.
16. Construction personnel are not permitted to block open stairway doors
and electrical room doors. These doors provide the fire protection required by
code. Continued violation of this provision shall be subject to a $300 fine.
Janitorial doors shall be kept closed at all times on occupied tenant floors.
During construction of Tenant's work, stairwells and fire doors leading to
stairwells may not be blocked with materials, equipment, trash or debris of any
kind. Fire doors may not be propped or blocked open in any fashion or in any
way. Keys will be issued by Building security. Stairwells may not be used for
the storage of any equipment, materials, trash or debris of any kind and are to
be kept clear at all times. During construction of Tenant's work, air
conditioning smoke dampers may not be propped open.
17. All smoke detectors in the construction areas are to be protected
during construction, demolition, sweeping, clean-up or other operations that may
cause considerable dust or smoke. At the end of each work day, after the dust
has settled, each smoke detector that has been protected during the day is to be
uncovered to ensure proper operation.
18. Each contractor and all construction personnel are to take adequate
precautions to prevent the accidental tripping of the fire alarm system. False
alarms shall be fined at $400 per offense. All management and other costs
connected with resetting false alarms initiated by the contractor or any
construction personnel will be charged to the Tenant's account. At completion
of every work day, the fire-life-safety system shall be left trouble and alarm
free. The contractor must notify the Building's engineer of said status before
leaving the job site.
19. The contractor must provide and keep available at least four currently
certified 10 pound ABC fire extinguishers on each floor during construction.
They are to be placed inside the controlled area, and all workers are to be
informed as to their location and proper use. In addition, construction
personnel shall be informed by their supervisors of the means of egress from the
floor in case of an emergency, location of fire pull stations and locations of
wet stand pipes.
20. All "J" boxes and fire-life-safety conduits that are installed during
the construction of Tenant's work must be marked with red spray paint. All
fire-life-safety wiring must be done strictly in accordance with Building
specifications (contact the Building's engineer for such wire specifications).
Failure to adhere to the required color code may result in costly, time-
consuming rewiring. Only life-safety contractors designated or approved by
Building Manager will be allowed to install and/or connect life-safety devices
(i.e., speakers, pull stations and smoke detectors).
21. Prior to core drilling, the contractor must inform Building Manager of
the locations of the core drill for the review and approval of the Building's
engineer. All core drills are to be located from the underside to prevent
damage to any of the exposed fire-life- safety conduits on the underside of the
decking. If cores are to be wet-drilled, slurry run-off shall be contained and
must not be allowed to reach tenant areas below the construction. Any slurry
that does migrate to the floor below shall be cleaned by the contractor at its
expense. Coring hours will be 8:00 p.m. to 7:00 a.m. Any penetrations made in
steel structural beams are to be approved in advance by the Building's engineer
and permitted by government authorities, if applicable.
22. Any damage sustained during construction of Tenant's work to
electrical rooms, telephone rooms, storage closets, janitor closets, restrooms,
or freight lobbies is the responsibility of the Tenant. A list of pre-existing
damage to these areas should be submitted to Building Manager, and should be
acknowledged by Building Manager, prior to commencement of Tenant's work.
23. The contractor must notify Building Manager at least 24 hours prior to
commencing any painting or varnishing. Any spray painting with solvent based
paints must be preapproved by the Los Angeles Fire Department. Painting of
elevator doors is to be supervised by the elevator maintenance company
appropriate to the Building.
SCHEDULE 1 TO EXHIBIT B - Page 3
<PAGE>
24. Building Manager shall at all time have access to the areas in which
Tenant's work is ongoing regardless of its state, preparation and progress.
Building Manager reserves the right to inspect work, stop work and/or have a
worker removed from the job at any time during Tenant's work if these Rules and
Regulations are not being followed.
25. The Building shall provide electrical service consisting of 120V
outlets with 15A/20A capacity. Any power requirements in excess of that listed
per the Lease shall be the responsibility of the contractor. The contractor
shall provide temporary electrical devices within the Premises for its
subcontractors' use. The contractor will not be permitted to run extension
cords through public space. The contractor shall use reasonable measures to
minimize energy consumption in the construction area when possible. The
Building shall pay for normal electrical consumption during the construction
process. All lights and equipment must be turned off at the end of the
contractor's business day. If the contractor or any construction personnel
leave lights or equipment on during off hours, Building Manager reserves the
right to receive from Tenant just compensation for excessive electrical
consumption.
26. The contractor and each subcontractor shall implement and maintain an
accident prevention program and an employee safety training program. Proof of
compliance with CAL-OSHA Rule SB198 must be submitted to Building Manager. All
persons on the job, regardless of whose direct payroll they are on, are required
to respond to safety instructions from the contractor's supervisor. Persons who
do not respond shall be removed from the job.
27. The contractor shall cover all return air transfers when working next
to a tenant-occupied space to control the transmission of dust and dirt.
Covering must be removed at the completion of daily construction. The
contractor shall keep all tenant entrance and exit doors closed to restrict the
movement of dust or dirt and shall close-off temporary openings with
polyurethane approved by the Los Angeles Fire Department. Due to local fire
codes, no openings may be made on a tenant-occupied floor to the corridor unless
materials are being delivered. All HVAC filters in fan rooms shall also be
delivered in operable condition at time of completion (thus temporary filter
should be added to the existing filter). Pre-filters should be installed over
all return air openings until finished floors are installed. If Building
filters or equipment require replacement or cleaning due to construction dust,
the contractor will be charged. The contractor shall verify with the Building's
engineer prior to installation of pre-filters.
28. Upon completion of Tenant's work, the contractor shall submit complete
sets of marked-up as-built drawings and record documents to the architect (or
space planner) for approval. Upon approval, these shall be forwarded to
Building Manager. In addition, Building Manager shall be allowed to obtain, at
no cost to Tenant or the contractor, copies of manuals for each item of
equipment and apparatus furnished in connection with the Tenant's work.
29. At the completion of Tenant's work, the contractor and each
subcontractor, along with Building Manager's Building maintenance personnel,
shall direct the checkout of utilities, operation systems and equipment for
readiness, shall assist in their initial start-up and testing by subcontractors
and shall provide general familiarization training for Building Manager
personnel during the checkout and startup period.
30. No tobacco smoking or chewing will be permitted in occupied or public
areas. Smoking is allowed only in designated areas approved by Building
Manager. It is understood that Building Manager, in its sole discretion, may
choose not to designate any approved areas in the Building for smoking.
31. No radios or other non-functional sound producing equipment will be
permitted on any floor (unless required by code).
32. Respect must be shown to the Building tenants at all times. Rude and
obscene behavior, including foul and abusive language, will be not be tolerated.
Offenders will be asked to remove themselves from the Premises and shall not be
permitted to return.
33. All work performed within the Building's conduits, risers and pathways
(including, without limitation, cabling or wiring to the rooftop of the
Building), work on the rooftop and work which affects or may reasonably be
expected to affect Building systems (such as plumbing, electrical, HVAC,
fire-life-safety, emergency power or the like) must be performed by bonded
contractors or subcontractors specifically approved in advance by Landlord. Upon
request, the Building Manager will provide Tenant with a list of approved
contractors or subcontractors for certain types of projects. Access to the
rooftop shall be scheduled in advance with the Building Manager. A Building
engineer shall accompany all persons performing work or inspecting equipment on
the rooftop, including in the case of emergency,
SCHEDULE 1 TO EXHIBIT B - Page 4
<PAGE>
except as otherwise agreed in Tenant's Lease. If rooftop access is required
during other than Building Hours, Tenant shall pay the cost of the Building's
engineer for the time spent accompanying Tenant's contractor or other agent to
the rooftop.
34. No one shall be allowed to endanger the Building, its premises or its
occupants in any manner whatsoever. If such a situation occurs, the contractor,
any subcontractor, supplier, etc., shall immediately take steps to correct and
eliminate the hazardous condition. In the event that the contractor's personnel
fail to perform in a satisfactory manner, the Building Manager reserves the
right to immediately take steps to remedy the hazard at the contractor's
expense.
35. All corrective work or work performed in occupied spaces at any time
must be scheduled and approved by Building Manager and must be immediately
cleaned up by the workmen prior to their leaving the job or at the end of the
business day if the project is on-going. The contractor shall be responsible
for all costs incurred by Building Manager if this clean-up work is not
performed satisfactorily.
36. All traffic control, flagmen, barricades, etc., as may be necessary or
required by any agency having jurisdiction shall be the sole responsibility of
and at the expense of the contractor.
37. Tenant shall contact the Building Manager to schedule work on the
following Building systems: (Any disruption of services will be scheduled at
Building Manager's discretion.)
A. Domestic water.
B. Fire alarm or speaker.
C. Electrical tie-ins to Base Building or the addition of
equipment to any suite other than the Tenant suite except subpanels located
within the Tenant premises.
D. Sprinkler system.
E. Any work that will take place outside the demised Premises.
F. Any tie-ins that may affect other Tenant spaces.
If a Building alarm is turned off for the contractor's work, the contractor
must notify Building Manager upon completion so the system can be tuned back on
as soon as possible.
38. No graffiti or vandalism will be tolerated. Any individual caught in
the act shall be immediately removed from the Premises and will not be allowed
to return. In addition, all repairs will be at the contractor's expense.
39. Wet paint signs must be posted in all public areas when appropriate.
40. The contractor/subcontractors may park in designated spaces only. Any
vehicles found in unauthorized spaces will be subject to towing.
41. No contractor shall be allowed to start any work in the Building
without having a current certificate of insurance on file with Building Manager.
The contractor must keep current insurance certificates on all subcontractors.
Any contractor or subcontractor performing work found not to have current
insurance will be immediately ordered off the Premises. General contractors
shall list the following as additionally insured:
600 W. Seventh Street Associates, Inc.
_________________
42. The contractor/subcontractors shall obtain and pay for a City of Los
Angeles business license.
43. The contractor/subcontractors shall obtain at their expense, all
permits and licenses necessary to perform the work and shall obtain at their
expense, all permits and licenses necessary to perform the work and shall comply
will all laws, ordinances, State and Federal government regulations, and all
rules or regulations of any board or commission or other duly qualified body.
SCHEDULE 1 TO EXHIBIT B - Page 5
<PAGE>
44. All work shall be performed in accordance with all applicable laws and
the rules and regulations of all City, State and Federal agencies having
jurisdiction over the work.
45. No work is to be performed, nor materials stored in public areas. No
staging of trucks or materials will be allowed in areas which may affect traffic
flow to the surrounding properties or ingress and egress to Building entrances,
fire lanes, reserved parking areas, etc.
46. Rubber wheels are required on all vehicles transporting materials in
the Building.
47. All equipment and material will be designed and attached for seismic
loading in accordance with governmental agencies having jurisdiction over the
work.
48. Material storage shall be limited to the Premises.
49. The contractor, or its agent, shall provide safety barricades or
cables at floor penetrations.
50. Tenant shall take such action as is necessary to confirm that all
contractors, subcontractors and other construction personnel are aware of these
construction rules, including, if necessary, requiring each to sign a copy
hereof.
SCHEDULE 1 TO EXHIBIT B - Page 6
<PAGE>
SCHEDULE 2 TO EXHIBIT B
-----------------------
SPECIAL TENANT REQUIREMENTS
1st Floor
- ---------
1. Landlord to supply access to the Standby Power Riser from the roof to the
Premises to accommodate a total of 3-3" conduits and 1-2" conduit for each
of the installed Tenant generators.
Mechanical
----------
. Tenant shall have the right to replace the existing windows with louvers
subject to the review and approval of Landlord, the city of Los Angeles and
historical agencies of the Federal and State governments.
Tenant shall provide such sound and vibration attenuation as may be required by
Landlord and public agencies having jurisdiction over the Project and shall at
all times comply with Landlord's Project Sound Requirements and Specifications.
1. Tenant shall have access to and provision of the freight elevator to the
Premises to transfer Equinix mechanical equipment.
2. Tenant shall have the right to connect to the Fire protection sprinkler
system and connection to building fire alarms for the ground floor generator
room.
3. Tenant shall be allocated its proportionate share of the total allowable day
tank storage in the Building
6th Floor
- ---------
Mechanical
----------
1. Landlord allows preaction fire protection sprinkler system in the Premises.
Tenant shall be responsible for all costs of removal of the existing wet
pipe sprinkler fire protection system.
2. Tenant shall be permitted to install a combined total of eight (8), eight
inch (8")" pipes in the Tenant Condenser water risers. Tenant shall also be
permitted to run the equivalent of 1-4" conduit to each of the installed
Tenant chillers on the roof through a chase designated by Landlord.
3. Landlord shall provide a pathway for exhaust and ventilation shafts and duct
to the roof or to an exterior wall louver for battery room ventilation and
purge, assuming lead-acid type batteries; two locations at 4000 cfm each.
Tenant shall comply with regulations of the City of Los Angeles Fire
Department and other public agencies having jurisdiction , with respect to
the allowable quantities of batteries in the Premises and the Building.
4. Landlord shall provide a pathway for toilet room exhaust connection to a
building exhaust riser.
5. Landlord shall allow general area ventilation air from a vent shaft to the
roof or from an outside wall louver subject to the review and approval of
city, state and federal historical authorities.
6. Landlord shall allow installation of office area air handling systems
including air handler and distribution overhead ductwork to spaces.
7. Landlord shall allow connection to the building domestic water source at
this floor for use in connection to room humidification equipment.
8. Landlord shall allow Tenant to install a direct digital control (DDC)
facility monitoring system as required to monitor and control the
environmental systems within the Premises, monitored within the Premises.
9. Landlord shall permit Tenant to reconfigure the toilet room fixtures on the
floor, provided that Tenant shall comply with the drainage stacking for the
Building.
SCHEDULE 2 TO EXHIBIT B - Page 1
<PAGE>
7th Floor
- ---------
Electrical
----------
1. The administrative offices of Owner located on the 7/th/ floor shall have a
preaction fire protection system installed at the cost of Equinix.
SCHEDULE 2 TO EXHIBIT B - Page 2
<PAGE>
EXHIBIT C
---------
CARRIER CENTER LOS ANGELES
--------------------------
NOTICE OF LEASE TERM DATES
--------------------------
To: _______________________
_______________________
_______________________
_______________________
Re: Office Lease dated ____________, 19__ between 600 SEVENTH STREET
ASSOCIATES, INC., a California corporation ("Landlord"), and
_____________________, a _______________________ ("Tenant") concerning
Suite ______ on floor(s) __________ of the office building located at
[*], Los Angeles, California.
Gentlemen:
In accordance with the Office Lease (the "Lease"), we wish to advise you
and/or confirm as follows:
1. The Lease Term shall commence on or has commenced on ______________
for a term of __________________ ending on __________________.
2. Rent commenced to accrue on __________________, in the amount of
________________.
3. If the Lease Commencement Date is other than the first day of the
month, the first billing will contain a pro rata adjustment. Each
billing thereafter, with the exception of the final billing, shall be
for the full amount of the monthly installment as provided for in the
Lease.
4. Your rent checks should be made payable to __________________ at
___________________.
5. The exact number of rentable square feet within the Premises is
____________ square feet.
6. Tenant's Share as adjusted based upon the exact number of rentable
square feet within the Premises is ________%.
"Landlord":
600 SEVENTH STREET ASSOCIATES, INC.,
a California corporation
By: _________________________
Name: ___________________
Title: __________________
Agreed to and Accepted
as of ____________, 19___.
"Tenant":
By: ____________________________
Its:
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT C - Page 1
<PAGE>
EXHIBIT D
---------
CARRIER CENTER LOS ANGELES
--------------------------
RULES AND REGULATIONS
---------------------
Tenant shall faithfully observe and comply with the following Rules and
Regulations. Landlord shall not be responsible to Tenant for the nonperformance
of any of said Rules and Regulations by or otherwise with respect to the acts or
omissions of any other tenants or occupants of the Project. In the event of any
conflict between the Rules and Regulations and the other provisions of this
Lease, the latter shall control.
1. Tenant shall not alter any lock or install any new or additional locks
or bolts on any doors or windows of the Premises without obtaining Landlord's
prior written consent. Tenant shall bear the cost of any lock changes or
repairs required by Tenant. Two keys will be furnished by Landlord for the
Premises, and any additional keys required by Tenant must be obtained from
Landlord at a reasonable cost to be established by Landlord. Upon the
termination of this Lease, Tenant shall restore to Landlord all keys of stores,
offices, and toilet rooms, either furnished to, or otherwise procured by, Tenant
and in the event of the loss of keys so furnished, Tenant shall pay to Landlord
the cost of replacing same or of changing the lock or locks opened by such lost
key if Landlord shall deem it necessary to make such changes.
2. All doors opening to public corridors shall be kept closed at all times
except for normal ingress and egress to the Premises.
3. Landlord reserves the right to close and keep locked all entrance and
exit doors of the Building during such hours as are customary for comparable
buildings in the vicinity of the Building. Tenant, its employees and agents
must be sure that the doors to the Building are securely closed and locked when
leaving the Premises if it is after the normal hours of business for the
Building. Any tenant, its employees, agents or any other persons entering or
leaving the Building at any time when it is so locked, or any time when it is
considered to be after normal business hours for the Building, may be required
to sign the Building register. Access to the Building may be refused unless the
person seeking access has proper identification or has a previously arranged
pass for access to the Building. Landlord will furnish passes to persons for
whom Tenant requests same in writing. Tenant shall be responsible for all
persons for whom Tenant requests passes and shall be liable to Landlord for all
acts of such persons. The Landlord and his agents shall in no case be liable
for damages for any error with regard to the admission to or exclusion from the
Building of any person. In case of invasion, mob, riot, public excitement, or
other commotion, Landlord reserves the right to prevent access to the Building
or the Project during the continuance thereof by any means it deems appropriate
for the safety and protection of life and property.
4. No furniture, freight or equipment of any kind shall be brought into
the Building without prior notice to Landlord. All moving activity into or out
of the Building shall be scheduled with Landlord and done only at such time and
in such manner as Landlord designates. Landlord shall have the right to
prescribe the weight, size and position of all safes and other heavy property
brought into the Building and also the times and manner of moving the same in
and out of the Building. Safes and other heavy objects shall, if considered
necessary by Landlord, stand on supports of such thickness as is necessary to
properly distribute the weight. Landlord will not be responsible for loss of or
damage to any such safe or property in any case. Any damage to any part of the
Building, its contents, occupants or visitors by moving or maintaining any such
safe or other property shall be the sole responsibility and expense of Tenant.
5. No furniture, packages, supplies, equipment or merchandise will be
received in the Building or carried up or down in the elevators, except between
such hours, in such specific elevator and by such personnel as shall be
designated by Landlord.
6. The requirements of Tenant will be attended to only upon application at
the management office for the Project or at such office location designated by
Landlord. Employees of Landlord shall not perform any work or do anything
outside their regular duties unless under special instructions from Landlord.
7. No sign, advertisement, notice or handbill shall be exhibited,
distributed, painted or affixed by Tenant on any part of the Premises or the
Building without the prior written consent of the Landlord. Tenant shall not
disturb, solicit, peddle, or canvass any occupant of the Project and shall
cooperate with Landlord and its agents of Landlord to prevent same.
8. The toilet rooms, urinals, wash bowls and other apparatus shall not be
used for any purpose other than that for which they were constructed, and no
foreign substance of any kind whatsoever
EXHIBIT D - Page 1
<PAGE>
shall be thrown therein. The expense of any breakage, stoppage or damage
resulting from the violation of this rule shall be borne by the tenant who, or
whose servants, employees, agents, visitors or licensees shall have caused same.
9. Tenant shall not overload the floor of the Premises without Landlord's
prior written consent.
10. Except for vending machines intended for the sole use of Tenant's
employees and invitees, no vending machine or machines other than fractional
horsepower office machines shall be installed, maintained or operated upon the
Premises without the written consent of Landlord.
11. Tenant shall not use or keep in or on the Premises, the Building, or
the Project any kerosene, gasoline, explosive material, corrosive material,
material capable of emitting toxic fumes, or other inflammable or combustible
fluid chemical, substitute or material except for (i) dry or gel cell batteries
and (ii) the fuel stored in the Generator Fuel Tanks (defined in Article 22 of
the Lease and any reasonable "belly" fuel storage tanks installed on Tenant's
Generators. Tenant shall provide material safety data sheets for any Hazardous
Material used or kept on the Premises.
12. Tenant shall not use, keep or permit to be used or kept, any foul or
noxious gas or substance in or on the Premises, or permit or allow the Premises
to be occupied or used in a manner offensive or objectionable to Landlord or
other occupants of the Project by reason of noise, odors, or vibrations, or
interfere with other tenants or those having business therein, whether by the
use of any musical instrument, radio, phonograph, or in any other way. Tenant
shall not throw anything out of doors, windows or skylights or down passageways.
13. Tenant shall not bring into or keep within the Project, the Building
or the Premises any animals, birds, aquariums, or, except in areas designated by
Landlord, bicycles or other vehicles.
14. No cooking shall be done or permitted on the Premises, nor shall the
Premises be used for the storage of merchandise, for lodging or for any
improper, objectionable or immoral purposes. Notwithstanding the foregoing,
Underwriters' laboratory-approved equipment and microwave ovens may be used in
the Premises for heating food and brewing coffee, tea, hot chocolate and similar
beverages for employees and visitors, provided that such use is in accordance
with all applicable federal, state, county and city laws, codes, ordinances,
rules and regulations.
15. The Premises shall not be used for manufacturing or for the storage of
merchandise except as such storage may be incidental to the use of the Premises
provided for in the Summary. Tenant shall not occupy or permit any portion of
the Premises to be occupied as an office for a messenger-type operation or
dispatch office, public stenographer or typist, or for the manufacture or sale
of liquor, narcotics, or tobacco in any form, or as a medical office, or as a
barber or manicure shop, or as an employment bureau without the express prior
written consent of Landlord. Tenant shall not engage or pay any employees on
the Premises except those actually working for such tenant on the Premises nor
advertise for laborers giving an address at the Premises.
16. Landlord reserves the right to exclude or expel from the Project any
person who, in the judgment of Landlord, is intoxicated or under the influence
of liquor or drugs, or who shall in any manner do any act in violation of any of
these Rules and Regulations.
17. Tenant, its employees and agents shall not loiter in or on the
entrances, corridors, sidewalks, lobbies, courts, halls, stairways, elevators,
vestibules or any Common Areas for the purpose of smoking tobacco products or
for any other purpose, nor in any way obstruct such areas, and shall use them
only as a means of ingress and egress for the Premises.
18. Tenant shall use reasonable best efforts to participate in recycling
programs undertaken by Landlord.
19. Tenant shall store all its trash and garbage within the interior of
the Premises. No material shall be placed in the trash boxes or receptacles if
such material is of such nature that it may not be disposed of in the ordinary
and customary manner of removing and disposing of trash and garbage in Los
Angeles, California without violation of any law or ordinance governing such
disposal. All trash, garbage and refuse disposal shall be made only through
entry-ways and elevators provided for such purposes at such times as Landlord
shall designate. If the Premises is or becomes infested with vermin as a result
of the use or any misuse or neglect of the Premises by Tenant, its agents,
servants, employees, contractors, visitors or licensees, Tenant shall forthwith,
at Tenant's expense, cause the Premises to be exterminated from time to time to
the satisfaction of Landlord and shall employ such licensed exterminators as
shall be approved in writing in advance by Landlord.
EXHIBIT D - Page 2
<PAGE>
20. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental agency.
21. Any persons employed by Tenant to do janitorial work shall be subject
to the prior written approval of Landlord, and while in the Building and outside
of the Premises, shall be subject to and under the control and direction of the
Building manager (but not as an agent or servant of such manager or of
Landlord), and Tenant shall be responsible for all acts of such persons.
22. No awnings or other projection shall be attached to the outside walls
of the Building without the prior written consent of Landlord. Neither the
interior nor exterior of any windows shall be coated or otherwise sunscreened
without the prior written consent of Landlord. Tenant shall be responsible for
any damage to the window film on the exterior windows of the Premises and shall
promptly repair any such damage at Tenant's sole cost and expense. Prior to
leaving the Premises for the day, Tenant shall draw or lower window coverings
and extinguish all lights.
23. Deleted.
24. Tenant must comply with requests by the Landlord concerning the
informing of their employees of items of importance to the Landlord.
25. Tenant must comply with the City of Los Angeles "NO-SMOKING" Ordinance
No. 159498. If Tenant is required under the ordinance to adopt a written
smoking policy, a copy of said policy shall be on file in the office of the
Building.
26. Tenant hereby acknowledges that Landlord shall have no obligation to
provide guard service or other security measures for the benefit of the
Premises, the Building or the Project. Tenant hereby assumes all responsibility
for the protection of Tenant and its agents, employees, contractors, invitees
and guests, and the property thereof, from acts of third parties, including
keeping doors locked and other means of entry to the Premises closed, whether or
not Landlord, at its option, elects to provide security protection for the
Project or any portion thereof. Tenant further assumes the risk that any safety
and security devices, services and programs which Landlord elects, in its sole
discretion, to provide may not be effective, or may malfunction or be
circumvented by an unauthorized third party, and Tenant shall, in addition to
its other insurance obligations under this Lease, obtain its own insurance
coverage to the extent Tenant desires protection against losses related to such
occurrences. Tenant shall cooperate in any reasonable safety or security
program developed by Landlord or required by law.
27. All office equipment of any electrical or mechanical nature shall be
placed by Tenant in the Premises in settings, to absorb or prevent any
vibration, noise and annoyance.
28. Tenant shall not use in any space or in the public halls of the
Building, any hand trucks except those equipped with rubber tires and rubber
side guards.
29. No auction, liquidation, fire sale, going-out-of-business or
bankruptcy sale shall be conducted in the Premises without the prior written
consent of Landlord.
30. No tenant shall use or permit the use of any portion of the Premises
for living quarters, sleeping apartments or lodging rooms.
31. Tenant shall not purchase spring water, towels, janitorial or
maintenance or other similar services from any company or persons not approved
by Landlord. Landlord shall approve a sufficient number of sources of such
services to provide Tenant with a reasonable selection, but only in such
instances and to such extent as Landlord in its judgment shall consider
consistent with the security and proper operation of the Building.
32. Tenant shall install and maintain, at Tenant's sole cost and expense,
an adequate, visibly marked and properly operational fire extinguisher next to
any duplicating or photocopying machines or similar heat producing equipment,
which may or may not contain combustible material, in the Premises.
Landlord reserves the right at any time to change or rescind any one or
more of these Rules and Regulations, or to make such other and further
reasonable Rules and Regulations as in Landlord's judgment may from time to time
be necessary for the management, safety, care and cleanliness of the Premises,
Building, the Common Areas and the Project, and for the preservation of good
order therein, as well as for the convenience of other occupants and tenants
therein. Landlord may waive any one or more of these Rules and Regulations for
the benefit of any particular tenants, but no such waiver by Landlord shall be
construed as a waiver of such Rules and Regulations in favor of any other
tenant, nor prevent Landlord from thereafter enforcing any such Rules or
Regulations against any or all tenants of the Project. Tenant shall be deemed
to have read these Rules and Regulations and to have agreed to abide by them as
a condition of its occupancy of the Premises.
EXHIBIT D - Page 3
<PAGE>
EXHIBIT E
---------
CARRIER CENTER LOS ANGELES
--------------------------
FORM OF TENANT'S ESTOPPEL CERTIFICATE
-------------------------------------
The undersigned as Tenant under that certain Office Lease (the "Lease")
made and entered into as of ___________, 199__ by and between 600 SEVENTH STREET
ASSOCIATES, INC., a California corporation a California limited liability
company, and 717 SOUTH GRAND ASSOCIATES, INC., a California corporation,
collectively as Landlord, and the undersigned as Tenant, for Premises on the
______________ floor(s) of the office building located at [*], Los Angeles,
California ____________, certifies as follows:
1. Attached hereto as Exhibit A is a true and correct copy of the Lease
---------
and all amendments and modifications thereto. The documents contained in
Exhibit A represent the entire agreement between the parties as to the Premises
- ---------
and the project of which the Premises are a part.
2. The undersigned currently occupies the Premises described in the Lease,
the Lease Term commenced on __________, and the Lease Term expires on
___________, and the undersigned has no option to terminate or cancel the Lease
or to purchase all or any part of the Premises, the Building and/or the Project
except as otherwise set forth in the Lease.
3. Base Rent became payable on ____________.
4. The Lease is in full force and effect and has not been modified,
supplemented or amended in any way except as provided in Exhibit A.
---------
5. Tenant has not transferred, assigned, or sublet any portion of the
Premises nor entered into any license or concession agreements with respect
thereto except as follows:
6. Tenant shall not modify the documents contained in Exhibit A without
---------
the prior written consent of Landlord's mortgagee.
7. All monthly installments of Base Rent, all Additional Rent and all
monthly installments of estimated Additional Rent have been paid when due
through ___________. The current monthly installment of Base Rent is
$_____________________.
8. To the actual knowledge of Tenant, all conditions of the Lease to be
performed by Landlord necessary to the enforceability of the Lease have been
satisfied and Landlord is not in default thereunder. In addition, the
undersigned has not delivered any notice to Landlord regarding a default by
Landlord thereunder.
9. No rental has been paid more than thirty (30) days in advance and no
security has been deposited with Landlord except as provided in the Lease.
10. As of the date hereof, there are no existing defenses or offsets, to
the undersigned's knowledge, claims or any basis for a claim, that the
undersigned has against Landlord.
11. If Tenant is a corporation or partnership, each individual executing
this Estoppel Certificate on behalf of Tenant hereby represents and warrants
that Tenant is a duly formed and existing entity qualified to do business in
California and that Tenant has full right and authority to execute and deliver
this Estoppel Certificate and that each person signing on behalf of Tenant is
authorized to do so.
12. There are no actions pending against the undersigned or any guarantor
of the Lease under the bankruptcy or similar laws of the United States or any
state.
13. Other than in compliance with all applicable laws and incidental to
the ordinary course of the use of the Premises, the undersigned has not used or
stored any hazardous substances in the Premises.
14. To the undersigned's knowledge, all tenant improvement work to be
performed by Landlord under the Lease has been completed in accordance with the
Lease and has been accepted by the undersigned and all reimbursements and
allowances due to the undersigned under the Lease in connection with any tenant
improvement work have been paid in full.
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT E - Page 1
<PAGE>
The undersigned acknowledges that this Estoppel Certificate may be
delivered to Landlord or to a prospective mortgagee or prospective purchaser,
and acknowledges that said prospective mortgagee or prospective purchaser will
be relying upon the statements contained herein in making the loan or acquiring
the property of which the Premises are a part and that receipt by it of this
certificate is a condition of making such loan or acquiring such property.
Executed at ______________ on the ____ day of ___________, 19__.
"Tenant"
______________________________, a
______________________________
By: ________________________________
Name:___________________________
Title: _________________________
EXHIBIT E - Page 1
<PAGE>
EXHIBIT F
---------
CARRIER CENTER LOS ANGELES
FORM OF NON-DISTURBANCE AGREEMENT
---------------------------------
[To be Provided by Landlord's Lender]
EXHIBIT F - Page 1
<PAGE>
EXHIBIT G
CARRIER CENTER LOS ANGELES
PROJECT SOUND REQUIREMENTS AND SPECIFICATIONS
---------------------------------------------
Noise and Vibration Control Design Requirements
It is the responsibility of each Design Builder to ensure that all mechanical,
electrical, plumbing and elevator equipment and systems comply with the
following noise and vibration criteria. The means employed to satisfy the
criteria will include: selection of suitably quiet equipment, sound traps,
acoustical enclosures, vibration isolators and generator exhaust mufflers.
It is strongly recommended that each Design Builder retains the services of a
suitably qualified and experienced Acoustical Consultant to assist in designing
suitably quiet and low-vibration systems.
1. Noise Emissions to the Exterior
- ------------------------------------
Noise emissions to the exterior surroundings shall satisfy all requirements
of the Noise Regulations Chapter of the City of Los Angeles Municipal Code.
Full account shall be taken of:
The nature of the noise produced by source, including penalties for tonal
or impulsive characteristics.
a) The zone classification of the surrounding properties.
b) The operating times of the equipment.
c) The additive effects of multiple noise sources operating
simultaneously.
In addition, the total noise produced by mechanical, electrical, plumbing
and elevator equipment associated with the base building and each of the
tenancies shall be within the following "noise budget" limits when measured
at the neighboring properties:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Noise Budget - Combined Effect of All Equipment
- -------------------------------------------------------------------------------------------------------------
Daytime (7am - 10pm) Nighttime (10pm - 7am)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Base Building Equipment 60 dBA 55 dBA
- -------------------------------------------------------------------------------------------------------------
Equipment Provided by Each Tenant:
- -------------------------------------------------------------------------------------------------------------
Total Size of Less than 1/2 Floor 49 dBA 44 dBA
Tenancy
- ------------------------------------------------------------------------------------------------------------
1/2 - 1 Floor 52 dBA 47 dBA
- ------------------------------------------------------------------------------------------------------------
1 - 1 1/2 Floors 55 dBA 50 dBA
- ------------------------------------------------------------------------------------------------------------
1 1/2 - 2 Floors 57 dBA 52 dBA
- ------------------------------------------------------------------------------------------------------------
</TABLE>
i. The noise budget values apply to all normally operating equipment -
such as fans, cooling towers, dry coolers, heat pumps, chillers,
transformers, pumps etc. - as well as the routine testing of
emergency equipment.
ii. Each Design Builder shall demonstrate - to the satisfaction of the
Owner - that the total effect of noise emitted by equipment within
their scope of work is within the appropriate noise budget value
under both day and night time operating conditions. During design,
community noise impact calculations, based on manufacturers'
certified noise data, shall be submitted for approval.
iii. All Design Builders should be aware of the proximity of existing
noise-sensitive properties around the project site and the
difficulties these adjacencies imply in terms of community noise
control.
The existing sensitive neighbors include the Hyatt Regency Hotel
and Christian Science Center on South Hope and the residential
buildings on South Olive.
EXHIBIT G - Page 1
<PAGE>
iv. The possibility of future development on the vacant space (currently
an open parking lot) situated on the block between South Grand, South
Olive, 7th and 8th Streets be taken into account in the Design
Builders' noise impact analysis.
v. Certain items of equipment will produce noise that has either a tonal
or impulsive characteristic. Also, the combination of multiple
similar noise sources can exaggerate tonal noise effects and
"beating" (a type of impulsive noise) can occur when several very
similar noise sources operate simultaneously. Tonal, impulsive or
beating characteristics tend to make noise more annoying and this is
recognized by the City Noise Ordinance, which applies a 5dBA penalty
to such noise.
The noise budget values given in the above table must therefore be reduced
by 5dBA in any cases where either an individual item of equipment or the
combination of several items of equipment produces tonal or impulsive noise
(including beating).
2. Interior Background Noise Levels
--------------------------------
Background noise levels in the occupied areas of the building shall meet
the requirements of Table 2, Chapter 43 of the ASHRAE Handbook, HVAC
Applications I-P Edition.
3. Vibration
---------
Vibration levels in occupied areas, circulation and toilet rooms shall not
exceed the criteria recommended in the current version of ANSI S3.29 "Guide
to the Evaluation of Human Exposure to Vibration in Buildings."
In technical areas, vibration levels shall be limited to either: the
criteria recommended in ANSI S3.29, or vibration sensitivity criteria
applicable to the telecommunications industry - whichever are the more
stringent.
EXHIBIT G - Page 2
<PAGE>
EXHIBIT H
---------
CARRIER CENTER LOS ANGELES
--------------------------
ANTENNA SPACE RIDER
-------------------
1. Lease of Antenna Space. Tenant wishes to install on the top roof of
----------------------
the Building (a) one GPS antenna as more particularly described below in this
section (collectively, the "Antennas "); and (b) one 2-inch conduit per each
Antenna connecting such Antenna to the Premises (collectively, the "Antenna
Conduits "). The Antennas to be installed by Tenant under this Rider shall be
installed in a one hundred square foot pad on the roof of the Building
designated by Landlord:
X
---
The space to be occupied by the Antennas and their exact location on the
top roof of the Building shall be designated by Landlord in its sole, reasonable
discretion and is hereby referred to as the "Antenna Space ." The exact
location of the Antenna Conduits and their precise route running from the
Antenna Space to the Premises shall be designated by Landlord in its sole,
reasonable discretion. The space within the Antenna Conduits is hereby referred
to as the "Antenna Conduit Space ." Effective as of the date Landlord tenders
possession of the Antenna Space and the Antenna Conduit Space to Tenant (the
"Antenna Space Effective Date "), the Premises shall be expanded to include the
Antenna Space and the Antenna Conduit Space.
2. Use of Antenna Space and Antenna Conduit Space. The Antenna Space
----------------------------------------------
shall be used by Tenant only for the installation and operation of the Antennas.
The Antenna Conduit Space shall be used by Tenant only for installing the
Antenna Conduits and running cable or connecting lines through the Antenna
Conduits to connect the Antennas to the Premises.
The installation of the Antennas, the Antenna Conduit, and cable and
connecting lines through the Antenna Conduits shall be performed by contractors
approved by Landlord in advance in writing and in accordance with Article 8 of
the Lease. Tenant shall pay all costs for such installation, including the cost
of the equipment and materials.
All ongoing operation and maintenance of the Antennas and the Antenna
Conduits shall be at the sole cost and expense of Tenant (including, but not
limited to, costs of any electrical supply, which, if Landlord so elects, shall
be metered separately to Tenant at Tenant's expense). Such ongoing operation
and maintenance of the Antennas and the Antenna Conduits shall be conducted by
Tenant in accordance with the Lease, all applicable laws (including but not
limited to any requirements for obtaining conditional use permits) and all
Landlord's building rules in effect from time to time. Without limiting the
foregoing, any installation activities by Tenant regarding the Antennas or the
Antenna Conduits, and Tenant's ongoing use of the Antennas and the Antenna
Conduits, shall require Landlord's prior written approval of (i) the plans and
specifications for any installation work; (ii) a description of the areas of the
Building to which Tenant will require access both for the initial work and for
ongoing maintenance of the improvements or installations; (iii) the names and
credentials of all contractors and subcontractors who will perform such work as
selected from Landlord's list of contractors and subcontractors currently
approved by Landlord for work in the Building; (iv) copies of all liability,
casualty and worker's compensation insurance applicable to the construction,
maintenance and ongoing operation of the improvements and installations; and (v)
copies of all governmental permits (including conditional use permits) required
for the work. Landlord's approval shall not be unreasonably withheld or
delayed.
Tenant represents and warrants to Landlord that the Antennas will not
interfere with the operation, transmissions or reception of any other antennas,
satellite dishes or equipment on the roof of the Building. In the event that
the Antennas do interfere with such operation, transmissions or reception, then
(without limiting any other remedy of Landlord) Tenant shall, promptly after
written notice from Landlord, cease operation of and remove the Antennas from
the Building at its sole cost and expense, and this Antenna Space Rider to the
Lease shall thereupon be deleted from the Lease with respect to the then
remaining Lease term.
3. Removal of Antennas, Cable and Connecting Lines. Tenant agrees that,
-----------------------------------------------
upon the expiration or termination of the Lease, Tenant (or, at Landlord's
election, the contractor designated by Landlord) shall promptly remove, at
Tenant's sole cost and expense, the Antennas and all cable, connecting lines,
and other installations installed under this Rider (excepting the Antenna
Conduits themselves, which shall remain the property of Landlord), and restore
those portions of the Building damaged by such removal to their condition
immediately prior to the installation of such items. If Tenant
EXHIBIT H - Page 1
<PAGE>
fails to promptly remove all such items pursuant to this Section 4, or if
Landlord elects to have such work performed by Landlord's contractor, Landlord
may remove such items installed hereunder, and restore those portions of the
Building damaged by such removal to their condition immediately prior to the
installation, in which case Tenant agrees promptly to pay Landlord's reasonable
costs of removal and restoration, including Landlord's administrative fee.
4. Miscellaneous. This Rider supersedes all prior or contemporaneous
-------------
understandings, negotiations or agreements between the parties, whether written
or oral, with respect to its subject matter. This Rider is part of and shall be
attached as an addendum to the Lease. All terms of the Lease which have not
been expressly altered by this Rider shall remain in full force and effect.
EXHIBIT H - Page 2
<PAGE>
EXHIBIT I
---------
FORM OF MEMORANDUM OF LEASE
---------------------------
RECORDING REQUESTED
BY AND WHEN
RECORDED RETURN TO:
_____________________
_____________________
_____________________
_____________________
================================================================================
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE is entered into as of _____________________, by
and between 600 SEVENTH STREET ASSOCIATES, INC., a California corporation,
(hereinafter referred to as "Landlord"), and EQUINIX, INC., a Delaware
corporation (hereinafter referred to as "Tenant").
1. For valuable consideration, Landlord does hereby lease and demise to
Tenant and Tenant hereby leases from Landlord approximately _____________ square
feet in a building ("Building") containing approximately ________________ square
feet to be constructed on the land ("Land") described or depicted on Exhibit A
---------
attached to this Memorandum of Lease and made a part hereof by this reference
(collectively, the "Premises").
2. The terms and conditions of the leasing of the Premises are set
forth in a Lease dated _________________________ ("Lease"), between Landlord and
Tenant, which is incorporated herein by this reference as though fully set
forth. Without limiting the foregoing, the Lease contains provisions which give
effect to the following:
(a) The Term (as defined in the Lease) of the Lease will commence on
or about ______________________ (with the exact date of commencement to be
determined by the provisions of the Lease) and extend for a period of
__________________ years thereafter; and
(b) Tenant has the right and option to extend the Term of the Lease
for _________________ successive year renewal terms, in accordance with the
provisions of the Lease; and
(c) Tenant has the right and option to lease from Landlord from time
to time while the Lease remains in effect any portion of the Building which
is not subject to the Lease, subject to and in accordance with Section ____
of the Lease.
3. The Lease contains other terms and conditions pertinent to the legal
relationship among the Landlord, Tenant and mortgagees of Landlord, including,
without limitation, terms and conditions relating to the occupancy and use of,
and otherwise affecting, the Premises, public notice of the existence of the
same being hereby given.
EXHIBIT I
<PAGE>
Executed the day and year first above written.
LANDLORD:
600 SEVENTH STREET ASSOCIATES, INC., a
California corporation
By: ___________________________________
Name: _________________
Title: __________________________
TENANT:
EQUINIX, INC., a Delaware corporation
By: ___________________________________
Name: _________________
Title: __________________________
EXHIBIT I- Page 2
<PAGE>
STATE OF _______________________)
) Ss.
COUNTY OF ______________________)
On ________________________, before me, ________________________, a Notary
Public in and for said state, personally appeared _______________________ and
______________________, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the persons whose names are subscribed to the
within instrument and acknowledged to me that they executed the same in their
authorized capacities, and that by their signature on the instrument, the
persons, or the entity upon behalf of which the persons acted, executed the
instrument.
WITNESS my hand and official seal.
____________________________________________
Notary Public in and for said State
STATE OF _______________________)
) Ss.
COUNTY OF ______________________)
On ________________________, before me, ________________________, a Notary
Public in and for said state, personally appeared _______________________ and
______________________, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the persons whose names are subscribed to the
within instrument and acknowledged to me that they executed the same in their
authorized capacities, and that by their signature on the instrument, the
persons, or the entity upon behalf of which the persons acted, executed the
instrument.
WITNESS my hand and official seal.
____________________________________________
Notary Public in and for said State
EXHIBIT I - Page 3
<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 [*]. Base Rent shall be adjusted accordingly
if the Rental Commencement Date is other than [*].
(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
6
<PAGE>
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.
7
<PAGE>
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
8
<PAGE>
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
<PAGE>
(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:
10
<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
12
<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;
13
<PAGE>
(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
<PAGE>
(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.
16
<PAGE>
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
17
<PAGE>
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.
18
<PAGE>
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
19
<PAGE>
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
20
<PAGE>
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
21
<PAGE>
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
22
<PAGE>
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.
23
<PAGE>
(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
- --------------------------------------------------------------------------------
E-3
<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 10.18
OFFICE SUBLEASE - GROSS
1. Basic Lease Provisions ("Basic Lease Provisions")
1.1 Parties: This Lease, dated, for reference purposes only,
November 1, 1998, is made by and between INSWEB CORPORATION, a Delaware
corporation (herein called "Lessor") and EQUINIX, INC., a Delaware corporation
(herein called "Lessee").
1.2 Premises: The entire second floors, consisting of
approximately 15,180 rentable feet, more or less, as defined in paragraph 2 and
as shown on Exhibit "A" hereto (the "Premises").
1.3 Building: Commonly described as being located at 901
Marshall Street in the City of Redwood City, County of San Mateo, State of
California, as more particularly described in Exhibit A hereto, and as defined
in paragraph 2.
1.4 Use: General office purposes, including the provision of
Internet service on a 24-hour a day basis, subject to paragraph 6.
1.5 Term: Nineteen (19) months commencing November 15, 1998
("Commencement Date") and ending June 14, 2000 ("Expiration Date"), as defined
in paragraph 3.
1.6 Base Rent: Base Rent shall be $3.15 per sq. ft. per month,
payable on the 1st day of each month, per paragraph 4.1 subject to the
following: No rent shall be payable for the period of November 15, 1998 through
December 14, 1998 ("Free Rent Period").
1.7 Base Rent Increase: On December 15, 1999 the monthly Base
Rent payable under paragraph 1.6 above shall be adjusted to $3.25 per square
foot per month.
1.8 Rent Paid Upon Execution: $47,817 representing Rent for the
first month after December 15, 1998 ("Rent Commencement Date").
1.9 Security Deposit: $47,817 shall be paid upon execution of
the Sublease.
1.10 Lessee's Share of Operating Expense Increase: 0% as defined
in paragraph 4.2. Base Rent is to be on gross full service basis, except as
otherwise stated herein.
2. Premises, Parking and Common Areas.
2.1 Premises: The Premises are a portion of a building, herein
sometimes referred to as the "Building" identified in paragraph 1.3 of the Basic
Lease
1
<PAGE>
Provisions. "Building" shall include adjacent parking structures used in
connection therewith. The Premises, the Building, the Common Areas, the land
upon which the same are located, along with all other buildings and improvements
thereon or thereunder, are herein collectively referred to as the "Office
Building Project." Lessor hereby leases to Lessee and Lessee leases from Lessor
for the term, at the rental, and upon all of the conditions set forth herein,
the real property referred to in the Basic Lease Provisions, paragraph 1.2, as
the "Premises," including rights to the Common Areas as hereinafter specified.
2.2 Vehicle Parking: So long as Lessee is not in default, and
subject to the rules and regulations attached hereto, and as established by
Lessor from time to time, Lessee shall be entitled to 53 parking spaces in the
Office Building Project on a non-exclusive basis at no cost to Lessee.
2.2.1 If Lessee commits, permits or allows any of the prohibited
activities described in the Lease or the rules then in effect, then Lessor shall
have the right, without notice, in addition to such other rights and remedies
that it may have, to remove or tow away the vehicle involved and charge the cost
to Lessee, which cost shall be immediately payable upon demand by Lessor.
2.2.2 The monthly parking rate per parking space will be $0.00
pr month at the commencement of the term of this Lease.
2.3 Common Areas--Definition. The term "Common Areas" is
defined as all areas and facilities outside the Premises and within the exterior
boundary line of the Office Building Project that are provided and designated by
the Lessor from time to time for the general non-exclusive use of Lessor, Lessee
and of other lessees of the Office Building Project and their respective
employees, suppliers, shippers, customers and invitees, including but not
limited to common entrances, lobbies, corridors, stairways and stairwells,
public restrooms, elevators, escalators, parking areas to the extent not
otherwise prohibited by this Lease, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, ramps, driveways, landscaped areas and
decorative walls.
2.4 Common Areas--Rules and Regulations. Lessee agrees to abide
by and conform to the rules and regulations attached hereto as Exhibit B with
respect to the Office Building Project and Common Areas, and to cause its
employees, suppliers, shippers, customers, and invitees to so abide and conform.
Lessor or such other person(s) as Lessor may appoint shall have the exclusive
control and management of the Common Areas and shall have the right, from time
to time, to modify, amend and enforce said rules and regulations. Lessor shall
not be responsible to Lessee for the non-compliance with said rules and
regulations by other lessees, their agents, employees and invitees of the Office
Building Project.
3. Term. SEE ADDENDUM
3.1 Term. The term and Commencement Date of this Lease shall be
as specified in paragraph 1.5 of the Basic Lease Provisions.
3.2 Delay in Possession. Notwithstanding said Commencement Date,
if for any reason Lessor cannot deliver possession of the Premises to Lessee on
said date and
2
<PAGE>
subject to paragraph 3.2.2, Lessor shall not be subject to any liability
therefor, nor shall such failure affect the validity of this Lease or the
obligations of Lessee hereunder or extend the term hereof; but, in such case,
Lessee shall not be obligated to pay rent or perform any other obligations of
Lessee under the terms of this Lease, except as may be otherwise provided in
this Lease, until possession of the Premises is tendered to Lessee, as
hereinafter defined; provided, however, that if Lessor shall not have delivered
possession of the Premises within thirty (30) days following said Commencement
Date, as the same may be extended under the terms of a Work Letter executed by
Lessor and Lessee, Lessee may, at Lessee's option, by notice in writing to
Lessor within ten (10) days thereafter, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder; provided, however,
that, as to Lessee's obligations, Lessee first reimburses Lessor for all costs
incurred for Non-Standard Improvements and, as to Lessor's obligations, Lessor
shall return any money previously deposited by Lessee (less any offsets due
Lessor for Non-Standard Improvements); and provided further, that if such
written notice by Lessee is not received by Lessor within said ten (10) day
period, Lessee's right to cancel this Lease hereunder shall terminate and be of
no further force or effect.
3.2.1 Possession Tendered-Defined. Possession of the Premises
shall be deemed tendered to Lessee ("Tender of Possession") when (1) the
improvements to be provided by Lessor under this Lease are substantially
completed, (2) the Building utilities are ready for use in the Premises, (3)
Lessee has reasonable access to the Premises, and (4) ten (10) days shall have
expired following advance written notice to Lessee of the occurrence of the
matters described in (1), (2) and (3), above of this paragraph 3.2.1
3.2.2 Delays Caused by Lessee. There shall be no abatement of
rent, and the sixty (60) day period following the Commencement Date before which
Lessee's right to cancel this Lease accrues under paragraph 3.2, shall be deemed
extended to the extent of any delays caused by acts or omissions of Lessee,
Lessee's agents, employees and contractors. SEE ADDENDUM.
3.3 Early Possession. If Lessee occupies the Premises prior to
said Commencement Date, such occupancy shall be subject to all provisions of
this Lease, such occupancy shall not change the termination date, and Lessee
shall pay rent for such occupancy.
3.4 Uncertain Commencement. In the event commencement of the
Lease term is defined as the completion of the improvements, Lessee and Lessor
shall execute an amendment to this Lease establishing the date of Tender of
Possession (as defined in paragraph 3.2.1) or the actual taking of possession by
Lessee, whichever first occurs, as the Commencement Date.
4. Rent.
4.1 Base Rent. Subject to adjustment as hereinafter provided in
paragraph 4.3, and except as may be otherwise expressly provided in this Lease,
Lessee shall pay to Lessor the Base Rent for the Premises set forth in paragraph
1.6 of the Basic Lease Provisions, without offset or deduction. Lessee shall pay
Lessor upon execution hereof the advance Base Rent described in paragraph 1.8 of
the Basic Lease Provisions. Rent for any period during the term hereof which is
for less than one month shall be prorated based upon the actual number of
3
<PAGE>
days of the calendar month involved. Rent shall be payable in lawful money of
the United States to Lessor at the address stated herein or to such other
persons or at such other places as Lessor may designate in writing.
5. Security Deposit. Lessee shall deposit with Lessor upon execution
hereof the security deposit set forth in paragraph 1.9 of the Basic Lease
Provisions as security for Lessee's faithful performance of Lessee's obligations
hereunder. If Lessee fails to pay rent or other charges due hereunder, or
otherwise defaults with respect to any provision of this Lease, Lessor may use,
apply or retain all or any portion of said deposit for the payment of any rent
or other charge in default for the payment of any other sum to which Lessor may
become obligated by reason of Lessee's default, or to compensate Lessor for any
loss or damage which Lessor may suffer thereby. If Lessor so uses or applies all
or any portion of said deposit, Lessee shall within ten (10) days after written
demand therefor deposit cash with Lessor in an amount sufficient to restore said
deposit to the full amount then required of Lessee. Lessor shall not be required
to keep said security deposit separate from its general accounts. If Lessee
performs all of Lessee's obligations hereunder, said deposit, or so much thereof
as has not heretofore been applied by Lessor, shall be returned, without payment
of interest or other increment for its use, to Lessee (or, at Lessor's option,
to the last assignee, if any, of Lessee's interest hereunder) at the expiration
of the term hereof, and after Lessee has vacated the Premises. No trust
relationship is created herein between Lessor and Lessee with respect to said
Security Deposit.
6. Use.
6.1 Use. The Premises shall be used and occupied only for the
purpose set forth in paragraph 1.4 of the Basic Lease Provisions or any other
use which is reasonably comparable to that use and for no other purpose.
6.2 Compliance with Law. SEE ADDENDUM.
(a) Lessor warrants to Lessee that the Premises, in the state
existing on the date that the Master Lease term commences, but without regard to
alterations or improvements made by Lessee or the use for which Lessee will
occupy the Premises, does not violate any covenants or restrictions or record,
or any applicable building code, regulation or ordinance in effect on such
Master Lease term Commencement Date. In the event it is determined that this
warranty has been violated, then it shall be the obligation of the Lessor, after
written notice from Lessee, to promptly, at Lessor's sole cost and expense,
rectify any such violation.
(b) Except as provided in paragraph 6.2(a) Lessee shall, at
Lessee's expense, promptly comply with all applicable statutes, ordinances,
rules, regulations orders, covenants and restrictions of record, and
requirements of any fire insurance underwriters or rating bureaus, now in effect
or which may hereafter come into effect, whether or not they reflect a change in
policy from that now existing, during the term or any part of the term hereof,
relating in any manner to the Premises and the occupation and use by Lessee of
the Premises. Lessee shall conduct its business in a lawful manner and shall not
use or permit the use of the Premises or the Common Areas in any manner that
will lend to create waste or a nuisance or shall tend to disturb other occupants
of the Office Building Project.
4
<PAGE>
6.3 Condition at Premises. SEE ADDENDUM.
(a) Lessor shall deliver the Premises to Lessee in a clean
condition on the Lease Commencement Dale (unless Lessee is already in
possession) and Lessor warrants to Lessee that the plumbing, lighting, air
conditioning, and heating system in the Premises shall be in good operating
condition. In the event that it is determined that this warranty has been
violated, then it shall be the obligation of Lessor, after receipt of written
notice from Lessee setting forth with specificity the nature of the violation,
to promptly, at Lessor s sole cost, rectify such violation.
(b) Except as otherwise provided in this Lease, Lessee hereby
accepts the Premises and the Office Building Project in their condition existing
as of the Lease Commencement Date or the date that Lessee takes possession of
the Premises, whichever is earlier, subject to all applicable zoning, municipal,
county and state laws, ordinances and regulations governing and regulating the
use of the Premises, and any easements, covenants or restrictions of record, and
accepts this Lease subject thereto and to all matters disclosed thereby and by
any exhibits attached hereto. Lessee acknowledges that it has satisfied itself
by its own independent investigation that the Premises are suitable for its
intended use, and that neither Lessor nor Lessor s agent or agents has made any
representation or warranty as to the present or future suitability of the
Premises, Common Areas, or Office Building Project for the conduct of Lessee's
business.
7. Maintenance, Repairs, Alterations and Common Area Services. SEE
ADDENDUM.
7.1 Lessors Obligations. Lessor shall keep the Office Building
Project, including the Premises, interior and exterior walls, roof, and common
areas, and the equipment whether used exclusively for the Premises or in common
with other premises, in good condition and repair; provided, however, Lessor
shall not be obligated to paint, repair or replace wall coverings, or to repair
or replace any improvements that are not ordinarily a part of the Building or
are above then Building standards. Except as provided in paragraph 9.5, there
shall be no abatement of rent or liability of Lessee on account of any injury or
interference with Lessee's business with respect to any improvements,
alterations or repairs made by Lessor to the Office Building Project or any part
thereof. Lessee expressly waives the benefits of any stature now or hereafter
in effect which would otherwise afford Lessee the right to make repairs at
Lessor's expense or to terminate this Lease because of Lessor s failure to keep
the Premises in good order, condition and repair.
7.2 Lessee's Obligations.
(a) Notwithstanding Lessor's obligation to keep the Premises
in good condition and repair, Lessee shall be responsible for payment of the
cost thereof Lessor as additional rent for that portion or the cost of any
maintenance and repair of the Premises, or any equipment (wherever located) that
serves only Lessee or the Premises, to the extent such cost is attributable to
causes beyond normal wear and tear. Lessee shall be responsible or the cost of
painting, repairing or replacing wall coverings, and to repair or replace any
Premises improvements that are not ordinarily a part of the Building or that are
above then Building
5
<PAGE>
standards. Lessor may, at its option, upon reasonable notice, elect to have
Lessee perform any particular such maintenance or repairs the cost of which is
otherwise Lessee's responsibility hereunder.
(b) On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the Premises to Lessor in the same condition
as received, ordinary wear and tear excepted, clean and free of debris. Any
damage or deterioration of the Premises shall not be deemed ordinary wear and
tear it the same could have been prevented by good maintenance practices by
Lessee. Lessee shall repair any damage to the Premises occasioned by the
Installation or removal of Lessee's trade fixtures, alterations, furnishings and
equipment. Except as otherwise staled in this Lease, Lessee shall leave the air
lines, power panels, electrical distribution systems, lighting fixtures, air
conditioning, window coverings. wall coverings, carpets, wall paneling, ceilings
and plumbing on the Premises and in good operating condition.
7.3 Alterations and Additions. SEE ADDENDUM.
(a) Lessee shall not, without Lessor's prior written consent
make any alterations, improvements, additions, Utility Installations or repairs
in, on or about the Premises or the Office Building Project. As used in this
paragraph 7.3 the term Utility Installation shall mean carpeting, window and
wall coverings, power panels, electrical distribution systems lighting fixtures,
air conditioning, plumbing and telephone and telecommunication wiring and
equipment. At the expiration of the term, Lessor may require the removal of any
or all of said alterations, improvements, additions or Utility Installations,
and the restoration of the Premises and the Office Building Project to their
prior condition, at Lessee's expense if Lessor reserved the right to require
removal upon installation. Should Lessor permit Lessee to make its own
alterations, improvements, additions or Utility Installations, Lessee shall use
only such contractor as has been expressly approved by Lessor, and Lessor may
require Lessee to provide Lessor, at Lessee's sole cost and expense, a lien and
completion bond in an amount equal to one and one-half times the estimated cost
or such improvements, to insure Lessor against any liability for mechanic's and
materialmen's liens and to insure completion of the work. Should Lessee make any
alterations, improvements, additions or Utility Installations without the prior
approval of Lessor, or use a contractor not expressly approved by Lessor, Lessor
may, at any time during the term or this Lease, require that Lessee remove any
part or all of the same.
(b) Any alterations, improvements, additions or Utility
Installations in or about the Premises or the Office Building Project that
Lessee shall desire to make shall be presented to Lessor in written form, with
proposed detailed plans. If Lessor shall give its consent to Lessee's making
such alteration, improvement, addition or Utility Installation, the consent
shall be deemed conditioned upon Lessee acquiring a permit to do so from the
applicable governmental agencies, furnishing a copy thereof to Lessor prior to
the commencement of the work, and compliance by Lessee with all conditions of
said permit in a prompt and expeditious manner.
(c) 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 in the Premises, which
6
<PAGE>
claims are or may be secured by any mechanic's or materialmen's lien against the
Premises, the Building or the Office Building Project, or any interest therein.
(d) Lessee shall give Lessor not less than ten (10) days'
notice prior to the commencement of any work in the Premises by Lessee, and
Lessor shall have the right to post notices of non-responsibility in or on the
Premises or the Building as provided by law. If Lessee shall, in good faith,
contest the validity of any such lien, claim or demand, then Lessee shall, at
its sole expense defend itself and Lessor against the same and shall pay and
satisfy any such adverse judgment that may be rendered thereon before the
enforcement thereof against the Lessor or the Premises, the Building or the
Office Building Project, upon the condition that if Lessor shall require, Lessee
shall furnish to Lessor a surety bond satisfactory to Lessor in an amount equal
to such contested lien claim or demand indemnifying Lessor against liability for
the same and holding the Premises, the Building and the Office Building Project
free from the effect of such lien or claim. In addition, Lessor may require
Leesee to pay Lessor's reasonable attorneys' fees and costs in participating in
such action if Lessor shall decide it is to Lessor's best interest so to do.
(e) All alterations, improvements, additions and Utility
Installations (whether or not such Utility Installations constitute trade
fixtures of Lessee), which may be made to the Premises by Lessee, including but
not limited to, floor coverings, panelings, doors, drapes, built-ins, moldings,
sound attenuation, and lighting and telephone or communication systems, conduit,
wiring and outlets, shall be made and done in a good and workmanlike manner and
of good and sufficient quality and materials and shall be the property of Lessor
and remain upon and be surrendered with the Premises at the expiration of the
Lease term, unless Lessor requires their removal pursuant to paragraph 7.3(a).
Provided Lessee is not in default, notwithstanding the provisions of this
paragraph 7.3(e), Lessee's personal property and equipment, other than that
which is affixed to the Premises so that it cannot be removed without material
damage to the Premises or the Building, and other than Utility Installations,
shall remain the property of Lessee and may be removed by Lessee subject to the
provisions of paragraph 7.2.
(f) Lessee shall provide Lessor with as-built plans and
specifications for any alterations, improvements, additions or Utility
Installations.
7.4 Utility Additions. Lessor reserves the right to install new
or additional facilities throughout the Office Building Project for the benefit
of Lessor or Lessee, or any other lessee of the Office Building Project,
including, but not by way of limitation, such utilities as plumbing, electrical
systems, communication systems, and fire protection and detection systems, so
long as such installations do not unreasonably interfere with Lessee's use of
the Premises.
8. Insurance; Indemnity. SEE ADDENDUM.
8.1 Liability Insurance--Lessee. Lessee shall, at Lessee's
expense, obtain and keep in force during the term of this Lease a policy of
Comprehensive General Liability Insurance utilizing an Insurance Services Office
standard form with Broad Form General Liability Endorsement (GL0404), or
equivalent, in an amount of not less than
7
<PAGE>
$1,000,000 per occurrence of bodily injury and property damage combined or in a
greater amount as reasonably determined by Lessor and shall insure Lessee with
Lessor as an additional insured against liability arising out of the use,
occupancy or maintenance of the Premises. Compliance with the above requirement
shall not, however, limit the liability of Lessee hereunder.
8.2 Liability Insurance--Lessor. Lessor shall obtain and keep in
force during the term of this Lease a policy of Combined Single Limit Bodily
Injury and Broad Form Property Damage Insurance, plus coverage against such
other risks Lessor deems advisable from time to time, insuring Lessor, but not
Lessee against liability arising out of the ownership, use, occupancy or
maintenance of the Office Building Project in an amount not less than $3,000,000
per occurrence.
8.3 Property Insurance--Lessee. Lessee shall, at Lessee's
expense, obtain and keep in force during the term of this Lease for the benefit
of Lessee, replacement cost fire and extended coverage insurance, with vandalism
and malicious mischief, sprinkler leakage and earthquake sprinkler leakage
endorsements, in an amount sufficient to cover not less than 100% of the full
replacement cost, as the same may exist from time to time, of all of Lessee's
personal property, fixtures, equipment and tenant improvements.
8.4 Property Insurance--Lessor. Lessor shall obtain and keep in
force during the term of this Lease a policy or policies of insurance covering
loss or damage to the Office Building Project Improvements, but not Lessee's
personal property, fixtures, equipment or tenant improvements in the amount of
the full replacement cost thereof, as the same may exist from time to time,
utilizing Insurance Services Office standard form, or equivalent, providing
protection against all perils included within the classification of fire,
extended coverage, vandalism, malicious mischief, plate glass, and such other
perils as Lessor deems advisable or may be required by a lender having a lien on
the Office Building Project. In addition, Lessor shall obtain and keep in force,
during the term of this Lease, a policy of rental value insurance covering a
period of one year, with loss payable to Lessor, which insurance shall also
cover all Operating Expenses for said period. Lessee will not be named in any
such policies carried by Lessor and shall have no right to any proceeds
therefrom. The policies required by these paragraphs 8.2 and 8.4 shall contain
such deductibles as Lessor or the aforesaid lender may determine. In the event
that the Premises shall suffer an insured loss as defined in paragraph 9.1(f)
hereof, the deductible amounts under the applicable insurance policies shall be
deemed an Operating Expense. Lessee shall not do or permit to be done anything
which shall invalidate the insurance policies carried by Lessor. Lessee shall
pay the entirety of any increase in the property insurance premium for the
Office Building Project over what it was immediately prior to the commencement
of the term of this Lease if the increase is specified by Lessor's insurance
carrier as being caused by the nature of Lessee's occupancy or any act or
omission of Lessee.
8.5 Insurance Policies. Lessee shall deliver to Lessor copies of
liability insurance policies required under paragraph 8.1 or certificates
evidencing the existence and amounts of such insurance within seven (7) days
after the Commencement Date of this Lease. No such policy shall be cancelable or
subject to reduction of coverage or other
8
<PAGE>
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 renewals thereof.
8.6 Waiver of Subrogation. Lessee and Lessor each hereby release
and relieve the other and waive their entire right of recovery against the
other, for direct or consequential loss or damage arising out of or incident to
the perils covered by property insurance carried by such party, whether due to
the negligence of Lessor or Lessee or their agents, employees, contractors
and/or invitees. If necessary all property insurance policies required under
this Lease shall be endorsed to so provide. SEE ADDENDUM.
8.7 Indemnity. Lessee shall indemnify and hold harmless Lessor
and its agents Lessor's master or ground lessor, partners and lenders, from and
against any and all claims for damage to the person or property of anyone or any
entity arising from Lessee's use of the Office Building Project, or from the
conduct of Lessee's business or from any activity work or things done permitted
or suffered by Lessee in or about the Premises or elsewhere and shall further
indemnify and hold harmless Lessor from and against any and all claims costs and
expenses arising from any breach or default in the performance of any obligation
on Lessee's part to be performed under the terms of this Lease or arising from
any act or omission of Lessee or any of Lessee's agent, contractor, employees,
or invitees, and from and against all costs, attorney's fees, expenses and
liabilities incurred by Lessor as the result of any such use, conduct, activity,
work, things done, permitted or suffered, breach, default or negligence, and in
dealing reasonably therewith, including but not limited to the defense or
pursuit of any claim or any action or proceeding involved therein; and in case
any action or proceeding be brought against Lessor by reason of any such matter,
Lessee upon notice from Lessor shall 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
so indemnified. Lessee, as a material part of the consideration to Lessor,
hereby assumes all risk of damage to property of Lessee or injury to persons,
in, upon or about the Office Building Project arising from any cause and Lessee
hereby waives all claims in respect thereof against Lessor.
8.8 Exemption of Lessor from Liability. SEE ADDENDUM. Lessee
hereby agrees that Lessor shall not be liable for injury to Lessee's business or
any loss of income therefrom or for loss of or damage to the goods, wares,
merchandise or other property of Lessee. Lessee's employees, invitees,
customers, or any other person in or about the Premises or the Office Building
Project, nor shall Lessor be liable for injury to the person of Lessee, Lessee's
employees, agent or contractors, whether such damage or injury is caused by or
results from theft, fire, steam, electricity, gas, water or rain, or from the
breakage, leakage, obstruction or other defects of pipes, sprinklers, wires,
appliance, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether said damage or injury result from conditions arising upon the
Premises or upon other portions of the Office Building Project, or from other
sources or places, or from new construction or the repair, alteration or
improvement of any part of the Office Building Project, or of the equipment,
fixtures or appurtenances applicable thereto, and regardless of whether the
cause of such damage or injury or the means of repairing the same is
inaccessible, Lessor shall not be liable for any damages arising from any act or
neglect of any other lessee, occupant or user of the Office Building Project,
not from the failure of Lessor to enforce the provisions of any other lease of
any other lessee of the Office Building Project.
9
<PAGE>
8.9 No Representation of Adequate Coverage. Lessor makes no
representation that the limits or forms of coverage of insurance specified in
this paragraph 8 are adequate to cover Lessee's property or obligations under
this Lease.
9. Damage or Destruction.
9.1 Definitions. SEE ADDENDUM.
(a) "Premises Damage" shall mean if the Premises are damaged
or destroyed to any extent.
(b) "Premises Building Partial Damage" shall mean if the
Building of which the Premises are a part is damaged or destroyed to the extent
that the cost to repair is less than fifty percent (50%) of the then Replacement
Cost of the building.
(c) "Premises Building Total Destruction" shall mean if the
Building of which the Premises are a part is damaged or destroyed to the extent
that the cost to repair is less than fifty percent (50%) or more of the then
Replacement Cost of the Building.
(d) "Office Building Project Buildings" shall mean all of
the buildings on the Office Building Project site.
(e) "Office Building Project Buildings Total Destruction"
shall mean if the Office Building Project Buildings are damaged or destroyed to
the extent that the cost of repair is fifty percent (50%) or more of the then
Replacement Cost of the Office Building Project Buildings.
(f) "Insured Loss" shall mean damage or destruction which
was caused by an event required to be covered by the insurance described in
paragraph 8. The fact that an insured Loss has a deductible amount shall not
make the loss an uninsured loss.
(g) "Replacement Cost" shall mean the amount of money
necessary to be spent in order to repair or rebuild the damaged area to the
condition that existed immediately prior to the damage occurring, excluding all
improvements made by lessees, other than those installed by Lessor at Lessee's
expense.
9.2 Premises Damage; Premises Building Partial Damage.
(a) Insured Loss: Subject to the provisions of paragraph 9.4
and 9.5, if at any time during the term of this Lease there is damage which is
an Insured Loss and which falls into the classification of either Premises
Damage or Premises Building Partial Damage, then Lessor shall, as soon as
reasonably possible and to the extent the required materials and labor are
readily available through usual commercial channels, at Lessor's expense, repair
such damage (but not Lessee's fixtures, equipment or tenant improvements
originally paid for by Lessee) to its condition existing at the time of the
damage, and this Lease shall continue in full force and effect.
10
<PAGE>
(b) Uninsured Loss: Subject to the provisions of paragraphs
9.4 and 9.5, if at any time during the term of this Lease there is damage which
is not an Insured Loss and which falls within the classification of Premises
Damage or Premises Building Partial Damage, unless caused by a negligent or
willful act of Lessee (in which event Lessee shall make the repairs at Lessee's
expense), which damage prevents Lessee from making any substantial use of the
Premises, Lessor may at Lessor's option 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) give written notice to Lessee within
thirty (30) days after the date of the occurrence of such damage of Lessor's
intention to cancel and terminate this Lease as of the date of the occurrence of
such damage, in which event this Lease shall terminate as of the date of the
occurrence of such damage.
9.3 Premises Building Total Destruction; Office Building Project
Total Destruction. Subject to the provisions of paragraphs 9.4 and 9.5, if at
any time during the term of this Lease there is damage, whether or not it is an
Insured Loss, which falls into the classifications of either (i) Premises
Building Total Destruction, or (ii) Office Building Project Total Destruction,
then Lessor may at Lessor's option either (i) repair such damage or destruction
as soon as reasonably possible at Lessor's expense (to the extent the required
materials are readily available through usual commercial channels) to its
condition existing at the time of the damage, but not Lessee's fixtures,
equipment or tenant improvements, and this Lease shall continue in full force
and effect, or (ii) give written notice to Lessee within thirty (30) days after
the date of occurrence of such damage of Lessor's intention to cancel and
terminate this Lease, in which case this Lease shall terminate as of the date of
the occurrence of such damage.
9.4 Damage Near End of Term.
(a) Subject to paragraph 9.4(b), if at any time during the
last twelve (12) months of the term of this Lease there is substantial damage to
the Premises, Lessor may at Lessor's option cancel and terminate this Lease as
of the date of occurrence of such damage by giving written notice to Lessee of
Lessor's election to do so within 30 days after the date of occurrence of such
damage.
9.5 Abatement of Rent; Lessee's Remedies.
(a) In the event Lessor repairs or restores the Building or
Premises pursuant to the provisions of this paragraph 9, and any part of the
Premises are not usable (including loss of use due to loss of access or
essential services), the rent payable hereunder (including Lessee's Share of
Operating Expense Increase) for the period during which such damage, repair or
restoration continues shall be abated, provided (1) the damage was not the
result of the negligence of Lessee, and (2) such abatement shall only be to the
extent the operation and profitability of Lessee's business as operated from the
Premises is adversely affected. Except for said abatement of rent, if any,
Lessee shall have no claim against Lessor for any damage suffered by reason of
any such damage, destruction, repair or restoration.
(b) Upon the occurrence of damage to 25% or more of the
Premises, if Lessor or Master Landlord shall be obligated to repair or restore
the Premises or the Building under the provisions of this Paragraph 9 and shall
not commence such repair or
11
<PAGE>
restoration within thirty (30) days after such occurrence, of if Lessor or
Master Landlord shall not complete the restoration and repair within ninety (90)
days after such occurrence, Lessee may at Lessee's option cancel and terminate
this Lease by giving Lessor written notice of Lessee's election to do so at any
time prior to the commencement or completion, respectively, of such repair or
restoration. In such event this Lease shall terminate as of the date of such
notice.
(c) Lessee agrees to cooperate with Lessor in connection
with any such restoration and repair, including but not limited to the approval
and/or execution of plans and specifications required.
9.6 Termination--Advance Payments. Upon termination of this
Lease pursuant to this paragraph 9, an equitable adjustment shall be made
concerning advance rent and any advance payments made by Lessee to Lessor.
Lessor shall, in addition, return to Lessee so much of Lessee's security deposit
as has not theretofore been applied by Lessor.
9.7 Waiver. Lessor and Lessee waive the provisions of any statue
which relate to termination of leases when leased property is destroyed and
agree that such event shall be governed by the terms of this Lease.
10. Real Property Taxes.
10.1 Personal Property Taxes.
(a) Lessee shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Lessee contained in the Premises or elsewhere.
(b) If any of Lessee's said personal property shall be
assessed with Lessor's real property, Lessee shall pay to Lessor the taxes
attributable to Lessee within ten (10) days after receipt of a written statement
setting forth the faxes applicable to Lessee's property.
11. Utilities. SEE ADDENDUM.
11.1 Services Provided by Lessor. Lessor shall provide heating,
ventilation, air conditioning, and janitorial service as reasonably required,
reasonable amount of electricity for normal lighting and office machines, water
for reasonable and normal drinking and lavatory use, and replacement light bulbs
and/or fluorescent tubes and ballasts for standard overhead fixtures.
11.2 Hours of Service. Said services and utilities shall be
provided during generally accepted business days and hours or such other days or
hours as may hereafter be set forth. Utilities and services required at other
times shall be subject to advance request and reimbursement by Lessee to Lessor
of the cost thereof.
11.3 Excess Usage by Lessee. Lessee shall not make connection to
the utilities except by or through existing outlets and shall not install or use
machinery or equipment in or about the Premises that uses excess water, lighting
or power, or suffer or permit any act that
12
<PAGE>
causes extra burden upon the utilities or services, including but not limited to
security services, over standard office usage for the Office Building Project.
Lessor shall require Lessee to reimburse Lessor for any excess expenses or costs
that may arise out of a breach of this subparagraph by Lessee. Lessor may, in
its sole discretion, install at Lessee's expense supplemental equipment and/or
separate metering applicable to Lessee's excess usage or loading.
11.4 Interruptions. There shall be no abatement of rent and
Lessor shall not be liable in any respect whatsoever for the inadequacy,
stoppage, interruption or discontinuance of any utility or service due to riot,
strike, labor dispute, breakdown, accident, repair or other cause beyond
Lessor's reasonable control or in cooperation with governmental request or
directions. SEE ADDENDUM.
12. Assignment and Subletting. SEE ADDENDUM.
12.1 Lessor's Consent Required. Lessee shall not voluntarily or
by operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interested in the Lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Lessor shall respond to Lessee's request for consent hereunder in a
timely manner and any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a material
default and breach of this Lease, without the need for notice to Lessee under
paragraph 13.1. "Transfer" within the meaning of this paragraph 12 shall include
the transfer or transfers aggregating: (a) is Lessee is a corporation, more than
fifty percent (50%) of the voting stock of such corporation, or (b) if Lessee is
a partnership, more than fifty percent (50%) of the profit and loss
participation in such partnership.
12.2 Lessee Affiliate. Notwithstanding the provisions of
paragraph 12.1 hereof, Lessee may assign or sublet the Premises, or any portion
thereof, without Lessor's consent, to any corporation which controls, are
controlled by or is under common control with Lessee, or to any corporation
resulting from the merger of consolidation with Lessee, or to any person or
entity which acquires all the assets of Lessee as a going concern of the
business that is being conducted on the Premises, all of which are referred to
as "Lessee Affiliate"; provided that before such assignment shall be effective,
(a) said assignee shall assume, in full, the obligations of Lessee under this
Lease and (b) Lessor shall be given written notice of such assignment and
assumption. Any such assignment shall not, in any way, affect or limit the
liability of Lessee under the terms of this Lease even if after such assignment
of subletting the terms of this Lease are materially changed or altered without
the consent of Lessee, the consent of whom shall not be necessary.
12.3 Terms and Conditions Applicable to Assignment and
Subletting. SEE ADDENDUM.
(a) Regardless of Lessor's consent, no assignment or
subletting shall release Lessee of Lessee's obligations hereunder or alter the
primary liability of Lessee to pay the rent and other sums due Lessor hereunder
including Lessee's Share of Operating Expense Increase, and to perform all other
obligations to be performed by Lessee hereunder.
13
<PAGE>
(b) Lessor may accept rent from any person other than
Lessee pending approval or disapproval of such assignment.
(c) Neither a delay in the approval or disapproval of such
assignment or subletting, nor the acceptance of rent, shall constitute a waiver
or estoppel of Lessor's right to exercise its remedies for the breach of any of
the terms or conditions of this paragraph 12 of this Lease.
(d) If Lessee's obligations under this Lease have been
guaranteed by third parties, then an assignment or sublease, and Lessor's
consent thereto shall not be effective unless said guarantors give their written
consent to such sublease and the terms thereof.
(e) The consent by Lessor to any assignment or subletting
shall not constitute a consent to any subsequent assignment or subletting by
Lessee or to any subsequent or successive assignment or subletting by the
sublessee. However, Lessor may consent to subsequent sublettings and assignments
of the sublease or any amendments or modifications thereto without notifying
Lessee or anyone else liable on the Lease or sublease and without obtaining
their consent and such action shall not relieve such persons from liability
under this Lease or said sublease; however, such persons shall not be
responsible to the extent any such amendment or modification enlarges or
increases the obligations of the Lessee or sublessee under this Lease or such
sublease.
(f) In the event of any default under this Lease, Lessor
may proceed directly against Lessee, any guarantors or any one else responsible
for the performance of 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 or Lessee.
(g) Lessor's written consent to any assignment or
subletting of the Premises by Lessee shall not constitute an acknowledgement
that no default then exists under this Lease of the obligations to be performed
by Lessee nor shall such consent be deemed a waiver of any then existing
default, except as may be otherwise stated by Lessor at the time.
(h) The discovery of the fact that any financial statement
relied upon by Lessor in giving its consent to an assignment or subletting was
materially false shall, at Lessor's election, render Lessor's said consent null
and void.
12.4 Additional Terms and Conditions Applicable to Subletting.
Regardless of Lessor's consent, 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 herein:
(a) Lessee hereby assigns and transfers to Lessor all of
Lessee's interest in all rentals and income arising from any sublease heretofore
or hereafter made by Lessee, and Lessor may collect such rent and income and
apply same toward Lessee's obligations under this Lease; provided, however, that
until a default shall occur in the performance of Lessee's obligations under
this Lease, Lessee may receive, collect and enjoy the rents accruing under such
sublease. Lessor shall not, by reason of this or any other assignment
14
<PAGE>
of such sublease to Lessor nor by reason of the collection of the rents from a
sublessee, be deemed liable to the sublessee for any failure of Lessee to
perform and comply with any of Lessee's obligations to such sublessee under such
sublease. Lessee hereby irrevocably authorizes and directs any such sublessee,
upon receipt of a written notice from Lessor stating that a default exists in
the performance of Lessee's obligations under this Lease, to pay to Lessor the
rents due and to become due under the sublease. Lessee agrees that such
sublessee shall have the right to rely upon any such statement and request from
Lessor, and that such sublessee shall pay such rents to Lessor without any
obligation or right to inquire as to whether such default exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against said sublessee or Lessor for any such rents
so paid by said sublessee to Lessor.
(b) No sublease entered into by Lessee shall be effective
unless and until it has been approved in writing by Lessor. In entering into any
sublease, Lessee shall use only such form of sublessee as is satisfactory to
Lessor, and once approved by Lessor, such sublease shall not be changed or
modified without Lessor's prior written consent. Any sublease shall, by reason
of entering into a sublease under this Lease, be deemed, for the benefit of
Lessor, to have assumed and agreed to conform and comply with each and every
obligation herein to be performed by Lessee other than such obligations as are
contrary to or inconsistent with provisions contained in a sublease to which
Lessor has expressly consented in writing.
(c) In the event Lessee shall default in the performance of
its obligations under this Lease, Lessor at its option and without any
obligation to do so, may require any sublessee to attorn to Lessor, in which
event Lessor shall undertake the obligations of Lessee under such sublease from
the time of the exercise of said option to the termination of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to Lessee or for any other prior defaults of
Lessee under such sublease.
(d) No sublessee shall further assign or sublet all or any
part of the Premises without Lessor's prior written consent.
(e) With respect to any subletting to which Lessor has
consented, Lessor agrees to deliver a copy of any notice of default by Lessee to
the sublessee. Such sublessee shall have the right to cure a default of Lessee
within three (3) days after service of said notice of default upon such
sublessee, and the sublessee shall have a right of reimbursement and offset from
and against Lessee for any such defaults cured by the sublessee.
12.5 Lessor's Expenses. In the event Lessee shall assign or
sublet the Premises or request the consent of Lessor to any assignment or
subletting or if Lessee shall request the consent of Lessor for any act Lessee
proposes to do then Lessee shall pay Lessor's reasonable costs and expenses
incurred in connection therewith, including attorneys', architects', engineers'
or other consultants' fees.
12.6 Conditions to Consent. Lessor reserves the right to
condition any approval to assign or sublet upon Lessor's determination that (a)
the proposed assignee or sublessee shall conduct a business on the Premises of a
quality substantially equal to that of
15
<PAGE>
Lessee and consistent with the general character of the other occupants of the
Office Building Project and not in violation of any exclusives or rights then
held by other tenants, and (b) the proposed assignee or sublessee be at least as
financially responsible as Lessee was expected to be at the time of the
execution of this Lease or of such assignment or subletting, whichever is
greater.
13. Defaults; Remedies.
13.1 Default. The occurrence of any one or more of the
following events shall constitute a material default of this Lease by Lessee:
(a) The vacation or abandonment of the Premises by Lessee.
Vacation of the Premises shall include the failure to occupy the Premises for a
continuous period of 30 days or more. SEE ADDENDUM.
(b) The breach by Lessee of any of the covenants, conditions
or provisions of paragraphs 7.3(a), (b) or (d) (alterations), 12.1 (assignment
or subletting), 13.1(a) (vacation or abandonment), 13.1(e) (insolvency), 13.1(f)
(false statement), 16(a) (estoppel certificate), 30(b) (subordination), 33
(auctions), or 41.1 (easements), all of which are hereby deemed to be material,
non-curable defaults without the necessity of any notice by Lessor to Lessee
thereof.
(c) The failure by Lessee to make any payment of rent or any
other payment required to be made by Lessee hereunder, as and when due, where
such failure shall continue for a period of three (3) days after written notice
thereof from Lessor to Lessee. In the event that Lessor serves Lessee with a
Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes
such Notice to Pay Rent or Quit shall also constitute the notice required by
this subparagraph.
(d) The failure by Lessee to observe or perform any of the
covenants or provisions of this Lease to be observed or performed by Lessee
other than those referenced in subparagraphs (b) and (c), above, where such
failure shall continue for a period of thirty (30) days after written notice
thereof from Lessor to Lessee; provided, however, that if the nature of Lessee's
noncompliance is such that more than thirty (30) days are reasonably required
for its cure, then Lessee shall not be deemed to be in default if Lessee
commenced such cure within said thirty (30) day period and thereafter diligently
pursues such cure to completion. To the extent permitted by law, such thirty
(30) day notice shall constitute the sole and exclusive notice required to be
given to Lessee under applicable Unlawful Detainer statutes.
(e) (i) The making by Lessee of any general arrangement or
general assignment for the benefit of creditors; (ii) Lessee 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 thirty
(30) 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 discharged
16
<PAGE>
within thirty (30) days. In the event that any provision of this paragraph
13.1(e) is contrary to any applicable law, such provision shall be of no force
or effect.
(f) The discovery by Lessor that any financial statement
given to Lessor by Lessee, or its successor in interest or by any guarantor of
Lessee's obligation hereunder, was materially false.
13.2 Remedies. In the event of any material default or breach of
this Lease by Lessee, Lessor may at any time thereafter, with or without notice
of demand and without limiting Lessor in the exercise of any right or remedy
which Lessor may have by reason of such default:
(a) Terminate Lessee's right to possession of the Premises
by any lawful means, in which case this Lease and the term hereof shall
terminate and Lessee shall immediately surrender possession of the Premises to
Lessor. In such event Lessor shall be entitled to recover from Lessee all
damages incurred by Lessor by reason of Lessee's default 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 any real estate commission actually paid, the
worth at the time of award by the court having jurisdiction thereof of the
amount by which the unpaid rent for the balance of the term after the time of
such award exceeds the amount of such rental loss for the same period that
Lessee proves could be reasonably avoided; that portion of the leasing
commission paid by Lessor pursuant to paragraph 15 applicable to the unexpired
term of this Lease.
(b) Maintain Lessee's right to possession in which case this
Lease shall continue in effect whether or to Lessee shall have vacated or
abandoned the Premises. In such event Lessor shall be entitled to enforce all of
Lessor's rights and remedies under this Lease, including the right to recover
the rent as it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to
Lessor under the laws or judicial decisions of the state wherein the Premises
are located. Unpaid installments of rent and other unpaid monetary obligations
of Lessee under the terms of this Lease shall bear interest from the date due at
the maximum rate then allowable by law.
13.3 Default by Lessor. Lessor shall not be in default unless
Lessor fails to perform obligations required of Lessor within a reasonable time,
but in no event later than thirty (30) days after written notice by Lessee to
Lessor and to the holder of any first mortgage or deed of trust covering the
Premises whose name and address shall have theretofore been furnished to Lessee
in writing, specifying wherein Lessor has failed to perform such obligation;
provided, however, that if the nature of Lessor's obligation is such that more
than thirty (30) days are required for performance then Lessor shall not be in
default if Lessor commences performance within such 30-day period and thereafter
diligently pursues the same to completion.
13.4 Late Charges. Lessee hereby acknowledges that late payment
by Lessee to Lessor of Base Rent or other sums due hereunder will cause Lessor
to incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain.
17
<PAGE>
Such costs include, but are not limited to, processing and accounting charges,
and late charges which may be imposed on Lessor by the terms of any mortgage or
trust deed covering the Office Building Project. Accordingly, if any installment
of Base Rent, or any other sum due from Leasee shall not be received by Lessor
or Lessor's designee within ten (10) days after such amount shall be due, then,
without any requirement for notice to Lessee, Lessee shall pay to Lessor a late
charge equal to 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 by Lessee. Acceptance of such late charge by
Lessor shall in no event constitute a waiver of Lessee's default with respect to
such overdue amount, nor prevent Lessor from exercising any of the other rights
and remedies granted hereunder.
14. Condemnation. If the Premises or any portion thereof or the
Office Building Project are taken under the power of eminent domain, or sold
under the threat of the exercise of said power (all of which are herein called
"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;
provided that if so much of the Premises or the Office Building Project are
taken by such condemnation as would substantially and adversely affect the
operation and profitability of Lessee's business conducted from the Premises,
Lessee shall have the option, to be exercised only in writing within thirty (30)
days after Lessor shall have given Lessee written notice of such taking (or in
the absence of such notice written thirty (30) days after the condemning
authority shall have taken possession), to 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
rent and Lessee's Share of Operating Expense increase shall be reduced in the
proportion that the floor area of the Premises taken bears to the total floor
area of the Premises. Common Areas taken shall be excluded from the Common Areas
usable by Lessee and no reduction of rent shall occur with respect thereto or by
reason thereof, Lessor shall have the option in its sole discretion to terminate
this Lease as of the taking of possession by the condemning authority, by giving
written notice to Lessee of such election within thirty (30) days after receipt
of notice of a taking by condemnation of any part of the Premises or the Office
Building Project. Any award for the taking of all or any part of the Premises or
the Office Building Project under the power of eminent domain or any payment
made under threat of the exercise of such power shall be the property of Lessor,
whether such award shall be made as compensation for diminution in value of the
leasehold or for the taking of the fee, or as severance damages; provided,
however, that Lessee shall be entitled to any separate award for loss of or
damage to Lessee's trade fixtures, removable personal property and unamortized
tenant improvements that have been paid for by Lessee. For that purpose the cost
of such improvements shall be amortized over the original term of this Lease
excluding any options. In the event that this Lease is not terminated by reason
of such condemnation, Lessor shall to the extent of severance damages received
by Lessor in connection with such condemnation, repair any damage to the
Premises caused by such condemnation except to the extent that Lessee has been
reimbursed therefor by the condemning authority. Lessee shall pay any amount in
excess of such severance damages required to complete such repair.
18
<PAGE>
15. Broker's Fee.
(a) The brokers involved in this transaction are BT
Commercial Real Estate representing Lessor as "listing broker" and Cornish &
Carey Commercial representing Lessee as "cooperating broker," licensed real
estate broker(s). A "cooperating broker" is defined as any broker other than the
listing broker entitled to a share of any commission arising under this Lease.
Upon execution of this Lease by both parties, Lessor shall pay to said brokers
jointly, or in such separate shares as they may mutually designate in writing, a
fee as set forth in a separate agreement between Lessor and said broker(s) for
brokerage services rendered by said broker(s) to Lessor in this transaction.
(b) Lessee and Lessor each represent and warrant to the
other that neither has had any dealings with any person, firm, broker or finder
(other than the person(s), if any, whose names are set forth in paragraph 15(a),
above) in connection with the negotiation of this Lease and/or the consummation
of the transaction contemplated hereby, and no other broker or other person,
firm or entity is entitled to any commission or finder's fee in connection with
said transaction and Lessee and Lessor do each hereby indemnify and hold the
other harmless from and against any costs, expenses, attorneys' fees or
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.
16. Estoppel Certificate.
(a) Each party (as "responding party") shall at any time
upon not less than ten (10) days' prior written notice from the other party
("requesting party") execute, acknowledge and deliver to the requesting party a
statement in writing (i) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect) and the
date to which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to the responding party's knowledge, any
uncured defaults on the part of the requesting party, or specifying such
defaults if any are claimed. Any such statement may be conclusively relied upon
by any prospective purchaser or encumbrancer of the Office Building Project or
of the business of Lessee.
(b) At the requesting party's option, the failure to deliver
such statement within such time shall be a material default of this Lease by the
party who is to respond, without any further notice to such party, or it shall
be conclusive upon such party that (i) this 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.
(c) If Lessor or Master Lease (as defined in the Addendum)
desires to finance, refinance, or sell the Office Building Project, or any part
thereof, Lessee hereby agrees to deliver to any lender or purchaser designated
by Lessor such financial statements of Lessee as may be reasonably required by
such lender or purchaser. Such statements shall include the past three (3)
years' financial statements of Lessee. All such
19
<PAGE>
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. Lessor's Liability. The term "Lessor" as used herein shall
mean only the owner or owners, at the time in question, of the fee title or a
lessee's interest in a ground lease of the Office Building Project, and except
as expressly provided in paragraph 15, in the event of any transfer of such
title or interest, Lessor herein named (and in case of any subsequent transfers
then the grantor) shall be relieved from and after the date of such transfer of
all liability as respects Lessor's obligations thereafter to be performed,
provided that any funds in the hands of Lessor or the then grantor at the time
of such transfer, in which Lessee has an interest, shall be delivered to the
grantee. The obligations contained in this Lease to be performed by Lessor
shall, subject as foresaid, be binding on Lessor's successors and assigns, only
during their respective periods of ownership.
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 any other provision hereof.
19. Interest on Past-due Obligations. Except as expressly herein
provided, any amount due to Lessor not paid when due shall bear interest at the
maximum rate then allowable by law or judgements from the date due. Payment of
such interest shall not excuse or cure any default by Lessee under this Lease;
provided, however, that interest shall not be payable on late charges incurred
by Lessee nor on any amounts upon which late charges are paid by Lessee.
20. Time of Essence. Time is of the essence with respect to the
obligations to be performed under this Lease.
21. Additional Rent. All monetary obligations of Lessee to Lessor
under the terms of this Lease, including but not limited to Lessee's Share of
Operating Expense increase and any other expenses payable by Lessee hereunder
shall be deemed to be rent.
22. Incorporation of Prior Agreements; Amendment. This Lease
contains all agreements of the parties with respect to any matter mentioned
herein. No prior or contemporaneous agreement or understanding pertaining to
any such matter shall be effective. This Lease may be modified in writing only,
signed by the parties in interest at the time of the modification. Except as
otherwise stated in this Lease, Lessee hereby acknowledges that neither the real
estate broker listed in paragraph 15 hereof nor any cooperating broker on this
transaction nor the Lessor or any employee or agents of any of said persons has
made any oral or written warranties or representations to Lessee relative to the
condition or use by Lessee of the Premises or the Office Building Project and
Lessee acknowledges that Lessee assumes all responsibility regarding the
Occupational Safety Health Act, the legal use and adaptability of the Premises
and the compliance thereof with all applicable laws and regulations in effect
during the term of this Lease.
23. Notices. Any notice required or permitted to be given
hereunder shall be in writing and may be given by personal delivery or by
certified or registered mail, and shall be
20
<PAGE>
deemed sufficiently given if delivered or addressed to Lessee or to Lessor at
the address noted below or adjacent to the signature of the respective parties,
as the case may be. Mailed notices shall be deemed given upon actual receipt at
the address required, or forty-eight hours following deposit in the mail,
postage prepaid, whichever first occurs. Either party may by notice to the other
specify a different address for notice purposes except that upon Lessee's taking
possession of the Premises, the Premises shall constitute Lessee's address for
notice purposes. A copy of all notices required or permitted to be given to
Lessor hereunder shall be concurrently transmitted to such party or parties at
such addresses as Lessor may from time to time hereafter designate by notice to
Lessee.
24. Waivers. No waiver by Lessor of any provision hereof shall be
deemed a waiver of any other provision hereof or of any subsequent breach by
Lessee of the same or any other provision. 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 act by Lessee. The acceptance of rent
hereunder by Lessor shall not be a waiver of any preceding breach by Lessee of
any provision hereof, other than the failure of Lessee to pay the particular
rent so accepted, regardless of Lessor's knowledge of such preceding breach at
the time of acceptance of such rent.
25. Holding Over. If Lessee, with Lessor's consent, remains in
possession of the Premises or any part thereof after the expiration of the term
hereof, such occupancy shall be a tenancy from month to month upon all the
provisions of this Lease pertaining to the obligations of Lessee, except that
the rent payable shall be one hundred fifty percent (150%) of the rent payable
immediately preceding the termination date of this Lease, and all Options, if
any, granted under the terms of this Lease shall be deemed terminated and be of
no further effect during said month to month tenancy.
26. 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.
27. Covenants and Conditions. Each provision of this Lease
performable by Lessee shall be deemed both a covenant and a condition.
28. Binding Effect; Choice of Law. Subject to any provisions hereof
restricting assignment or subletting by Lessee and subject to the provisions of
paragraph 17, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the State
where the Office Building Project is located and any litigation concerning this
Lease between the parties hereto shall be initiated in the county in which the
Office Building Project is located.
29. Subordination.
(a) This Lease, and any Option or right of first
refusal granted hereby, at Lessor's option, shall be subordinate to the Master
Lease (as defined in the Addendum), any ground lease, mortgage, deed of trust,
or any other hypothecation or security now or hereafter placed upon the Office
Building Project and to any and all advances made on
21
<PAGE>
the security thereof and to all renewals, modifications, consolidations,
replacements and extensions thereof. Notwithstanding such subordination,
Lessee's right to quiet possession of the Premises shall not be disturbed if
Lessee is not in default and so long as Lessee shall pay the rent and observe
and perform all of the provisions of this Lease, unless this Lease is otherwise
terminated pursuant to its terms or the Master Lease is terminated by its terms.
If any mortgagee, trustee or ground lessor shall elect to have this Lease and
any Options granted hereby prior to the lien of its mortgage, deed of trust or
ground lease, and shall give written notice thereof to Lessee, this Lease and
such Options shall be deemed prior to such mortgaging deed of trust or ground
lease, whether this Lease or such Options are dated prior or subsequent to the
date of said mortgage, deed of trust or ground lease or the date of recording
thereof.
(b) Lessee agrees to execute any documents required to
effectuate an attornment, a subordination, or to make this Lease or any Option
granted herein prior to the lien of any mortgage, deed of trust or ground lease,
as the case may be. Lessee's failure to execute such documents within ten (10)
days after written demand shall constitute a material default by Lessee
hereunder without further notice to Lessee or, at Lessor's option, Lessor shall
execute such documents on behalf of Lessee as Lessee's attorney-in-fact. Lessee
does hereby make, constitute and irrevocably appoint Lessor as Lessee's
attorney-in-fact and in Lessee's name, place and stead, to execute such
documents in accordance with this paragraph 30(b).
30. Attorneys' Fees.
30.1 If either party or the broker(s) named herein bring an
action to enforce the terms hereof or declare rights hereunder, the prevailing
party in any such action, trial or appeal thereon, shall be entitled to his
reasonable attorneys' fees to be paid by the losing party as fixed by the court
in the same or a separate suit, and whether or not such action is pursued to
decision or judgment. The provisions of t his paragraph shall inure to the
benefit of the broker named herein who seeks to enforce a right hereunder.
30.2 The attorneys' fee award shall not be computed in accordance
with any court fee schedule, but shall be such as to fully reimburse all
attorneys' fees reasonably incurred in good faith.
30.3 Lessor shall be entitled to reasonable attorneys' fees and
all other costs and expenses incurred in the preparation and service of notice
of default and consultations in connection therewith, whether or not a legal
transaction is subsequently commenced in connection with such default.
31. Lessor's Access.
31.1 Lessor and Lessor's agents and Master Landlord and its
agents shall have the right to enter the Premises at reasonable times after 24
hours notice except in an emergency for the purpose of inspecting the same,
performing any services required of Lessor, showing the same to prospective
purchasers, lenders, or lessees, taking such safety measures, erecting such
scaffolding or other necessary structures, making such alterations, repairs,
improvements or additions to the Premises or to the Office Building Project as
Lessor may
22
<PAGE>
reasonably deem necessary or desirable and the erecting, using and maintaining
of utilities, services, pipes and conduits through the Premises and/or other
premises as long as there is no material adverse effect to Lessee's use of the
Premises. Lessor may at any time place on or about the Premises or the Building
any ordinary "For Sale" signs and Lessor may at any time during the last 120
days of the term hereof place on or about the Premises any ordinary "For Lease"
signs.
31.2 All activities of Lessor pursuant to this paragraph shall be
without abatement of rent, nor shall Lessor have any liability to Lessee for the
same.
31.3 Lessor shall have the right to retain keys to the Premises
and to unlock all doors in or upon the Premises other than to files, vaults and
safes, and in the case of emergency to enter the Premises by any reasonably
appropriate means, and any such entry shall not be deemed a forcible or unlawful
entry or detainer of the Premises or an eviction. Lessee waives any charges for
damages or injuries or interference with Lessee's property or business in
connection therewith.
32. Auctions. Lessee shall not conduct, nor permit to be conducted,
either voluntarily or involuntarily, any auction upon the Premises or the Common
Areas without first having obtained Lessor's prior written consent.
Notwithstanding anything to the contrary in this Lease, Lessor shall not be
obligated to exercise any standard or reasonableness in determining whether to
grant such consent. The holding of any auction on the Premises or Common Areas
in violation of this paragraph shall constitute a material default of this
Lease.
33. Signs. Lessee shall not place any sign upon the Premises or the
Office Building Project without Lessor's prior written consent. Under no
circumstances shall Lessee place a sign on any roof of the Office Building
Project. SEE ADDENDUM.
34. Merger. The voluntary or other surrender of this Lease by
Lessee, or a mutual cancellation thereof, or a termination by Lessor, shall not
work a merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to Lessor
of any or all of such subtenancies.
35. Consents. Except for paragraphs 33 (auctions) and 34 (signs)
hereof, wherever in this Lease the consent of one party is required to an act of
the other party such consent shall not be unreasonably withheld or delayed.
36. Guarantor. In the event that there is a guarantor of this Lease,
said guarantor shall have the same obligations as Lessee under this Lease.
37. Quiet Possession. Upon Lessee paying the rent for the Premises
and observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease. The individuals executing this Lease on behalf of
Lessor represent and warrant to Lessee that they are fully authorized and
legally capable of executing this Lease on behalf of Lessor and that such
execution is binding upon all parties holding an ownership interest in the
Office Building Project.
23
<PAGE>
38. Options.
38.1 Definition. As used in this paragraph the work "Option" has
the following meaning: (1) the right or option to extend the term of this Lease
or to renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (2) the option of right of first refusal to lease the
Premises or the right of first offer to lease the Premises or the right of first
refusal to lease other space within the Office Building Project or other
property of Lessor or the right of first offer to lease other space within the
Office Building Project or other property of Lessor; (3) the right or option to
purchase the Premises or the Office Building Project, or the right of first
refusal to purchase the Premises or the Office Building Project or the right of
first offer to purchase the Premises or the Office Building Project, or the
right or option to purchase other property of Lessor, or the right of first
refusal to purchase other property of Lessor or the right of first offer to
purchase other property of Lessor.
38.2 Options. The Options, if any, herein granted to Lessee are
not assignable separate and apart from this Lease, nor may any Option be
separated from this Lease in any manner, either by reservation or otherwise.
38.3 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 option to extend or renew this Lease has been so exercised.
38.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary, (i) during
the time commencing from the date Lessor gives to Lessee a notice of default
pursuant to paragraph 13.1(c) or 13.1(d) and continuing until the noncompliance
alleged in said notice of default is cured, or (ii) during the period of time
commencing on the day after a monetary obligation to Lessor is due from Lessee
and unpaid (without any necessity for notice thereof to Lessee) and continuing
until the obligation is paid, or (iii) in the event that Lessor has given to
Lessee three or more notices of default under paragraph 13.1(c), or paragraph
13.1(d), whether or not the defaults are cured, during the 12 months period of
time immediately prior to the time that Lessee attempts to exercise the subject
Option, (iv) if Lessee has committed any non-curable breach, including without
limitation those described in paragraph 13.1(b), or is otherwise in default of
any of the terms, covenants or conditions of this Lease.
(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 38.4(a).
(c) All rights of Lessee under the provisions so 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 during the
term of this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of
Lessee for a period of thirty (30) days after such obligation becomes due
(without any necessity of Lessor to give notice thereof to Lessee), or (ii)
Lessee fails to commence to cure a default specified in paragraph 13.1(d) within
thirty (30) days after
24
<PAGE>
the date that Lessor gives notice to Lessee of such default and/or Lessee fails
thereafter to diligently prosecute said cure to completion, or (iii) Lessor
gives to Lessee three or more notices of default under paragraph 13.1(c), or
paragraph 13.1(d), whether or not the defaults are cured, or (iv) if Lessee has
committed any non-curable breach, including without limitation those described
in paragraph 13.1(b), or is otherwise in default of any of the terms, covenants
and conditions of this Lease.
39. Security Measures--Lessor's Reservations.
39.1 Lessee hereby acknowledges that Lessor shall have no
obligation whatsoever to provide guard service or other security measures for
the benefit of the Premises or the Office Building Project. Lessee assumes all
responsibility for the protection of Lessee, its agents, and invitees and the
property of Lessee and of Lessee's agents and invitees from acts of third
parties. Nothing herein contained shall prevent Lessor, at Lessor's sole option,
from providing security protection for the Office Building Project or any part
thereof, in which event the cost thereof shall be included within the definition
of Operating Expenses, as set forth in paragraph 4.2(b).
39.2 Lessor shall have the following rights:
(a) To change the name, address or title of the Office
Building Project or building in which the Premises are located upon not less
than 90 days prior written notice;
(b) To, at Lessee's expense, provide and install Building
standard graphics on the door of the Premises and such portions of the Common
Areas as Lessor shall reasonably deem appropriate;
(c) To permit any lessee the exclusive right to conduct any
business as long as such exclusive right does not conflict with any rights
expressly given herein;
(d) To place such signs, notices or displays as Lessor
reasonably deems necessary or advisable upon the roof, exterior of the buildings
or the Office Building Project or on pole signs in the Common Areas;
39.3 Lessee shall not:
(a) Suffer or permit anyone, except in emergency, to go upon
the roof of the Building.
40. Easements.
40.1 Lessor reserves to itself the right, from time to time, to
grant such easements, rights and dedications that Lessor deems necessary or
desirable, 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 shall sign
any of the aforementioned documents upon request of Lessor and failure to do so
shall constitute a material default of this Lease by Lessee without the need for
further notice to Lessee.
25
<PAGE>
40.2 The obstruction of Lessee's view, air, or light by any
structure erected in the vicinity of the Building, whether by Lessor or third
parties, shall in no way affect this Lease or impose any liability upon Lessor.
41. 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 a 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 under the
provisions of this Lease.
42. Authority. If Lessee is a corporation, trust, or general or
limited partnership, Lessee, and each individual executing this Lease on behalf
of such entity represent and warrant that such individual is duly authorized to
execute and deliver this Lease on behalf of said entity. If Lessee is a
corporation, trust or partnership, Lessee shall, within thirty (30) days after
execution of this Lease, deliver to Lessor evidence of such authority
satisfactory to Lessor.
43. Conflict. Any conflict between the printed provisions, Exhibits
or Addenda of this Lease and the typewritten or handwritten provisions, if any,
shall be controlled by the typewritten or handwritten provisions.
44. No Offer. Preparation of this Lease by Lessor or Lessor's agent
and submission of same to Lessee shall not be deemed an offer to Lessee to
lease. This Lease shall become binding upon Lessor and Lessee only when fully
executed by both parties.
45. Lender Modification. Lessee agrees to make such reasonable
modifications to this Lease as may be reasonably required by an institutional
lender in connection with the obtaining of normal financing or refinancing of
the Office Building Project.
46. Multiple Parties. If more than one person or entity is named as
either Lessor or Lessee herein, except as otherwise expressly provided herein,
the obligations of the Lessor or Lessee herein shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee,
respectively.
47. Work Letter. This Lease is supplemented by that certain Work
Letter of even date executed by Lessor and Lessee, attached hereto as Exhibit C,
and incorporated herein by this reference.
48. Attachments. Attached hereto are the following documents which
constitute a part of this Lease:
ADDENDUM TO OFFICE SUBLEASE OF EVEN DATE HEREWITH
COPY OF MASTER LEASE
26
<PAGE>
IN WITNESS WHEREOF, this Office Sublease has been executed by the
parties as of the date first written above.
LESSOR:
INSWEB CORPORATION,
a Delaware corporation
By: /s/ Sheryl S. Dodsworth
--------------------------
Name: Sheryl S. Dodsworth
Title: SVP Finance & Administration
LESSEE:
EQUINIX, INC.
a Delaware corporation
By: /s/ Albert M. Avery, IV
-----------------------
Name: Albert M. Avery, IV
Title: Chief Executive Officer
27
<PAGE>
EXHIBIT A
[GRAPHIC OF FLOOR PLAN OF LEASED SPACE]
28
<PAGE>
EXHIBIT B
RULES AND REGULATIONS
Dated: November 1, 1998
By and Between: InsWeb Corporation and Equinix, Inc.
GENERAL RULES
1. Lessee shall not suffer or permit the obstruction of any Common
Areas, including driveways, walkways and stairways.
2. Lessor reserves the right to refuse access to any persons Lessor
in good faith judges to be a threat to the safety, reputation, or property of
the Office Building Projects and its occupants.
3. Lessee shall not make or permit any noise or odors that annoy or
interfere with other lessees or persons having business within the Office
Building Project.
4. Lessee shall not keep animals or birds within the Office Building
Project, and shall not bring bicycles, motorcycles or other vehicles into areas
not designated as authorized for same.
5. Lessee shall not make, suffer or permit litter except in
appropriate receptacles for that purpose.
6. Lessee shall not alter any lock or install new or additional
locks or bolts.
7. Lessee shall be responsible for the inappropriate use of any
toilet rooms, plumbing or other utilities. No foreign substances of any kind
are to be inserted therein.
8. Lessee shall deface the walls, partitions or other surfaces of
the premises or Office Building Project.
9. Lessee shall suffer or permit any thing in or around the Premises
or Building that causes excessive vibration or floor loading in any part of the
Office Building Project.
10. Furniture, significant freight and equipment shall be moved into
or out of the building only with the Lessor's knowledge and consent, and subject
to such reasonable limitations, techniques and timing, as may designated by
Lessor. Lessee shall be responsible for any damage to the Office Building
Project arising from any such activity.
11. Lessee shall not employ any service or contractor for services or
work to be performed in the Building, except as approved by Lessor.
29
<PAGE>
12. Lessor reserves the right to close and lock the Building on
Saturdays, Sundays and legal holidays, and on other days between the hours of
____ P.M. and ___ A.M. of the following day. If Lessee uses the Premises during
such periods, Lessee shall be responsible for securely locking any doors it may
have opened for entry.
13. Lessee shall return all keys at the termination of its tenancy
and shall be responsible for the cost of replacing any keys that are lost.
14. No window coverings, shades or awnings shall be installed or used
by Lessee.
15. No Lessee, employee or invitee shall go upon the roof of the
Building.
16. Lessee shall not suffer or permit smoking or carrying of lighted
cigars or cigarettes in areas reasonably designated by Lessor or by applicable
governmental agencies as non-smoking areas.
17. Lessee shall not use any method of heating or air conditioning
other than as provider by Lessor.
18. Lessee shall not install, maintain or operate any vending
machines upon the Premises without Lessor's written consent.
19. The Premises shall not be used for lodging or manufacturing,
cooking or food preparation.
20. Lessee shall comply with all safety, fire protection and
evacuation regulations established by Lessor or any applicable governmental
agency.
21. Lessor reserves the right to waive any one of these rules or
regulations, and/or as to any particular Lessee, and any such waiver shall not
constitute a waiver of any other rule or regulation or any subsequent
application thereof to such Lessee.
22. Lessee assumes all risks from theft or vandalism and agrees to
keep its Premises locked as may be required.
23. Lessor reserves the right to make such other reasonable rules and
regulations as it may from time to time deem necessary for the appropriate
operation and safety of the Office Building Project and its occupants. Lessee
agrees to abide by these and such rules and regulations.
30
<PAGE>
PARKING RULES
1. Parking areas shall be used only for parking by vehicles no
longer than full size, passenger automobiles herein called "Permitted Size
Vehicles," Vehicles other than Permitted Size Vehicles are herein referred to as
"Oversized Vehicles."
2. Lessee shall not permit or allow any vehicles that belong to or
are controlled by Lessee or Lessee's employees, suppliers, shippers, customers,
or invitees to be loaded, unloaded, or parked in areas other than those
designated by Lessor for such activities.
3. Parking stickers or identification devices shall be the property
of Lessor and be returned to Lessor by the holder thereof upon termination of
the holder's parking privileges. Lessee will pay such replacement charge as is
reasonably established by Lessor for the loss of such devices.
4. Lessor reserves the right to refuse the sale of monthly
identification devices to any person or entity that willfully refuses to comply
with the applicable rules, regulations, laws and/or agreements.
5. Lessor reserves the right to relocate all or a part of parking
spaces from floor to floor, within one floor, and/or to reasonably adjacent
offsite location(s), and to reasonably allocate them between compact and
standard size spaces, as long as the same compiles with applicable law,
ordinances and regulations.
6. Users of the parking area will obey all posted signs and park
only in the areas designated for vehicle parking.
7. Unless otherwise instructed, every person using the parking area
is required to park and lock his own vehicle. Lessor will not be responsible
for any damage to vehicles, injury to persons or loss of property, all of which
risks are assumed by the party using the parking area.
8. Validation, if established, will be permissible only by such
method or methods as Lessor and/or its licensee may establish at rates generally
applicable to visitor parking.
9. The maintenance, washing, waxing or cleaning of vehicles in the
parking structure or Common Areas is prohibited.
10. Lessee shall be responsible for seeing that all of its employees,
agents and invitees comply with the applicable parking rules, regulations, laws
and agreements.
11. Lessor reserves the right to modify these rules and/or adopt such
other reasonable and non-discriminatory rules and regulations as it may deem
necessary for the proper operation of the parking area.
12. Such parking use as is herein provided is intended merely as a
license only and no bailment is intended or shall be created hereby.
31
<PAGE>
EXHIBIT C
MASTER LEASE
To be attached.
32
<PAGE>
EXHIBIT D
[GRAPHIC OF FLOOR PLAN OF LEASED SPACE]
33
<PAGE>
ADDENDUM TO SUBLEASE
THIS ADDENDUM TO SUBLEASE shall constitute a part of that certain
OFFICE SUBLEASE dated as of November 1, 1998 (the "Sublease") between INSWEB
CORPORATION, a Delaware corporation as Lessor and EQUINIX, INC., a Delaware
corporation as Lessee, and the terms hereof shall for all purposes be deemed
incorporated in the Sublease.
1. Master Lease. Lessee acknowledges that Lessor leases the
------------
Building in which the subleased Premises ("Subleased Premises") are located
pursuant to a Triple Net Lease dated January 12, 1998 (the "Master Lease")
between Lessor as Tenant and Marshall Squares LLC, a California limited
liability company as Landlord ("Master Landlord"), a copy of which is attached
hereto as Exhibit C, and which is incorporated herein by this reference for the
purpose of informing Lessee of the terms and conditions applicable to and
binding upon Master Landlord and Lessor with respect to the leasehold of the
Building. Lessee further acknowledges that this Sublease, and the rights of
Lessee with respect to the Subleased Premises, are subordinate to the provisions
of the Master Lease to the extent the same affect or are applicable to the
Subleased Premises, but that Lessee is not bound to perform Lessor's obligations
thereunder for the benefit of Master Landlord. Notwithstanding the foregoing
acknowledgement of subordination, except as otherwise expressly provided in this
Addendum with respect to particular provisions so stating, in the event of a
conflict or inconsistency between the Master Lease and this Sublease, the
provisions of this Sublease shall control as between Sublessor and Sublessee
with respect to the leasing of the Premises.
2. Approval and Consent. In all provisions of the Sublease where
--------------------
the Lessor's consent or approval is required, unless Lessor otherwise elects in
a particular instance, the consent or approval of both Lessor and Master
Landlord shall be required. Lessor shall have no obligation with respect to
such consent or approval of Master Landlord, except the obligation to use
reasonable efforts to obtain such consent or approval from Master Landlord. In
no event shall Lessor be obligated to spend more than a nominal sum in
connection with seeking or obtaining any such consent or approval of Master
Landlord. In connection with any such solicitation of Master Landlord's consent
or approval on Lessee's behalf, Lessee at its sole cost and expense shall
provide Lessor with all information, materials and reimbursement of costs and
expenses (including reasonable attorneys' fees, if applicable) reasonably
required by Master Landlord under the Master Lease or by Lessor in order to
determine whether such approval or consent shall be given.
3. Term; Early Occupancy. Notwithstanding the provisions of
---------------------
Paragraph 3.3 of the Sublease to the contrary, Lessor, upon two (2) days prior
written notice from Lessee, shall provide Lessee access to the Premises prior to
the Commencement Date only for the purpose of installing cabling, partitions and
other furnishings required by Lessee. Lessee shall have no obligation for the
payment of Rent during such early access period. Lessee shall in no event
commence operation of its business at the Premises prior to November 15, 1998.
4. Extension Option. Lessor hereby grants Lessee a conditional
----------------
option to extend the Term of this Sublease for a period of six (6) months beyond
the Expiration Date set
34
<PAGE>
forth in Paragraph 1.5 of the Sublease. Lessee's right to exercise this option
shall be expressly conditioned upon the following: (i) Lessor shall have
notified Lessee in writing on or before November 15, 1999 that Lessor does not
intend to occupy the Premises for its own use; and (ii) Lessee shall have
notified Lessor in writing on or before January 15, 2000 that Lessee elects to
exercise the option to extend the Term from June 15, 2000 through December 14,
2000 ("Extension Term"). The Base Rent payable during the Extension Term shall
be $3.25 per rentable square foot. All other terms, conditions and provisions of
this Sublease in effect immediately prior to the original Expiration Date shall
be applicable during the Term, except that Lessee shall have no additional
option rights.
5. After Hours HVAC. The normal business hours for operation of the
----------------
HVAC system for the Premises shall be 7 AM to 6 PM Monday through Friday. In
the event Lessee gives Lessor reasonable prior written notice that Lessee needs
additional HVAC service beyond such normal business hours, Lessor will make
reasonable efforts to accommodate such a request, and Lessee shall be obligated
to pay for such additional service at a rate to be reasonably determined by
Lessor from time to time as approximately equivalent to Lessor's cost for such
service, which rate initially shall be thirty-five dollars ($35) per hour, and
in no event shall exceed fifty dollars ($50) per hour.
6. Janitorial Service. Lessor, at no additional cost to Lessee,
------------------
shall provide janitorial service to the Premises Monday through Friday in
accordance with basic building standards for janitorial cleaning services.
7. Signaqe. Lessor at no cost to Lessee shall provide Lessee
-------
building standard signage on the directory in the lobby on the ground floor of
the Building. Lessee at Lessee's sole cost and expense shall have the right to
install signage at the entrance to Premises on the second floor, and shall
remove the same at its cost and expense upon the termination or earlier
expiration of the Term of the Sublease.
8. Security Card Keys. Lessor, at no additional cost to Lessee,
------------------
shall make available to Lessee up to sixty (60) non-photo security card keys
providing access to the Building and the Premises for the use of Lessee's staff.
Lessee shall immediately notify Lessor in the event any of such security card
keys are lost, stolen or destroyed. Upon reasonable prior notice and request by
Lessee, Lessor shall provide Lessee replacement and additional card keys, or
photographic card keys, at a cost to be reasonably determined by Lessor.
9. Compliance; Punchlist Procedure. On or before the third (3rd)
-------------------------------
day after the Commencement Date and prior to Lessee's commencement of any
cabling, furnishing or other work or installation at the Premises, Lessor and
Lessee shall jointly inspect the condition of the Premises and prepare a list of
items, if any, requiring correction for compliance with the provisions of this
Sublease. Within ten (10) business days after the Rent Commencement Date,
Lessee shall provide Lessor with a punchlist of any additional items requiring
correction at the Premises. Within five (5) days thereafter, Lessor and Lessee
shall jointly inspect the Premises to determine what actions, if any, are needed
to correct any such punch list items for which Lessor is responsible, and any
additional items requiring correction or repair by Lessee as a result of damage
occurring during the course of tenant improvement work undertaken by Lessee.
35
<PAGE>
Lessor's obligations under Paragraph 6.2(a) of the Sublease to rectify
any failure of the Subleased Premises to comply with applicable building codes,
regulations and ordinances as of the Commencement Date of the Master Lease shall
be deemed fully satisfied if Lessor uses reasonable efforts to require Master
Landlord to so rectify such noncompliance in accordance with the provisions of
the Master Lease. In no event shall Lessor be obligated to spend more than a
nominal sum in connection with seeking to enforce such compliance obligations on
the part of Master Landlord.
10. Systems. Lessor's obligations under Paragraph 6.3(a) of the
-------
Sublease to rectify any failure of the plumbing, lighting, heating and air
conditioning systems in the Subleased Premises to be in good operating condition
as of the Commencement Date, including any items included on the punchlist
prepared by Lessee in accordance with Paragraph 9 hereinabove, shall be deemed
fully satisfied if Lessor uses reasonable efforts to require Master Landlord to
so rectify such failure in accordance with the provisions of the Master Lease.
In no event shall Lessor be obligated to spend more than a nominal sum in
connection with seeking to enforce such obligations on the part of Master
Landlord.
11. Maintenance, Repairs, Common Area Services. Lessor's obligations
------------------------------------------
under Paragraph 7.1 of the Sublease to keep the Building exterior walls,
equipment, roof and structural components, and the landscaping, parking
structure and other components of the Common Areas of the Project in their
condition existing as of the Commencement Date shall be deemed fully satisfied
if Lessor uses reasonable efforts to require Master Landlord to fulfill its
maintenance and repair obligations with respect to such elements in accordance
with the provisions of the Master Lease. In no event shall Lessor be obligated
to spend more than a nominal sum in connection with seeking to enforce such
obligations on the part of Master Landlord.
12. Insurance and Indemnity. The liability insurance required to be
-----------------------
maintained by Lessee shall named both Lessor and Master Landlord as additional
insureds. No such policy shall be cancellable except upon thirty (30) days
prior written notice to Lessor and Master Landlord. Lessee's indemnity
obligations under Paragraph 8.7 of the Sublease shall be deemed to benefit and
apply to both Lessor and Master Landlord. The waiver of subrogation set forth
in Paragraph 8.6 shall be deemed applicable as between Lessee and both Lessor
and Master Landlord.
13. Failure of Electrical Service. Notwithstanding the provisions of
-----------------------------
Section 8.8 of the Sublease, Lessor agrees to use reasonable efforts and
diligence (i) to provide Lessee reasonable prior notice of Lessor's intent to
undertake (or to cause Master Landlord or the agents of either to undertake)
repairs or adjustments to the power panels for the building or the Premises,
which repairs or adjustments are reasonably likely to interrupt or interfere
with the normal operation of the electrical system for the Premises, and (ii) to
minimize the effects of any such interruption or interference upon Lessee's use
of the Premises and operation of its business therein, by acceding to Lessee's
reasonable repair scheduling requests or otherwise (except in the event of an
emergency). In the event any such interruption of electrical service to the
Premises is caused by Lessor's negligence or willful misconduct, and such
interruption materially and substantially interferes with Lessee's operation of
its business and substantially deprives Lessee of use of the Premises, then
Lessee shall be entitled to an abatement of Rent for each day of
36
<PAGE>
utility service disruption, up to a maximum abatement amount equal to five (5)
days Rent. In no event or circumstance shall Lessor have any other obligation or
liability whatsoever to Lessee, for damages or loss of any sort, resulting from
or arising out of any interruption of utility services to the Premises,
regardless of the cause thereof.
14. Damage and Destruction. Notwithstanding the provisions of
----------------------
Article 9 of the Sublease to the contrary, Lessor's obligations and Lessee's
rights with respect to repair and restoration of the Subleased Premises or the
Building shall be conditioned upon and subject to Lessor's rights, if any, to
enforce Master Landlord's obligations with respect to repair and restoration
under Section 11 of the Master Lease.
15. Assignment and Subletting. In connection with any proposal by
-------------------------
Lessee with respect to an assignment of the Sublease or the subletting of all or
part of the Subleased Premises, Lessee shall be required to comply with and
satisfy for the benefit of Lessor all obligations and conditions applicable to
"Tenant" for the benefit of Master Landlord as stated in Article 13 of the
Master Lease, in addition to all applicable provisions of this Sublease. In
addition, upon Lessor's receipt of a proposal for any such assignment or
subletting, Lessor shall have the right to elect to terminate the Sublease with
respect to the Subleased Premises (or such lesser portion thereof as may be
applicable to the proposal) upon thirty (30) days prior written notice to
Lessee.
16. Vacating or Abandonment. Notwithstanding the provisions of
-----------------------
Paragraph 13.1(a) of the Sublease, the vacating or abandonment of the Premises
by Lessee shall not be deemed a material default under the Sublease if Lessee
continues to pay all Rent and other sums payable to Lessor under the sublease
when due during such vacancy and (i) notifies Lessor in writing of Lessee's
intent to vacate not less than thirty (30) days in advance, (ii) Lessee obtains
and provides Lessor prior to vacating the Premises all necessary endorsements
required to ensure that the insurance with respect to the Premises shall in
remain in full force and effect notwithstanding such vacating; (iii) Lessee
takes all commercially reasonable steps necessary to secure the Premises against
unauthorized entry during the period of such vacancy, and (iv) Lessee
indemnifies Lessor against any claim, cost, damage, expense, fee, liability or
suit arising from or in connection with, such vacancy.
17. Estoppel Certificate. Lessee's obligation under Paragraph 16 of
--------------------
the Sublease to deliver estoppel certificates and other information to Lessor
upon certain specified circumstances shall be deemed to require Lessee to
provide such certificates and information to both Lessor and Master Landlord, if
Lessor so requests in writing.
18. Environmental Compliance. Lessee shall comply with, perform and
------------------------
be bound by all covenants, terms and conditions undertaken by or applicable to
"Tenant" under Article 9 of the Master Lease, as the same may be applicable to
the Subleased Premises or to the Lessee's use thereof or of the Parking
Structure or other Common Areas, except that Lessee's obligations thereunder
shall be deemed to benefit and be enforceable by both Lessor and Master
Landlord. All references therein to the "Construction Parcel" shall be deemed
to refer to the parcel of land upon which the Building is located.
37
<PAGE>
19. Address for Notices. The addresses of Lessor and Lessee for
-------------------
notice purposes shall be as follows, or as otherwise stated in a written change
of address notice delivered to the other party in the manner provided in
Paragraph 23 of the Sublease.
LESSOR: InsWeb Corporation
901 Marshall Street,
Redwood City, CA 94063
Attn: Sherie Dodsworth,
SVP Finance and Administration
with a copy to:
Law Offices of D. A. Berndt
55 Oak Ridge Road
Berkeley, CA 94705
LESSEE: Equinix, Inc.
Second Floor
901 Marshall Street
Redwood City, CA 94063
with a copy to:
Garth Pickett, Esq.
Hopkins & Carley, a Law Corporation
2 West Santa Clara Street
6th Floor
San Jose, California 95113
20. No Solicitation of Employees. Lessor and Lessee covenant and
----------------------------
agree that neither shall solicit the employment or services of persons employed
by (or serving as independent contractor for) the other party. Each party shall
inform its human resources managers and staff of the foregoing covenant and
shall make all reasonable efforts to enforce their observance of it.
21. Incorporation of Exhibits. All Exhibits referred to herein and
-------------------------
attached hereto are made a part hereof by this reference as fully as though set
forth herein in their entirety.
22. Condition Precedent. Section 13 of the Master Lease requires the
-------------------
consent of Master Landlord to the subletting of any portion of the Building.
Lessor shall solicit Master Landlord's consent to this Sublease promptly
following execution of this Sublease by both parties. In the event Master
Landlord's written consent to this Sublease has not been obtained within thirty
(30) days after the execution hereof by Lessor and Lessee, then this Sublease
may be terminated by either party hereto upon written notice to the other, and
upon such termination neither party hereto shall have any further rights against
or obligations to the other party hereunder.
23. Initial Tenant Improvements. Lessee, at Lessee's sole cost and
---------------------------
expense, shall have the right to construct the tenant improvement work (the
"Work") as shown in the floor plan attached hereto as Exhibit D subject to the
following conditions. Prior to submission for
38
<PAGE>
permits Lessee shall submit the working drawings, plans and specifications for
the Work (collectively, "the Plans") to Lessor and Master Landlord for their
review and approval which in Lessor's case shall not be unreasonably withheld or
delayed. If Lessor or Master Landlord informs Lessee of objection to the Plans,
Lessee shall modify the Plans to satisfy such objection prior to commencement of
the Work. The Work shall be completed in accordance with the Plans as approved
by Lessor and Master Landlord and with all applicable building and other
permits, and shall comply with all applicable local, state and federal laws and
regulations.
At least six (6) months prior to expiration of the Term of the
Sublease Lessor shall notify Lessee whether Lessee shall be required to remove
all or any part of the Tenant Improvement Work upon expiration of the Term. If
so required, Lessee shall remove the Tenant Improvements or the applicable
portion thereof at Lessee's sole cost and expense and shall restore the Premises
to its condition as of the effective date of the Sublease.
IN WITNESS WHEREOF, this Office Sublease has been executed by the
parties as of the date first written above.
LESSOR: INSWEB CORPORATION,
a Delaware corporation
By: /s/ Sheryl S. Dodsworth
-------------------------------------
Name: Sheryl S. Dodsworth
Title: SVP Finance & Administration
LESSEE: EQUINIX, INC.,
a Delaware corporation
By: /s/ Albert M. Avery, IV
-------------------------------------
Name: Albert M. Avery, IV
Title: Chief Executive Officer
39
<PAGE>
EXHIBIT 10.20
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
AGREEMENT BETWEEN
EQUINIX, INC. AND MCI WORLDCOM
This Agreement ("Agreement") is made by and between Equinix, Inc.
("Equinix"), a Delaware corporation, and MCI Worldcom, Inc. directly or through
one or more of its operating affiliates ("MCI").
The parties shall execute a Customer Agreement ("Customer Agreement")
concurrently with the execution of this Agreement. The Customer Agreement and
this Agreement are separate agreements and shall be interpreted separately.
However, if there is a direct conflict between the two agreements, then this
Agreement shall take precedence.
NOW THEREFORE, in consideration of the covenants and conditions contained
herein, the parties agree as follows:
1. Installation of Local Connectivity Services.
-------------------------------------------
(a) MCI shall (i) provide, install and maintain full [*] connectivity,
including, but not limited to full regional internodal capacity with
other MCI nodes, and (ii) provide an upgrade plan to [*] which will be
implemented once an [*] is at 50% of capacity based on orders
(collectively, the "Service"), in each of the seven IBX facilities to
be opened by Equinix in Los Angeles, CA, Chicago, IL, Atlanta, GA,
Dallas, TX, Ashburn, VA, Newark, NJ, and San Jose, CA (the
"Facilities"). MCI shall provide all equipment and labor for
installation and use of the Service at the Facilities except with
respect to any items expressly and unambiguously required to be
provided by Equinix hereunder. At each of the Facilities, MCI shall
provide sufficient Service capacity to fulfill the Service
requirements of all other customers of Equinix at and/or through such
Facility.
(b) The installation shall occur in accordance with Exhibit A. Within each
Facility, Equinix shall provide MCI with sufficient access, security
(only with respect to matters in Equinix's reasonable control), space,
environmental maintenance for the equipment required to provide the
Service (only with respect to matters in Equinix's reasonable
control), and power in each Facility to locate and power the equipment
that is required to operate the Service. Any license or use of the
Space or the foregoing shall be subject to the terms and conditions of
the Customer Agreement. MCI shall diligently and promptly apply for,
prosecute and endeavor
___________________
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
1
<PAGE>
to obtain the licenses and permits and other items necessary to
install the Service at the Facilities by the installation dates
described in Exhibit A. Equinix agrees to provide reasonable
assistance to MCI to aid MCI in obtaining consent from the landlord of
each Facility, in furtherance of the foregoing.
(c) The parties will develop a written plan which will document how they
will cooperate to implement the Service installations for each of the
Facilities. Equinix shall make the Facilities available to MCI for
installation of the Services, as the parties deem necessary. The
Services shall be available at each Facility for a minimum of two
years from the date of completed installation at the applicable
Facility and MCI shall have the right to extend the term of provision
of its Services at each Facility for an additional term of five years,
at its sole discretion.
(d) MCI's sole compensation from Equinix (including expenses) for
providing, installing and maintaining the Service at each of the
Facilities shall be receipt of Equinix Warrants ("Warrants") subject
to the terms and conditions of: (1) the form of the Warrant Agreement
attached as Exhibit B, with respect to the Ashburn, Newark, Los
Angeles and San Jose Facilities and (2) the form of the Warrant
Agreement attached as Exhibit C, with respect to the other Facilities.
The Warrants shall be exercisable for an aggregate of 450,000 shares
of Common Stock (as defined in Exhibits B and C) broken down among the
Facilities as follows:
Ashburn: [*]
Newark: [*]
San Jose: [*]
Los Angeles: [*]
Chicago: [*]
Atlanta: [*]
Dallas: [*]
(e) The Warrant shall be issued upon execution of this Agreement and shall
bear the same date as this Agreement. Equinix warrants that it will in
no way compensate MCI for Services provided to customers located in
the Facilities. The charging or receipt of any installation fees and
other fees related to Services sold to Equinix's other customers shall
not be the right or responsibility of Equinix and shall be invoiced to
such customers only. Equinix will cooperate with MCI in developing and
implementing order and delivery procedures appropriate for delivery of
the Services at the Facilities.
2. Customer Agreement. For the first two years from the date of completion of
------------------
installation at the applicable Facility, Equinix shall not charge MCI any
fees or charges of any kind for the Space provided to MCI at the seven IBX
Facilities noted above. For the purposes of this Agreement, "Space" shall
mean a 15x9 foot cage with six, 35-amp dual feed
___________________
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
2
<PAGE>
circuits. After the first two years for such Space, MCI shall pay Equinix's
standard rates which will in no case exceed the rate being charged the
dominant local access provider. For any additional Equinix facilities,
---------------------------------
Equinix shall not charge MCI any fees or charges of any kind for the Space
for the first six months of operations and charges thereafter will not
exceed those charged to the dominant local access provider. MCI shall
retain title and have access to its free-standing equipment at all times,
provided that removal of such equipment shall not cause damage to the
applicable Facility. Any license or use of the Space or the foregoing shall
be subject to the terms and conditions of the Customer Agreement.
3. Indemnity. MCI shall defend, indemnify and hold harmless Equinix and its
---------
affiliates, representatives, other customers, contractors, and agents from
any and all third party claims, liability, damages, costs and expenses
payable to a third party (including, but not limited to attorneys' fees and
expenses awarded to such third party by a final court judgment) arising
from or relating to the provision of the Service by MCI (including but not
limited to installation of equipment or Service) or any willful misconduct
or grossly negligent action or inaction of MCI. Equinix shall defend,
indemnify and hold harmless MCI and its affiliates, representatives, other
customers, contractors, and agents from any and all third party claims,
liability, damages, costs and expenses payable to a third party (including,
but not limited to attorney's fees and expenses awarded to such third party
by a final court judgment) arising from or relating to any willful
misconduct or grossly negligent action or inaction of Equinix. As the
condition of the foregoing, the indemnifying party ("Indemnitor") shall be
promptly notified by the party being indemnified ("Indemnitee") of any and
all threats, claims and proceedings related thereto and the Indemnitee
shall give the Indemnitor all reasonable assistance, and the Indemnitor
shall have sole control over the defense and all negotiations for a
settlement or compromise; the Indemnitor will not be responsible for any
settlement it does not approve in writing.
4. Warranty. MCI warrants: (1) that the work and Services under this
--------
Agreement shall be performed in a professional and workman-like manner, (2)
that it has full rights and authority to enter into and perform this
Agreement and to its knowledge none of the Services will infringe,
misappropriate, or violate any intellectual property or other right of any
person or entity, (3) that the work and Services under this Agreement shall
fully conform to the specifications and terms set forth herein and (4) the
work and Services shall be completed on time, in accordance with Exhibit A,
subject to any delays caused by Equinix or its agents or representatives.
5. Term and Termination. The term of this Agreement shall continue until two
--------------------
years from the date of the completion of installation at each applicable
Facility. If either party breaches the terms and conditions of this
Agreement, in addition to all other available remedies, the other party may
terminate this Agreement upon thirty (30) days' prior written notice to the
breaching party if such breach is not cured within such period. Sections 3,
4, 6, and 7 shall survive termination.
6. Confidentiality. Each party agrees that all business, technical and
---------------
financial information it obtains or learns from the other are the
confidential property of the other ("Proprietary
3
<PAGE>
Information''). Except as expressly and unambiguously allowed herein, each
party will hold in confidence and not use or disclose any Proprietary
Information and shall similarly bind its employees and representatives in
writing. Each party's nondisclosure obligation shall not apply to
information it can document is generally available to the public (other
than through breach of this Agreement).
7. Miscellaneous.
-------------
(a) This Agreement shall be governed in all respects by the laws of the
State of California without regard to its conflict of laws provisions.
The sole jurisdiction and venue for actions related to the subject
matter hereof shall be the state and U.S. federal courts in San
Francisco, California. If any provision of this Agreement shall be
held by a court of competent jurisdiction to be illegal, invalid or
unenforceable, that provision shall be limited or eliminated to the
minimum extent necessary so that this Agreement shall otherwise remain
in full force and effect and enforceable. In any action or proceeding
to enforce rights under this Agreement, the prevailing party will be
entitled to recover costs and attorneys fees.
(b) No waiver of any breach of any provision of this Agreement shall
constitute a waiver of any prior, concurrent or subsequent breach of
the same or any other provisions hereof, and no waiver shall be
effective unless made in writing and signed by an authorized
representative of the waiving party.
(c) MCI shall not assign or transfer the rights or obligations associated
with this Agreement, in whole or in part, (except to an entity,
directly or indirectly through one or more intermediatiaries,
controlling, controlled by or under common control with such party or
other entity. "Control" for this purpose shall mean greater than 50%
voting control) without Equinix's prior written consent. Equinix, its
successors and assigns may each assign, transfer, and delegate any of
its rights or obligations under this Agreement without MCI's consent.
(d) Equinix and MCI are independent contractors and not partners, joint
venturers or otherwise affiliated and neither has any right or
authority to bind the other in any way. MCI is an independent
contractor and is solely responsible for all taxes, withholdings, and
other statutory or contractual obligations of any sort, including, but
not limited to, Workers' Compensation Insurance. The parties recognize
and agree that "TIME IS OF THE ESSENCE'' with respect to completion of
the Services and work hereunder.
(e) Headings and captions are for convenience only and are not to be used
in the interpretation of this Agreement.
(f) Except as is otherwise provided herein, neither MCI nor Equinix shall
be prohibited from providing any of their respective services to any
other entity, including competitors of the other party, in any market.
4
<PAGE>
(g) All notices and other communications which are required or permitted
hereunder shall be in writing and shall be deemed duly given (i) when
delivered by hand, (ii) one day after being given to an express
carrier with a reliable system for tracking delivery, or (iii) six (6)
days after the day of mailing, when mailed by United States mail,
postage prepaid and addressed as follows:
In the case of Equinix:
Al Avery
President
Equinix, Inc.
901 Marshall Street
Redwood City, CA 94063
With a copy to:
Scott Dettmer, Esq.
Gunderson Dettmer et al.
155 Constitution Drive,
Menlo Park, CA 94025
Fax: (650)321-2800
Email: [email protected]
In the case of MCI WORLDCOM:
Dennis Muse
1 Tower Lane, Suite 2300
Oak Brook Terrace, Illinois 60181
Fax: (630)203-0564
Email: [email protected]
With a copy to:
Charles P. Adams, Jr., Esq.
111 Capitol Building, Suite 350
111 East Capitol Street
P.O. Box 24297
Jackson, Mississippi 39225-4297
Fax: (601)355-9708
Email: [email protected]
(h) Except for the Customer Agreement, this Agreement supersedes all
proposals, oral or written, all negotiations, conversations, or
discussions between or among the parties relating to the subject
matter of this Agreement and all past dealing or industry custom, and
all modifications must be in a non-preprinted writing signed by both
parties.
5
<PAGE>
(i) EXCEPT FOR SECTION 6, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE
OTHER PARTY OR ANY THIRD PARTY FOR ANY INCIDENTAL, INDIRECT,
CONSEQUENTAL, PUNITIVE, EXEMPLARY, OR SPECIAL DAMAGES EVEN IF A PARTY
IS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
IN WITNESS WHEREOF, the parties have caused this Addendum to be executed by
their duly authorized representatives.
EQUINIX, INC. MCI WORLDCOM
/s/ Albert M. Avery, IV /s/ Dennis D. Muse
- ----------------------------- ----------------------------
Signature Signature
Albert M. Avery, IV Dennis D. Muse
- ----------------------------- -----------------------------
Name Name
President President, Telecom
- ----------------------------- -----------------------------
Title Title
November 16, 1999 November 16, 1999
- ----------------------------- -----------------------------
Date Date
6
<PAGE>
EXHIBIT A
INSTALLATION SCHEDULE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Facility Address MCI Service Availability: All
Services to be available at the
corresponding Facility beginning
on the corresponding date below:
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Northern Virginia [*] [*]
Ashburn, VA
- ------------------------------------------------------------------------------------------------------------
Newark [*] [*]
8th Floor
- ------------------------------------------------------------------------------------------------------------
San Jose [*] [*]
- ------------------------------------------------------------------------------------------------------------
Los Angeles [*] [*]
6th Floor
- ------------------------------------------------------------------------------------------------------------
Chicago [*] [*]
5th Floor
- ------------------------------------------------------------------------------------------------------------
Atlanta [*](tentative) [*]
- ------------------------------------------------------------------------------------------------------------
Dallas [*] [*]
- ------------------------------------------------------------------------------------------------------------
</TABLE>
_________________
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
7
<PAGE>
EXHIBIT B
---------
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SUCH ACT.
WARRANT TO PURCHASE COMMON STOCK
of
EQUINIX, INC.
Void after November 16, 2004
This Warrant is issued to MCI WORLDCOM, INC. or its registered assigns
("Holder") by Equinix, Inc., a Delaware corporation (the "Company"), on November
16, 1999 (the "Warrant Issue Date"). This Warrant is issued pursuant to the
terms of that certain Agreement dated as of the date hereof (the "Agreement")
and relates to the Company's Ashburn, Newark, Los Angeles and San Jose
facilities (the "Facilities"). In consideration of the Holder executing the
Agreement and in consideration of the mutual covenants and agreements contained
herein, the Company and the Holder agree as follows:
1. Purchase of Shares. Subject to the terms and conditions hereinafter
------------------
set forth and set forth in the Agreement, the Holder is entitled, upon surrender
of this Warrant at the principal office of the Company (or at such other place
as the Company shall notify the holder hereof in writing), to purchase from the
Company up to Three Hundred Fifty Thousand (350,000) and fully paid and
nonassessable shares of Common Stock of the Company, as constituted on the
Warrant Issue Date (the "Common Stock"). The number of shares of Common Stock
issuable pursuant to this Section 1 (the "Shares") shall be subject to
adjustment pursuant to Section 9 hereof.
2. Exercise Price. The purchase price for the Shares shall be $1.00, as
--------------
adjusted from time to time pursuant to Section 9 hereof (the "Exercise Price").
3. Exercise Period. This Warrant shall be exercisable during the term
---------------
commencing at such time as Holder provides Service (as defined in the Agreement)
to a given Facility (for such amount per Facility as set forth in the Agreement,
subject to adjustment pursuant to Section 9 hereof), and ending at 5:00 p.m. on
November 16, 2004. Notwithstanding the term of this Warrant fixed pursuant to
the preceding sentence, the right to purchase Common Stock as granted herein
shall expire, if not previously exercised, immediately upon the closing of a
merger
8
<PAGE>
or consolidation of the Company with or into another corporation when the
Company is not the surviving corporation, or the sale of all or substantially
all of the Company's properties and assets to any other person, provided such
transaction is one in which Holder realizes a value for its shares equal to or
greater than three (3) times the Exercise Price for such shares (the
"Threshold") (in connection therewith, the "Termination Event"). The Threshold
shall be adjusted in tandem with each adjustment in the Exercise Price
hereunder. In the event of a proposed transaction of the kind described above,
the Company shall notify the holder of the Warrant at least fifteen (15) days
prior to the consummation of such Termination Event. If such closing does not
take place, the Company shall promptly notify the Holder that the proposed
Termination Event has been terminated and the Holder may rescind any exercise of
this Warrant which occurred after the Company first notified the Holder of the
Termination Event. In the event of such recission, this Warrant will continue to
be exercisable on the same terms and conditions contained herein.
4. Method of Exercise. While this Warrant remains outstanding and
------------------
exercisable in accordance with Section 3 above, the Holder may exercise, in
whole or in part, the purchase rights evidenced hereby. Such exercise shall be
effected by:
(a) the surrender of the Warrant, together with a duly executed copy
of the form of Notice of Election attached hereto, to the
Secretary of the Company at its principal offices; and
(b) the payment to the Company of an amount equal to the aggregate
Exercise Price for the number of Shares being purchased, which
may be paid by cash, check, wire transfer or by the surrender of
promissory notes or other instruments representing indebtedness
of the Company to the Holder.
5. Net Exercise. In lieu of exercising this Warrant pursuant to Section
------------
4, the Holder may elect to receive, without the payment by the Holder of any
additional consideration, shares of Common Stock equal to the value of this
Warrant (or the portion thereof being canceled) by surrender of this Warrant at
the principal office of the Company together with notice of such election, in
which event the Company shall issue to the holder hereof a number of shares of
Common Stock computed using the following formula:
Y (A - B)
---------
X = A
Where: X = The number of shares of Common Stock to be issued to the
Holder pursuant to this net exercise;
Y = The number of Shares in respect of which the net issue
election is made;
A = The fair market value of one share of the Common Stock at
the time the net issue election is made;
B = The Exercise Price (as adjusted to the date of the net
issuance).
9
<PAGE>
For purposes of this Section 5, the fair market value of one share of Common
Stock as of a particular date shall be determined as follows: (i) 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 over the thirty (30) day period ending three (3) days prior to the net
exercise election; (ii) if 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 net exercise; and
(iii) if there is no active public market, the value shall be the fair market
value thereof, as determined in good faith by the Board of Directors of the
Company; provided, that, if the Warrant is being exercised upon the closing of
the IPO, the value will be the initial "Price to Public" of one share of such
Common Stock specified in the final prospectus with respect to such offering.
6. "Easy Sale" Exercise. In lieu of the payment methods set forth in
--------------------
Sections 4 and 5 above, when permitted by law and applicable regulations
(including Nasdaq Stock Market and National Association of Securities Dealers,
Inc. ("NASD") rules), the Holder may pay the Exercise Price through a "same day
sale" commitment from the Holder (and if applicable a broker-dealer that is a
member of the NASD (and "NASD Dealer")), whereby the Holder irrevocably elects
to exercise this Warrant and to sell a portion of the Common Stock so purchased
to pay for the Exercise Price and the Holder (or, if applicable, the NASD
Dealer) commits upon sale (or, in the case of the NASD Dealer, upon receipt) of
such Common Stock to forward the Exercise Price directly to the Company.
7. Certificates for Shares. Upon the exercise of the purchase rights
-----------------------
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued in the name of the Holder (or as the Holder may
direct) as soon as practicable thereafter (with appropriate restrictive legends,
if applicable), and in any event within ten (10) days of the delivery of the
Notice of Election.
8. Representations and Warranties. The Company hereby represents and
------------------------------
warrants to Holder as follows:
(a) Corporate Power. The Company will have at the Warrant Issue
---------------
Date all requisite legal and corporate power to execute and deliver this
Warrant, to sell and issue from Shares and to carry out and perform its
obligations under the terms of this Warrant.
(b) Authorization. All corporate action on the part of the Company,
-------------
its directors and stockholders necessary for the authorization, execution,
delivery and performance of this Warrant by the Company, the authorization, sale
issuance and delivery of the Shares and the performance of all of the Company's
obligations under this Warrant has been taken or will be taken prior to the
Warrant Issue Date. This Warrant, when executed and delivered by the Company,
shall constitute a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms. The Shares issuable upon
exercise of this Warrant have been duly and validly reserved and, when issued in
compliance with the provisions of this Warrant, will be validly issued and will
be fully paid and nonassessable and will have the rights, preferences and
privileges described in the Company's Amended and Restated Certificate of
Incorporation (the "Restated Certificate"). The Shares, when issued upon
exercise of this Warrant, will be free of any liens or encumbrances other than
those created by or imposed upon
10
<PAGE>
the holders thereof through no action of the Company; provided, however, that
the Shares may be subject to restrictions on transfer under state and/or federal
securities laws. The Common Stock is not subject to any preemptive rights or
rights of first refusal.
9. Adjustment of Exercise Price and Number of Shares. The number of and
-------------------------------------------------
kind of securities purchasable upon exercise of this Warrant and the Exercise
Price shall be subject to adjustment from time to time as follows:
(a) Subdivisions, Combinations and Other Issuances. If the Company
----------------------------------------------
shall at any time prior to the expiration of this Warrant subdivide its Common
Stock, by split-up or otherwise, or issue additional shares of its Common Stock
as a dividend with respect to any shares of its Common Stock, the number of
Shares issuable on the exercise of this Warrant shall forthwith be
proportionately increased in the case of a subdivision or stock dividend, or
proportionately decreased in the case of a combination. Appropriate adjustments
shall also be made to the Exercise Price, but the aggregate Exercise Price
payable for the total number of Shares purchasable under this Warrant (as
adjusted) shall remain the same. Any adjustment under this Section 9(a) shall
become effective at the close of business on the date the subdivision or
combination becomes effective, or as of the record date of such dividend, or in
the event that no record date is fixed, upon the making of such dividend.
(b) Reclassification, Reorganization and Consolidation. In case of
--------------------------------------------------
any reclassification, capital reorganization, or change in the Common Stock of
the Company (other than as a result of a subdivision, combination, or stock
dividend provided for in Section 9(a) above), then, as a condition of such
reclassification, reorganization, or change, lawful provision shall be made, and
duly executed documents evidencing the same from the Company or its successor
shall be delivered to the Holder, so that the Holder shall have the right at any
time prior to the expiration of this Warrant to purchase, at a total price equal
to that payable upon the exercise of this Warrant, the kind and amount of shares
of stock and other securities and property receivable in connection with such
reclassification, reorganization, or change by a holder of the same number of
shares of Common Stock as were purchasable by the Holder immediately prior to
such reclassification, reorganization, or change. In any such case appropriate
provisions shall be made with respect to the rights and interest of the Holder
so that the provisions hereof shall thereafter be applicable with respect to any
shares of stock or other securities and property deliverable upon exercise
hereof, and appropriate adjustments shall be made to the Exercise Price payable
hereunder, provided the aggregate Exercise Price shall remain the same.
(c) Adjustment for Capital Reorganization, Merger or Consolidation.
--------------------------------------------------------------
In case of any capital reorganization of the capital stock of the Company (other
than a combination, reclassification, exchange or subdivision of shares
otherwise provided for herein), or any merger or consolidation of the Company
with or into another corporation whether or not the Company is the surviving
corporation, or the sale of all or substantially all of the assets of the
Company other than a Termination Event as defined in Section 3 hereof, then, and
in each such case, as a part of such reorganization, merger, consolidation, sale
or transfer, lawful provision shall be made so that the Holder of this Warrant
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the Exercise Price then in
effect, the number of shares of stock or other securities or property of the
successor corporation resulting from such reorganization, merger, consolidation,
sale or transfer that the Holder would
11
<PAGE>
have been entitled to if this Warrant had been exercised immediately before such
reorganization, merger, consolidation, sale or transfer, all subject to further
adjustment as provided in this Section 9. The foregoing provisions of this
Section 9(c) shall similarly apply to successive reorganizations,
consolidations, mergers, sales and transfers and to the stock or securities of
any other corporation that are at the time receivable upon the exercise of this
Warrant. If the per share consideration payable to the Holder hereof for shares
in connection with any such transaction is in a form other than cash or
marketable securities, then the value of such consideration shall be determined
in good faith by the Company's Board of Directors. In all events, appropriate
adjustment (as determined in good faith by the Company's Board of Directors)
shall be made in the application of the provisions of this Warrant with respect
to the rights ad interests of the Holder after the transaction, to the end that
the provisions of this Warrant shall be applicable after that event to the
greatest extent possible.
(d) Adjustment for Delays Under the Agreement. This Warrant shall
-----------------------------------------
be subject to downward adjustment in the event that Holder fails to timely meet
its obligations with respect to the Company's Ashburn, Newark, Los Angeles or
San Jose facility under the Agreement. The number of shares of Common Stock
purchasable upon exercise of this Warrant shall be adjusted as follows, based on
number of days of delay of the timeline for the Facility outlined on Schedule A
----------
of the Agreement:
0 to 14 days delay: [*] adjustment
15 to 30 days delay: [*]% adjustment (total: [*]%)
31 to 45 days delay: additional [*]% adjustment (total: [*]%)
46 to 60 days delay: additional [*]% adjustment (total: [*]%)
61-90 days delay: additional [*]% adjustment (total: [*]%)
91+ days or more delay: additional [*]% adjustment (total: [*]%)
provided, however that no adjustment shall be made if the delay is caused by
acts, delays or omissions of the Company, the Company's contractors, equipment
vendors of the Holder, federal, state or local jurisdictions or the inability of
the Holder to obtain necessary licenses or permits necessary for the Holder's
Service (as defined in the Agreement). In addition, in the event the Facility
is not located at the address set forth on Schedule A of the Agreement, the
----------
timeline for the Facility shall be as mutually agreed to by Holder and the
Company at such time as a new address is identified for the Facility.
(e) Repurchase of Shares. In the event of a downward adjustment
--------------------
after Holder has exercised this warrant, the Company shall be entitled to
repurchase the shares subject to the downward adjustment at the exercise price.
(f) Notice of Adjustment. When any adjustment is required to be
--------------------
made in the number or kind of shares purchasable upon exercise of the Warrant,
or in the Exercise Price, the Company shall promptly notify the holder of such
event and (i) of the number of shares of Common Stock or other securities or
property thereafter purchasable upon exercise of this Warrant and (ii) the
Exercise Price after such adjustment.
___________________
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
12
<PAGE>
10. Registration Rights. Holder shall be entitled to all of the rights
-------------------
set forth in Section 1 of the Amended and Restated Investors' Rights Agreement
(the "Investors' Rights Agreement") dated August 26, 1999 among the Company,
Holder and certain other Investors (as defined therein) on the terms and
conditions set forth therein, as if such terms and conditions were set forth in
this Warrant Agreement. In furtherance of the preceding sentence, the Company
and Holder agree that the Shares issuable upon exercise of this Warrant are
"Registrable Securities," as that term is defined in the Investors' Rights
Agreement. The Company shall provide Holder with all notices and information at
the time and to the extent it is required to do so pursuant to Section 1 of the
Investors' Rights Agreement.
11. No Fractional Shares or Scrip. No fractional shares or scrip
-----------------------------
representing fractional shares shall be issued upon the exercise of this
Warrant, but in lieu of such fractional shares the Company shall make a cash
payment therefor on the basis of the Exercise Price then in effect.
12. No Stockholder Rights. Prior to exercise of this Warrant, the Holder
---------------------
shall not be entitled to any rights of a stockholder with respect to the Shares,
including (without limitation) the right to vote such Shares, receive dividends
or other distributions thereon, exercise preemptive rights or be notified of
stockholder meetings, and such holder shall not be entitled to any notice or
other communication concerning the business or affairs of the Company. However,
nothing in this Section 12 shall limit the right of the Holder to be provided
the Notices required under this Warrant or the Agreement.
13. Transfers of Warrant. Subject to compliance with applicable federal
--------------------
and state securities laws, this Warrant and all rights hereunder are
transferable in whole or in part by the Holder to any person or entity upon
written notice to the Company. The transfer shall be recorded on the books of
the Company upon the surrender of this Warrant, properly endorsed, to the
Company at its principal offices, and the payment to the Company of all transfer
taxes and other governmental charges imposed on such transfer. In the event of a
partial transfer, the Company shall issue to the holders one or more appropriate
new warrants.
14. Successors and Assigns. The terms and provisions of this Warrant and
----------------------
the Agreement shall inure to the benefit of, and be binding upon, the Company
and the Holders hereof and their respective successors and assigns.
15. Amendments and Waivers. Any term of this Warrant may be amended and
----------------------
the observance of any term of this Warrant may be waived (either generally or in
a particular instance and either retroactively or prospectively), with the
written consent of the Company and the Holder.
16. Reservation of Stock. The Company will at all times reserve and keep
--------------------
available, solely for the issuance and delivery upon the exercise of this
Warrant, such shares of Common Stock and other stock, securities and property,
as from time to time shall be issuable upon the exercise of this Warrant.
17. Notices. All notices required under this Warrant and shall be deemed
-------
to have been given or made for all purposes (i) upon personal delivery, (ii)
upon confirmation receipt
13
<PAGE>
that the communication was successfully sent to the applicable number if sent by
facsimile; (iii) one day after being sent, when sent by professional overnight
courier service, or (iv) five days after posting when sent by registered or
certified mail. Notices to the Company shall be sent to the principal office of
the Company (or at such other place as the Company shall notify the Holder
hereof in writing). Notices to the Holder shall be sent to the address of the
Holder on the books of the Company (or at such other place as the Holder shall
notify the Company hereof in writing).
18. Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement in an amount reasonably satisfactory to the Company, or (in
the case of mutilation) upon surrender and cancellation of this Warrant, the
Company will issue, in lieu thereof, a new Warrant of like tenor.
19. Attorneys' Fees. If any action of law or equity is necessary to
---------------
enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to its reasonable attorneys' fees, costs and disbursements in addition
to any other relief to which it may be entitled.
20. Captions. The section and subsection headings of this Warrant are
--------
inserted for convenience only and shall not constitute a part of this Warrant in
construing or interpreting any provision hereof.
21. Governing Law. This Warrant shall be governed by the laws of the
-------------
State of California as applied to agreements among California residents made and
to be performed entirely within the State of California.
IN WITNESS WHEREOF, Equinix, Inc. caused this Warrant to be executed by an
officer thereunto duly authorized.
EQUINIX, INC.
By: ___________________________________
Name
Title
14
<PAGE>
NOTICE OF EXERCISE
------------------
To: EQUINIX, INC.
The undersigned hereby elects to [check applicable subsection]:
________ (a) Purchase _________________ shares of Common Stock of Equinix,
Inc., pursuant to the terms of the attached Warrant and payment
of the Exercise Price per share required under such Warrant
accompanies this notice;
OR
________ (b) Exercise the attached Warrant for [all of the shares] [________
of the shares] [cross out inapplicable phrase] purchasable under
the Warrant pursuant to the net exercise provisions of Section 5
of such Warrant.
The undersigned hereby represents and warrants that the undersigned is
acquiring such shares for its own account for investment purposes only, and not
for resale or with a view to distribution of such shares or any part thereof.
WARRANTHOLDER:
_________________________________________
By:______________________________________
[NAME]
Address: _________________________________________
_________________________________________
Date:_____________________
Name in which shares should be registered:
_________________________________________
15
<PAGE>
EXHIBIT C
---------
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION
IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SUCH ACT.
WARRANT TO PURCHASE COMMON STOCK
of
EQUINIX, INC.
Void after November 16, 2004
This Warrant is issued to MCI WORLDCOM, INC. or its registered assigns
("Holder") by Equinix, Inc., a Delaware corporation (the "Company"), on November
16, 1999 (the "Warrant Issue Date"). This Warrant is issued pursuant to the
terms of that certain Agreement dated as of the date hereof (the "Agreement").
In consideration of the Holder executing the Agreement and in consideration of
the mutual covenants and agreements contained herein, the Company and the Holder
agree as follows:
1. Purchase of Shares. Subject to the terms and conditions hereinafter
------------------
set forth and set forth in the Agreement, the Holder is entitled, upon surrender
of this Warrant at the principal office of the Company (or at such other place
as the Company shall notify the holder hereof in writing), to purchase from the
Company up to One Hundred Thousand (100,000) fully paid and nonassessable shares
of Common Stock of the Company, as constituted on the Warrant Issue Date (the
"Common Stock"). The number of shares of Common Stock issuable pursuant to this
Section 1 (the "Shares") shall be subject to adjustment pursuant to Section 9
hereof .
2. Exercise Price. The purchase price for the Shares shall be $1.00, as
--------------
adjusted from time to time pursuant to Section 9 hereof (the "Exercise Price").
3. Exercise Period. This Warrant shall be exercisable, in whole or in
---------------
part, during the term commencing on the Warrant Issue Date and ending at 5:00
p.m. on November 16, 2004. Notwithstanding the term of this Warrant fixed
pursuant to the preceding sentence, the right to purchase Common Stock as
granted herein shall expire, if not previously exercised, immediately upon the
closing of a merger or consolidation of the Company with or into another
corporation when the Company is not the surviving corporation, or the sale of
all or substantially all of the Company's properties and assets to any other
person, provided such transaction is one in which
16
<PAGE>
Holder realizes a value for its shares equal to or greater than three (3) times
the Exercise Price for such shares (the "Threshold") (in connection therewith,
the "Termination Event"). The Threshold shall be adjusted in tandem with each
adjustment in the Exercise Price hereunder. In the event of a proposed
transaction of the kind described above, the Company shall notify the holder of
the Warrant at least fifteen (15) days prior to the consummation of such
Termination Event. If such closing does not take place, the Company shall
promptly notify the Holder that the proposed Termination Event has been
terminated and the Holder may rescind any exercise of this Warrant which
occurred after the Company first notified the Holder of the Termination Event.
In the event of such recission, this Warrant will continue to be exercisable on
the same terms and conditions contained herein.
4. Method of Exercise. While this Warrant remains outstanding and
------------------
exercisable in accordance with Section 3 above, the Holder may exercise, in
whole or in part, the purchase rights evidenced hereby. Such exercise shall be
effected by:
(a) the surrender of the Warrant, together with a duly executed copy
of the form of Notice of Election attached hereto, to the Secretary of the
Company at its principal offices; and
(b) the payment to the Company of an amount equal to the aggregate
Exercise Price for the number of Shares being purchased, which may be paid
by cash, check, wire transfer or by the surrender of promissory notes or
other instruments representing indebtedness of the Company to the Holder.
5. Net Exercise. In lieu of exercising this Warrant pursuant to Section
------------
4, the Holder may elect to receive, without the payment by the Holder of any
additional consideration, shares of Common Stock equal to the value of this
Warrant (or the portion thereof being canceled) by surrender of this Warrant at
the principal office of the Company together with notice of such election, in
which event the Company shall issue to the holder hereof a number of shares of
Common Stock computed using the following formula:
Y (A - B)
---------
X = A
Where: X = The number of shares of Common Stock to be issued to the
Holder pursuant to this net exercise;
Y = The number of Shares in respect of which the net issue
election is made;
A = The fair market value of one share of the Common Stock at
the time the net issue election is made;
B = The Exercise Price (as adjusted to the date of the net
issuance).
For purposes of this Section 5, the fair market value of one share of Common
Stock as of a particular date shall be determined as follows: (i) 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
17
<PAGE>
the securities on such exchange over the thirty (30) day period ending three (3)
days prior to the net exercise election; (ii) if 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 net exercise; and (iii) if there is no active public market, the
value shall be the fair market value thereof, as determined in good faith by the
Board of Directors of the Company; provided, that, if the Warrant is being
exercised upon the closing of the IPO, the value will be the initial "Price to
Public" of one share of such Common Stock specified in the final prospectus with
respect to such offering.
6. "Easy Sale" Exercise. In lieu of the payment methods set forth in
-------------------
Sections 4 and 5 above, when permitted by law and applicable regulations
(including Nasdaq Stock Market and National Association of Securities Dealers,
Inc. ("NASD") rules), the Holder may pay the Exercise Price through a "same day
sale" commitment from the Holder (and if applicable a broker-dealer that is a
member of the NASD (and "NASD Dealer")), whereby the Holder irrevocably elects
to exercise this Warrant and to sell a portion of the Common Stock so purchased
to pay for the Exercise Price and the Holder (or, if applicable, the NASD
Dealer) commits upon sale (or, in the case of the NASD Dealer, upon receipt) of
such Common Stock to forward the Exercise Price directly to the Company.
7. Certificates for Shares. Upon the exercise of the purchase rights
-----------------------
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued in the name of the Holder (or as the Holder may
direct) as soon as practicable thereafter (with appropriate restrictive legends,
if applicable), and in any event within ten (10) days of the delivery of the
Notice of Election.
8. Representations and Warranties. The Company hereby represents and
------------------------------
warrants to Holder as follows:
(a) Corporate Power. The Company will have at the Warrant Issue Date
---------------
all requisite legal and corporate power to execute and deliver this
Warrant, to sell and issue from Shares and to carry out and perform its
obligations under the terms of this Warrant.
(b) Authorization. All corporate action on the part of the Company,
-------------
its directors and stockholders necessary for the authorization, execution,
delivery and performance of this Warrant by the Company, the authorization,
sale issuance and delivery of the Shares and the performance of all of the
Company's obligations under this Warrant has been taken or will be taken
prior to the Warrant Issue Date. This Warrant, when executed an delivered
by the Company, shall constitute a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms. The
Shares issuable upon exercise of this Warrant have been duly and validly
reserved and, when issued in compliance with the provisions of this
Warrant, will be validly issued and will be fully paid and nonassessable
and will have the rights, preferences and privileges described in the
Company's Amended and Restated Certificate of Incorporation (the "Restated
Certificate"). The Shares, when issued upon exercise of this Warrant, will
be free of any liens or encumbrances other than those created by or imposed
upon the holders thereof through no action of the Company; provided,
however, that the Shares may be subject to restrictions on transfer under
state and/or federal securities laws. The Common Stock is not subject to
any preemptive rights or rights of first refusal.
18
<PAGE>
9. Adjustment of Exercise Price and Number of Shares. The number of and
-------------------------------------------------
kind of securities purchasable upon exercise of this Warrant and the Exercise
Price shall be subject to adjustment from time to time as follows:
(a) Subdivisions, Combinations and Other Issuances. If the Company
----------------------------------------------
shall at any time prior to the expiration of this Warrant subdivide its
Common Stock, by split-up or otherwise, or issue additional shares of its
Common Stock as a dividend with respect to any shares of its Common Stock,
the number of Shares issuable on the exercise of this Warrant shall
forthwith be proportionately increased in the case of a subdivision or
stock dividend, or proportionately decreased in the case of a combination.
Appropriate adjustments shall also be made to the Exercise Price, but the
aggregate Exercise Price payable for the total number of Shares purchasable
under this Warrant (as adjusted) shall remain the same. Any adjustment
under this Section 9(a) shall become effective at the close of business on
the date the subdivision or combination becomes effective, or as of the
record date of such dividend, or in the event that no record date is fixed,
upon the making of such dividend.
(b) Reclassification, Reorganization and Consolidation. In case of
--------------------------------------------------
any reclassification, capital reorganization, or change in the Common Stock
of the Company (other than as a result of a subdivision, combination, or
stock dividend provided for in Section 9(a) above), then, as a condition of
such reclassification, reorganization, or change, lawful provision shall be
made, and duly executed documents evidencing the same from the Company or
its successor shall be delivered to the Holder, so that the Holder shall
have the right at any time prior to the expiration of this Warrant to
purchase, at a total price equal to that payable upon the exercise of this
Warrant, the kind and amount of shares of stock and other securities and
property receivable in connection with such reclassification,
reorganization, or change by a holder of the same number of shares of
Common Stock as were purchasable by the Holder immediately prior to such
reclassification, reorganization, or change. In any such case appropriate
provisions shall be made with respect to the rights and interest of the
Holder so that the provisions hereof shall thereafter be applicable with
respect to any shares of stock or other securities and property deliverable
upon exercise hereof, and appropriate adjustments shall be made to the
Exercise Price payable hereunder, provided the aggregate Exercise Price
shall remain the same.
(c) Adjustment for Capital Reorganization, Merger or Consolidation.
--------------------------------------------------------------
In case of any capital reorganization of the capital stock of the Company
(other than a combination, reclassification, exchange or subdivision of
shares otherwise provided for herein), or any merger or consolidation of
the Company with or into another corporation whether or not the Company is
the surviving corporation, or the sale of all or substantially all of the
assets of the Company other than a Termination Event as defined in Section
3 hereof, then, and in each such case, as a part of such reorganization,
merger, consolidation, sale or transfer, lawful provision shall be made so
that the Holder of this Warrant shall thereafter be entitled to receive
upon exercise of this Warrant, during the period specified herein and upon
payment of the Exercise Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from
such reorganization, merger, consolidation, sale or transfer that the
Holder would have been entitled to if this Warrant had been exercised
immediately before such reorganization, merger, consolidation, sale or
transfer, all subject to further adjustment as provided in this Section 9.
The foregoing provisions of this Section 9(c) shall similarly apply to
successive reorganizations, consolidations, mergers, sales and transfers
and to the stock or securities of any
19
<PAGE>
other corporation that are at the time receivable upon the exercise of this
Warrant. If the per share consideration payable to the Holder hereof for
shares in connection with any such transaction is in a form other than cash
or marketable securities, then the value of such consideration shall be
determined in good faith by the Company's Board of Directors. In all
events, appropriate adjustment (as determined in good faith by the
Company's Board of Directors) shall be made in the application of the
provisions of this Warrant with respect to the rights ad interests of the
Holder after the transaction, to the end that the provisions of this
Warrant shall be applicable after that event to the greatest extent
possible.
(d) Notice of Adjustment. When any adjustment is required to be made
--------------------
in the number or kind of shares purchasable upon exercise of the Warrant,
or in the Exercise Price, the Company shall promptly notify the holder of
such event and (i) of the number of shares of Common Stock or other
securities or property thereafter purchasable upon exercise of this Warrant
and (ii) the Exercise Price after such adjustment.
10. Registration Rights. Holder shall be entitled to all of the rights
-------------------
set forth in Section 1 of the Amended and Restated Investors' Rights Agreement
(the "Investors' Rights Agreement") dated August 26, 1999 among the Company,
Holder and certain other Investors (as defined therein) on the terms and
conditions set forth therein, as if such terms and conditions were set forth in
this Warrant Agreement. In furtherance of the preceding sentence, the Company
and Holder agree that the Shares issuable upon exercise of this Warrant are
"Registrable Securities," as that term is defined in the Investors' Rights
Agreement. The Company shall provide Holder with all notices and information at
the time and to the extent it is required to do so pursuant to Section 1 of the
Investors' Rights Agreement.
11. No Fractional Shares or Scrip. No fractional shares or scrip
-----------------------------
representing fractional shares shall be issued upon the exercise of this
Warrant, but in lieu of such fractional shares the Company shall make a cash
payment therefor on the basis of the Exercise Price then in effect.
12. No Stockholder Rights. Prior to exercise of this Warrant, the Holder
---------------------
shall not be entitled to any rights of a stockholder with respect to the Shares,
including (without limitation) the right to vote such Shares, receive dividends
or other distributions thereon, exercise preemptive rights or be notified of
stockholder meetings, and such holder shall not be entitled to any notice or
other communication concerning the business or affairs of the Company. However,
nothing in this Section 12 shall limit the right of the Holder to be provided
the Notices required under this Warrant or the Agreement.
13. Transfers of Warrant. Subject to compliance with applicable federal
--------------------
and state securities laws, this Warrant and all rights hereunder are
transferable in whole or in part by the Holder to any person or entity upon
written notice to the Company. The transfer shall be recorded on the books of
the Company upon the surrender of this Warrant, properly endorsed, to the
Company at its principal offices, and the payment to the Company of all transfer
taxes and other governmental charges imposed on such transfer. In the event of a
partial transfer, the Company shall issue to the holders one or more appropriate
new warrants.
20
<PAGE>
14. Successors and Assigns. The terms and provisions of this Warrant and
----------------------
the Agreement shall inure to the benefit of, and be binding upon, the Company
and the Holders hereof and their respective successors and assigns.
15. Amendments and Waivers. Any term of this Warrant may be amended and
----------------------
the observance of any term of this Warrant may be waived (either generally or in
a particular instance and either retroactively or prospectively), with the
written consent of the Company and the Holder.
16. Reservation of Stock. The Company will at all times reserve and keep
--------------------
available, solely for the issuance and delivery upon the exercise of this
Warrant, such shares of Common Stock and other stock, securities and property,
as from time to time shall be issuable upon the exercise of this Warrant.
17. Notices. All notices required under this Warrant and shall be deemed
-------
to have been given or made for all purposes (i) upon personal delivery, (ii)
upon confirmation receipt that the communication was successfully sent to the
applicable number if sent by facsimile; (iii) one day after being sent, when
sent by professional overnight courier service, or (iv) five days after posting
when sent by registered or certified mail. Notices to the Company shall be sent
to the principal office of the Company (or at such other place as the Company
shall notify the Holder hereof in writing). Notices to the Holder shall be sent
to the address of the Holder on the books of the Company (or at such other place
as the Holder shall notify the Company hereof in writing).
18. Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement in an amount reasonably satisfactory to the Company, or (in
the case of mutilation) upon surrender and cancellation of this Warrant, the
Company will issue, in lieu thereof, a new Warrant of like tenor.
19. Attorneys' Fees. If any action of law or equity is necessary to
---------------
enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to its reasonable attorneys' fees, costs and disbursements in addition
to any other relief to which it may be entitled.
20. Captions. The section and subsection headings of this Warrant are
--------
inserted for convenience only and shall not constitute a part of this Warrant in
construing or interpreting any provision hereof.
21. Governing Law. This Warrant shall be governed by the laws of the
-------------
State of California as applied to agreements among California residents made and
to be performed entirely within the State of California.
21
<PAGE>
IN WITNESS WHEREOF, Equinix, Inc. caused this Warrant to be executed by an
officer thereunto duly authorized.
EQUINIX, INC.
By:___________________________________
Name
Title
22
<PAGE>
NOTICE OF EXERCISE
------------------
To: EQUINIX, INC.
The undersigned hereby elects to [check applicable subsection]:
________ (a) Purchase _________________ shares of Common Stock of Equinix,
Inc., pursuant to the terms of the attached Warrant and payment
of the Exercise Price per share required under such Warrant
accompanies this notice;
OR
________ (b) Exercise the attached Warrant for [all of the shares] [________
of the shares] [cross out inapplicable phrase] purchasable under
the Warrant pursuant to the net exercise provisions of Section 5
of such Warrant.
The undersigned hereby represents and warrants that the undersigned is
acquiring such shares for its own account for investment purposes only, and not
for resale or with a view to distribution of such shares or any part thereof.
WARRANTHOLDER:
_________________________________________
By:______________________________________
[NAME]
Address: _________________________________________
_________________________________________
Date:________________
Name in which shares should be registered:
_________________________________________
23
<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
April 20, 2000
